11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

VOL. 180, DECEMBER 29, 1989 635

Ramos vs. Court of Appeals
*
G.R. No. 42108. December 29, 1989.

OSCAR D. RAMOS and LUZ AGUDO, petitioners, vs.

HON. COURT OF APPEALS, ADELAIDA RAMOS and
LAZARO E. MENESES, respondents.

Civil Law; Mortgages; Sales; Equitable mortgage; The

purported deeds of sale con pacto de retro are equitable mortgages;
The two deeds were executed by reason of the loan and. that the
purchase price stated therein was the amount of the loan itself.—
Even if we indulge the petitioners in their contention that they
are justified in not taking possession of the lots considering that
what were allegedly sold to them were only the rights, shares,
interests and participation of private respondent Adelaida Ramos
in the said lots which were under administration, however, such
fact will not justify a reversal of the conclusion reached by the
respondent court that the purported deeds of sale con pacto de
retro are equitable mortgages. Such a conclusion is buttressed by
the other circumstances catalogued by respondent court especially
the undisputed fact that the two deeds were executed by reason of
the loan extended by petitioner Oscar Ramos to private
respondent Adelaida Ramos and that the purchase price stated
therein was the amount of the loan itself.
Same; Same; Same; Same; The true intention of the parties
being that the transaction shall secure the payment of the debt, it
shall be presumed to be an equitable mortgage; Existence of one
circumstance is enough to create the presumption.—The above-
stated circumstances are more than sufficient to show that the
true intention of the parties is that the transaction shall secure
the payment of said debt and, therefore, shall be presumed to be
an equitable mortgage under Paragraph 6 of Article 1602
hereinbefore quoted. Settled is the rule that to create the
presumption enunciated by Article 1602, the existence of one
circumstance is enough. The said article expressly provides
therefor “in any of the following cases,” hence the existence of any
of the circumstances enumerated therein, not a concurrence nor
an overwhelming number of such circumstances, suffices to give
rise to the presumption that the contract with the right of
repurchase is an equitable mortgage.

www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 1/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

Same; Same; Same; Same; Interpretation; Parol evidence rule;

The case at bar falls squarely under one of the exceptions to the
rule that

_______________

* SECOND DIVISION.

636

636 SUPREME COURT REPORTS ANNOTATED

Ramos vs. Court of Appeals

there was failure to express the true intent and agreement of the
parties.—Equally puerile is the other contention of petitioners
that respondent court erred in not applying the exclusionary parol
evidence rule in ascertaining the true intendment of the
contracting parties. The present case falls squarely under one of
the exceptions to said rule as provided in then Section 7 of Rule
130, thus: x x x (a) Where a mistake or imperfection of the writing
or its failure to express the true intent and agreement of the
parties, or the validity of the agreement is put in issue by the
pleadings.
Same; Same; Same; Same; Same; If the terms of the contract
are clear and leave no doubt as to the intention of the contracting
parties, the literal meaning of the stipulation shall control;
Exception.—Moreover, it is a well entrenched principle in the
interpretation of contracts that if the terms thereof are clear and
leave no doubt as to the intention of the contracting parties the
literal meaning of the stipulation shall control but when the
words appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former.
Same; Same; Same; Same; Same; Admission of parol
testimony to prove that a’deed, absolute in form, was in fact given
and accepted as a mortgage does not violate the rule against
admission of oral evidence to vary or contradict the terms of a
written instrument; Sales with a right to repurchase are not
favored.—The admission of parol testimony to prove that a deed,
absolute in form, was in fact given and accepted as a mortgage
does not violate the rule against the admission of oral evidence to
vary or contradict the terms of a written instrument. Sales with a
right to repurchase, as defined by the Civil Code, are not favored.
We will not construe instruments to be sales with a right to
repurchase, with the stringent and onerous effects which follow,
unless the terms of the document and the surrounding
circumstances require it. Whenever, under the terms of the
writing, any other construction can fairly and reasonably be
www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 2/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

made, such construction will be adopted and the contract will be

construed as a mere loan unless the court can see that, if enforced
according to its terms, it is not an unconscionable one.
Same; Same; Same; Same; Whenever it is clearly shown that a
deed of sale with pacto de retro, regular on its face, is given as
security for a loan, it must be regarded as an equitable mortgage.
—On the faces thereof, the contracts purport to be sales with
pacto de retro; however, since the same were actually executed in
consideration of the aforesaid loans said contracts are indubitably
equitable mortgages. The

