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G.R. No. 42108 December 29, 1989OSCAR D. RAMOS and LUZ AGUDO, petitioners, vs.HON. COURT OF APPEALS, ADELAIDA RAMOS and LAZARO E. MENESES, respodents.Godofredo V. Magbiray for petitioners.Joselito Lim for private respondents.

REGALADO, J.:The instant petition for review on certiorari impugns the decision of the Court of Appeals dated October 7, 1975, 1which 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 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 P 5,000.00 and P 9,000.00 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, Valente Ramos and Margarita Denoga, now deceased; 2 and Lot No. 4221 covered by Transfer Certificate of Title No. 10788 then registered in the names of Socorro Ramos, Josefina Ramos and Adelaida Ramos, 3 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, entitled "Intestate Estate of the late Margarita Denoga," 4 and a petition for approval of the pacto de retro sale of Lot No. 4221 in the former Court of First Instance of Tarlac acting as a cadastral court. 5 On January 22, 1960, the said 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 known as Document No. 14, Page 26, Book VI, Series of 1959, of the notarial register of Notary Public Jose P. Sibal, is hereby approved. 6The 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 Document. 7Private 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, 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 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 "G" were in fact intended to be equitable mortgages. 8 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-l' and 'G' is one of loan. The parties differ, however, on the nature of the security described therein. 9On May 17, 1971, the court a quo rendered a decision the decretal part of which reads:WHEREFORE, judgment is hereby rendered:1) Denying defendants' motion to dismiss of February 23, 1970;2) Declaring Exhibits 'B', 'B-I' and 'G' as loan transaction secured by real estate mortgages;3) Annulling and setting aside Exhibits 'D', 'D-l', 'I', 'I-l' and 'I-2';4) Ordering plaintiffs, jointly and severally to pay (within ninety [90] days from receipt of a copy of this judgment) defendants the sum of P 5,000.00 specified in Exhibit 'B', with interest thereon at the legal rate from November 28, 1959 until full payment together with the sum of P 9,308.00 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; and5) Dismissing defendants' counter-claim.With costs against defendants. 10On 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 reconsideration of said decision was denied on November 27, 1975. 11On 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.4. The Hon. Court of Appeals erred in not applying the applicable provisions of law on the prescription of action and in not dismissing the complaint filed in the lower court. 12We 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 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 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) 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 taxation purposes in their names. Exhibits K, K-1, L and L-1. 13Even 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, 14 however, such fact will not justify a reversal of the conclusion reached by 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.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. 15 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. 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 accordingly be reformed and construed as equitable mortgages. 16Equally 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:xxx xxx 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 validity of the agreement is put in issue by the pleadings; 17xxx xxx xxxMoreover, 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.18The 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. 19 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 according to its terms, it is not an unconscionable one. 20On 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 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. 21With 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 meaning, to confirm, ratify, sanction or consent to some act or thing done by another. 22 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. 23 As held in Duran, et al., vs. Duran 24 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 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 in the preparation or presentation of evidence. 25 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 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.Hence in Crisologo, et al. vs. Centeno, et al., 26 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 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 in any action or proceeding whenever it is invoked. 27 It is not necessary to take any step to vacate or avoid a void judgment; it may simply be ignored. 28On 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. 29Article 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 laws against usury and pactum commissorium. 30 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 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. ...xxx xxx xxxIt 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 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 money-lenders 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 Civil Code, but with adequate safeguards and restrictions. 31WHEREFORE, the instant petition is hereby DENIED and the assailed decision of the Court of Appeals is hereby AFFIRMED.SO ORDERED.G.R. No. L-28527 June 16, 1988ALFONSO FLORES AND VALENTIN GALLANO, defendants-appellants, vs.JOHNSON SO, plaintiff-appellee.

YAP, C. J.:This case was certified to us by the Court of Appeals there being no question of fact involved, but the application of the pertinent provisions of the old and new Civil Code on the "Pacto de Retro Sale" executed by defendant Valentin Gallano on February 27, 1950 in favor of defendant-appellant Alfonso Flores over the land in question which sale is contested by plaintiff-appellee Johnson So on the ground that in truth and in fact, it was an equitable mortgage to secure a loan of P2,550.00, the supposed purchase price. Valentin Gallano, impleaded as co-defendant by order of the lower court, has aligned himself with the cause of Johnson So.The antecedent facts are:On August 2, 1958, Johnson So filed an action for specific performance before the Court of First Instance (now Regional Trial Court) of Sorsogon, Tenth Judicial District, and docketed as Civil Case No. 1305, against Alfonso Flores to effect the redemption of a parcel of coconut and rice land situated in Matnog, Sorsogon, containing an area of 165,056 square meters which was alleged to have been ostensibly sold to the latter by Valentin Gallano on February 27, 1950, with right of repurchase within four (4) years from the date of the sale, for a price of P2,550.00. Valentin Gallano sold in an absolute manner the same land to Johnson So on February 26, 1958 for the price of P5,000.00. On the allegation that the Pacto de Retro Sale did not embody the real intent and nature of the agreement between the parties, the transaction being pi mere mortgage to secure a loan, Johnson So prayed that the court declare the said Pacto de Retro Sale as a mere equitable mortgage and order Alfonso Flores receive the sum of P2,550.00 deposited with the court in Civil Case No. 1224 and to consider the land in question redeemed from the latter for all legal purposes. On September 24, 1960, the lower court ruled that, on the issue of the nature of the contract in question, it is a contract of sale of a parcel of land with the reservation in favor of the vendor a retro of the right to repurchase it within a period of four (4) years from execution thereof, that the execution of the affidavit of consolidation of ownership by Flores on March 6, 1958 and its subsequent registration in the Office of the Register of Deeds of Sorsogon did not make his ownership over the land in question absolute and indefeasible because of non-compliance with Articles 1606 and 1607 of the New Civil Code, which require a judicial order for consolidation of the title of vendee a retro; and that the right of redemption belonging to Valentin Gallano was, ipso facto, acquired by Johnson So when he brought the land in question. Thus, the Court ordered Alfonso Flores to deliver the possession of the land in question to Johnson So and to execute the necessary deed of resale in favor of the latter and authorized Flores to withdraw for his own use and benefit the redemption money in the sum of P2,550.00. Valentin Gallano was absolved from liability.Alfonso Flores moved for a reconsideration of the above decision but the motion was denied. On appeal to the Court of Appeals, the latter certified the case to