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Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 154339               October 15, 2007

ROMUALDO ANSELMO for himself and in representation of his deceased wife, EMERLINDA MERCADO-ANSELMO, Petitioner,
vs.
SPOUSES WILLIAM HERNANDEZ & ROSEMARIE HERNANDEZ, Respondents.

D E C I S I O N

AZCUNA, J.:

This is a petition for review¹ of the Decision and Resolution of the Court of Appeals (CA), dated April 3, 2002 and July 11, 2002, respectively, in CA-G.R. CV No. 49437, entitled "Spouses William G. Hernandez and Rosemarie Z. Hernandez v. Spouses Romualdo Anselmo and Emerlinda Mercado-Anselmo."

The facts appear as follows:²

Petitioner and his wife and the spouses Manuel San Diego and Azucena Anselmo San Diego were the registered owners of a 712-square meter lot covered by Transfer Certificate of Title No. 95064, located in San Francisco del Monte, Quezon City where petitioner and his wife likewise maintained their residence and place of business.

On April 24, 1991, the parcel of land and the improvements erected thereon, namely, petitioner’s house and garments factory, were allegedly sold by petitioner and his wife and the San Diegos to respondents for the sum of ₱2,500,000 as evidenced by a deed of absolute sale. The sale was registered and on April 29, 1991, the Register of Deeds issued Transfer Certificate of Title No. 36791 in the name of respondents.

The sale allegedly came with an understanding that petitioner and his wife, while searching for a place to transfer, will be permitted to stay on the property temporarily or until April 30, 1991. Petitioner and his wife, however, did not move out on April 30, 1991. Respondents sent a letter to them on May 13, 1991 ordering them to vacate the premises. Another demand letter was sent on August 21, 1991, giving petitioner and his wife fifteen (15) days from receipt to leave the property. Despite the demands, they remained on the property.

Consequently, on February 13, 1992, respondents filed against petitioner and his wife a Complaint for Specific Performance and Damages with the Regional Trial Court (RTC) of Quezon City³ praying that they deliver the physical possession of the property to them.

In their Answer with Counterclaim, petitioner and his wife contended: 1) that they did not sell the subject property to respondents, and that the deed of sale and other documents were obtained fraudulently; 2) that the sale is void for want of consideration because their supposed transaction with respondents was for a loan of money in the amount of ₱2,500,000; 3) that the house and lot served as collateral for the loan; 4) that they have received ₱300,000 from respondents; 5) that they paid the corresponding interest on the loan; 6) that contrary to respondents’ assertion, they did not have any business transaction with or indebtedness to Boston Equity Resources, Inc. (hereafter, Boston Equity); and 7) that respondents use Boston Equity, with intent to gain, in their dealings with unsuspecting borrowers.

On February 23, 1995, the RTC of Quezon City rendered a Decision upholding the validity of the sale and ordering petitioners to deliver the physical possession of the property to respondents, thus:

At the outset, it must be pointed out that the defendants have the burden of proof … to present evidence on the facts in issue necessary to establish their defense … by preponderance of evidence. [T]here is a disputable presumption that private transactions have been fair and regular, that the ordinary course of business has been followed, and that there is sufficient consideration for a contract (Sec. 3, Rule 131, Rules of Court)…

A simple scrutiny of defendant’s evidence will readily reveal that they have miserably failed to discharge or fulfill their burden of proof. Defendant Emerlinda Mercado-Anselmo, in her own testimony under cross-examination, admitted that plaintiff William Hernandez paid her ₱350,000.00 in cash and assumed and actually paid her obligation to a certain Mr. Choa. It is not true, therefore, that the Deed of Absolute Sale was not supported by a sufficient consideration. Mrs. Anselmo herself acknowledge[d] that Mr. Hernandez paid a total of ₱2,250,000.00 in connection with the Deed of Absolute Sale. The fact that the latter state[d] [that] the consideration [was] ₱2.5 Million is of little moment. The difference is so minute as to command an overpowering importance. Besides, Mr. Hernandez testified that the obligation of the defendant which he settled amounted to more than ₱2.2 Million.