637

VOL. 180, DECEMBER 29, 1989 637

Ramos vs. Court of Appeals

rule is firmly settled that whenever it is clearly shown that a deed

of sale with pacto de retro, regular on its face, is given as security
for a loan, it must be regarded as an equitable mortgage.
Same; Same; Special proceedings; Partition; Probate court;
Jurisdiction; Approval of the probate court of the conditional sale
is not a conclusive determination of the intrinsic or extrinsic
validity of the contract but a mere recognition of the rights of
private respondent as an heir to dispose of her rights and interests
over her inheritance even before partition.—A reading of the order
of the probate court will show that it is merely an approval of the
deed of conditional sale dated May 27, 1959 executed by petitioner
Adelaida Ramos in favor of petitioners. There is nothing in said
order providing for the consolidation of ownership over the lots
allegedly sold to petitioners nor was the issue of the validity of
said contract discussed or resolved therein. “To give approval”
means in its essential and most obvious meaning, to confirm,
ratify, sanction or consent to some act or thing done by another.
The approval of the probate court of the conditional sale is not a
conclusive determination of the intrinsic or extrinsic validity of
the contract but a mere recognition of the right of private
respondent Adelaida Ramos as an heir, to dispose of her rights
and interests over her inheritance even before partition. As held
in Duran, et al, vs. Duran, the approval by the settlement court of
the assignment pendente lite, made by one heir in favor of the
other during the course of the settlement proceedings, is not
deemed final until the estate is closed and said order can still be
vacated, hence the assigning heir remains an interested person in
the proceeding even after said approval.
Same; Same; Same; Same; Same; Same; Same; Probate
jurisdiction of the former court of first instance or the present
regional trial court relates only to matters having to do with the
settlement of the estate and probate of wills of deceased persons,

www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 3/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

but does not extend to the determination of questions of ownership

that arise during the proceeding; A separate action may be the
appropriate remedy; Approval of the conditional sale by the
probate court was without prejudice to the filing of the proper
action for consolidation of ownership and / or reformation of
instrument in the proper court within the prescriptive period.—
Moreover, the probate jurisdiction of the former court of first
instance or the present regional trial court relates only to matters
having to do with the settlement of the estate and probate of wills
of deceased persons, and the appointment and removal of
administrators, executors, guardians and trustees. Subject to
settled exceptions not present in this case, the law does not
extend the jurisdiction of a

638

638 SUPREME COURT REPORTS ANNOTATED

Ramos vs. Court of Appeals

probate court to the determination of questions of ownership that

arise during the proceeding. The parties concerned may choose to
bring a separate action as a matter of convenience in the
preparation or presentation of evidence. Obviously, the approval
by the probate court of the conditional sale was without prejudice
to the filing of the proper action for consolidation of ownership
and/or reformation of instrument in the proper court within the
statutory period of prescription.
Same; Same; Same; Same; Same; Same; A probate court
acting as a cadastral court acts with limited competence and has
no jurisdiction over actions for consolidation of ownership, and
such action must have been filed in the former CFI, now in the
regional trial court in the exercise of its general jurisdiction.—The
same jurisdictional flaw obtains in the order of consolidation
issued by the cadastral court. The court of first instance or the
regional trial court, acting as cadastral court, acts with limited
competence. It has no jurisdiction to take cognizance of an action
for consolidation of ownership, much less to issue an order to that
effect, such action must have been filed in the former court of first
instance, now in the regional trial court, in the exercise of its
general jurisdiction. That remedy, and the procedure therefor, is
now governed by Rule 64 of the Rules of Court as a special civil
action cognizable by the regional trial court in the exercise of
original general jurisdiction.
Same; Same; Same; Same; Same; Art. 1607 of the Civil Code
contemplates a contentious proceeding wherein the vendor a retro
must be named respondent in the caption and title of the petition
for consolidation of ownership and duly summoned and heard.—
Hence in Crisologo, et al. vs. Centeno, et al., we ruled that said
Article 1607 contemplates a contentious proceeding wherein the
www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 4/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

vendor a retro must be named respondent in the caption and title

of the petition for consolidation of ownership and duly summoned
and heard. An order granting the vendee’s petition for
consolidation of ownership, without the vendor a retro being
named as respondent, summoned and heard, is a patent nullity
for want of jurisdiction of the court over the person of the latter.
Same; Same; Same; Same; Same; Null and void judgment;
The order of consolidation issued by the cadastral court being void
for lack of jurisdiction, is non-existent and may be wholly
disregarded.—The questioned order of consolidation issued by the
cadastral court, being void for lack of jurisdiction, is in
contemplation of law non-existent and may be wholly disregarded.
Such judgment may be assailed any

