G.R. No. 156522, 28 May 2004

FACTS:

Petitioner Erlinda San Pedro initiated this suit against the spouses Ruben1 Lee and Lilian Sison on November 23, 1994, praying for: (1) a declaration that the document entitled “Kasulatan ng Ganap na Bilihan ng Lupa” is an equitable mortgage and not a sale; (2) the reconveyance of the property subject of the “Kasulatan ng Ganap na Bilihan ng Lupa”; and (3) damages.

San Pedro’s version of events paints a portrait of an unscrupulous couple, usuriously taking advantage of her financial straits to enrich themselves. Petitioner claims that she desperately needed money to support her children’s college education, and approached one Philip dela Torre, who introduced her to respondent Ruben Lee. From Lee and his wife Lilian Sison, San Pedro was able to secure a loan in the amount of P105,000.00, with interest of P45,000.00, or a total indebtedness of P150,000.00. As security for this loan, she agreed to mortgage a 17,235-square meter parcel of agricultural land located at San Juan, Balagtas, Bulacan, covered by Transfer Certificate of Title (TCT) No. T-290387. This transaction took place in the office of Atty. Venustiano Roxas, where she met Lee for the first time.

Petitioner claims that Atty. Roxas and Lee coerced her to sign the “Kasulatan ng Ganap na Bilihan ng Lupa” and that the document was executed merely as written evidence of the loan and mortgage. She alleges that Atty. Venustiano Roxas and Ruben Lee told her that the document was just a formality, with the assurance from Atty. Roxas and Lee that respondents would never enforce the contract against her. She readily agreed because she believed in good faith that the spouses were “tunay na tao”. She further claims that she continued in possession of the parcel of land through her tenant, Federico Santos, and continued to receive her landowner’s share of the harvest from 1985 until 1995.

For their part, respondents presented Carlito Lee, Jose Samaniego, Atty. Amando Tetangco, Philip dela Torre, and Atty. Venustiano Roxas, in addition to respondent Ruben Lee.

Carlito Lee, Ruben’s brother, testified that Philip dela Torre introduced him and Ruben to Erlinda San Pedro, who wanted to sell her property. The sale price was originally P200,000.00, which was reduced to P150,000.00 because the agricultural lot in question had no existing right of way and was frequently flooded during the rainy season. Carlito also testified that although the contract of sale was entered into between San Pedro and Ruben Lee, the money for the purchase of the property came from Cenica Hardware, a corporation of which he is a part owner. Carlito alleged that he and Ruben met with San Pedro on several occasions, in order to negotiate the purchase price and terms of payment.

On their second meeting, they requested San Pedro to execute an affidavit of non-tenancy to prove that the property was not occupied. On their third meeting, San Pedro produced the requested affidavit, which was notarized by a certain Atty. Amando Tetangco. They set another meeting, for May 23, 1985, at which San Pedro arrived at the Cenica Hardware store with the affidavit of non-tenancy and the original title of the property. That same day, Carlito and his brother withdrew the amount of P150,000.00 from Solid Bank, and paid San Pedro, for which she signed a receipt.45 They then proceeded to the office of Atty. Venustiano Roxas for the execution of the contract of sale.

Jose Samaniego, the Municipal Assessor of Balagtas, Bulacan, explained that the amount appearing on the declaration of real property stands for the value of a certain parcel of land per square meter if the land is residential, commercial or industrial, and per hectare if it is agricultural. The unit value is based on the schedule of market value prepared during the revision, which is approved by the Provincial Assessor and submitted to the Sangguniang Panlalawigan for approval. Thus, the bases for determining unit value are the deed of sale, the payment value and the production cost of the land.

Atty. Amando Tetangco, testified that he notarized an affidavit of non-tenancy executed by Erlinda San Pedro sometime in May 1985. Philip dela Torre, a real estate broker, testified as to the negotiations between San Pedro and Lee regarding the purchase price of the property.54 The sum of P150,000.00 was finally agreed upon, with the capital gains tax to be paid by Lee.

The agreement between the parties was reduced in writing as the “Kasulatan ng Ganap na Bilihan ng Lupa”. For his participation in the transaction, dela Torre received a commission of 3%, or P4,500.00. Dela Torre was one of the witnesses to this contract, and identified his signature thereon. He also identified (1) the signature of San Pedro, who signed the document in his presence and (2) the document embodying the agreement that Ruben Lee would pay the capital gains tax on the transaction.

Finally, Atty. Venustiano Roxas testified for the respondents. He recalls having prepared and notarized the “Kasulatan ng Ganap na Bilihan ng Lupa”, and identified his signature thereon.

On June 22, 1998, the trial court rendered a decision in favor of petitioner, declaring the contract between petitioner and respondents as one of mortgage and not of sale, and ordering the reconveyance of the property and the payment of damages.

On appeal, the Court of Appeals reversed the trial court, and rendered a decision in favor of respondents.

ISSUE:

Whether or not the contract in question is an equitable mortgage or a deed of absolute sale?

RULING:

The contract was a deed of absolute sale.

Absent any evidence of the market value of the locale as of the date of the contract, it cannot be concluded that the price at which the property was sold, or about P8.70 per square meter, was grossly inadequate. Mere inadequacy of price would not be sufficient. The price must be grossly inadequate, or purely shocking to the conscience. Since the property in question could have been worth as little as P20.00 per square meter in 1994, the price of P8.70 per square meter nine years earlier, in 1985, does not seem to be grossly inadequate. Indeed, respondents’ Declaration of Real Property No. 10786, for the year 1987, shows the market value of the property to be only P34,470.00 for that year.

However, while the witness may have established that he was, indeed, the agricultural tenant of the petitioner, the identity of the parcel of land which he tills and the parcel of land described in the complaint was not established. The “Kasunduan sa Buwisan” entered into between Federico J. Santos and Lourdes Manalo Vda. De San Pedro dated May 14, 1975 reiterates the tenancy relation between witness Santos and the San Pedro family.

The parcel of land described therein has an area of 1.5 hectares, while the property subject of the contract in question has an area of 17,235 square meters, or 1.72 hectares. There is therefore no clear indicator that the parcel of land being tilled by Santos is, indeed, the parcel of land subject of the contract between San Pedro and Lee. Although a landowner-tenant relation has been established between San Pedro and Santos, we cannot conclude therefrom that San Pedro was in possession of the property subject of the “Kasulatan ng Ganap na Bilihan ng Lupa” through her tenant Federico Santos.

Respondents presented documentary evidence which shows that the contract was indeed a sale:

(1) a receipt for P150,000.00 dated May 23, 1985, issued by Erlinda San Pedro, attesting full receipt of the amount in question;
(2) an authority to pay capital gains tax, executed by Erlinda San Pedro in favor of Ruben Lee; and
(3) an affidavit of non-tenancy executed by Erlinda San Pedro.

The “Kasulatan ng Ganap na Bilihan ng Lupa” unequivocally states the absolute sale of the property covered by Transfer Certificate of Title No. T-290387. Being a notarized document, it carries the evidentiary weight conferred upon duly executed instruments provided by law, and is entitled to full faith and credit upon its face.

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