Lao vs. Court of Appeals 275 SCRA 237, July 08, 1997 Facts

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Lao vs.

Court of Appeals 275 SCRA 237 , July 08, 1997

FACTS:

Private respondent filed a complaint that he is the owner of the premises situated at Unit
I, No. 21 N. Domingo Street, Quezon City, evidenced by TCT No. 22184; that petitioner
occupied the property without rent and despite demands to vacate, the petitioner refused. The
petitioner claimed that he is the true owner of the house and lot located in the said place; that the
private respondent purchased the same from N. Domingo Realty and Development Corporation
but the agreement was actually a loan secured by mortgage. The MTC ordered the petitioner to
vacate the said premises. RTC reversed MTC’s decision. CA affirmed MTC’s.

ISSUE:

Whether or not the transaction made is an absolute sale.

RULING:

NO, the transaction made is an absolute sale.

The law enumerates when a contract may be presumed to be an equitable mortgage:


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 purchase 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 this case, the agreement between the private respondent and N. Domingo Realty &
Housing Corporation, as represented by petitioner, manifestly one of equitable mortgage. First,
possession of the property in the controversy remained with Petitioner. Second, the option given
to Petitioner to purchase the property in controversy had been extended twice through
documents. The wording of the first extension is a refreshing revelation that indeed the parties
really intended to be bound by a loan with mortgage, not by a pacto de retro. These extensions
clearly represent the extension of time to pay the loan given to Petitioner upon his failure to pay
said loan on its maturity.

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