639

VOL. 180, DECEMBER 29, 1989 639

Ramos vs. Court of Appeals

time, either directly or collaterally, by means of a separate action

or by resisting such judgment in any action or proceeding
whenever it is invoked. It is not necessary to take any step to
vacate or avoid a void judgment; it may simply be ignored.
Same; Same; Prescription; The present case having been filed
approximately seven years from the execution of the deeds, was
seasonably instituted; Prescriptive period for action based upon a
written contract and for reformation is ten years.—On the issue of
prescription, in addition to what has been said, the present case,
having been filed on February 28, 1960, approximately seven (7)
years from the execution of the questioned deeds, was seasonably
instituted. The prescriptive period for actions based upon a
written contract and for reformation is ten (10) years under
Article 1144 of the Civil Code. Such right to reformation is
expressly recognized in Article 1365 of the same code. Same;
Same; Purpose of Art. 1602 of the Civil Code.—Article 1602 of the
Civil Code is designed primarily to curtail the evils brought about
by contracts of sale with right of repurchase, such as the
circumvention of the law against usury and pactum
commissorium. In the present case before us, to rule otherwise
would contravene the legislative intent to accord the vendor a
retro maximum safeguards for the protection of his legal rights
under the true agreement of the parties.

PETITION for certiorari to review the decision of the Court

of Appeals. Gancayco, J.

The facts are stated in the opinion of the Court.

     Godofredo V. Magbiray for petitioners.
     Joselito Lim for private respondents.
www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 5/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

REGALADO, J.:

The instant petition for review on cetiorari impugns the1

decision of the Court of Appeals dated October 7, 1975,
which affirmed in toto the decision of the Court of First
Instance of Tarlac in Civil Case No. 4168, entitled
“Adelaida Ramos, et al. vs. Oscar D. Ramos, et al.,” holding
that the contracts between

_______________

1 CA-G.R. No. 49354-R. Penned by Justice Emilio A. Gancayco and

concurred in by Associate Justices Ricardo C. Puno and B.S. de la Fuente.
Rollo, 28-37.

640

640 SUPREME COURT REPORTS ANNOTATED

Ramos vs. Court of Appeals

the parties are not ventas con pacto de retro but are
equitable mortgages.
Sometime in January, 1959, private respondent
Adelaida Ramos borrowed from her brother, petitioner
Oscar D. Ramos, the amounts of P5,000.00 and P9,000.00
in connection with her business transaction with one Flor
Ramiro, Fred Naboa and Atty. Ruperto Sarandi involving
the recovery of a parcel of land in Tenejeros, Malabon. The
said amount was used to finance the trip to Hawaii of
Ramiro, Naboa and Atty. Sarandi. As security for said loan,
private respondent Adelaida Ramos executed in favor of
petitioners two (2) deeds of conditional sale dated May 27,
1959 and August 30, 1959, of her rights, shares, interests
and participation respectively over Lot No. 4033 covered by
Original Certificate of Title No. 5125 registered in the
name of their parents,2 Valente Ramos and Margarita
Denoga, now deceased, and Lot No. 4221 covered by
Transfer Certificate of Title No. 10788 then registered in
the names
3
of Socorro Ramos, Josefina Ramos and Adelaida
Ramos, said properties being of the Cadastral Survey of
Paniqui, Tarlac.
Upon the failure of said private respondent as vendor a
retro to exercise her right of repurchase within the
redemption period, aforenamed petitioner filed a petition
for consolidation and approval of the conditional sale of Lot
No. 4033 in Special Proceedings No. 5174, 4entitled
“Intestate Estate of the late Margarita Denoga,” and a
petition for approval of the pacto de retro sale of Lot No.
4221 in the former Court5
of First Instance of Tarlac acting
as a cadastral court. On January 22, 1960, the said

www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 6/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

probate court issued an order with the following

disposition:

“WHEREFORE, the deed of CONDITIONAL SALE executed on

May 27, 1959, by Adelaida Ramos in favor of spouses Oscar D.
Ramos and Luz Agudo, conveying to the latter by way of pacto de
retro sale whatever rights and interests the former may have in
Lot No. 4033 of the Cadastral Survey of Paniqui, which, deed of
conditional sale is

_______________

2 Folder of Exhibits, 1-6.

3 Ibid., 11-13, 15.
4 Ibid., 7-8.
5 Ibid., 16-17.

641

VOL. 180, DECEMBER 29, 1989 641

Ramos vs. Court of Appeals

known as Document No. 14, Page 26, Book VI, Series of 1959, of the
6
notarial register of Notary Public Jose P. Sibal, is hereby approved.”

