272 SCRA 95


That sometime before May 5, 1967, Raymundo Dapiton who was then needing money, approached the private respondent Meljohn dela Pena and requested for a loan of P400.00 offering to place as security of said loan his residential house and lot located at Almeria, Leyte.

That the fair market value of the same is not less than P3,000.00 more or less; it is the house where Dapiton has been living for thirty (30) years up to the present.

That the private respondent agreed to the request of Dapiton and thereafter said private respondent prepared the corresponding document and Dapiton was made to sign the same on the 5th day of May, 1967, before Notary Public, Dionisio R. dela Peña, father of herein defendant.

Thus, the petitioners contend that the transaction between Raymundo Dapiton and the private respondent was one of loan of P400.00 to be paid within one year time with the property subject of the question deed as security for the payment of the said loan.

Private respondent, however, maintains that the transaction between him and the deceased Dapiton was one of absolute sale.


Whether or not the true nature of the contract between Dapiton and dela Pena was one of an equitable mortgage or absolute sale.


Closely examining the facts of this case, we find that, contrary to the findings of the Court of Appeals, there are numerous indications that the contract effected between the parties is actually an equitable mortgage and not an absolute deed of sale.

Firstly, it is without dispute that private respondent Dela Peña made two (2) annotations on the deed of sale, one at the left hand margin and another at the back of the page. These annotations grant Raymundo Dapiton the right to repurchase his property within one year. This right of repurchase is a clear contravention of private respondent’s claim that the deed of sale was meant to be absolute.

Secondly, it has been established that the deceased Dapiton habitually borrowed money from numerous acquaintances, using the said property as security for the loan. The amount borrowed, amounting to Four Hundred Pesos (P400.00), invariably remained the same. Although these loans were constantly denoted as “sale with right of repurchase,” the deceased Dapiton continously remained in possession of the property despite a succession of such loan transactions. Evidently, all these transactions were equitable mortgages.

Thirdly, we find it difficult to believe that the private respondent would tolerate the uninterrupted occupation of the property by the Dapitons simply because he has no need for it just yet. In the light of the fact that the private respondent has been in dispute with the Dapitons since 1968, and considering his claim of absolute ownership, it is unthinkable for private respondent to let Dapiton and his heirs remain and make use of the property for almost thirty (30) years.

Fourthly, the private respondent is a member of the bar, well-versed in the intricacies of the law. We thus find it improbable that he would agree to add the annotations pertaining to the deceased Dapiton’s right of repurchase only to appease Dapiton’s children. If , as he claims, the sale was indeed absolute, the fact that he would place such annotations as would put in question the absoluteness of the sale raises some doubt as to the true nature of the transaction involved. After all, if the property is truly his by right, no amount of objections raised by the children of the elder Dapiton would change the fact that the sale is already a fait accompli. No vendee in his right mind would agree to any act which would weaken his absolute claim to a property sold to him wthout any restraint or condition. If the sale was indeed absolute, why grant Dapiton a right to repurchase at all?

Lastly, Article 1603 of the New Civil Code provides:

“Article 1603. In case of doubt , a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.”

In the case at bar, the true nature of the contract between Dapiton and dela Peña is the crux of the issues raised in this petition. Considering the circumstances of this case, we resolved the doubt in favor of the petitioner. The actuations of the private respondent are highly suspect, if not downright dishonorable. AS A JUDGE and member of the bar, he is charged with the duty to act fairly and equitably. He has not been fair, nor has been forthright in his dealings with Raymundo Dapiton.

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