this Court as involving purely questions of law.In essence, the question to be resolved is whether or not the execution of the affidavit of consolidation of ownership by Alfonso Flores and its subsequent registration in the Office of the Register of Deeds of Sorsogon made his ownership over the land in question absolute and indefeasible.In its determination of the nature of the contract, the lower court ruled that, based on the document itself which is the only evidence, its terms being clear, explicit and without any confusion, it is a pacto de retro sale with the vendor a retro being given four years from execution thereof to redeem the subject property; however, notwithstanding the fact that Valentin Gallano had four years from February 27, 1950, or until February 27, 1954 only to redeem the property, he could still exercise the right of redemption in 1958 when he sued the vendee, Flores, for redemption, since, upon the effectivity of the New Civil Code on August 30, 1950, Flores" right of ownership over the land was not yet absolute and indefeasible for his failure to comply with the requirements of Articles 1606 and 1607 of the said Code.We disagree. The pacto de retro sale between Gallano and Flores was executed when the Civil Code of Spain was still in effect. It is provided in Article 1509 thereof that if the vendor does not comply with the provisions of Article 1518, (i.e. to return the price, plus expenses) the vendee shall acquire irrevocably the ownership of the thing sold.Under the old Civil Code, the ownership was consolidated in the vendee a retro by operation of law. Accordingly, upon the failure of Valentin Gallano, as the vendor a retro, to redeem the property subject of the pacto de retro sale within the period agreed upon, the vendee a retro, Alfonso Flores, became the absolute owner of the subject property.This right of ownership which had already vested in Alfonso Flores way back in 1954 upon Gallano's failure to redeem within the stipulated period cannot be defeated by the application of Articles 1606 and 1607 of the New Civil Code which requires registration of the consolidation of ownership in the vendee a retro only by judicial order. Article 2252 on Transitional Provisions in the New Civil Code provides that:Art. 2252. Changes made and new provisions and rules laid down by this Code which may prejudice or impair vested or acquired rights in accordance with the old legislation shall have no retroactive effect ...Furthermore, Article 2255 thereof states that:Art. 2255. The former laws shall regulate acts and contracts with a condition or period which were executed or entered into before the effectivity of this Code, even though the condition or period may still be pending at the time this body of laws goes into effect.In Manalansan v. Manalang, 108 Phil. 1041, we held that in a sale with the right of redemption, the ownership over the thing sold is transferred to the vendee upon execution of the contract, "subject only to the resolutory condition that the vendor exercise his right of repurchase within the period agreed upon." Consequently, since the pacto de retro sale in question, which was executed in February of 1950, before the effectivity of the New Civil Code in August of 1950, was a contract with a resolutory condition, and the condition was still pending at the time the new law went into effect, the provisions of the old Civil Code would still apply.The trial court, therefore, erred in allowing redemption of the subject property by plaintiff-appellee, Johnson So. Valentin Gallano was no longer the owner of the same at the time of sale to Johnson So, thus, no right whatsoever was transmitted to the latter, except the right to redeem the property. Ownership over the subject property had long vested upon the defendant appellant Alfonso Flores.In view of the foregoing, the decision appealed from is reversed and defendant-appellant Alfonso Flores is hereby declared the absolute owner of the land subject of the controversy. Plaintiff- appellee Johnson So is hereby ordered to pay the defendant-appellant the sum of P500.00 as attorney's fees Plus costs of suit pursuant to their agreement. 1SO ORDERED.G.R. No. 72873 May 28, 1987CARLOS ALONZO and CASIMIRA ALONZO, petitioners, vs.INTERMEDIATE APPELLATE COURT and TECLA PADUA, respondents.Perpetuo L.B. Alonzo for petitioners.Luis R. Reyes for private respondent.CRUZ, J.:The question is sometimes asked, in serious inquiry or in curious conjecture, whether we are a court of law or a court of justice. Do we apply the law even if it is unjust or do we administer justice even against the law? Thus queried, we do not equivocate. The answer is that we do neither because we are a court both of law and of justice. We apply the law with justice for that is our mission and purpose in the scheme of our Republic. This case is an illustration.Five brothers and sisters inherited in equal pro indiviso shares a parcel of land registered in 'the name of their deceased parents under OCT No. 10977 of the Registry of Deeds of Tarlac. 1On March 15, 1963, one of them, Celestino Padua, transferred his undivided share of the herein petitioners for the sum of P550.00 by way of absolute sale. 2 One year later, on April 22, 1964, Eustaquia Padua, his sister, sold her own share to the same vendees, in an instrument denominated "Con Pacto de Retro Sale," for the sum of P 440.00.3By virtue of such agreements, the petitioners occupied, after the said sales, an area corresponding to two-fifths of the said lot, representing the portions sold to them. The vendees subsequently enclosed the same with a fence. In 1975, with their consent, their son Eduardo Alonzo and his wife built a semi-concrete house on a part of the enclosed area. 4On February 25, 1976, Mariano Padua, one of the five coheirs, sought to redeem the area sold to the spouses Alonzo, but his complaint was dismissed when it appeared that he was an American citizen . 5 On May 27, 1977, however, Tecla Padua, another co-heir, filed her own complaint invoking the same right of redemption claimed by her brother. 6The trial court * also dismiss this complaint, now on the ground that the right had lapsed, not having been exercised within thirty days from notice of the sales in 1963 and 1964. Although there was no written notice, it was held thatactual knowledge of the sales by the co-heirs satisfied the requirement of the law. 7In truth, such actual notice as acquired by the co-heirs cannot be plausibly denied. The other co-heirs, including Tecla Padua, lived on the same lot, which consisted of only 604 square meters, including the portions sold to the petitioners . 8 Eustaquia herself, who had sold her portion, was staying in the same house with her sister Tecla, who later claimed redemption petition. 9 Moreover, the petitioners and the private respondents were close friends and neighbors whose children went to school together. 10It is highly improbable that the other co-heirs were unaware of the sales and that they thought, as they alleged, that the area occupied by the petitioners had merely been mortgaged by Celestino and Eustaquia. In the circumstances just narrated, it was impossible for Tecla not to know that the area occupied by the petitioners had been purchased by them from the other. co-heirs. Especially significant was the erection thereon of the permanent semi-concrete structure by the petitioners' son, which was done without objection on her part or of any of the other co-heirs.The only real question in this case, therefore, is the correct interpretation and application of the pertinent law as invoked, interestingly enough, by both the petitioners and the private respondents. This is Article 1088 of the Civil Code, providing as follows:Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one month from the time they were notified in writing of the sale by the vendor.In reversing the trial court, the respondent court ** declared that the notice required by the said article was writtennotice and that actual notice would not suffice as a substitute. Citing the same case of De Conejero v. Court of Appeals 11 applied by the trial court, the respondent court held that that decision, interpreting a like rule in Article 1623, stressed the need for written notice although no particular form was required.Thus, according to Justice J.B.L. Reyes, who was the ponente of the Court, furnishing the co-heirs with a copy of the deed of sale of the property subject to redemption would satisfy the requirement for written notice. "So long, therefore, as the latter (i.e., the redemptioner) is informed in writing of the sale and the particulars thereof," he declared, "the thirty days for redemption start running. "In the earlier decision of Butte v. UY, 12 " the Court, speaking through the same learned jurist, emphasized that the written notice should be given by the vendor and not