The cadastral Court also issued a similar order dated April

18, 1960, the dispositive portion of which reads:

“WHEREFORE, by way of granting the petition, the Court orders

the consolidation of ownership and dominion in petitioners-
spouses Oscar D. Ramos and Luz Agudo over the rights, shares
and interests of Adelaida Ramos in Lot No. 4221 of the Cadastral
Survey of Paniqui, Tarlac, which the latter sold to the former
under a pacto de retro sale executed in a public instrument known
as Document No. 22, Page 28, Book No. VI. Series of 1959, of the
Notarial Registry of Notary Public Jose P. Sibal but which she
failed to repurchase within the period specified in said
7
Document.”

Private respondents had been and remained in possession

of these properties until sometime in 1964 when petitioner
took possession thereof.
On February 28, 1968, private respondent filed Civil
Case No. 4168 with the then Court of First Instance of
Tarlac for declaration of nullity of orders, reformation of
instrument, recovery of possession with preliminary
injunction and damages. The complaint therein alleged
that the deeds of conditional sale, dated May 27, 1959 and
August 30, 1959, are mere mortgages and were vitiated by
misrepresentation, fraud and undue influence and that the
orders dated January 22, 1960 and April 18, 1960,
respectively issued by the probate and cadastral courts,

www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 7/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

were null and void for lack of jurisdiction. Petitioners, in

their answer to the complaint, specifically deny the
allegations of fraud and misrepresentation and interposed
as defense the fact that the questioned conditional sales of
May 27, 1959 and August 30, 1959 were voluntarily
executed by private respondent Adelaida Ramos and truly
expressed the intention of the parties; that the action, if
any, has long prescribed; that the questioned orders of
January 22, 1960 and April 18, 1960, approving the
consolidation of ownership of the lands in question in favor
of petitioner were within the jurisdiction of the lower court,
in its capacity as

_______________

6 Rollo, 7-8.
7 Ibid.,8.

642

642 SUPREME COURT REPORTS ANNOTATED

Ramos vs. Court of Appeals

a probate court insofar as Lot No. 4033 is concerned, and

acting as a cadastral court with respect to Lot No. 4221;
and that said lands subject of the conditional sales were in
custodia legis in connection with the settlement of the
properties of the late Margarita Denoga, the predecessor in
interest of both petitioners and private respondents.
On January 7, 1970, the court below issued a pre-trial
order to the effect that petitioners admit the genuineness
and due execution of the promissory notes marked as
Exhibits “F” and “F-1” and that the principal triable issue
is whether or not the documents purporting to be deeds of
conditional sale, marked as Exhibits “B”, “B-1” and 8
“G”
were in fact intended to be equitable mortgages. In its
order dated February 17, 1971, the trial court also
declared: “Both parties agreed and manifested in open
court the principal obligation in the transaction reflected in
Exhibits ‘B’ and ‘B-1’ and ‘G’ is one of loan. The parties
differ, however,
9
on the nature of the security described
therein.”
On May 17, 1971, the court a quo rendered a decision
the decretal part of which reads:

“WHEREFORE, jugment is hereby rendered:

1) Denying defendants’ motion to dismiss of February 23,

1970;
2) Declaring Exhibits ‘B’, ‘B-1’ and ‘G’ as loan transaction
secured by real estate mortgages;

www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 8/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

Annulling and setting aside Exhibits ‘D’, ‘D-1’, ‘I’, ‘I-1’ and
3) ‘I-2’;
4) Ordering plaintiff’s, jointly and severally to pay (within
ninety [90] days from receipt of a copy of this judgment)
defendants the sum of P5,000.00 specified in Exhibit ‘B’,
with interest thereon at the legal rate from November 28,
1959 until full payment together with the sum of
P9,308.00 specified in Exhibit ‘G’ with interest thereon at
the legal rate from December 1, 1959 until full payment,
and in default of such payment, let the properties
mortgaged under Exhibits ‘B’, ‘B-1’ and ‘G’ be sold to
realize the mortgage debt and costs; and
5) Dismissing defendants’ counter-claim.

