41 MYRNA RAMOS, petitioner, vs. SUSANA S.

SARAO and JONAS RAMOS,

respondents.

[G.R. No. 149756. February 11, 2005]

Facts:

Before the court, Myrna Ramos as petitioner, claims of an equitable mortgage of

a contract denominated as sale. The contract named Deed of Sale under Pacto de
Retro by the parties pertains to the contract they made on Feb. 21, 1991 with spouses
Jonas and Myrna Ramos as vendors of house and lot sold at P1,310,430 to Susana S.
Sarao. On the same contract, a stipulation of a right to repurchase exists within six
months with a 4.5% interest per month to be paid by the vendors in addition to the
original price. If there will be no repurchase, then the sale would be deemed an
absolute sale. Unrelated to the contract stipulations, the vendors remained residence on
the said house and lot.

On July 30, 1991, before the expiration of such right to repurchase, Myrna
Ramos tendered payment to Sarao two mangers checks amounting to P1,633,034.20
which Sarao refused for being insufficient. Ramos filed a complaint for this non-
acceptance of payment on Aug. 8, 1991 in which she consigned the money. Sarao too
filed a case to consolidate her claim of ownership over the property on Dec. 21, 1991
for alleged non-payment to redeem the house and lot.

Other facts about this case is that sometime during the Regional Trial Court
(RTC) trials, Myrna Ramos alleged that her very own husband, Jonas Ramos to be a co-
defendant of Sarao through acts with Sarao without her consent.

Issue:

Myrna claims of an equitable mortgage out of the contract deemed by the parties
as Deed of Sale under Pacto de Retro. She claimed that the features of the contract,
as well as how they executed it, pertain to an equitable mortgage in reality. She also
added that the low selling and redemption price prove such claim whereas the market
value of the house and lot was estimated to be more or less 10 million. As to the refusal
of payment by the Sarao, Ramos believes that the amount she tendered payment is
correct under the stipulations of the contract.

On the other hand Sarao, through her lawyer, refused acceptance of the
payment due to deficiency. Sarao claimed she has the right to refuse payment because
preceding the said event, Jonas Ramos, husband of Mryna, sent a letter of incapacity to
redeem the property when the spouses failed to pay the monthly interest. Sarao then
started to consolidate the property incurring tax and legal expenses that purported to a
higher redemption price. And even though consigned, the amount is insufficient so as
to pay the obligation. With that, the payment of Ramos was deemed insufficient and
the sale rightfully deemed an absolute one. RTC favoured the appeal of Sarao.

Now, the Court of Appeals (CA) is to decide on the petition of Myrna Ramos,
whether the RTC erred in the decision that the disputed contract was of sale with
repurchase rather than a mortgage to secure a loan and that she was deemed to fail
the payment because of insufficiency in spite of the act of consignation.

In addition, she stated that their acts pertain to a mortgage rather than a Pacto
de Retro. The consignation, too, she stated as rightful as to the original amount had
there been no inclusion of non-creditable amounts.

Decision:

The CA decided that the contract was of equitable mortgage reversing its
previous decision that stated otherwise, also deeming the RTC conclusion as
insufficiently justified. For this decision, the property could be repurchased with
purchase price plus interest, reimbursement of real property tax to Sarao which she
made in good faith through the trials, RTC to release the consigned amount to Sarao
and to return the title of land to the spouses Jonas and Myrna Ramos. As to the
additional demand of Ramos against Sarao for moral damages amounting to P500,000,
the court decided on the issue that it is not needed for lacking sufficient legal basis.

Basis:

For the decision of the court that the contract was of equitable mortgage and not
of sale with repurchase, they referred to the Article 1371 of the Civil Code that
pertains to the intent of the contract to be the deciding factor of what a contract is. In
line with this particular decision they reiterated the natures of Equitable Mortgage and
Pacto de Retro in Articles 1602 and 1607 of the Civil Code. Under these articles,
equitable mortgage is presumed to be favoured by law over Pacto de Retro, because it
is in the doctrine that the law supports the less transmission of rights. Yet, the law
permits a rebuttal with clear evidence against what was previously construed, in which
Sarao failed to present. For the decision that pertains to the reimbursement of Sarao for
the real property tax payments, the court referred to Article 2175, Any person who is
constrained to pay the taxes of another shall be entitled to reimbursement from the
latter. The basis for the decision on the consigned amount falls under the Article 1602
which pertains to the consignation of amount due in case the creditor is unable to
accept payment.