the vendees, conformably to a similar requirement under Article 1623, reading as follows:Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor, or by the vendors, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners.The right of redemption of co-owners excludes that of the adjoining owners.As "it is thus apparent that the Philippine legislature in Article 1623 deliberately selected a particular method of giving notice, and that notice must be deemed exclusive," the Court held that notice given by the vendees and not the vendor would not toll the running of the 30-day period.The petition before us appears to be an illustration of the Holmes dictum that "hard cases make bad laws" as the petitioners obviously cannot argue against the fact that there was really no written notice given by the vendors to their co-heirs. Strictly applied and interpreted, Article 1088 can lead to only one conclusion, to wit, that in view of such deficiency, the 30 day period for redemption had not begun to run, much less expired in 1977.But as has also been aptly observed, we test a law by its results; and likewise, we may add, by its purposes. It is a cardinal rule that, in seeking the meaning of the law, the first concern of the judge should be to discover in its provisions the in tent of the lawmaker. Unquestionably, the law should never be interpreted in such a way as to cause injustice as this is never within the legislative intent. An indispensable part of that intent, in fact, for we presume the good motives of the legislature, is to render justice.Thus, we interpret and apply the law not independently of but in consonance with justice. Law and justice are inseparable, and we must keep them so. To be sure, there are some laws that, while generally valid, may seem arbitrary when applied in a particular case because of its peculiar circumstances. In such a situation, we are not bound, because only of our nature and functions, to apply them just the same, in slavish obedience to their language. What we do instead is find a balance between the word and the will, that justice may be done even as the law is obeyed.As judges, we are not automatons. We do not and must not unfeelingly apply the law as it is worded, yielding like robots to the literal command without regard to its cause and consequence. "Courts are apt to err by sticking too closely to the words of a law," so we are warned, by Justice Holmes again, "where these words import a policy that goes beyond them." 13 While we admittedly may not legislate, we nevertheless have the power to interpret the law in such a way as to reflect the will of the legislature. While we may not read into the law a purpose that is not there, we nevertheless have the right to read out of it the reason for its enactment. In doing so, we defer not to "the letter that killeth" but to "the spirit that vivifieth," to give effect to the law maker's will.The spirit, rather than the letter of a statute determines its construction, hence, a statute must be read according to its spirit or intent. For what is within the spirit is within the letter but although it is not within the letter thereof, and that which is within the letter but not within the spirit is not within the statute. Stated differently, a thing which is within the intent of the lawmaker is as much within the statute as if within the letter; and a thing which is within the letter of the statute is not within the statute unless within the intent of the lawmakers. 14In requiring written notice, Article 1088 seeks to ensure that the redemptioner is properly notified of the sale and to indicate the date of such notice as the starting time of the 30-day period of redemption. Considering the shortness of the period, it is really necessary, as a general rule, to pinpoint the precise date it is supposed to begin, to obviate any problem of alleged delays, sometimes consisting of only a day or two.The instant case presents no such problem because the right of redemption was invoked not days but years after the sales were made in 1963 and 1964. The complaint was filed by Tecla Padua in 1977, thirteen years after the first sale and fourteen years after the second sale. The delay invoked by the petitioners extends to more than a decade, assuming of course that there was a valid notice that tolled the running of the period of redemption.Was there a valid notice? Granting that the law requires the notice to be written, would such notice be necessary in this case? Assuming there was a valid notice although it was not in writing. would there be any question that the 30-day period for redemption had expired long before the complaint was filed in 1977?In the face of the established facts, we cannot accept the private respondents' pretense that they were unaware of the sales made by their brother and sister in 1963 and 1964. By requiring written proof of such notice, we would be closing our eyes to the obvious truth in favor of their palpably false claim of ignorance, thus exalting the letter of the law over its purpose. The purpose is clear enough: to make sure that the redemptioners are duly notified. We are satisfied that in this case the other brothers and sisters were actually informed, although not in writing, of the sales made in 1963 and 1964, and that such notice was sufficient.Now, when did the 30-day period of redemption begin?While we do not here declare that this period started from the dates of such sales in 1963 and 1964, we do say that sometime between those years and 1976, when the first complaint for redemption was filed, the other co-heirs were actually informed of the sale and that thereafter the 30-day period started running and ultimately expired. This could have happened any time during the interval of thirteen years, when none of the co-heirs made a move to redeem the properties sold. By 1977, in other words, when Tecla Padua filed her complaint, the right of redemption had already been extinguished because the period for its exercise had already expired.The following doctrine is also worth noting:While the general rule is, that to charge a party with laches in the assertion of an alleged right it is essential that he should have knowledge of the facts upon which he bases his claim, yet if the circumstances were such as should have induced inquiry, and the means of ascertaining the truth were readily available upon inquiry, but the party neglects to make it, he will be chargeable with laches, the same as if he had known the facts. 15It was the perfectly natural thing for the co-heirs to wonder why the spouses Alonzo, who were not among them, should enclose a portion of the inherited lot and build thereon a house of strong materials. This definitely was not the act of a temporary possessor or a mere mortgagee. This certainly looked like an act of ownership. Yet, given this unseemly situation, none of the co-heirs saw fit to object or at least inquire, to ascertain the facts, which were readily available. It took all of thirteen years before one of them chose to claim the right of redemption, but then it was already too late.We realize that in arriving at our conclusion today, we are deviating from the strict letter of the law, which the respondent court understandably applied pursuant to existing jurisprudence. The said court acted properly as it had no competence to reverse the doctrines laid down by this Court in the above-cited cases. In fact, and this should be clearly stressed, we ourselves are not abandoning the De Conejero and Buttle doctrines. What we are doing simply is adopting an exception to the general rule, in view of the peculiar circumstances of this case.The co-heirs in this case were undeniably informed of the sales although no notice in writing was given them. And there is no doubt either that the 30-day period began and ended during the 14 years between the sales in question and the filing of the complaint for redemption in 1977, without the co-heirs exercising their right of redemption. These are the justifications for this exception.More than twenty centuries ago, Justinian defined justice "as the constant and perpetual wish to render every one his due." 16 That wish continues to motivate this Court when it assesses the facts and the law in every case brought to it for decision. Justice is always an essential ingredient of its decisions. Thus when the facts warrants, we interpret the law in a way that will render justice, presuming that it was the intention of the lawmaker, to begin with, that the law be dispensed with justice. So we have done in this case.WHEREFORE, the petition is granted. The decision of the respondent court is REVERSED and that of the trial court is reinstated, without any pronouncement as to costs. It is so ordered.G.R. No. 115307 July 8, 1997MANUEL LAO, petitioner, vs.COURT OF APPEALS and BETTER HOMES REALTY & HOUSING CORPORATION, respondents.