_______________

8 Rollo, 25; Record on Appeal, 64-67.

9 Ibid., id., 132.

643

VOL. 180, DECEMBER 29, 1989 643

Ramos vs. Court of Appeals
10
With costs against defendants.”

On June 14, 1971, petitioners appealed said decision to the

Court of Appeals which, on October 7, 1975; affirmed in all
respects the judgment of the trial court. Petitioners’ motion
for reconsideration11 of said decision was denied on
November 27, 1975.
On January 8, 1976, petitioners filed the petition at bar
anchored on the following assignments of errors:

“1. The Hon. Court of Appeals erred in not applying the

correct provisions of law interpreting the
conditional sales dated May 27, 1959 and August
30, 1959, Exhibits ‘B’ and ‘G’ as equitable
mortgages.
“2. That as a consequence of its ruling that the
conditional sales, Exhibits ‘B’ and ‘G’, are equitable
mortgages, the Hon. Court of Appeals erred in
ordering the reformation of the same.
“3. The Honorable Court of Appeals erred in holding
that the order dated January 22, 1960, Exhibit C or
2, and the order dated April 18, 1960, Exhibit H or
6, issued by the probate court in Sp. Proc. No. 5174
and by the cadastral court in G.L.R.O. Rec. No. 395,
respectively, are null and void for lack of
jurisdiction. ,

www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 9/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

“4. The Hon. Court of Appeals erred in not applying the

applicable provisions of law on the prescription of
action and in not
12
dismissing the complaint filed in
the lower court.

We find the petition devoid of merit.

Article 1602 of the Civil Code provides:

“The contract shall be presumed to be an equitable mortgage, in

any of the following cases:

(1) When the price of a sale with right to repurchase is

unusually inadequate;
(2) When the vendor remains in possession as lessee or
otherwise;
(3) When upon or after the expiration of the right to
repurchase another instrument extending the period of
redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the pur-

_______________

10 Folder of Original Record on Appeal, 103-104.

11 Rollo, 48.
12 Ibid., 105; Brief for Petitioners, 8-9.

644

644 SUPREME COURT REPORTS ANNOTATED

Ramos vs. Court of Appeals

chase price;
(5) When the vendor binds himself to pay the taxes on the
thing sold;
(6) In any other case where it may be fairly inferred that the
real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of any
other obligation.

In any of the foregoing cases, any money, fruits or other benefit to

be received by the vendee as rent or otherwise shall be considered
as interest which shall be subject to the usury laws.”

The Court of Appeals, in holding that the two (2) deeds

purporting to be pacto de retro sale contracts are equitable
mortgages, relied on the following factual findings of the
trial court, to wit:

“Several undisputed circumstances persuade this Court (that) the

questioned deeds should be construed as equitable mortgages as
contemplated in Article 1602 of the Civil Code, namely: (1)

www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 10/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

plaintiff vendor remained in possession until 1964 of the

properties she allegedly sold in 1959 to defendants; (2) the sums
representing the alleged purchase price were actually advanced to
plaintiff by way of loans, as expressly admitted by the parties at
the hearing of February 17, 1971, reflected in an Order of the
same date: and (3) the properties allegedly purchased by
defendant Oscar Ramos and his wife have never been declared for
13
taxation purposes in their names. Exhibits K, K-1, L and L-l.”

Even if we indulge the petitioners in their contention that

they are justified in not taking possession of the lots
considering that what were allegedly sold to them were
only the rights, shares, interests and participation of
private respondent Adelaida14Ramos in the said lots which
were under administration, however, such fact will not
justify a reversal of the conclusion reached by respondent
court that the purported deeds of sale conpacto de retro are
equitable mortgages. Such a conclusion is

_______________

13 Rollo, 32-33.
14 A co-owner has the right to freely sell and dispose of his undivided
interest but no right to sell a divided, definite part of the real estate
owned in common. The transferee does not acquire any specific portion of
the whole until partition. (Lopez vs. Ilustre, 5 Phil. 567 [1906]; Ramos
Silos, et al. vs. Ramos, et al., 97 Phil. 263 [1955]).

