222 SCRA 612


On May 20, 1986, the parties, with plaintiff-appellant as vendor and defendant-appellee David Motors and Marketing Corporation (DMMC, for brevity) through its representative, defendant-appellee David, executed by and between themselves a “Deed of Absolute Sale of Real Property” over a parcel of land (Lot 7-B of the Subd. plan (LRC) psd-324403, approved as a non-subd. proj. being a portion of Lot 7 (LRC) Pcs-16468 LRC Rec. No. 5941), including all improvements thereon, situated in the barrio of Hen. T. de Leon, Municipality of Valenzuela, Metro Manila, containing an area of Six Hundred Thirty One (631) square meters, more or less, covered by Transfer Certificate of Title No. 119038 of the Registry of Deeds of Caloocan City, and for and in consideration of One Hundred Fifty Thousand (P150,000.00) Pesos.

On November 27, 1987, plaintiff-appellant filed the instant complaint, praying for the annulment of the subject deed of absolute sale and consequent cancellation of the certificate of title obtained by defendants-appellees by virtue thereof; the interpretation and declaration of the subject deed of absolute sale as an equitable mortgage; and for a writ of preliminary injunction.

In their answer, defendants-appellees, contended that the subject encumbrance was one of absolute sale.


Whether the transaction effected between herein petitioner and private respondent is an absolute sale.


No, it is an equitable mortgage.

Private respondent’s demeanor in retaining a portion of the alleged purchase price, as advance interest for two months, is akin to, if not precisely the very circumstance mentioned by Article 1602(4) of the Civil Code that will warrant the legal presumption of an equitable mortgage. Besides, it was erroneous for respondent court to have made a sweeping insinuation that it was petitioner as vendor who suggested the “purchase price” and is thus precluded from assailing the sufficiency thereof, on account of the admission in judicio of private respondent that it was he who “placed the value of P150,000.00” as consideration on the document.

The fact that petitioner was accompanied by her “businesswoman daughter” to the office of private respondent is of no practical bearing because even persons of average intelligence invariably find themselves in no position whatsoever when bargaining with their creditor such as private respondent’s corporation whose primary business concern includes giving loans. Moreover, it may be recalled that petitioner only received the sum of P1,000.00 out of the P150,000.00 alleged as consideration for the “sale”. Such a measly sum is certainly another circumstance that reinforces our belief that the entire transaction was but a loan accommodation since no seller in her right senses will part with her treasured possession via a tedious process only to end up with a small sum of money in her pocket as consideration therefor.

At any rate, substantive law mandates that a contract purporting to be venta con pacto de retro or an outright sale shall be construed as an equitable mortgage for it involves a smaller transmission of rights. Moreover, there is no doubt that petitioner agreed to the execution of the so-called sale in favor of private respondent because of the urgent necessity for money of the apparent vendor to liquidate her indebtedness to Mrs. Dimafelis.

This is another circumstance where it may be fairly inferred that the real intention of the parties is for the transaction to secure the payment of a debt or the performance of any other obligation (Article 1602(6), New Civil Code).

*Case digest by Benjie L. Sumalpong, JD – 4, Andres Bonifacio College, SY 2019 – 2020