G.R. No.

171321
2008

December 18,

MARY ANN DEHEZA-INAMARGA, petitioner,

vs.
CELENIA C. ALANO, BERNALDA A.
PAROHINOG, GODOFREDO ALANO,
AVELINO ALANO, ESTRELLA ALANO,
FORTUNATA ALANO, NANY ALANO, SALLY
ALANO, ADIONITO ALANO, and SUFRONIA
ALANO,respondents.

Forgery/Evidence/Appeals: Questions of
forgery is one of fact. Findings of fact in
trial courts are entitled to great weight
in appeal.
Equitable Mortgage Although lacking
in formality or form or words or other
requisites demanded by a statute,
nevertheless reveals the intention of
the parties to charge real property as a
security for a debt and contains
nothing impossible or contrary to the
law.

Presumptions of equitable mortgages in the

following cases:
1. When the price of the sale with right to
repurchase is usually inadequate.
2. When the vendor remains in possession as
lessee or otherwise.
3. When upon or after the expiration of the
right to repurchase another instrument
extending the period of redemption or granting
a new period is executed.
4. When the purchaser retains for himself a
part of the purchase price.
5. When the vendor binds himself to pay the
taxes on the thing sold.
6. In any case where it may be fairly inferred
that the real intention of the parties is that the
transaction shall secure the payment of a debt
or performance of any other obligation.
Facts:
* Tomas Alano owned 2 parcels of land covered
by OCT (Original Certifs of Title) P761 & P762
which he mortgaged to one Renato Gepty on
Sept. 2, 1972. When Gepty demanded for the
payment of the loans, Alano having no money,
then sought the help of his niece Mary Ann
Deheza-Inamarga.
* Inamarga agreed to pay the loan for the
petitioners upon the condition that the
petitioners mortgage the property to her. In
addition to this, she also asked that the
spouses (Tomas Alano & Celenia Alano) sign a
blank document which would be converted into
receipts of indebtedness.
* When Tomas died, Celenia and her children
went to Inamarga to redeem the property who
denied on the alleged mortgage of the latter to
the bank.
* Upon investigation, it was found out that the
OCT was cancelled and TCT were issued in
Inamargas name.
* Respondent filed a contended that the deed
of sale was null and void as the signatures
purporting to be Alanos signature was forged,
which the petitioner denied.
* Petitioner contended that the spouses offered
to sell the property to her so they can use the
purchase price to redeem the property to
Gepty + defense of prescription.
* RTC held that the transaction between the
plaintiff & respondent was one of equitable
mortgage and thus the respondents are
entitled to redeem the mortgaged property.
* CA denied the appeal of the petitioners.

Issues :
1. Whether the DOS is a forgery.
2. Whether the transaction between the
petitioner & respondent was one of sale or
equitable mortgage.
3. Whether the action is already barred by
prescription, laches or estoppel.
4. Whether the award of damages is legal &
justifiable.
Ruling:
1. Whether the DOS is a forgery.
It is well-settled that when supported by
substantial evidence or borne out by the
records, the findings of fact of the Court of
Appeals are conclusive and binding on the
parties and are not reviewable by this Court.
It is a hornbook doctrine that the findings of
fact of trial courts are entitled to great weight
on appeal and should not be disturbed except
for strong and valid reasons. It is not a function
of this Court to analyze and weigh evidence by
the parties all over again. Our jurisdiction is
limited to reviewing errors of law that might
have been committed by the Court of Appeals.
Court finds sufficient basis for the finding of the
Court of Appeals that the said signatures were
indeed forged.
Also, it found that the signatures on the deed
of sale appeared to be different in
characteristics, spacing and strokes from the
signatures of the Spouses Alano appearing in
other documents forming part of the records of
this case which are admittedly genuine.
Such allegation of forgery cannot overcome the
presumption of regularity in the performance of
duty of the notary public as well as the due
execution of the public document.
2. Whether the transaction between the
petitioner & respondent was one of sale
or equitable mortgage.