645

VOL. 180, DECEMBER 29, 1989 645

Ramos vs. Court of Appeals

buttressed by the other circumstances catalogued by

respondent court especially the undisputed fact that the
two deeds were executed by reason of the loan extended by
petitioner Oscar Ramos to private respondent Adelaida
Ramos and that the purchase price stated therein was the
amount of the loan itself.
The above-stated circumstances are more than sufficient
to show that the true intention of the parties is that the
transaction shall secure the payment of said debt and,
therefore, shall be presumed to be an equitable mortgage
under Paragraph 6 of Article 1602 hereinbefore quoted.
Settled is the rule that to create the presumption
enunciated by Article 151602, the existence of one
circumstance is enough. The said article expressly
provides therefor “in any of the following cases,” hence the
existence of any of the circumstances enumerated therein,
not a concurrence nor an overwhelming number of such
circumstances, suffices to give rise to the presumption that

www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 11/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

the contract with the right of repurchase is an equitable

mortgage. As aptly stated by the Court of Appeals:

“Thus, it may be fairly inferred that the real intention of the

parties is that the transactions in question were entered into to
secure the payment of the loan and not to sell the property
(Article 1602, Civil Code). Under Article 1603 of the Civil Code it
is provided that: ‘In case of doubt, a contract purporting to be a
sale with right to repurchase shall be construed as an equitable
mortgage.’ In this case, we have no doubt that the transaction
between the parties is that of a loan secured by said properties by
way of mortgage. Hence, we find that Exhibits B and G do not
reflect the true and real intention of the parties and should
16
accordingly be reformed and construed as equitable mortgages.”

Equally puerile is the other contention of petitioners that

respondent court erred in not applying the exclusionary
parol evidence rule in ascertaining the true intendment of
the contracting parties. The present case falls squarely
under one of the exceptions to said rule as provided in then
Section 7 of Rule

_______________

15 Santos vs. Duata, et al., 14 SCRA 1041 (1965); Capulong, et al. vs.
Court of Appeals, et al, 130 SCRA 245 (1984).
16 Rollo, 33-34.

646

646 SUPREME COURT REPORTS ANNOTATED

Ramos vs. Court of Appeals

130, thus:

xxx
(a) Where a mistake or imperfection of the writing or its failure
to express the true intent and agreement of the parties, or the
17
validity of the agreement is put in issue by the pleadings;”
xxx

Moreover, it is a well entrenched principle in the

interpretation of contracts that if the terms thereof are
clear and leave no doubt as to the intention of the
contracting parties the literal meaning of the stipulation
shall control but when the words appear to be contrary to
the evident intention
18
of the parties, the latter shall prevail
over the former.
The admission of parol testimony to prove that a deed,
absolute in form, was in fact given and accepted as a
mortgage does not violate the rule against the admission of
oral evidence to vary or contradict the terms of a written
19
www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 12/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180
19
instrument. Sales with a right to repurchase, as defined
by the Civil Code, are not favored. We will not construe
instruments to be sales with a right to repurchase, with the
stringent and onerous effects which follow, unless the
terms of the document and the surrounding circumstances
require it. Whenever, under the terms of the writing, any
other construction can fairly and reasonably be made, such
construction will be adopted and the contract will be
construed as a mere loan unless the court can see that, if
enforced
20
according to its terms, it is not an unconscionable
one.
On the faces thereof, the contracts purport to be sales
with pacto de retro; however, since the same were actually
executed

_______________

17 Formerly, Sec. 22, Rule 123, 1940 Rules of Court; now reproduced in
Sec. 9, Rule 130, 1989 Revised Rules on Evidence.
18 Art. 1370, Civil Code; Labasan, et al. vs. Lacuesta. et al., 86 SCRA 16
(1978); Balatero vs. Intermediate Appellate Court, et al., 154 SCRA 530
(1987).
19 Ignacio vs. Chua Hong, et al., 52 Phil. 940 (1929); Aguinaldo vs.
Esteban, et al., 135 SCRA 645 (1985); Serrano vs. Court of Appeals, et al.,
139 SCRA 179 (1985).
20 Padilla vs. Linsangan, 19 Phil. 65 (1911); Aquino vs. Deala, 63 Phil.
582 (1936).