PANGANIBAN, J.:As a general rule, the main issue in an ejectment suit is possession de facto, not possession de jure. In the event the issue of ownership is raised in the pleadings, such issue shall be taken up only for the limited purpose of determining who between the contending parties has the better right to possession. However, where neither of the parties objects to the allegation of the question of ownership which may be initially improvident or improper in an ejectment suit and, instead, both present evidence thereon, argue the question in their various submissions and participate in all aspects of the trial without objecting to the Metropolitan (or Municipal) Trial Court's jurisdiction to decide the question of ownership, the Regional Trial Court in the exercise of its original jurisdiction as authorized by Section 11, Rule 40 of the Rules of Court may rule on the issue and the corollary question of whether the subject deed is one of sale or of equitable mortgage.These postulates are discussed by the Court as it resolves this petition under Rule 45 seeking a reversal of the December 21, 1993 Decision 1 and April 28, 1994 Resolution 2 of the Court of Appeals in CA-G.R. SP No. 92-14293.The Antecedent FactsThe facts of this case are narrated by Respondent Court of Appeals as follows: 3On June 24, 1992, (herein Private Respondent Better Homes Realty and Housing Corporation) filed with the Metropolitan Trial Court of Quezon City, a complaint for unlawful detainer, on the ground that (said private respondent) is the owner of the premises situated at Unit I, No. 21 N. Domingo Street, Quezon City, evidenced by Transfer Certificate of Title No. 22184 of the Registry of Deeds of Quezon City; that (herein Petitioner Manuel Lao) occupied the property without rent, but on (private respondent's) pure liberality with the understanding that he would vacate the property upon demand, but despite demand to vacate made by letter received by (herein petitioner) on February 5, 1992, the (herein petitioner) refused to vacate the premises.In his answer to the complaint, (herein petitioner) claimed that he is the true owner of the house and lot located at Unit I, No. 21 N. Domingo Street, Quezon City; that the (herein private respondent) purchased the same from N. Domingo Realty and Development Corporation but the agreement was actually a loan secured by mortgage; and that plaintiff's cause of action is for accion publiciana, outside the jurisdiction of an inferior court.On October 9, 1992, the Metropolitan Trial Court of Quezon City rendered judgment ordering the (petitioner) to vacate the premises located at Unit I, No. 21 N. Domingo Street, Quezon City; to pay (private respondent) the sum of P300.00 a day starting on January 31, 1992, as reasonable rent for the use and occupation of the premises; to pay plaintiff P5,000.00, as attorney's fees, and costs.On appeal to the Regional Trial Court of Quezon City, 4 on March 30, 1993, the latter court rendered a decision reversing that of the Metropolitan Trial Court, and ordering the dismissal of the (private respondent's) complaint for lack of merit, with costs taxed against (private respondent).In its decision, the Regional Trial Court held that the subject property was acquired by (private respondent) from N. Domingo Realty and Development Corporation, by a deed of sale, and (private respondent) is now the registered owner under Transfer Certificate of Title No. 316634 of the Registry of Deeds of Quezon City, but in truth the (petitioner) is the beneficial owner of the property because the real transaction over the subject property was not a sale but a loan secured by a mortgage thereon.The dispositive portion of the Regional Trial Court's decision is quoted below: 5WHEREFORE, judgment is hereby rendered reversing the appealed decision and ordering the dismissal of plaintiffs complaint for lack of merit, with the costs taxed against it.IT IS SO ORDERED.On April 28, 1993, private respondent filed an appeal with the Court of Appeals which reversed the decision of the Regional Trial Court. The Respondent Court ruled:The Metropolitan Trial Court has no jurisdiction to resolve the issue of ownership in an action for unlawful detainer (B.P. 129, Sec. 33 [2]; Cf. Alvir vs. Vera, 130 SCRA 357). The jurisdiction of a court is determined by the nature of the action alleged in the complaint (Ching vs. Malaya, l53 SCRA 412). In its complaint in the inferior court, the plaintiff alleged that it is the owner of the premises located at Unit I, No. 21 N. Domingo Street, Quezon City, and that defendant's occupation is rent free and based on plaintiffs pure liberality coupled with defendant's undertaking to vacate the premises upon demand, but despite demands, defendant has refused to vacate. The foregoing allegations suffice to constitute a cause of action for ejectment (Banco de Oro vs. Court of Appeals, 182 SCRA 464).The Metropolitan Trial Court is not ousted of jurisdiction simply because the defendant raised the question ownership (Bolus vs. Court of Appeals, 218 SCRA 798). The inferior court shall resolve the issue of ownership only to determine who is entitled to the possession of the premises (B.P. 129, Sec. 33[2]; Bolus vs. Court of Appeals, supra).Here, the Metropolitan Trial Court ruled that as owner, plaintiff (herein private respondent Better Homes Realty and Housing Corporation) is entitled to the possession of the premises because the defendant's stay is by mere tolerance of the plaintiff (herein private respondent).On the other hand, the Regional Trial Court ruled that the subject property is owned by the defendant, (herein petitioner Manuel Lao) and, consequently, dismissed the complaint for unlawful detainer. Thus, the Regional Trial Court resolved the issue of ownership, as if the case were originally before it as an action for recovery of possession, or accion publiciana, within its original jurisdiction. In an appeal from a decision of the Municipal Trial Court, or Metropolitan Trial Court, in an unlawful detainer case, the Regional Trial Court is simply to determine whether the inferior court correctly resolved the issue of possession; it shall not delve into the issue of ownership (Manuel vs. Court of Appeals, 199 SCRA 603). What the Regional Trial Court did was to rule that the real agreement between the plaintiff and the previous owner of the property was not a sale, but an equitable mortgage. Defendant was only a director of the seller corporation, and his claim of ownership could not be true. This question could not be determined summarily. It was not properly in issue before the inferior court because, as aforesaid, the only issue was possession de facto (Manlapaz vs. Court of Appeals, 191 SCRA 795), or who has a better right to physical possession (Dalida vs. Court of Appeals, 117 SCRA 480). Consequently, the Regional Trial Court erred in reversing the decision of the Metropolitan Trial Court.WHEREFORE, the Court hereby REVERSES the decision of the Regional Trial Court. In lieu thereof, We affirm the decision of the Metropolitan Trial Court of Quezon City sentencing the defendant and all persons claiming right under him to vacate the premises situated at Unit I, No. 21 N. Domingo Street, Quezon City, and to surrender possession to the plaintiff; to pay plaintiff the sum of P300.00, a day starting on January 31, 1992, until defendant shall have vacated the premises; to pay plaintiff P5,000.00 as attorneys fees, and costs.SO ORDERED. 6Manuel Lao's motion for reconsideration dated January 24, 1994 was denied by the Court of Appeals in its Resolution promulgated on April 28, 1994. Hence, this petition for review before this Court. 7The IssuesPetitioner Manuel Lao raises three issues:3.1 Whether or not the lower court can decide on the issue of ownership in the present ejectment case.3.2 Whether or not private respondent had acquired ownership over the property in question.3.3 Whether or not petitioner should be ejected from the premises in question 8The Court's RulingThe petition for review is meritorious.First Issue: Jurisdiction to Decide the Issue of OwnershipThe Court of Appeals held that as a general rule, the issue in an ejectment suit is possession de facto, not possession de jure, and that in the event the issue of ownership is raised as a defense, the issue is taken up for the limited purpose of determining who between the contending parties has the better right to possession. Beyond this, the MTC acts in excess of its jurisdiction. However, we hold that this is not a hard and fast rule that can be applied automatically to all unlawful detainer cases.Section 11, Rule 40 of the Rules of Court provides that "[a] case tried by an inferior court without jurisdiction over the subject matter shall be dismissed on appeal by the Court of First Instance. But instead of dismissing the case, the Court of First Instance, in the exercise of its original jurisdiction, may try the case on the merits if the parties therein file their pleadings and go to the trial without any objection to such jurisdiction." After a thorough review of the records of this case, the Court finds that the respondent appellate court failed to apply this Rule and erroneously reversed the RTC Decision.Respondent Court cites Alvir vs. Vera to support its Decision. On the contrary, we believe such case buttresses instead the Regional Trial Court's decision. The cited case involves an unlawful detainer suit where the issue of possession was inseparable from