The defendants insist that their indebtedness (which Mr. Hernandez paid) was not to BOSTON but to a certain Mr. Chua. However, said person was not presented to corroborate defendant’ bare assertion. Worse, said claim is belied by the documents admittedly signed by defendant Emerlinda Anselmo … which either refer to BOSTON or are written on its stationery. As such, this court is more inclined to believe Mr. Hernandez’ testimony that defendants’ creditor was BOSTON… But whether it was to Mr. Chua or to BOSTON that the defendants were indebted matters little, if at all. The fact remains that Mr. Hernandez assumed the obligation and paid it as part of the consideration for the Deed of Absolute Sale. That the defendants were consequently relieved from their obligation is not denied by them, but is in effect admitted.

In [the] light of the foregoing findings of fact, there is no way by which the questioned Deed of Absolute Sale can be categorized as void for want of consideration. Let us now examine if defendant’s contention that it is invalid for being simulated and having been secured through fraud and false representation has any factual and legal basis.

… In this case, the defendants claim that the real agreement between them and the plaintiffs was one of equitable mortgage but they were induced by the latter to sign a Deed of Absolute Sale instead over the property intended to secure the loan on the pretext (albeit false or fraudulent) that Mr. Hernandez needed such instrument to obtain from his Chinese friends the money he was going to lend to them (the defendants). This is of course strongly controverted and denied by the plaintiffs. But granting arguendo that the said allegation of the defendants were true, the resulting contract would not be simulated or fictitious but only fraudulent (Pangadil v. CFI of Cotabato, 116 SCRA 347), pursuant to Article 1338 of the Civil Code of the Philippines, which thus renders the said Deed of Absolute Sale merely voidable at the most (Arts. 1334 and 1390, Civil Code of the Philippines). As such, said Deed is valid until it is set aside, and its validity may be assailed only in action for that purpose (Llacer v. Muñoz, 12 Phil. 328), which shall be brought within four years from the time of the discovery of the fraud (Art. 1591, ibid.).

In other words, the attack against its validity must be directly made in an action or in a counterclaim for that purpose…. In their "Answer with Compulsory Counterclaim," the defendants patently failed to allege and pray for the annulment of the said Deed of Absolute Sale as a counterclaim, but limited their allegations and prayer to actual, moral and exemplary damages.

To emphasize, the fraud and false representation alleged by the defendants would not have rendered the questioned Deed of Absolute Sale simulated and void, but only voidable, and only if they had successfully proven the existence of the [said] fraud or false representation, which they actually have not. While defendant Emerlinda Anselmo testified on this matter, the probative value of her testimony does not outweigh the contrary declaration of plaintiff Mr. Hernandez. Not only is the latter more consistent with human behavior and ordinary experience, it [plaintiff’s declaration] is more importantly supported by the documentary evidence admittedly signed or executed by Mrs. Anselmo. In contrast, we only have her naked assertion shot through and through with glaring inconsistencies. The weak and puerile corroborative testimony of her sister-in-law miserably failed to bolster Mrs. Anselmo’s case, proceeding as it was from a biased and polluted source.

Because of the foregoing considerations and conclusions, the first issue in this case is hereby resolved in favor of the validity and legality of the Deed of Absolute Sale executed by the parties herein on April 24, 1991… The second issue is likewise resolved in the affirmative, that is, that the defendants had transacted with Boston Equity Resources, Inc. as clearly borne [out] by the documentary evidence admittedly signed and executed by the defendants.

As regards the third issue, suffice it to state that plaintiffs’ version of the circumstances surrounding and leading to the execution of the Deed of Absolute Sale conforms to usual business practice much more than that of the defendants’. it is not uncommon for debtors in default to sell their mortgaged property, rather than have it foreclosed, so that they can fetch a higher price therefore. As Mrs. Anselmo herself testified, she received ₱350,000 from Mr. Hernandez aside from the latter’s assumption of her obligation to a certain Mr. Chua. Obviously, the cash she received represented an additional amount over and above what would have been realized [had the property been] foreclosed and sold at public auction.