The transaction was an equitable

mortgage since the clear intention
when the contract was constituted was
to charge a real property as security for
a debt.
An equitable mortgage is one which although
lacking in some formality, or form, or words or
other requisites demanded by statute
nevertheless reveals the intention of the
parties to charge real property as security for a
debt and contains nothing impossible or
contrary to law.
Furthermore, basing on Article 1602 and 1604
of the NCC which lay down the requisites for a
contract to be considered an equitable
mortgage, it clearly shows that more than one
of the circumstances enumerated in the Article
1602 are present, which are:
a) The inadequacy of the selling price in
relation to its true value
b) The continued possession of the Spouses
Alano as lessee
c) Respondent paying the real property taxes
d) The respondents secured the payment with
said properties
3. Whether the action is already barred
by prescription, laches or estoppel.
No, since there was no consent that was given
by the Sps to the document, then it does not
create any contract. The deed
of sale was declared by the Court to be a void
contract.

4. Whether the award of damages is legal

& justifiable.
On the issue of damages, petitioner contends
that the award of exemplary damages and
attorneys fees were not justified under the law
and the facts obtaining in this
case.20 Respondents, on their part, state that
petitioner having acted in bad faith to the
damage and prejudice of respondents, it is but
proper that she should pay for such deception
and unlawful acts.
As correctly held by the RTC, the act of
petitioner of inducing her two trusting old
relatives to sign blank pieces of paper
purporting to be a deed of sale so that the
certificates of title of their properties could be
transferred in her name is a fraudulent act.
Exemplary damages were rightfully imposed in
order to deter persons similarly disposed from
committing such acts of fraud.
Consequently, with the grant of exemplary
damages, attorneys fees should likewise be
awarded

[G.R. No. 125055. October 30, 1998]

A. FRANCISCO REALTY AND DEVELOPMENT
CORPORATION, petitioner, vs. COURT OF
APPEALS and SPOUSES ROMULO S.A.
JAVILLONAR and ERLINDA P. JAVILLONAR,
respondents.
FACTS:
* Petitioner A. Francisco Realty and
Development Corporation granted a loan of
P7.5 Million to private respondents, the
spouses Romulo and Erlinda Javillonar,
respondents subsequently obtained an
additional loan of P2.5 Million from petitioner
on March 13, 1992
* in consideration of which the Respondents
executed the following documents:

a promissory note, dated November

27, 1991, stating an interest charge of
4% per month for six months

a deed of mortgage over realty

covered by TCT No. 58748, together
with the improvements thereon and

an undated deed of sale of the

mortgaged property in favor of the
mortgagee, petitioner A. Francisco
Realty

* The interest on the said loan was to be paid

in four installments: half of the total amount
agreed upon (P900,000.00) to be paid in
advance through a deduction from the
proceeds of the loan, while the balance to be
paid monthly by means of checks postdated
March 27, April 27, and May 27, 1992.
* The promissory note expressly provided that
upon failure of the MORTGAGOR [private
respondents] to pay the interest without prior
arrangement with the MORTGAGEE [petitioner],
full possession of the property will be
transferred and the deed of sale will be
registered. For this purpose, the owners
duplicate of TCT No. 58748 was delivered to
petitioner A. Francisco Realty.
* Petitioner claims that private respondents
failed to pay the interest and, as a
consequence, it registered the sale of the land
in its favor on February 21, 1992. As a result,
TCT No. 58748 was cancelled and in lieu
thereof TCT No. PT85569 was issued in the
name of petitioner A. Francisco Realty