the issue of transfer of ownership, and the latter was determinable only after an examination of a contract of sale involving the property in question. The Court ruled that where a "case was tried and heard by the lower court in the exercise of its original jurisdiction by common assent of the parties by virtue of the issues raised . . . and the proofs presented by them," any dismissal on the ground of lack of jurisdiction "would only lead to needless delays and multiplicity of suits." The Court held:In actions of forcible entry and detainer, the main issue is possession de facto, independently of any claim of ownership or possession de jure that either party may set forth in his pleading. . . . Defendant's claim of ownership of the property from which plaintiff seeks to eject him is not sufficient to divest the inferior court of its jurisdiction over the action of forcible entry and detainer. However, if it appears during the trial that the principal issue relates to the ownership of the property in dispute and any question of possession which maybe involved necessarily depends upon the result of the inquiry into the title, previous rulings of this Court are that the jurisdiction of the municipal or city court is lost and the action should be dismissed.We have at bar a case where, in effect, the question of physical possession could not properly be determined without settling that of lawful or de jure possession and of ownership and hence, following early doctrine, the jurisdiction of the municipal court over the ejectment case was lost and the action should have been dismissed. As a consequence, respondent court would have no jurisdiction over the case on appeal and it should have dismissed the case on appeal from the municipal trial court. However, in line with Section 11, Rule 40 of the Revised Rules of Court, which reads Sec. 11. Lack of Jurisdiction. A case tried by an inferior court without jurisdiction over the subject matter shall be dismissed on appeal by the Court of First Instance. But instead of dismissing the case, the Court of First Instance in the exercise of its original jurisdiction, may try the case on the merits if the parties therein file their pleadings and go to trial without objection to such jurisdiction.this Court held in Saliwan vs. Amores, 51 SCRA 329, 337, that dismissal "on the said ground of lack of appellate jurisdiction on the part of the lower court flowing from the municipal court's loss of jurisdiction would lead only to needless delay and multiplicity of suits in the attainment of the same result and ignores, as above stated, that the case was tried and heard by the lower court in the exercise of its original jurisdiction by common assent of the parties by virtue of the issues raised by the parties and the proof presented by them thereon." 9This pronouncement was reiterated by this Court through Mr. Justice Teodoro R. Padilla in Consignado vs. Court of Appeals 10 as follows:As the MTC of Laguna had no jurisdiction over the unlawful detainer case in view of the raised question of title or ownership over the property in dispute, the RTC of Laguna also had no appellatejurisdiction to decide the case on the merits. It should have dismissed the appeal. However, it hadoriginal jurisdiction to pass upon the controversy. It is to be noted, in this connection, that in their respective memoranda filed with the RTC of Laguna, the petitioners and private respondents did not object to the said court exercising its original jurisdiction pursuant to the aforequoted provisions of Section 11, Rule 40 of the Rules of Court.xxx xxx xxxPetitioners now contend, among others, that the Court of Appeals erred in resolving the question of ownership as if actual title, not mere possession of subject premises, is involved in the instant case.The petitioner's contention is untenable. Since the MTC and RTC of Laguna decided the question of ownership over the property in dispute, on appeal the Court of Appeals had to review and resolve also the issue of ownership. . . .It is clear, therefore, that although an action for unlawful detainer "is inadequate for the ventilation of issues involving title or ownership of controverted real property, [i]t is more in keeping with procedural due process that where issues of title or ownership are raised in the summary proceedings for unlawful detainer, said proceeding should be dismissed for lack of jurisdiction, unless, in the case of an appeal from the inferior court to the Court of First Instance, the parties agree to the latter Court hearing the case in its original jurisdiction in accordance with Section 11, Rule 40 . . ." 11In the case at bar, a determination of the issue of ownership is indispensable to resolving the rights of both parties over the property in controversy, and is inseparable from a determination of who between them has the right to possess the same. Indeed, the very complaint for unlawful detainer filed in the Metropolitan Trial Court of Quezon City is anchored on the alleged ownership of private respondent over the subject premises. 12 The parties did not object to the incongruity of a question of ownership being brought in an ejectment suit. Instead they both submitted evidence on such question, and the Metropolitan Trial Court decided on the issue. These facts are evident in the Metropolitan Trial Court's decision:From the records of the case, the evidence presented and the various arguments advanced by the parties, the Court finds that the property subject matter of this case is in the name of (herein private respondent) Better Homes and Realty Housing Corporation; that the Deed of Absolute Sale which was the basis for the issuance of said TCT No. 22184 is between N. Domingo Realty and Development Corporation and Better Homes Realty and Housing Corporation which was signed by Artemio S. Lao representing the seller N. Domingo and Realty Development Corporation; that a Board Resolution of N. Domingo and Realty and Development Corporation (Exhibit "D" position paper) shows that the Directors of the Board of the N. Domingo Realty and Development Corporation passed a resolution selling apartment units I and F located at No. 21 N. Domingo St., Quezon City and designating the (herein petitioner) with his brother Artemio S. Lao as signatories to the Deed of Sale. The claim therefore of the (herein petitioner) that he owns the property is not true . . . 13When the MTC decision was appealed to the Regional Trial Court, not one of the parties questioned the Metropolitan Trial Court's jurisdiction to decide the issue of ownership. In fact, the records show that both petitioner and private respondent discussed the issue in their respective pleadings before the Regional Trial Court.14 They participated in all aspects of the trial without objection to its jurisdiction to decide the issue of ownership. Consequently, the Regional Trial Court aptly decided the issue based on the exercise of its original jurisdiction as authorized by Section 11, Rule 40 of the Rules of Court.This Court further notes that in both of the contending parties' pleadings filed on appeal before the Court of Appeals, the issue of ownership was likewise amply discussed. 15 The totality of evidence presented was sufficient to decide categorically the issue of ownership.These considerations, taken together with the fact that both the Metropolitan Trial Court and the Regional Trial Court decided the issue of ownership, justify the review of the lower courts' findings of fact and decision on the issue of ownership. This we now do, as we dispose of the second issue and decide the case with finality to spare the parties the time, trouble and expense of undergoing the rigors of another suit where they will have to present the same evidence all over again and where, in all probability, the same ultimate issue of ownership will be brought up on appeal.Second Issue: Absolute Sale or Equitable Mortgage?Private Respondent Better Homes Realty and Housing Corporation anchored its right in the ejectment suit on a contract of sale in which petitioner (through their family corporation) transferred the title of the property in question. Petitioner contends, however that their transaction was not an absolute sale, but an equitable mortgage.In determining the nature of a contract, the Court looks at the intent of the parties and not at the nomenclature used to describe it. Pivotal to deciding this issue is the true aim and purpose of the contracting parties as shown by the terminology used in the covenant, as well as "by their conduct, words, actions and deeds prior to, during and immediately after executing the agreement." 