On the other hand, defendants’ version is simply incredible. This Court cannot imagine how a businesswoman of Mrs. Anselmo’s stature and standing would willingly sign a document she fully knew to be an Absolute Deed of Sale if her real agreement with Mr. Hernandez was only for a loan secured by a real estate mortgage. The ploy supposedly employed by Mr. Hernandez, that of using the instrument to obtain the money to be loaned to the defendants from his Chinese friends, is too pat and transparent as to deceive and mislead even an ordinary [man], much less an established businesswoman engaged in the manufacturing and export of garments like Mrs. Anselmo. If only on this score, the latter’s version must perforce be rejected.

Accordingly, said third issue is resolved to the effect that the agreement between the parties was indeed a sale (of the property in question) and not merely an equitable mortgage. It necessarily follows [therefore] that the defendants are bound to deliver the possession of said property to the plaintiffs…. From all the above, it becomes obvious that the plaintiffs are the ones entitled to the reliefs prayed for in their Complaint… It goes without saying that the defendants wrongfully retained possession and use of subject property after the last demand of the plaintiffs, thereby entitling the latter to reasonable compensation for the deprivation of their right to the use and enjoyment thereof.

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs, and against the defendants, as follows:

1) Ordering the defendants to forthwith deliver the physical possession of the subject property to the plaintiffs;

2) Ordering the defendants to pay to the plaintiffs the following:

(i) Compensation at the rate of ₱2,000.00 a month, with legal interest, for the use and occupation of subject property, computed from 1 September 1991 until date of actual delivery thereof to the plaintiffs;

(ii) ₱50,000.00 as moral damages;

(iii) ₱30,000.00 as exemplary damages;

(iv) ₱30,000.00 as and by way of attorney’s fees; and

(v) Costs of suit.

Defendants’ counterclaims are DISMISSED.

SO ORDERED.⁴

The ruling of the RTC was affirmed by the CA in a Decision dated April 3, 2002. The dispositive portion thereof reads:

"WHEREFORE, premises considered, the Decision dated February 23, 1995 of the Regional Trial Court, Branch 82, Quezon City, in Civil Case No. Q92-11368, is hereby AFFIRMED. Costs against the appellants.

SO ORDERED.⁵

Petitioner’s motion for reconsideration was denied. Hence, this petition raising the following issues:⁶

I

WHETHER THE LOWER COURT AND THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING THE DEED OF ABSOLUTE SALE AS NULL AND VOID FOR BEING FICTITIOUS AND SIMULATED;

II

WHETHER THE LOWER COURT AND THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING THE DEED OF ABSOLUTE SALE AS AN EQUITABLE MORTGAGE;

III

WHETHER THE LOWER COURT AND THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING THE TRANSACTION BETWEEN THE PETITIONERS AND RESPONDENTS AS A LOAN; AND

IV

WHETHER THE LOWER COURT AND THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING THAT THE LOWER COURT DID NOT HAVE JURISDICTION OVER THE COMPLAINT FOR SPECIFIC PERFORMANCE WHICH, IN REALITY, IS A COMPLAINT FOR EJECTMENT.

Petitioner argues, as follows:

One, the transaction between the parties was principally a loan with equitable mortgage, and that the sale was merely a ruse to circumvent the prohibition against pactum commissorium;

Two, the deed of sale was executed on April 24, 1991. The loan vouchers of Boston Equity in the sum of ₱2,500,000 evidencing the indebtedness of petitioner’s deceased wife, Emerlinda, were executed on November 16, 1990. This shows that the sale was a convenient scheme of respondents to circumvent the legal requirement of foreclosure;

Three, notwithstanding the deed of absolute sale, petitioner and his wife and respondent William, along with the co-owners of the property, had a verbal agreement that the transaction was a loan. Petitioner and his wife agreed to sign the deed of sale because, according to respondent William, it would be easier for him to borrow money from his Chinese friends, on petitioner’s behalf, if the title to the property were in his name;

Petitioner never had the intention of selling his property to respondents because the loan that he and his wife wanted to obtain from respondent William was to be used for the expansion of their garments business. They signed the documents in the name of Boston Equity under the instruction of respondent William who likewise serves as President of Boston Equity. Petitioner claims that he and his wife never received any amount from Boston Equity. Their property was given as security for the loan of ₱2,500,000 that they obtained from respondent William;⁷