* Petitioner demanded possession of the

mortgaged realty and the payment of 4%
monthly interest from May 1992, plus
surcharges. As respondent spouses refused to
vacate, petitioner filed the present action for
possession before the Regional Trial Court in
Pasig City
* The RTC held that: "WHEREFORE,
prescinding from the foregoing considerations,
judgment is hereby rendered declaring as legal
and valid, the right of ownership of A. Francisco
Realty And Development Corporation, over the
property subject of this case and now
registered in its name as owner thereof, under
TCT No. 85569"
* Respondent spouses appealed to the Court
of Appeals which reversed the decision of
the trial court and dismissed the
complaint against them holding that: "the
deed of sale was void for being in fact a
pactum commissorium which is prohibited by
Art. 2088 of the Civil Code"
* Petitioner filed for review on certiorari
with the Supreme Court
ISSUE : WHETHER OR NOT THE COURT OF
APPEALS ERRED IN RULING THAT THE
CONTRACTUAL DOCUMENTS SUBJECT OF THE
INSTANT CASE ARE CONSTITUTIVE OF
PACTUM COMMISSORIUM AS DEFINED UNDER
ARTICLE 2088 OF THE CIVIL CODE OF THE
PHILIPPINES
RULING:
The ruling of the appellate court should be
AFFIRMED.
The act of applicant in registering the property
in his own name upon mortgagors failure to
redeem the property would amount to
a pactum commissorium which is against good
morals and public policy.
Thus, in the case at bar, the stipulations in the
promissory notes providing that, upon failure of
respondent spouses to pay interest,
ownership of the property would be
automatically transferred to petitioner A.
Francisco Realty and the deed of sale in its
favor would be registered, are in substance
a pactum commissorium. They embody the two
elements of pactum commissorium as laid
down in Uy Tong v. Court of Appeals, to wit:
ART. 2088. The creditor cannot appropriate the
things given by way to pledge or mortgage, or
dispose of them. Any stipulation to the contrary
is null and void.
The aforequoted provision furnishes the two
elements for pactum commissorium to exist:
(1) that there should be a pledge or
mortgage wherein a property is
pledged or mortgaged by way of
security for the payment of the
principal obligation and
(2) that there should be a stipulation
for an automatic appropriation by
the creditor of the thing pledged or
mortgaged in the event of
nonpayment of the principal
obligation within the stipulated
period
The subject transaction being void, the
registration of the deed of sale, by virtue of
which petitioner A. Francisco Realty was able to
obtain TCT No. PT-85569 covering the subject
lot, must also be declared void, as prayed for
by respondents in their counterclaim.

WHEREFORE, the decision of the Court of

Appeals is AFFIRMED, insofar as it dismissed
petitioners complaint against respondent
spouses on the ground that the stipulations in
the promissory notes are void for being
a pactum commissorium, but REVERSED
insofar as it ruled that the trial court had no
jurisdiction over this case. The Register of
Deeds of Pasig City is hereby ORDERED to
CANCEL TCT No. PT-85569 issued to petitioner
and ISSUE a new one in the name of
respondent spouses.
G.R. Nos. L-10837-38

May 30, 1958

ASSOCIATED INSURANCE and SURETY

COMPANY, INC., plaintiff,
vs.
ISABEL IYA, ADRIANO VALINO and LUCIA
VALINO, defendants.
ISABEL IYA, plaintiff,
vs.
ADRIANO VALINO, LUCIA VALINO and
ASSOCIATED INSURANCE and SURETY
COMPANY. INC.,defendants.
A building is an immovable property
irrespective of where or not said structure and
the land on which it is adhered to belong to
the same owner.
FACTS: Adriano Valino and Lucia A. Valino,
husband and wife, were the owners and
possessors of a house of strong materials
constructed on Lot No. 3, Block No. 80 of the
Grace Park Subdivision in Caloocan, Rizal,
which they purchased on installment basis
from the Philippine Realty Corporation.
On November 6, 1951, to enable her to
purchase on credit rice from the NARIC, Lucia
A. Valino filed a bond in the sum of P11,000.00
(AISCO Bond No. G-971) subscribed by the
Associated Insurance and Surety Co., Inc., and
as counter-guaranty therefor, the spouses
Valino executed an alleged chattel mortgage
on the aforementioned house in favor of the
surety company, which encumbrance was duly
registered with the Chattel Mortgage Register
of Rizal on December 6, 1951.
At the same time, the parcel of land which the
house was erected was registered in the name
of Philippine Realty Corporation.
Valino, to secure payment of an indebtedness
in the amount of P12,000.00, executed a real
estate mortgage over the lot and the house in
favor of Isabel Iya, which was duly registered
and annotated at the back of the certificate of
title.
Valino failed to satisfy her obligation to NARIC,
so the surety company was compelled to pay
the same pursuant to the undertaking of the
bond. In turn, surety company demanded
reimbursement from Valino, and as they failed
to do so, the company foreclosed the chattel
mortgage over the house. As a result, public

