G.R. No. 73889, 30 September 1987, 154 SCRA 530

FACTS:

The claimants for Lot No. 433 with an area of 216 square meters and Lot No. 817 with an area of 34 square meters were:

1. Petitioner Florencio Balatero, for a portion of both lots by purchase from Josefa I. de Badelles and Leona, Salvacion, Jose, Catalina and Dominga, as surnamed Badelles;
2. Josefa Iglupas Badelles, for Lot No. 433 having inherited the same from her parents. Josefa died during the pendency of the case and was substituted by her heirs, petitioners herein;
3. Private respondent Juan A. Veloso, for Lot No. 433, having purchased the same from Josefa Iglupas; and
4. Anacleto Iglupas for Lot No. 433, having inherited the same from his deceased parents Alejo Iglupas and Tomasa Ronda.

The court finds that Lot No. 817 which contains an area of 34 square meters was provided by the cadastral surveyors for the widening of a national street and the corner thereof with San Miguel St. With the filing of their cadastral answers, claimants admit that the land in question is still part and parcel of the public domain. The State as sovereign power and as absolute and final owner of as lands of the public domain has the right to segregate from an area which it allows to be claimed for private ownership such portion or portions thereof as it may deem necessary to retain for common use and for the public good. Lot No. 817 cannot, therefore, be claimed in private ownership by the claimants herein or any other person for that matter. The State had reserved the same for public use.

That the property in question was originally owned by the parents of Josefa Iglupas (mother-in-law of claimant Florencio Balatero) and her brother Alejo (father of claimant Anacleto Iglupas); that after the death of their parents, the lot was given to Alejo Iglupas and his wife Tomasa Ronda; that Alejo Iglupas died in 1916 and on May 10, 1968, his widow Tomasa Ronda, and their son Severo sold the property to Josefa Iglupas and her husband Juan Badelles for a consideration of P111.00, which sale is embodied in a public document denominated “Escritura de Compra Venta” (Exh. “E”); that in that same year of 1918, Josefa Iglupas together with her husband and children occupied the lot and the old house thereon; that in 1926, Josefa Badelles built a new and bigger house on the lot; that Juan Badelles died in that house and lot in 1927 and his widow Josefa Badelles and her children continued living thereon until the children became of age and got married; that Josefa 1.

Badelles herself died in that property in 1967; that on June 9, 1930, Josefa Iglupas in order to secure a loan of P68.00 mortgaged the property to claimant Juan Veloso in a public document denominated as “Pacto de Retro Sale” (Exh. “B”); that this loan was paid sometime in 1947, first in an amount of P100.00 and subsequently an additional amount of P300.00 00; that on April 30, 1954, Josefa Iglupas and her children Catalina, Leona, Salvacion and Leoncia sold a portion of the lot to Florencio Balatero as shown in a document denominated “Deed of Sale Unregistered Land’ (Exh. “II”); that the lot was later resurveyed and subdivided and in a plan (Exh. “I”) duly approved by the Director of Lands, Lot 433 was divided into Lot 433-A (Exh. “I-A”) with an area of 98 square meters as pertaining to Florencio Balatero and Lot 433-B (Exh. ” I-B “) with an area of 118 square meters as pertaining to the Heirs of Josefa Badelles; that Josefa Iglupas Vda. de Badelles had occupied the property from the year 1918 and up to the time of her death in 1967 when her “Deed of Sale of Unregistered Land” (Exh. “II”); (sic) that heirs succeeded her in the possession thereof; that the property has always been d in the name of Josefa Iglupas Badelles (Exhs. “IV-Badelles”) and taxes thereon paid under her name (Exhs. “VI-Badelles” and “VI-A-Badelles” to “VI-J-Badelles”), that the portion, Lot 433-A, acquired by Florencio Balatero was also later declared in his own name (Exh. “III”) and the taxes thereon also paid by him (Exhs. “IV” and “IV-A” to “IV-U”)

After consideration of the evidence of the claimants, the court finds and holds that it is claimant Florencio Balatero who has a registerable title over Lot No. 433-A and the Heirs of Josefa Iglupas Vda. de Badelles over that of Lot No. 433-B. There is no conflict as between the Heirs of Josefa I. Badelles and Florencio Balatero, hence it is only incumbent upon the court to treat of the claims of Anacleto Iglupas and Juan Veloso.

ISSUE:

Whether or not the respondent court erred in holding that the court a quo committed an error in declaring the pacto de retro sale, Exhibit B as a mere mortgage?

RULING:

Yes, because the said contract was one of an equitable mortgage and not a pacto de retro sale.

On its face, the contract would show that the disputed parcel of land was transferred to private respondent Juan Veloso by way of sale with pacto de retro. However, there are circumstances present in the instant case which clearly indicate that the contract should be treated as an equitable mortgage.

First, the 216 square meters parcel of land remained undisturbed in the possession of the vendor Josefa Iglupas even after the execution of the contract. Had Josefa Iglupas really executed a contract of sale in favor of Juan Veloso, this small parcel of land should have been delivered to the latter and he would have taken immediate possession after the execution of the contract of sale. The assertion of the private respondent to the effect that Josefa Iglupas became a lessee after the execution of the contract and his claim that the P100.00 received from Josefa Iglupas and the P300.00 from Leoncia Balatero (receipt of which amounts he had earlier denied) were rentals create a presumption that the contract was intended to be an equitable mortgage under paragraph 2, Article 1602 of the New Civil Code (see Capulong vs. Court of Appeals, 130 SCRA 245). Moreover, Josefa paid the taxes due on the property, mortgaged the lot to the Philippine National Bank, and exercised all acts of ownership during the period when it was supposed to already have been sold.

Second, the price or consideration in 1930 of P68.00 is unusually inadequate. This conclusion is supported by the fact that the same parcel of land was bought by Josefa Iglupas in 1918 for the price of P111.00. If the contract was indeed one of sale, why should the vendor, Josefa Iglupas sell the parcel of land for a price almost half of what she paid for it twelve years earlier. It is common knowledge that the value of real property appreciates through the years and not otherwise. This fact also shows that the contract was an equitable mortgage rather than a contract of sale (See Labasan vs. Lacuesta, supra; and Serrano vs. Court of Appeals, 139 SCRA 179).

The fact that four (4) years after the execution of the contract, more specifically on October 6, 1934, private respondent Juan Veloso executed an affidavit (Exh. “D”) to consolidate his right of ownership over the subject parcel of land is of no consequence. The “constructive possession” over the parcel of land mentioned by the appellate court did not ripen into ownership. The rule is that only the possession acquired and enjoyed in the concept of owner can seven as a title for acquiring dominion. (Article 447, old Civil Code, Aside 540, new Civil Code) As can be gleaned from the facts earlier stated, Juan Veloso never owned the subject parcel of land because the contract over the same between Josefa Iglupas and Juan Veloso was actually an equitable mortgage and not a contract of sale.

*Case digest by Mary Tweetie Antonette G. Semprun, JD – IV, Andres Bonifacio College, SY 2019 – 2020