Civil Law,  Legally Yours

Diño v. Jardines

Diño v. Jardines

G.R. No. 145871; January 31, 2006


On January 31, 1987, Lina Jardines (respondent) executed in her favor a Deed of Sale with Pacto de Retro over a parcel of land with improvements, the consideration for which amounted to P165,000.00.

It was stipulated in the deed that the period for redemption would expire in six months or on July 29, 1987. Such period expired but neither respondent nor any of her legal representatives were able to redeem or repurchase the subject property.

As a consequence, absolute ownership over the property has been consolidated in favor of petitioner, Diño.

Respondent contends that:

(a) the Deed of Sale with Pacto de Retro did not embody the real intention of the parties; the transaction actually entered into by the parties was one of simple loan and the Deed of Sale with Pacto de Retro was executed just as a security for the loan,

(b) the amount borrowed by respondent during the first week of January 1987 was only P50,000.00 with a monthly interest of 9% to be paid within a period of six months, but since the said amount was insufficient to buy construction materials for the house she was then building, she again borrowed an additional amount of P30,000.00. It was never the intention of respondent to sell her property to petitioner,

(c) the value of respondent’s residential house alone is over a million pesos and if the value of the lot is added, it would be around one and a half million pesos; it is unthinkable that respondent would sell her property worth one and a half million pesos for only P165,000.00, 

(d) respondent has even paid a total of P55,000.00 out of the amount borrowed and she is willing to settle the unpaid amount, but petitioner insisted on appropriating the property of respondent which she put up as collateral for the loan, and

(e) respondent has been the one paying for the realty taxes on the subject property.


Whether or not the transaction between Diño and Jardines is an equitable mortgage


Yes, it is an equitable mortgage.

In the instant case, the presence of the circumstances provided for under paragraphs (2) and (5) of Article 1602 of the Civil Code, and the fact that petitioner herself demands payment of interests on the purported purchase price of the subject property, clearly show that the intention of the parties was merely for the property to stand as security for a loan. The fact that it was not true that the price was not grossly inadequate does not make the transaction that of absolute sale.

The presence of even one of the above-mentioned circumstances as enumerated in Article 1602 is sufficient basis to declare a contract of sale with right to repurchase as one of equitable mortgage. As stated by the Code Commission which drafted the new Civil Code, 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.

Also,  Article 1603 of the Civil Code provides that in case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.

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