FACTS:Eliodoro BACARON conveyed a 15.3955-hectare parcel of land infavor of Benny GO for P20,000.00. He however averred that prior to extending said loan to him, GO required him to execute a document purporting to be a Transfer of Rights but was told that the same would only be a formality as he could redeem the unregistered land the moment he pays the loan. BACARON remains in possession of the property even after the conclusion of the transaction and continued paying the real property taxes subsequent to the alleged sale. About a year thereafter, BACARON, seeking to recover his property, went to GO to pay his alleged “loan” but the latter refused to receive the same and to return his property saying that the transaction between them was a sale and not a mortgage.
ISSUE: Whether the agreement entered into by the parties was one for equitable mortgage or for absolute sale.
HELD: The instances in which a contract of sale is presumed to be an equitable mortgage are enumerated in Article 1602 of the Civil Code. In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.Furthermore, Article 1604 of the Civil Code provides that the provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale.The present Contract, which purports to be an absolute deed of sale, should be deemed an equitable mortgage for the following reasons: (1) the consideration has been proven to be unusually inadequate; (2) the supposed vendor has remained in possession of the property even after the execution of the instrument; and (3) the alleged seller has continued to pay the real estate taxes on the property.
Digest Credit: Irvin Henson S. Ilog
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