Four, respondents’ evidence made it appear that petitioner and his wife were indebted to two parties: Mr. Bonifacio Choa and Boston Equity. During the trial, respondents averred that petitioner and his wife had to borrow money from Boston Equity in order to pay their obligation to Mr. Choa. Respondents’ Exhibits "J" and "K" show on their face that the obligation of petitioner and his wife was to a certain Mr. Bonifacio Choa in whose favor the sum of ₱1,900,000 as loan granted by Boston Equity was applied. This demonstrates that the property was not sold to respondents but was mortgaged to Boston Equity. That the property was mortgaged to Boston Equity is further bolstered by the fact that respondent William testified that petitioner and his wife offered that he buy the subject property because they obtained a loan from Boston Equity and they were unable to pay the interest so the latter was going to foreclose the property;

Five, it is highly surprising that the lower court dismissed "as of little moment" the difference (₱250,000) between what petitioner and his wife received (₱2,250,000) as against the consideration of the alleged sale (₱2,500,000) as "so minute as to command an overpowering importance." The lower court should have held the difference of ₱250,000 as evidence that respondents retained for themselves a part of the purchase price indicative of an equitable mortgage. Moreover, the peculiar circumstances surrounding the execution of the deed of sale give rise to a fair inference that the real intention of the parties is that the transaction shall secure the payment of a debt, evidencing equitable mortgage rather than a contract of sale; and

Six, the appealed decisions should be nullified for want of jurisdiction. The complaint should have been treated as one for Unlawful Detainer. The pertinent allegations of the complaint are reproduced as follows:

"7. However, notwithstanding the lapse of four (4) months, more or less, from receipt of the aforesaid demand letter ("to vacate the subject property and surrender possession thereof") … defendants still failed and/or refused to deliver the subject property to plaintiffs."

Section 1, Rule 70 of the Rules of Court, provides:

… such … vendee … may, at anytime within one year after such unlawful deprivation or withholding of possession, bring an action in the proper Municipal Trial Court against the person or persons unlawfully withholding or depriving of possession … for the restitution of such possession together with damages and costs."⁸

The issue is whether the parties truly entered into a contract of sale, a resolution of which requires an examination of the facts and the evidence presented in the case.

This Court is not a trier of facts.⁹ The findings of facts of the CA, especially when these agree with those of the trial court, are accorded respect and seldom disturbed.

From the records, the Court considers the following: 1) the promissory note evidencing a loan of ₱2,500,000¹⁰ prepared by Boston Equity was signed by petitioner and his wife on November 16, 1990; 2) a loan voucher issued by Boston Equity on November 16, 1990 showed that petitioner and his wife received the total amount of ₱2,250,000 (₱1,900,000 of which was indicated to have been applied to petitioner and his wife’s indebtedness to Mr. Bonifacio M. Choa); 3) petitioner’s wife Emerlinda wrote on March 12, 1991 and June 24, 1991 letters of extension for the payment of the loan, addressed to Boston Equity; 4) Boston Equity issued a Statement of Account in the name of petitioner’s wife Emerlinda; 5) the Deed of Absolute Sale was executed on April 24, 1991; 6) respondent William Hernandez was the President of Boston Equity at the time the alleged loan was extended by the latter to petitioner and his wife, and when the purported contract of sale was executed; 7) petitioner’s residence and garments business are situated in the lot covered by the deed of sale; 8) no real estate mortgage was shown to have been executed by petitioner in favor of Boston Equity to secure the loan; 9) petitioner received ₱300,000 in cash from respondents; and 10) the San Diego spouses, the co-owners of the property, did not receive anything from the proceeds of the sale.

While the circumstances of the case and the parties’ testimonies may appear to give various possibilities, it is not the Court’s function to speculate. The evidence points to the fact that petitioner and his wife obtained a loan from Boston Equity, and entered into a contract of sale with respondents.