16 In this regard, parol evidence becomes admissible to prove the true intent and agreement of the parties which the Court will enforce even if the title of the property in question has already been registered and a new transfer certificate of title issued in the name of the transferee. In Macapinlac vs.Gutierrez Repide, which involved an identical question, the Court succintly stated:. . . This conclusion is fully supported by the decision in Cuyugan vs. Santos (34 Phil., 100), where this court held that a conveyance in the form of a contract of sale with pacto de retro will be treated as a mere mortgage, if really executed as security for a debt, and that this fact can be shown by oral evidence apart from the instrument of conveyance, a doctrine which has been followed in the later cases of Villa vs. Santiago (38 Phil., 157), and Cuyugan vs. Santos (39 Phil., 970).xxx xxx xxxIn the first place, it must be borne in mind that the equitable doctrine which has been so fully stated above, to the effect that any conveyance intended as security for a debt will be held in effect to be a mortgage, whether so actually expressed in the instrument or not, operates regardless of the form of the agreement chosen by the contracting parties as the repository of their will. Equity looks through the form and considers the substance; and no kind of engagement can be adopted which will enable the parties to escape from the equitable doctrine to which reference is made. In other words, a conveyance of land, accompanied by registration in the name of the transferee and the issuance of a new certificate, is no more secured from the operation of this equitable doctrine than the most informal conveyance that could be devised. 17The 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 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.xxx xxx xxx 18The foregoing presumption applies also to a "contract purporting to be an absolute sale." 19Applying the preceding principles to the factual milieu of this case, we find 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 Manuel Lao who was the beneficial owner of the property, before, during and after the alleged sale. 20 It is settled that a "pacto de retro sale should be treated as a mortgage where the (property) sold never left the possession of the vendors." 21Second, the option given to Manuel Lao to purchase the property in controversy had been extended twice 22through documents executed by Mr. Tan Bun Uy, President and Chairman of the Board of Better Homes Realty & Housing Corporation. 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. It reads, "On June 10, 88, this option is extended for another sixty days to expired (sic) on Aug. 11, 1988. The purchase price is increased to P137,000.00. Since Mr. Lao borrow (sic) P20,000.00 from me." 23 These extensions clearly represent the extension of time to pay the loan given to Manuel Lao upon his failure to pay said loan on its maturity. Mr. Lao was even granted an additional loan of P20,000.00 as evidenced by the above-quoted document. Third, unquestionably, Manuel Lao and his brother were in such "dire need of money" that they mortgaged their townhouse units registered under the name of N. Domingo Realty Corporation, the family corporation put up by their parents, to Private Respondent Better Homes Realty & Housing Corporation. In retrospect, it is easy to blame Petitioner Manuel Lao for not demanding a reformation of the contract to reflect the true intent of the parties. But this seeming inaction is sufficiently explained by the Lao brothers' desperate need for money, compelling them to sign the document purporting to be a sale after they were told that the same was just for "formality." 24 In fact, this Court, in various cases involving the same situation, had occasion to state:. . . In Jayme, et al. v. Salvador, et al., this Court upheld a judgment of the Court of First Instance of Iloilo which found the transaction between the parties to be a loan instead of a sale of real property notwithstanding the terminology used in the document, after taking into account the surrounding circumstances of the transaction. The Court through Justice Norberto Romualdez stated that while it was true that plaintiffs were aware of the contents of the contracts, the preponderance of the evidence showed however that they signed knowing that said contracts did not express their real intention, and if they did so notwithstanding this, it was due to the urgent necessity of obtaining fund. "Necessitous men are not, truly speaking, free men; but to answer a present emergency, will submit to any terms that the crafty may impose upon them." 25Moreover, since the borrower's urgent need for money places the latter at a disadvantage vis-a-vis the lender who can thus dictate the terms of their contract, the Court, in case of an ambiguity, deems the contract to be one which involves the lesser transmission of rights and interest over the property in controversy. 26As aptly found and concluded by the regional trial court:The evidence of record indicates that while as of April 4, 1988 (the date of execution of the Deed of Absolute Sale whereby the N. Domingo and Realty & Development Corporation purportedly sold the townhouse and lot subject of this suit to [herein private respondent Better Homes Realty & Housing Corporation] for P100,000.000) said N. Domingo Realty & Development Corporation (NDRDC, for short) was the registered owner of the subject property under Transfer Certificate of Title (TCT) No. 316634 of the Registry of Deeds for Quezon City, (herein petitioner Manuel Lao) in fact was and has been since 1975 the beneficial owner of the subject property and, thus, the same was assigned to him by the NDRDC, the family corporation set up by his parents and of which (herein petitioner) and his siblings are directors. That the parties' real transaction or contract over the subject property was not one of sale but, rather, one of loan secured, by a mortgage thereon is unavoidably inferrable from the following facts of record, to (herein petitioner's) possession of the subject property, which started in 1975 yet, continued and remained even after the alleged sale of April 4, 1988; (herein private respondent) executed an option to purchase in favor (herein petitioner) as early as April 2, 1988 or two days before (herein private respondent) supposedly acquired ownership of the property; the said option was renewed several times and the price was increased with each renewal (thus, the original period for the exercise of the option was up to June 11, 1988 and the price was P109,000.00; then, on June 10, 1988, the option was extended for 60 days or until August 11, 1988 and the price was increased to P137,000.00; and then on August 11, 1988, the option was again extended until November 11,1988 and the price was increased to P158,840.00); and, the Deed of Absolute Sale of April 4, 1988 was registered and the property transferred in the name of (private respondent) only on May 10, 1989, per TCT No. 22184 of the Registry of Deeds for Quezon City (Arts. 1602, nos. 2, 3, & 6, & 1604, Civil Code). Indeed, if it were true, as it would have the Court believe, that (private respondent) was so appreciative of (petitioner's) alleged facilitation of the subject property's sale to it, it is quite strange why (private respondent) some two days before such supposed sale would have been minded and inclined to execute an option to purchase allowing (petitioner) to acquire the property the very same property it was still hoping to acquire at the time. Certainly, what is more likely and thus credible is that, if (private respondent) was indeed thankful that it was able to purchase the property, it would not given (petitioner) any option to purchase at all . . . 27Based on the conduct of the petitioner and private respondent and even the terminology of the second option to purchase, we rule that the intent and agreement between them was undoubtedly one of equitable mortgage and not of sale.Third Issue: Should Petitioner Be Ejected?We answer in the negative. An action for unlawful detainer is grounded on Section 1, Rule 70 of the Rules of Court which provides that:. . . a landlord, vendor, vendee, or other person against whom the possession of any land or building is unlawfully withheld after the expiration or termination of the right to hold possession, by virtue of any contract, express or implied, or the legal representatives or assigns of any such landlord, vendor, vendee, or other person, may, at any time within one (1) year after such unlawful deprivation or withholding of possession, bring an action in the proper inferior court against the person or persons unlawfully withholding or depriving of possession, or any person or persons claiming under them, for the restitution of such possession, together with damages and costs . . . .Based on the previous discussion, there was no sale of the disputed property. Hence, it still belongs to petitioner's family corporation, N. Domingo Realty & Development Corporation. Private respondent, being a mere mortgagee, has no right to eject petitioner. Private respondent, as a creditor and mortgagee, " . . . cannot appropriate the things given by way of pledgeor mortgage, or dispose of them. Any stipulation to the contrary is null and void." 28Other MattersPrivate respondent in his memorandum also contends that (1) petitioner is not the real party in interest and (2) the petition should be dismissed for "raising/stating facts not so found by the Court of Appeals." These deserve scant consideration. Petitioner was impleaded as party defendant in the ejectment suit by private respondent itself. Thus, private respondent cannot question his standing as a party. As such party, petitioner should be allowed to raise defenses which negate private respondent's right to the property in question. The second point is really academic. This ponencia relies on the factual narration of the Court of Appeals and not on the "facts" supplied by petitioner.WHEREFORE, the petition is hereby GRANTED. The challenged Decision of the Court of Appeals is REVERSED and SET ASIDE. The decision of the Regional Trial Court of Quezon City ordering the dismissal of the complaint for ejectment is REINSTATED and AFFIRMED. No pronouncement as to costs.SO ORDERED.