sale was conducted and the property was

awarded to the surety company.
The surety company then learned of the
existence of the real estate mortgage over the
lot and the improvements thereon; thus, they
prayed for the exclusion of the residential
house from the real estate mortgage and the
declaration of its ownership in virtue of the
award given during bidding.
Iya alleged that she acquired a real right over
the lot and the house constructed thereon, and
that the auction sale resulting from the
foreclosure of chattel mortgage was null and
void.
Surety company argued that as the lot on
which the house was constructed did not
belong to the spouses at the time the chattel
mortgage was executed, the house might be
considered as personal property, and they
prayed that the said building be excluded from
the real estate mortgage.
LC: Court rendered judgment dated March 8,
1956, holding that the chattel mortgage in
favor of the Associated Insurance and
Surety Co., Inc., was preferred and
superior over the real estate mortgage
subsequently executed in favor of Isabel
Iya. It was ruled that as the Valinos were not
yet the registered owner of the land on
which the building in question was
constructed at the time the first
encumbrance was made, the building then was
still a personality and a chattel mortgage over
the same was proper.
However, as the mortgagors were already the
owner of the land at the time the contract with
Isabel Iya was entered into, the building was
transformed into a real property and the real
estate mortgage created thereon was likewise
adjudged as proper. It is to be noted in this
connection that there is no evidence on record
to sustain the allegation of the spouses Valino
that at the time they mortgaged their house
and lot to Isabel Iya, the latter was told or knew
that part of the mortgaged property, i.e.,
the house, had previously been mortgaged to
the surety company.
The residential building was, therefore, ordered
excluded from the foreclosure prayed for by
Isabel Iya, although the latter could exercise
the right of a junior encumbrance. So the
spouses Valino were ordered to pay the amount
demanded by said mortgagee or in their
default to have the parcel of land subject of the
mortgage sold at public auction for the
satisfaction of Iya's claim.
The lower Court, deciding in favor of the
surety company, based its ruling on the
premise that as the mortgagors were not
the owners of the land on which the
building is erected at the time the first
encumbrance was made, said structure
partook of the nature of a personal property
and could properly be the subject of a chattel
mortgage. We find reason to hold otherwise,
for as this Court, defining the nature or
character of a building, has said:
. . . while it is true that generally, real
estate connotes the land and the

building constructed thereon, it is

obvious that the inclusion of the
building, separate and distinct from the
land, in the enumeration of what may
constitute real properties (Art. 415,
new Civil Code) could only mean one
thing that a building is byitself an
immovable property . . . Moreover, and
in view of the absence of any specific
provision to the contrary, a building is
an immovable property irrespective of
whether or not said structure and the
land on which it is adhered to belong to
the same owner. (Lopez vs. Orosa, G.R.
Nos. supra, p. 98).
Issue:
There is no question over Iyas right over the
land by real estate mortgage; however, as the
building instructed thereon has been the
subject of two mortgages, controversy arises
as to which of these encumbrances should
receive preference over the other.
HELD:
Wherefore the portion of the decision of the
lower Court in these two cases appealed from
holding the rights of the surety company, over
the building superior to that of Isabel Iya and
excluding the building from the foreclosure
prayed for by the latter is reversed and
appellant Isabel Iya's right to foreclose
not only the land but also the building
erected thereon is hereby recognized,
and the proceeds of the sale thereof at
public auction (if the land has not yet
been sold), shall be applied to the
unsatisfied judgment in favor of Isabel
Iya. This decision however is without prejudice
to any right that the Associated Insurance and

Surety Co., Inc., may have against the spouses

Adriano and Lucia Valino on account of the
mortgage of said building they executed in
favor of said surety company. Without
pronouncement as to costs. It is so ordered.
While it is true that real estate connotes the
land and the building constructed thereon, it is
obvious that the inclusion of the building,
separate and distinct from the land, in the
enumeration of what may constitute real
properties (Article 415), could only mean that a
building is by itself an immovable property.
Moreover, in view of the absence of any
specific provision to the contrary, a building is
an immovable property irrespective of whether
or not said structure and the land on which it is
adhered to belong to the same owner (Lopez v.
Orosa)
A building certainly cannot be divested of its
character of a realty by the fact that the land
on which it is constructed belongs to another.
In the case at bar, as personal properties could
only be the subject of a chattel mortgage
(Section 1, Act 3952) and as obviously the
structure in question is not one, the execution
of the chattel mortgage covering said building
is clearly invalid and a nullity.
While it is true that said document was
correspondingly registered in the Chattel
Mortgage Register of Rizal, this act produced
no effect whatsoever for where the interest
conveyed is in the nature of a real property,
the registration of the document in the registry
of chattels is merely a futile act. Thus, the
registration of the chattel mortgage of a
building of strong materials produce no effect
as far as the building is concerned (Leung
Yee vs. Strong Machinery Co., 37 Phil., 644).