DACQUEL V. SPOUSES SOTELO [G.R. No. 203946, August 4, 2021]

 

DACQUEL V. SPOUSES SOTELO

G.R. No. 203946, August 4, 2021

SECOND DIVISION, HERNANDO J.

 

Sales; Equitable Mortgage

Principle: An equitable mortgage exists when a property is used as security for a debt, without the intention of actually transferring ownership. Decisive for the proper determination of the true nature of the transaction between the parties is their intent, shown not merely by the contract's terminology but by the totality of the surrounding circumstances, such as acts, conduct, declarations, and negotiations leading to the agreement.

This involves a parcel of land in Malabon City, originally owned by the Spouses Sotelo. In 1994, the Sotelos borrowed P140,000.00 from Arturo Dacquel to finance the construction of a 7-door apartment on the land. To secure the loan, the Sotelos allegedly signed a Deed of Sale, transferring the land to Dacquel. However, the Sotelos claimed that they signed the document without fully comprehending its contents and that they were deceived by Dacquel's actions. They argued that the Deed of Sale was fraudulent and that Dacquel held the land in trust for them. They filed a complaint seeking to annul the title and regain ownership of the land, asserting that the Deed of Sale was merely intended as security for the loan and not an actual sale.

 

Dacquel, in defense claimed that the Deed of Sale was a valid agreement and that the Sotelos voluntarily offered to sell the land to him.

 

Whether the Deed of Sale executed between Dacquel and the Spouses Sotelo was a valid sale.

 

NO. The court ruled in favor of the Spouses Sotelo, declaring the Deed of Sale to be an equitable mortgage rather than a valid sale. It found that the Sotelos signed the document without understanding its contents and were deceived by Dacquel. The court acknowledged that Dacquel held the title to the land as security for the loan, and the true nature of the transaction was an equitable mortgage.

 

The court emphasized that the essential characteristic of an equitable mortgage is that it is intended as security for a debt and does not involve a valid transfer of ownership. In this case, the evidence presented supported the Sotelos' claim that the Deed of Sale was a mortgage and not an actual sale.

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