PNB v Banatao

Facts:
Banatao, et al., filed an action for recovery of a real property, against Carag. The property is an accretion
that Carag was occupying and Banatao is claiming. During the pendency of the case, Carag was able to
secure a homestead patent over the property and was given an OCT.

Subsequently, while the case was still pending, he applied for a loan from PNB and secured it using the
property (mortgage ba). PNB approved the application, relying on the OCT, which had no notice of lis
pendens. Carag was not able to pay the loan so the property was extrajudicially foreclosed by PNB and
consolidated ownership in its name.

However, Banatao and Carag entered into a compromise agreement stating that Banatao would own
the northern half while Carag would own the Southern half. PNB was not made a party of the
compromise agreement however, Carag acknowledged their indebtedness to petitioner PNB and bound
themselves to pay their respective obligations to the bank, including the interests accruing thereon.

Trial Court approved the compromise agreement in which the PNB disagreed on the ground that the
bank is not an indispensable party to the compromise agreement and the bank claims good faith on the
position that the OCTs presented to it were all clean on their faces at the time the mortgages were
applied for; that there were no notices of lis pendens. The CA affirmed in toto the decision of the lower
court. Hence this petition.

Issue: (1) W/N the compromise agreement entered into by Banatao and Carag legally binds PNB which is
not a party thereto and constitutes sufficient legal basis to nullify PNB’s mortgage lien on the property
(2) W/N the mortgage was valid

Ruling:
Affirmative; Negative; It is basic in law that a compromise agreement, as a contract, is binding only upon
the parties to the compromise, and not upon non-parties. This is the doctrine of relativity of contracts.
A court judgment made solely on the basis of a compromise agreement binds only the parties to the
compromise, and cannot bind a party litigant who did not take part in the compromise agreement.

It is basic in law that a compromise agreement, as a contract, is binding only upon the parties to the
compromise, and not upon non-parties. This is the doctrine of relativity of contracts. Consistent with
this principle, a judgment based entirely on a compromise agreement is binding only on the parties to
the compromise the court approved, and not upon the parties who did not take part in the compromise
agreement and in the proceedings leading to its submission and approval by the court. Otherwise
stated, a court judgment made solely on the basis of a compromise agreement binds only the parties to
the compromise, and cannot bind a party litigant who did not take part in the compromise agreement.

Following Castaeda, the judgment on compromise rendered by the trial court in this case, and later
affirmed by the appellate court, is final with respect only to the Banatao and Carag, but not with respect
to the PNB. Hence, the trial court's judgment on compromise which settles the issue of ownership over
the properties in question is but a partial decision that does not completely decide the case and cannot
bind the PNB.
However, we conclude from our own examination of these OCTs that the mortgages cannot but be void
ab initio. On the faces of allthe OCTs—secured through homestead patents—are inscribed which
contains a proscription against the alienation or encumbrance of homestead patents within five years
from issue.
PNB cannot claim that it is a mortgagee in good faith. One who contracts with a homestead patentee is
charged with knowledge of the law's proscriptive provision that must necessarily be read into the terms
of any agreement involving the homestead. Under the circumstances, the PNB simply failed to observe
the diligence required in the handling of its transactions and thus made the fatal error of approving the
loans secured by mortgages of properties that cannot, in the first place, be mortgaged. Both the
defendants-respondents and the bank are to be faulted for the invalidity of the mortgages.
Our conclusion on the nullity of mortgage issue renders it unnecessary to decide the question of
whether the compromise agreement between the plaintiffs-respondents and the defendants-
respondents should be set aside for its effect on the bank. With the mortgages invalidated, the PNB no
longer has any interest that the compromise agreement can affect. The parties’ liabilities to PNB on the
loans they obtained are not issues before us for disposition, and are for the parties to act upon as
matters outside the coverage of this case.
 Manila Banking Corporation vs. Teodoro

Facts:
On April 25, 1966, defendants, together with Teodoro, Sr., jointly and severally, executed in favor of
plaintiff a Promissory Note (No. 11487) for P10,420.00, at 12% interest per annum. On May 3, 1966 and
June 20, 1966, defendants Teodoro, Sr. (Father) and Teodoro, Jr. (Son) executed in favor of plaintiff two
Promissory Notes (Nos. 11515 and 11699) for P8,000.

