Monday, June 7, 2010

Myrna Ramos vs Susana Sarao & Jonas Ramos

Chester Cabalza recommends his visitors to please read the original & full text of the case cited. Xie xie!

Myrna Ramos vs Susana Sarao & Jonas Ramos
G.R. No. 149756
February 11, 2005


Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the August 31, 2001 Decision of the Court of Appeals, WHEREFORE, the instant appeal is DISMISSED for lack of merit. The decision dated January 19, 1995 of the Regional Trial Court, Branch 145, Makati City is AFFIRMED in toto.

On February 21, 1991, Spouses Jonas Ramos and Myrna Ramos executed a contract over their conjugal house and lot in favor of Susana S. Sarao for and in consideration of P1,310,430. Entitled "DEED OF SALE UNDER PACTO DE RETRO," the contract, inter alia, granted the Ramos spouses the option to repurchase the property within six months from February 21, 1991, for P1,310,430 plus an interest of 4.5 percent a month. It was further agreed that should the spouses fail to pay the monthly interest or to exercise the right to repurchase within the stipulated period, the conveyance would be deemed an absolute sale.

On July 30, 1991, Myrna Ramos tendered to Sarao the amount of P1,633,034.20 in the form of two manager’s checks, which the latter refused to accept for being allegedly insufficient. On August 8, 1991, Myrna filed a Complaint for the redemption of the property and moral damages plus attorney’s fees. On August 13, 1991, she deposited with the RTC two checks that Sarao refused to accept.

On December 21, 1991, Sarao filed against the Ramos spouses a Petition "for consolidation of ownership in pacto de retro sale", the civil cases were later consolidated and jointly tried before RTC in Makati.

After trial, the RTC dismissed the Complaint and granted the prayer of Sarao to consolidate the title of the property in her favor. Aggrieved, Myrna elevated the case to the CA.

The appellate court sustained the RTC’s finding that the disputed contract was a bonafide pacto de retro sale, not a mortgage to secure a loan. It ruled that Myrna Ramos had failed to exercise the right of repurchase, as the consignation of the two manager’s checks was deemed invalid. She allegedly failed (1) to deposit the correct repurchase price and (2) to comply with the required notice of consignation.


a) Whether or not the honorable appellate court erred in ruling the subject Deed of Sale under Pacto de Retro was, and is in reality and under the law an equitable mortgage?

b) Whether or not the honorable appellate court erred in affirming the ruling of the court a quo that there was no valid tender of payment of the redemption price neither [sic] a valid consignation in the instant case?

c) Whether or not [the] honorable appellate court erred in affirming the ruling of the court a quo denying the claim of petitioner for damages and attorney’s fees?


The Petition is meritorious in regard to Issues 1 and 2.

A Pacto de Retro Sale or an Equitable Mortgage?

Respondent Sarao avers that the herein Petition should have been dismissed outright, because petitioner (1) failed to show proof that she had served a copy of it to the Court of Appeals and (2) raised questions of fact that were not proper issues in a petition under Rule 45 of the Rules of Court. This Court, however, disregarded the first ground; otherwise, substantial injustice would have been inflicted on petitioner. Since the Court of Appeals is not a party here, failure to serve it a copy of the Petition would not violate any right of respondent. Service to the CA is indeed mentioned in the Rules, but only to inform it of the pendency of the appeal before this Court.

As regards Item 2, there are exceptions to the general rule barring a review of questions of fact. The Court reviewed the factual findings in the present case, because the CA had manifestly overlooked certain relevant and undisputed facts which, after being considered, justified a different conclusion.

Pacto de Retro Sale Distinguished from Equitable Mortgage

The pivotal issue in the instant case is whether the parties intended the contract to be a bona fide pacto de retro sale or an equitable mortgage.

In a pacto de retro, ownership of the property sold is immediately transferred to the vendee a retro, subject only to the repurchase by the vendor a retro within the stipulated period. The vendor a retro’s failure to exercise the right of repurchase within the agreed time vests upon the vendee a retro, by operation of law, absolute title to the property. Such title is not impaired even if the vendee a retro fails to consolidate title under Article 1607 of the Civil Code.

