Case Digest: PEDRO MOLINA v. COURT OF APPEALS, et al.

PEDRO MOLINA v. COURT OF APPEALS, et al.

398 SCRA 97 (2003)

If prior to the execution of the impugned Deed, a party signed receipts under which he acknowledged receiving sums of money as payment for his property, which receipts were worded in the vernacular and could not have been mistaken or misunderstood for anything else other than as evidence of the sale of his property, the transaction indicated was one of sale on installment.

More than four years after petitioner Pedro Molina (Molina) executed the Deed of Sale conveying his share of the property to his sister Felisa, Molina executed another Deed of Absolute Sale in lieu of the first deed covering the same share in favor of Felisa‘s son respondent Margarito Flores and his wife Nerisa Herrera.

Molina filed an action for reformation of instrument and/or annulment of document and title with reconveyance and damages before the Regional Trial Court (RTC) of Cavite, alleging that the Deed of Absolute Sale does not express the true will of the parties. The RTC ruled in favor of Molina and ordered the annulment of the Deed of Absolute Sale.

Margarito and Nerisa appealed to the Court of Appeals which reversed the RTC‘s decision and dismissed the complaint of Molina.

ISSUE:

Whether the parties intended the Deed of Absolute Sale in favor of Flores and Herrera to be an absolute sale or an equitable mortgage

HELD:

For the presumption of an equitable mortgage to arise under Art. 1602, two (2) requisites must concur: (a) that the parties entered into a contract denominated as a contract of sale, and (b) that their intention was to secure an existing debt by way of a mortgage. In the case at bar, the second requisite is conspicuously absent. That the alleged loan was received by Molina in installments of P1,000.00 per month for ten months or a total of P10,000.00 in fact indicates that the transaction was not one of a loan but of sale on installment.

Molina argues that assuming arguendo that a contract of sale was entered into, it was not consummated as the entire purchase price was not paid. Assuming that to be so albeit, by the Deed in question Molina acknowledged receipt of the P8,000.00 purchase price, it does not by itself bar the transfer of the ownership or possession of the property, much less dissolve the contract of sale. The contract remains but the payment of the price is a resolutory condition, and the remedy of the seller is to exact fulfillment or, in case of a substantial breach, to rescind the contract under Article 1191 of the Civil Code.

That Molina, prior to the execution of the impugned Deed, signed receipts under which he acknowledged receiving sums of money as payment for his property, which receipts were worded in the vernacular and could not have been mistaken or misunderstood for anything else other than as evidence of the sale of his property, seals the case against him. It confirms this Court‘s earlier observation that the transaction indicated was one of sale on installment.