It appears that on January 24, 1964, the Son executed in favor of plaintiff a Deed of Assignment of
Receivables from the Emergency Employment Administration (EEA) in the sum of P44,635.00. The Deed
of Assignment provided that it was for and in consideration of certain credits, loans, overdrafts and
other credit accommodations extended to defendants as security for the payment of said sum and the
interest thereon, and that defendants `do hereby remise, release and quitclaim all its rights, title, and
interest in and to the accounts receivables.' Further:

(1) the title and right of possession to said accounts receivable is to remain in the assignee, x x x;

(9) x x x This Assignment shall also stand as a continuing guarantee for any and all whatsoever
there is or in the future there will be justly owing from the Assignor to the Assignee x x x.

In their stipulations of facts, it is admitted by the parties that plaintiff extended loans to defendants on
the basis and by reason of certain contracts entered into by the defunct Emergency Employment
Administration (EEA) with defendants for the fabrication of fishing boats, and that the Philippine
Fisheries Commission succeeded the EEA after its abolition; that non-payment of the notes was due to
the failure of the Commission to pay defendants after the latter had complied with their contractual
obligations; and that the President of plaintiff Bank took steps to collect from the Commission, but no
collection was effected.

For failure of defendants to pay the sums due on the Promissory Notes, this action was instituted.

The Trial Court rendered its judgment adverse to defendants. Upon appeal, the Court of Appeals,
certified the case to the Supreme Court.

Issue: (1) W/N the assignment of receivables has the effect of payment of all the loans contracted by
appellants from appellee bank; and (2) W/N appellee bank must first exhaust all legal remedies against
the Philippine Fisheries Commission before it can proceed against appellants for collections of loan
under the promissory notes

Ruling:
Negative; Negative; Assignment of credit is an agreement by virtue of which the owner of a credit,
known as the assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and
without the need of the consent of the debtor, transfers his credit and its accessory rights to another,
known as the assignee, who acquires the power to enforce it to the same extent as the assignor could
have enforced it against the debtor. x x x It may be in the form of a sale, but at times it may constitute a
dation in payment, such as when a debtor, in order to obtain a release from his debt, assigns to his
creditor a credit he has against a third person, or it may constitute a donation as when it is by gratuitous
title; or it may even be merely by way of guaranty, as when the debtor gives as a collateral, to secure his
own debt in favor of the assignee, without transmitting ownership. The character that it may assume
determines its requisites and effects, its regulation, and the capacity of the parties to execute it; and in
every case, the obligations between assignor and assignee will depend upon the judicial relation which is
the basis of the assignment.

There is no question as to the validity of the assignment of receivables executed by appellants in favor of
appellee bank. The issue is with regard to its legal effects.

It is evident that the assignment of receivables executed by appellants on January 24, 1964 did not
transfer the ownership of the receivables to appellee bank and release appellants from their loans with
the bank incurred under promissory notes Nos. 11487, 11515 and 11699.

The Deed of Assignment provided that it was for and in consideration of certain credits, loans,
overdrafts, and their credit accommodations extended to appellants by appellee bank, and as security
for the payment of said sum and the interest thereon; that appellants as assignors, remise, release, and
quitclaim to assignee bank all their rights, title and interest in and to the accounts receivable assigned. It
was further stipulated that the assignment will also stand as a continuing guaranty for future loans of
appellants to appellee bank and correspondingly the assignment shall also extend to all the accounts
receivable; appellants shall also obtain in the future, until the consideration on the loans secured by
appellants from appellee bank shall have been fully paid by them.

The position of appellants, however, is that the deed of assignment is a quitclaim in consideration of
their indebtedness to appellee bank, not mere guaranty, in view of the following provisions of the deed
of assignment:

"x x x the Assignor do hereby remise, release and quit-claim unto said assignee all its rights, title
and interest in the accounts receivable described hereunder."

"x x x that the title and right of possession to said account receivable is to remain in said
assignee, x x x.”

The character of the transactions between the parties is not, however, determined by the language used
in the document but by their intention.