On the other hand, an equitable mortgage is a contract that -- although lacking the formality, the form or words, or other requisites demanded by a statute -- nevertheless reveals the intention of the parties to burden a piece or pieces of real property as security for a debt. The essential requisites of such a contract are as follows: (1) the parties enter into what appears to be a contract of sale, but (2) their intention is to secure an existing debt by way of a mortgage. The nonpayment of the debt when due gives the mortgagee the right to foreclose the mortgage, sell the property, and apply the proceeds of the sale to the satisfaction of the loan obligation.

Equitable Mortgage Presumed to be Favored by Law

Jurisprudence has consistently declared that the presence of even just one of the circumstances set forth in the forgoing Civil Code provision suffices to convert a contract to an equitable mortgage. Article 1602 specifically states that the equitable presumption applies to any of the cases therein enumerated.

In the present factual milieu, the vendor retained possession of the property allegedly sold. Petitioner and her children continued to use it as their residence, even after Jonas Ramos had abandoned them. In fact, it remained as her address for the service of court orders and copies of Respondent Sarao’s pleadings.

The presumption of equitable mortgage imposes a burden on Sarao to present clear evidence to rebut it. Corollary to this principle, the favored party need not introduce proof to establish such presumption; the party challenging it must overthrow it, lest it persist. To overturn that prima facie fact that operated against her, Sarao needed to adduce substantial and credible evidence to prove that the contract was a bona fide pacto de retro. This evidentiary burden she miserably failed to discharge.

Contrary to Sarao’s bare assertions, a meticulous review of the evidence reveals that the alleged contract was executed merely as security for a loan.

Second Issue: Propriety of Tender of Payment and Consignation

Tender of payment is the manifestation by debtors of their desire to comply with or to pay their obligation If the creditor refuses the tender of payment without just cause, the debtors are discharged from the obligation by the consignation of the sum due. Consignation is made by depositing the proper amount to the judicial authority, before whom the tender of payment and the announcement of the consignation shall be proved. All interested parties are to be notified of the consignation. Compliance with these requisites is mandatory.

The trial and the appellate courts held that there was no valid consignation, because petitioner had failed to offer the correct amount and to provide ample consignation notice to Sarao. This conclusion is incorrect.

Third Issue: Moral Damages and Attorney’s Fees

Petitioner seeks moral damages in the amount of P500,000 for alleged sleepless nights and anxiety over being homeless. Her bare assertions are insufficient to prove the legal basis for granting any award under Article 2219 of the Civil Code. Verily, an award of moral damages is uncalled for, considering that it was Respondent Sarao’s accommodation that settled the earlier obligation of the spouses with the commercial bank and allowed them to retain ownership of the property.
Neither have attorney’s fees been shown to be proper. As a general rule, in the absence of a contractual or statutory liability therefor, sound public policy frowns on penalizing the right to litigate. This policy applies especially to the present case, because there is a need to determine whether the disputed contract was a pacto de retro sale or an equitable mortgage.

WHEREFORE, the Petition is partly GRANTED and the assailed Decision SET ASIDE. Judgment is hereby rendered:

(1) DECLARING (a) the disputed contract as an equitable mortgage, (b) petitioner’s loan to Respondent Sarao to be in the amount of P1,633,034.19 as of July 30, 1991; and (c) the mortgage on the property -- covered by TCT No. 151784 in the name of the Ramos spouses and issued by the Register of Deeds of Makati City --as discharged

(2) ORDERING the RTC to release to Sarao the consigned amount of P1,633,034.19

(3) COMMANDING Respondent Sarao to return to petitioner the owner’s copy of TCT No. 151784 in the name of the Ramos spouses and issued by the Register of Deeds of Makati City

(4) DIRECTING the Register of Deeds of Makati City to cancel Entry No. 24057, the annotation appearing on TCT No. 151784

(5) ORDERING petitioner to pay Sarao in the amount of P67,567.10 as reimbursement for real property taxes. No pronouncement as to costs. SO ORDERED.

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