647

VOL. 180, DECEMBER 29, 1989 647

Ramos vs. Court of Appeals

in consideration of the aforesaid loans said contracts are

indubitably equitable mortgages. The rule is firmly settled
that whenever it is clearly shown that a deed of sale with
pacto de retro, regular on its face, is given as security
21
for a
loan, it must be regarded as an equitable mortgage.
With respect to the orders dated January 22, 1960 and
April 18, 1960, issued by the Court below acting as a
probate court and cadastral court, respectively, the same
could not preclude the institution of the case now under
review.
A reading of the order of the probate court will show
that it is merely an approval of the deed of conditional sale
dated May 27, 1959 executed by petitioner Adelaida Ramos
in favor of petitioners. There is nothing in said order
providing for the consolidation of ownership over the lots
allegedly sold to petitioners nor was the issue of the
validity of said contract discussed or resolved therein. “To
give approval” means in its essential and most obvious

www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 13/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

meaning, to confirm, ratify,22sanction or consent to some act

or thing done by another. The approval of the probate
court of the conditional sale is not a conclusive
determination of the intrinsic or extrinsic validity of the
contract but a mere recognition of the right of private
respondent Adelaida Ramos as an heir, to dispose of her
rights and 23
interests over her inheritance even 24 before
partition. As held in Duran, et al, vs. Duran, the
approval by the settlement court of the assignment
pendente lite, made by one heir in favor of the other during
the course of the settlement proceedings, is not deemed
final until the estate is closed and said order can still be
vacated, hence the assigning heir remains an interested
person in the proceeding even after said approval.
Moreover, the probate jurisdiction of the former court of
first instance or the present regional trial court relates only
to

_______________

21 Ignacio vs. Chua Hong, supra; Capulong vs. Court of Appeals, et al.,
ante.
22 State vs. Rhein, 127 N.E., 1079, 1081; 149 Iowa, 76; 3A Words and
Phrases, Permanent Edition, 500.
23 Arts. 493 and 1088, Civil Code; Jakosalem vs. Rafols, et al., 73 Phil.
628; De Borja, et al. vs. Vda. de Borja, 46 SCRA 755 (1972); Go Ong vs.
Court of Appeals, 154 SCRA 271 (1987).
24 20 SCRA 279 (1967).

648

648 SUPREME COURT REPORTS ANNOTATED

Ramos vs. Court of Appeals

matters having to do with the settlement of the estate and

probate of wills of deceased persons, and the appointment
and removal of administrators, executors, guardians and
trustees. Subject to settled exceptions not present in this
case, the law does not extend the jurisdiction of a probate
court to the determination of questions of ownership that
arise during the proceeding. The parties concerned may
choose to bring a separate action as a matter of
convenience
25
in the preparation or presentation of
evidence. Obviously, the approval by the probate court of
the conditional sale was without prejudice to the filing of
the proper action for consolidation of ownership and/or
reformation of instrument in the proper court within the
statutory period of prescription.
The same jurisdictional flaw obtains in the order of
consolidation issued by the cadastral court. The court of
first instance or the regional trial court, acting as cadastral

www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 14/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

court, acts with limited competence. It has no jurisdiction

to take cognizance of an action for consolidation of
ownership, much less to issue an order to that effect, such
action must have been filed in the former court of first
instance, now in the regional trial court, in the exercise of
its general jurisdiction. That remedy, and the procedure
therefor, is now governed by Rule 64 of the Rules of Court
as a special civil action cognizable by the regional trial
court in the exercise of original general jurisdiction.
Antecedent thereto, Article 1607 of the Civil Code
provided for consolidation as follows:

“In case of real property, the consolidation of ownership in the

vendee by virtue of the failure of the vendor to comply with the
provisions of article 1616 shall not be recorded in the Registry of
Property without a judicial order, after the vendor has been duly
heard.”
26
Hence in Crisologo, et al. vs. Centeno, et al., we ruled that
said Article 1607 contemplates a contentious proceeding
wherein the vendor a retro must be named respondent in
the caption and title of the petition for consolidation of
ownership and duly

_______________

25 Vda. de Mañalac vs. Ocampo, et al., 73 Phil. 661 (1942).

26 26 SCRA 48 (1948).

649

VOL. 180, DECEMBER 29, 1989 649

Ramos vs. Court of Appeals

summoned and heard. An order granting the vendee’s

petition for consolidation of ownership, without the vendor
a retro being named as respondent, summoned and heard,
is a patent nullity for want of jurisdiction of the court over
the person of the latter.
The questioned order of consolidation issued by the
cadastral court, being void for lack of jurisdiction, is in
contemplation of law non-existent and may be wholly
disregarded. Such judgment may be assailed any time,
either directly or collaterally, by means of a separate action
or by resisting such judgment
27
in any action or proceeding
whenever it is invoked. It is not necessary to take any
step to vacate
28
or avoid a void judgment; it may simply be
ignored.
On the issue of prescription, in addition to what has
been said, the present case, having been filed on February
28, 1960, approximately seven (7) years from the execution
of the questioned deeds, was seasonably instituted. The
www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 15/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

