ROCKVILLE EXCEL INTERNATIONAL EXIM CORPORATION, PETITIONER, VS.

SPOUSES OLIGARIO CULLA AND BERNARDITA MIRANDA, RESPONDENTS.

FACTS:

The spouses Culla are the registered owners of a parcel of land.They mortgaged this
property to PS Bank to secure a loan of P1,400,000.00. To prevent the foreclosure,
Husband approached ROCKVILLE for financial assistance. Rockville extended him total
loan amount of P2,000,000.00. Husband failed to pay his indebtedness, so they agreed,
both parties to settle the debt is to sell another property of the Culla's to ROCKVILLE.
The parties agreed to fix the purchase price at P3,500,000.00 since a survey revealed
that the property is worth more than the P2,000,000.00 loan.

ROCKVILLE and Husband executed a Deed of Absolute Sale over the property with an
agreement that the former would pay the additional P1,500,000.00 after Wife affixes her
signature to the Deed of Absolute Sale since the land is a conjugal property.
ROCKVILLE filed a complaint for Specific Performance and Damages since the Wife
refused to sign, insisting that the transaction was an absolute sale by way of dacion en
pago.(dation in payment)

Dacion en pago is a Spanish term that means the giving back of the property to the
lender inexchange for the discharge of a mortgage debt. This procedure is usually
resorted to by borrowers who cannot anymore meet the mounting obligation on the
mortgage. As debt accumulates and becomes unmanageable, daciion becomes a
solution of the last resort that the borrower can take.

ISSUE:

Whether the transaction entered by the parties is therefore an absolute sale or an

equitable mortgage.

HELD:

The transaction between the parties was in reality an equitable mortgage, not an
absolute sale. First, the Culla's retained possession of the property. Second,
ROCKVILLE kept a part of the purchase price. Third, ROCKVILLE continued to give the
Culla's extensions on the period to repay their loan even after the parties allegedly
agreed to a dacion en pago. Fourth,different testimonies of the Culla's that the purpose
of the Deed of Absolute Sale was merely to guarantee their loan.
In determining the nature of a contract, courts are not bound by the title or name given
by the parties. The decisive factor in evaluating an agreement is the
intention of the parties, as shown, not necessarily by the name given used in the
contract but, by the intention they shown prior to, during and immediately after
executing the agreement. After all an equitable mortgage has been
defined as one which although lacking in some formality, or form
or words, or other requisites demanded by a statute, nevertheless
reveals the intention of the parties to charge real property as
security for a debt, there being no impossibility nor anything
contrary to law in this intent.