The Court finds no reason, therefore, to overturn the findings of the RTC and the CA. Pertinent portions of the CA decision read:

[A] contract, according to Article 1305 of the Civil Code, ‘is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Once the minds of the contracting parties meet, a valid contract exists, whether it is reduced to writing or not. And, when the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors-in-interest, no evidence of such terms other than the contents of the written agreement, except when it fails to express the true intent and agreement of the parties thereto, in which case, one of the parties may bring an action for reformation of an instrument to the end that such true intention may be expressed…

For an action for reformation of an instrument as provided for in Article 1359 to prosper, the following requisites must concur, to wit: (1) there must have been a meeting of the minds of the parties to the contract; (2) the instrument does not express the true intention of the parties; and (3) the failure of the instrument to express the true intention of the parties is due to mistake, fraud, inequitable conduct or accident…

In the case at bench, appellants [petitioners] had not shown or established the presence of the afore-stated requirements for the reformation of the deed in question. In fact, as correctly pointed out by the court a quo, appellants failed to allege and pray for the annulment of the deed of absolute sale as a counterclaim, but limited their allegations and prayer to actual, moral and exemplary damages. As earlier stressed, the subject deed of absolute sale was couched in clear terms and conditions.

Finally, the claim of the appellants that their indebtedness was not to Boston Equity Resources, Inc. but to a certain Mr. Choa is unsubstantiated. It bears stressing that said person was not presented to corroborate appellant’s bare assertion, and besides, said claim is belied by the documents…admittedly signed by appellant Emerlinda Anselmo, which either refer to Boston or written on its stationery. Also, Mrs. Anselmo herself testified that she received ₱350,000.00 from Mr. Hernandez aside from the latter’s assumption of her obligation to Mr. Choa…In light of the foregoing, it cannot be said that the deed of absolute sale can be categorized as void for want of consideration. In addition, the voluntary, written and unconditional acceptance of contractual commitments negated the theory of equitable mortgage.¹¹

With regard to the award of damages, attorney’s fees and litigation costs, however, the Court believes that the same is not warranted under the circumstances. Respondents failed to show proof or factual basis of the alleged moral injury.¹² Likewise, where there is no showing that petitioner acted in a wanton, fraudulent, reckless, oppressive or malevolent manner, the award of exemplary damages cannot be granted.¹³ Finally, attorney’s fees and expenses of litigation cannot, according to Article 2208 of the Civil Code, ¹⁴ be recovered in this case, there being no stipulation to that effect and the case does not fall under any of the exceptions provided by law.

WHEREFORE, the petition is PARTIALLY GRANTED. The award of moral and exemplary damages, and attorney’s fees and litigation costs is DELETED, and the Decision and Resolution of the Court of Appeals, dated April 3, 2002 and July 11, 2002, respectively, in CA-G.R. CV No. 49437 are MODIFIED accordingly.

No costs.

SO ORDERED.

ADOLFO S. AZCUNA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

ANGELINA SANDOVAL-GUTIERREZ Associate Justice

RENATO C. CORONA Associate Justice

CANCIO C. GARCIA
Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes

¹ Under Rule 45 of the Rules of Court.

² Rollo, pp. 77-79.

³ Docketed as Civil Case No. Q-92-11368.

⁴ Rollo, pp. 116-125.

⁵ Id. at 82.

⁶ Id. at 14-15.

⁷ Id. at 69-71.

⁸ Id. at 16-29 (emphasis supplied).

⁹ Only in instances when a miscarriage of justice could probably result from the trial court’s and/or the Court of Appeals’ oversight of significant facts which could materially alter the determination of the case does this Court step in and evaluate evidentiary matters.

¹⁰ Maturity date of the loan was December 16, 1990 with an interest rate of 7%.

¹¹ Rollo, pp. 80-82.

¹² While no proof of pecuniary loss is necessary, it is essential that the claimant should satisfactorily provide factual basis for the alleged moral injury (People v. Villamor, G.R. Nos. 111313-14, January 16, 1988, 284 SCRA 184).

¹³ Xentrex Automobile, Inc. v. Court of Appeals, G.R. No. 121559, June 18, 1998, 291 SCRA 66.

¹⁴ In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;

…

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim;

…

(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered.

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