The character of the transaction between the parties is to be determined by their intention, regardless
of what language was used or what the form of the transfer was. It has been said that a transfer of
property by the debtor to a creditor, even if sufficient on its face to make an absolute conveyance,
should be treated as a pledge if the debt continues in existence and is not discharged by the transfer,
and that accordingly, the use of the terms ordinarily importing conveyance, of absolute ownership will
not be given that effect in such a transaction if they are also commonly used in pledges and mortgages
and therefore do not unqualifiedly indicate a transfer of absolute ownership, in the absence of clear and
ambiguous language or other circumstances excluding an intent to pledge.

Definitely, the assignment of the receivables did not result from a sale transaction. It cannot be said to
have been constituted by virtue of a dation in payment for appellants' loans with the bank evidenced by
promissory note Nos. 11487, 11515 and 11699 which are the subject of the suit for collection in Civil
Case No. 78178. At the time the deed of assignment was executed, said loans were non-existent yet.
The deed of assignment was executed on January 24, 1964, while promissory note No. 11487 is dated
April 25, 1966, promissory note 11515, dated May 3, 1966, and promissory note 11699, on June 20,
1966. At most, it was a dation in payment for the amount of credit from appellee bank indicated in the
deed of assignment. At the time the assignment was executed, there was no obligation to be
extinguished. Moreover, in order that an obligation may be extinguished by another which substitutes
the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other.

Obviously, the deed of assignment was intended as collateral security for the bank loans of appellants,
as a continuing guaranty for whatever sums would be owing by defendants to plaintiff, as stated in
stipulation No. 9 of the deed.

In case of doubt as to whether a transaction is a pledge or a dation in payment, the presumption is in

favor of pledge, the latter being the lesser transmission of rights and interests.

The second issue must also be answered in the negative.

The obligation of appellants under the promissory notes not having been released by the assignment of
receivables, appellants remain as the principal debtors of appellee bank rather than mere
guarantors. The deed of assignment merely guarantees said obligations. That the guarantor cannot be
compelled to pay the creditor unless the latter has exhausted all the property of the debtor, and has
resorted to all the legal remedies against the debtor, under Article 2058 of the New Civil Code does not
therefore apply to them. It is of course of the essence of a contract of pledge or mortgage that when
the principal obligation becomes due, the things in which the pledge or mortgage consists may be
alienated for the payment to the creditor (Article 2087, New Civil Code). In the instant case, appellants
are both the principal debtors and the pledgors or mortgagors. Resort to one is, therefore, resort to the
other.
 Citybank and Investors Finace Corp. v. Sabeniano

Facts:
Modesta Sabeniano is a client of Citibank and FNCB Finance. On February 1978, Sabeniano obtained a
loan of Php 200,000 from Citibank. This loan was followed with several other loans – some were paid,
while some were not. Those that were not paid upon maturity were rolled over, reflecting a total unpaid
loan of Php 1,069,847.40 as of September 1979.

These loans were secured by Sabeniano’s money market placements with FNCB Finance through a Deed
of Assignment plus a Declaration of Pledge which states that all present and future fiduciary placements
held in her personal and/or joint name with Citibank Switzerland, will secure all claims that Citibank may
have or, in the future, acquire against her.

The Deeds of Assignment were duly notarized, while the Declaration of Pledge was not notarized and
Citibank’s copy was undated, while that of Sabeniano bore the date, September 24, 1979.

Since Sabeniano failed to pay her obligations to Citibank, the latter sent demand letters to request
payment. Her total unpaid loan initially amounted to Php 2,123,843.20 (inclusive of interests).

Still failing to pay, Citibank executed the Deeds of Assignment and used the proceeds of Sabeniano’s
money market placement from FNCB Finance which totaled Php 1,022,916.66 and her deposits with
Citibank which totaled Php 31,079.14 to set-off her loan.

This reduced the unpaid balance to Php 1,069,847.40 as previously mentioned. Since the loan remains
unpaid, Citibank proceeded to execute the Declaration of Pledge and remitted a total of $149,632.99
from Sabeniano’s Citibank-Geneva accounts to off-set the loan.