prescriptive period for actions based upon a written

contract and for reformation is ten (10) years under Article
1144 of the Civil Code. Such right to reformation 29
is
expressly recognized in Article 1365 of the same code.
Article 1602 of the Civil Code is designed primarily to
curtail the evils brought about by contracts of sale with
right of repurchase, such as the circumvention
30
of the laws
against usury and pactum commissorium. In the present
case before us, to rule otherwise would contravene the
legislative intent to accord the vendor a retro maximum
safeguards for the protection of his legal rights under the
true agreement of the parties. The judicial experience in
cases of this nature and the rationale for the remedial
legislation are worth reiterating, considering that such
nefarious practices still persist:

“It must be admitted that there are some cases where the parties
really intend a sale with right to repurchase. Although such cases
are

_______________

27 Banco Español-Filipino vs. Palanca, 37 Phil. 921 (1918); Gomez vs.

Concepcion, etc., et al., 47 Phil. 717 (1925); Ang Lam vs. Rosillosa. et. al.,
86 Phil. 447 (1950).
28 49 C.J.S. 879-880.
29 Conde, et al. vs. Cuenca, et al, 99 Phil. 1056 (1956); Seno vs.
Mangubat, 156 SCRA 113 (1987).
30 Balatero vs. Intermediate Appellate Court, et al., ante.

650

650 SUPREME COURT REPORTS ANNOTATED

Ramos vs. Court of Appeals

rare, still the freedom of contract must be maintained and

respected. Therefore, the contract under consideration is
preserved, but with adequate safeguards and restrictions.
“One of the gravest problems that must be solved is that raised
by the contract of sale with right of repurchase or pacto de retro.
The evils arising from this contract have festered like a sore on
the body politic, x x x
xxx
“It is a matter of common knowledge that in practically all of
the so-called contracts of sale with right of repurchase, the real
intention of the parties is that the pretended purchase-price is
money loaned, and in order to secure the payment of the loan a
contract purporting to be a sale with pacto de retro is drawn up. It
is thus that the provisions contained in articles 1859 and 1858 of
the present Civil Code which respectively prohibit the creditor
from appropriating the things given in pledge or mortgage and

www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 16/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

ordering that said things be sold or alienated when the principal

obligation becomes due, are circumvented.
“Furthermore, it is well-known that the practice in these so-
called contracts of sale with pacto de retro is to draw up another
contract purporting to be a lease of the property to the supposed
vendor, who pays in money or in crops a so-called rent. It is,
however, no secret to anyone that this simulated rent is in truth
and in fact interest on the money loaned. In many instances, the
interest is usurious. Thus, the usury law is also circumvented.
“It is high time these transgressions of the law were stopped. It
is believed by the Commission that the plan submitted for the
solution of the problem will meet with the approval of an
enlightened public opinion, and in general, of everyone moved by
a sense of justice.
“During the deliberations of the Commission the question arose
as to whether the contract of purchase with pacto de retro should
be abolished and forbidden. On first impression, this should be
done, but there is every reason to fear that in such a case the
usurious moneylenders would demand of the borrowers that,
although the real agreement is one of loan secured with a
mortgage, the instrument to be signed should purport to be an
absolute sale of the property involved. Should this happen, the
problem would become aggravated. Moreover, it must be admitted
that there are some cases where the parties really intend a sale
with right to repurchase. Although such cases are rare, still the
freedom of contract must be maintained and respected. Therefore,
the contract under consideration is preserved in the Project of
31
Civil Code, but with adequate safeguards and restrictions.”

_______________

31 Report of the Code Commission, 61-64.

651

VOL. 180, DECEMBER 29, 1989 651

Mobil Oil Philippines, Inc. vs. Court of Appeals

WHEREFORE, the instant petition is hereby DENIED and

the assailed decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.

          Melencio-Herrera (Chairman), Paras, Padilla and

Sarmiento, JJ., concur.

Petition denied. Decision affirmed.

Note.—After the lapse of redemption period without any

redemption made, a writ of possession can be issued in
favor of purchaser (Banco Filipino vs. IAC, 142 SCRA 44).

www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 17/18
11/6/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

——o0o——

© Copyright 2019 Central Book Supply, Inc. All rights reserved.

www.central.com.ph/sfsreader/session/0000016e3eb4760d3a1471e4003600fb002c009e/t/?o=False 18/18