G.R. No. L-22331 June 6, 1967IN RE: PETITION FOR CONSOLIDATION OF TITLE IN THE VENDEES OF A HOUSE AND THE RIGHTS TO A LOT. MARIA BAUTISTA VDA. DE REYES, ET AL., vendees-petitioners-appellees. RODOLFO LANUZA, vendor, vs.MARTIN DE LEON, intervenor-appellant.Erasmo R. Cruz and C. R. Pascual for intervenor-appellant.Augusto J. Salas for vendees-petitioners-appellees.REGALA, J.:Rodolfo Lanuza and his wife Belen were the owners of a two-story house built on a lot of the Maria Guizon Subdivision in Tondo, Manila, which the spouses leased from the Consolidated Asiatic Co. On January 12, 1961, Lanuza executed a document entitled "Deed of Sale with Right to Repurchase" whereby he conveyed to Maria Bautista Vda. de Reyes and Aurelia R. Navarro the house, together with the leasehold rights to the lot, a television set and a refrigerator in consideration of the sum of P3,000. The deed reads:DEED OF SALE WITH RIGHT TO REPURCHASE KNOW ALL MEN BY THESE PRESENTS:That I, RODOLFO LANUZA, Filipino, of legal age, married to Belen Geronimo, and residing at 783-D Interior 14 Maria Guizon, Gagalangin, Tondo, Manila, hereby declare that I am the true and absolute owner of a new two storey house of strong materials, constructed on a rented lot Lot No. 12 of the Maria Guizon Subdivision, owned by the Consolidated Asiatic Co. as evidenced by the attached Receipt No. 292, and the plan of the subdivision, owned by said company.That for and in consideration of the sum of THREE THOUSAND PESOS (P3,000.00) which I have received this day from Mrs. Maria Bautista Vda. de Reyes, Filipino, of legal age, widow; and Aurelia Reyes, married to Jose S. Navarro, Filipinos, of legal ages, and residing at 1112 Antipolo St., Tondo, Manila, I hereby SELL, CEDE, TRANSFER, AND CONVEY unto said Maria Bautista Vda. de Reyes, her heirs, succesors, administrators and assigns said house, including my right to the lot on which it was constructed, and also my television, and frigidaire "Kelvinator" of nine cubic feet in size, under the following conditions:I hereby reserve for myself, my heirs, successors, administrators, and assigns the right to repurchase the above mentioned properties for the same amount of P3,000.00, without interest, within the stipulated period of three (3) months from the date hereof. If I fail to pay said amount of P3,000.00, within the stipulated period of three months, my right to repurchase the said properties shall be forfeited and the ownership thereto shall automatically pass to Mrs. Maria Bautista Vda. de Reyes, her heirs, successors, administrators, and assigns, without any Court intervention, and they can take possession of the same.1wph1.tIN WITNESS WHEREOF, we have signed this contract in the City of Manila, this 12th day of January, 1961.s/t RODOLFO LANUZA Vendors/t MARIA BAUTISTA VDA. DE REYESVendee

s/t AURELIA REYES VendeeWITH MY MARITAL CONSENT: s/t JOSE S. NAVARRO

When the original period of redemption expired, the parties extended it to July 12, 1961 by an annotation to this effect on the left margin of the instrument. Lanuza's wife, who did not sign the deed, this time signed her name below the annotation.It appears that after the execution of this instrument, Lanuza and his wife mortgaged the same house in favor of Martin de Leon to secure the payment of P2,720 within one year. This mortgage was executed on October 4, 1961 and recorded in the Office of the Register of Deeds of Manila on November 8, 1961 under the provisions of Act No. 3344.As the Lanuzas failed to pay their obligation, De Leon filed in the sheriff's office on October 5, 1962 a petition for the extra-judicial foreclosure of the mortgage. On the other hand, Reyes and Navarro followed suit by filing in the Court of First Instance of Manila a petition for the consolidation of ownership of the house on the ground that the period of redemption expired on July 12, 1961 without the vendees exercising their right of repurchase. The petition for consolidation of ownership was filed on October 19. On October 23, the house was sold to De Leon as the only bidder at the sheriffs sale. De Leon immediately took possession of the house, secured a discharge of the mortgage on the house in favor of a rural bank by paying P2,000 and, on October 29, intervened in court and asked for the dismissal of the petition filed by Reyes and Navarro on the ground that the unrecorded pacto de retro sale could not affect his rights as a third party.The parties1 thereafter entered into a stipulation of facts on which this opinion is mainly based and submitted the case for decision. In confirming the ownership of Reyes and Navarro in the house and the leasehold right to the lot, the court said:It is true that the original deed of sale with pacto de retro, dated January 12, 1961, was not signed by Belen Geronimo-Lanuza, wife of the vendor a retro, Rodolfo Lanuza, at the time of its execution. It appears, however, that on the occasion of the extension of the period for repurchase to July 12, 1961, Belen Geronimo-Lanuza signed giving her approval and conformity. This act, in effect, constitutes ratification or confirmation of the contract (Annex "A" Stipulation) by Belen Geronimo-Lanuza, which ratification validated the act of Rodolfo Lanuza from the moment of the execution of the said contract. In short, such ratification had the effect of purging the contract (Annex "A" Stipulation) of any defect which it might have had from the moment of its execution. (Article 1396, New Civil Code of the Philippines; Tang Ah Chan and Kwong Koon vs. Gonzales, 52 Phil. 180)Again, it is to be noted that while it is true that the original contract of sale with right to repurchase in favor of the petitioners (Annex "A" Stipulation) was not signed by Belen Geronimo-Lanuza, such failure to sign, to the mind of the Court, made the contract merely voidable, if at all, and, therefore, susceptible of ratification. Hence, the subsequent ratification of the said contract by Belen Geronimo-Lanuza validated the said contract even before the property in question was mortgaged in favor of the intervenor.It is also contended by the intervenor that the contract of sale with right to repurchase should be interpreted as a mere equitable mortgage. Consequently, it is argued that the same cannot form the basis for a judicial petition for consolidation of title over the property in litigation. This argument is based on the fact that the vendors a retro continued in possession of the property after the execution of the deed of sale with pacto de retro. The mere fact, however, that the vendors a retro continued in the possession of the property in question cannot justify an outright declaration that the sale should be construed as an equitable mortgage and not a sale with right to repurchase. The terms of the deed of sale with right to repurchase (Annex "A" Stipulation) relied upon by the petitioners must be considered as merely an equitable mortgage for the reason that after the expiration of the period of repurchase of three months from January 12, 1961.Article 1602 of the New Civil Code provides:"ART. 1602. The contract shall be presumed to be in equitable mortgage, in any of the following cases;x x x x x x x x x"(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.x x x x x x x x xIn the present case, it appears, however, that no other instrument was executed between the parties extending the period of redemption. What was done was simply to annotate on the deed of sale with right to repurchase (Annex "A" Stipulation) that "the period to repurchase, extended as requested until July 12, 1961." Needless to say, the purchasers a retro, in the exercise of their freedom to make contracts, have the power to extend the period of repurchase. Such extension is valid and effective as it is not contrary to any provision of law. (Umale vs. Fernandez, 28 Phil. 89, 93)The deed of sale with right to repurchase (Annex "A" Stipulation) is embodied in a public document. Consequently, the same is sufficient for the purpose of transferring the rights of the vendors a retro over the property in question in favor of the petitioners. It is to be noted that the deed of sale with right to repurchase (Annex "A" Stipulation) was executed on January 12, 1961, which was very much ahead in point of time to the execution of the real estate mortgage on October 4, 1961, in favor of intervenor (Annex "B" Stipulation). It is obvious, therefore, that when the mortgagors, Rodolfo Lanuza and Belen Geronimo Lanuza, executed the real estate mortgage in favor of the intervenor, they were no longer the absolute owners of the property since the same had already been sold a retro to the petitioners. The spouses Lanuza, therefore, could no longer constitute a valid mortgage over the property inasmuch as they did not have any free disposition of the property mortgaged. (Article 2085, New Civil Code.) For a valid mortgage to exist, ownership of the property mortgaged is an essential requisite. A mortgage executed by one who is not the owner of the property mortgaged is without legal existence and the registration cannot validate. (Philippine National Bank vs. Rocha, 55 Phil. 497).The intervenor invokes the provisions of article 1544 of the New Civil Code for the reason that while the real estate mortgage in his favor (Annex "B" Stipulation) has been registered with the Register of Deeds of Manila under the provisions of Act No. 3344 on November 3, 1961, the deed of sale with right to repurchase (Annex "A" Stipulation) however, has not been duly registered. Article 1544 of the New Civil Code, however, refers to the sale of the same property to two or more vendees. This provision of law, therefore, is not applicable to the present case which does not involve sale of the same property to two or more vendees. Furthermore, the mere registration of the property mortgaged in favor of the intervenor under Act No. 3344 does not prejudice the interests of the petitioners who have a better right over the property in question under the old principle of first in time, better in right. (Gallardo vs. Gallardo, C.B., 46 O.G. 5568)De Leon appealed directly to this Court, contending (1) that the sale in question is not only voidable but void ab initio for having been made by Lanuza without the consent of his wife; (2) that the pacto de retro sale is in reality an equitable mortgage and therefore can not be the basis of a petition for consolidation of ownership; and (3) that at any rate the sale, being unrecorded, cannot affect third parties.We are in accord with the trial court's ruling that a conveyance of real property of the conjugal partnership made by the husband without the consent of his wife is merely voidable. This is clear from article 173 of the Civil Code which gives the wife ten years within which to bring an action for annulment. As such it can be ratified as Lanuza's wife in effect did in this case when she gave her conformity to the extension of the period of redemption by signing the annotation on the margin of the deed. We may add that actions for the annulment of voidable contracts can be brought only by those who are bound under it, either principally or subsidiarily (art. 1397), so that if there was anyone who could have questioned the sale on this ground it was Lanuza's wife alone.We also agree with the lower court that between an unrecorded sale of a prior date and a recorded mortgage of a later date the former is preferred to the latter for the reason that if the original owner had parted with his ownership of the thing sold then he no longer had the ownership and free disposal of that thing so as to be able to mortgage it again. Registration of the mortgage under Act No. 3344 would, in such case, be of no moment since it is understood to be without prejudice to the better right of third parties.2 Nor would it avail the mortgagee any to assert that he is in actual possession of the property for the execution of the conveyance in a public instrument earlier was equivalent to the delivery of the thing sold to the vendee.3But there is one aspect of this case which leads us to a different conclusion. It is a point which neither the parties nor the trial court appear to have sufficiently considered. We refer to the nature of the so-called "Deed of Sale with Right to Repurchase" and the claim that it is in reality an equitable mortgage. While De Leon raised the question below and again in this Court in his second assignment of error, he has not demonstrated his point; neither has he pursued the logical implication of his argument beyond stating that a petition for consolidation of ownership is an inappropriate remedy to enforce a mortgage.De Leon based his claim that the pacto de retro sale is actually an equitable mortgage on the fact that, first, the supposed vendors (the Lanuzas) remained in possession of the thing sold and, second, when the three-month period of redemption expired the parties extended it. These are circumstances which indeed indicate an equitable mortgage.4 But their relevance emerges only when they are seen in the perspective of other circumstances which indubitably show that what was intended was a mortgage and not a sale.These circumstances are:1. The gross inadequacy of the price. In the discussion in the briefs of the parties as well as in the decision of the trial court, the fact has not been mentioned that for the price of P3,000, the supposed vendors "sold" not only their house, which they described as new and as being made of strong materials and which alone had an assessed value of P4,000, but also their leasehold right television set and refrigerator, "Kelvinator of nine cubic feet in size." indeed, the petition for consolidation of ownership is limited to the house and the leasehold right, while the stipulation of facts of the parties merely referred to the object of the sale as "the property in question." The failure to highlight this point, that is, the gross inadequacy of the price paid, accounts for the error in determining the true agreement of the parties to the deed.2. The non-transmission of ownership to the vendees. The Lanuzas, the supposed vendors did not really transfer their ownership of the properties in question to Reyes and Navarro. What was agreed was that ownership of the things supposedly sold would vest in the vendees only if the vendors failed to pay P3,000. In fact the emphasis is on the vendors payment of the amount rather than on the redemption of the things supposedly sold. Thus, the deed recites that If I (Lanuza) fail to pay said amount of P3,000.00 within the stipulated period of three months, my right to repurchase the said properties shall be forfeited and the ownership thereto automatically pass to Mrs. Maria Bautista Vda. de Reyes . . . without any Court intervention and they can take possession of the same.This stipulation is contrary to the nature of a true pacto de retro sale under which a vendee acquires ownership of the thing sold immediately upon execution of the sale, subject only to the vendor's right of redemption.5 Indeed, what the parties established by this stipulation is an odious pactum commissorium which enables the mortgages to acquire ownership of the mortgaged properties without need of foreclosure proceedings. Needless to say, such a stipulation is a nullity, being contrary to the provisions of article 2088 of the Civil Code.6 Its insertion in the contract of the parties is an avowal of an intention to mortgage rather than to sell.73. The delay in the filing of the petition for consolidation. Still another point obviously overlooked in the consideration of this case is the fact that the period of redemption expired on July 12, 1961 and yet this action was not brought until October 19, 1962 and only after De Leon had asked on October 5, 1962 for the e