Sabeniano then filed a complaint against Citibank for damages and specific performance (for proper
accounting and return of the remitted proceeds from her personal accounts). She also contended that
the proceeds of 2 promissory notes (PN) from her money market placements with Citibank were rolled
over or reinvested into the petitioner bank, and these should also be returned to her.

Regarding the execution of the pledge, the RTC declared this illegal, null and void. Citibank was ordered
to return the $149,632.99 to Sabeniano’s Citibank-Geneva account with a legal interest of 12% per
annum. The RTC also ordered Sabeniano to pay her outstanding loan to Citibank without interests and
penalty charges.

Both parties appealed to the CA which affirmed the RTC’s decision, but further ruled entirely in favor of
Sabeniano – holding that Citibank failed to establish her indebtedness and that all the executed deeds
should be returned to her account. The case has now reached the Supreme Court.

Issue: W/N Citibank’s execution of deeds and pledge to off-set Sabeniano’s loan was valid and legal.

Ruling:
The Supreme Court reversed the CA’s findings regarding Sabeniano’s Citibank loan as this was properly
documented and sufficient in evidence. Thus, the execution of deeds was valid, especially that the
agreement was duly notarized, signed and prepared in accordance with the law.
The court also ordered Citibank to return the amount of P318,897.34 and P203,150.00 plus 14.5% per
annum to Sabeniano. This is the total amount from the 2 PNs which were executed despite being
reinvested in said bank. The bank was also ordered to pay moral damages of P300,000, exemplary
damages for P250,000, attorney’s fees of P200,000.

The SC however affirmed the RTC’s decision regarding the pledge. Being a separate entity, Citibank
cannot exercise automatic remittance from Sabeniano’s Citibank Geneva account to off-set her
outstanding loan.

The court also noted that the pledge was filled out irregularly – it was not notarized and Citibank’s copy
bore no date. The original copy was not also produced in court.

Regarding Sabeniano’s obligation, the Supreme Court affirmed RTC’s decision and ordered her to pay
the remaining balance of her loan which amounts to P1,069,847.40 as of 5 September 1979. These loans
continue to earn interest based on the maturity date that were agreed and stipulated upon by the
parties.
 Sps. Ong v. Roban Lending Corp.

Facts:
Petitioner-spouses Ong obtained several loans from Roban Lending Corporation (respondent) in the
total amount of P4,000,000.00. These loans were secured by a real estate mortgage on petitioners
parcels of land located in Binauganan, Tarlac City.

The parties executed a Dacion in Payment Agreement wherein petitioners assigned the properties to
respondent in settlement of their total obligation, and a Memorandum of Agreement that the Roban
Lending Corp and the petitioners agreed to consolidate and restructure all loans, which have been all
past due and delinquent since April 19, 2000, and outstanding obligations totaling P5,916,117.50. The
petitioners sign another promissory note in the amount of P5,916,117.50 with a promise to pay the
respondent in full within one year from the date of the consolidation and restructuring, otherwise the
petitioners agree to have their Dacion in Payment agreement, which they have executed and signed
today in favor of the respondent.

Petitioners filed a Complaint RTC of Tarlac City, for declaration of mortgage contract as abandoned,
annulment of deeds, illegal exaction, unjust enrichment, accounting, and damages, alleging that the
Memorandum of Agreement and the Dacion in Payment executed are void for being pactum
commissorium.

Petitioners alleged that the loans extended to them from July 14, 1999 to March 20, 2000 were founded
on several uniform promissory notes, which provided for 3.5% monthly interest rates, 5% penalty per
month on the total amount due and demandable, and a further sum of 25% attorneys fees thereon and
in addition, respondent exacted certain sums denominated as EVAT/AR.

Petitioners decried these additional charges as illegal, iniquitous, unconscionable, and revolting to the
conscience as they hardly allow any borrower any chance of survival in case of default. Petitioners
further alleged that they had previously made payments on their loan accounts, but because of the
illegal exactions thereon, the total balance appears not to have moved at all, hence, accounting was in
order.

Respondent maintained the legality of its transactions with petitioners, alleging that the Dacion in
Payment Agreement is lawful and valid as it is recognized under Art. 1245 of the Civil Code as a special
form of payment whereby the debtor-Plaintiffs alienates their property to the creditor-Defendant in
satisfaction of their monetary obligation.

The Tarlac City RTC, finding on the basis of the pleadings that there was no pactum commissorium,
dismissed the complaint.

On appeal, the Court of Appeals noted that what the RTC actually rendered was a summary judgment
and upheld the RTC decision that there was no pactum commissorium. Their Motion for Reconsideration
having been denied.

Issue: W/N the dacion in payment agreement entered into by Spouses Ong and Roban constitutes
pactum commissorium

Ruling:
Affirmative; The questioned contracts were freely and voluntarily executed by petitioners and
respondent is pactum commissorium being void for being prohibited by law. Under Article 2088 of the
Civil Code which provides:
The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them.
Any stipulation to the contrary is null and void.

The elements of pactum commissorium, which enables the mortgagee to acquire ownership of the
mortgaged property without the need of any foreclosure proceedings are:

(1) there should be a property mortgaged by way of security for the payment of the principal
obligation, and

(2) there should be a stipulation for automatic appropriation by the creditor of the thing
mortgaged in case of non-payment of the principal obligation within the stipulated period.

The MOA and the Dacion in Payment contain no provisions for foreclosure proceedings nor redemption.
Under the MOA, the failure by the petitioners to pay their debt within the one-year period gives
respondent the right to enforce the Dacion in Payment transferring to it ownership of the properties.
Which the respondent, in effect, automatically acquires ownership of the properties upon petitioners
failure to pay their debt within the stipulated period.

Respondent argues that the law recognizes dacion en pago as a special form of payment whereby the
debtor alienates property to the creditor in satisfaction of a monetary obligation. This does not
persuade. In a true dacion en pago, the assignment of the property extinguishes the monetary debt. In
the case at bar, the alienation of the properties was by way of security, and not by way of satisfying the
debt. The Dacion in Payment did not extinguish petitioners obligation to respondent. On the contrary,
under the Memorandum of Agreement executed on the same day as the Dacion in Payment, petitioners
had to execute a promissory note for P5,916,117.50 which they were to pay within one year.
 Ramirez v. CA

Facts:
In 1959, petitioners-spouses Hilario Ramirez and Valentina Bonifacio filed an application for registration
of a parcel of riceland in Pamplona, Las Pinas Rizal. After notice and publication nobody appeared to
oppose the application. Thereafter, the petitioners presented parol evidence that they acquired the land
in question by purchase from Gregorio Pascual during the early part of the American regime but the
corresponding contract of sale was lost and no copy or record of the same was available.

In 1960, the court ordered the issuance of the decree of registration and consequently: Original
Certificate of Title No. 2273 of the Registry of Deeds of Rizal was issued in the petitioners names.

Private respondents Francisca Medina, et al., filed a petition to review the decree of registration on the
ground of fraud. The private respondents based their claim to the land on the following allegations: that
they are the legal heirs of the deceased Agapita Bonifacio who died intestate on March 11, 1936; that
Valentina Bonifacio is a sister of the deceased Agapita Bonifacio, they being the children of one Gregoria
Pascual; that Gregoria Pascual previously owned the land in question as evidenced by Tax Declaration
No. 6611 of Las Pinas Rizal issued on December 8, 1920; that Agapita Bonifacio acquired the property in
question by purchase from Gregoria Pascual for which reason Tax Declaration No. 8777 was issued in
her name on May 21, 1928; that Gregoria Pascual during her lifetime, from 1916, possessed the said
property in the concept of owner, publicly and uninterruptedly, which possession was continued by
Agapita Bonifacio in 1928; that in 1938 respondents obtained a loan of P400 from the petitioners which
they secured with a mortgage on the land in question by way of antichresis; that for this reason, Tax
Declaration No. 8777 was cancelled and substituted by Tax Declaration Nos. 9522 and 2385 issued in the
names of the petitioners; that, thereafter, the petitioners began paying taxes on the land; that after
several attempts to redeem the land were refused by the petitioners, the respondents filed a complaint
in the Court of First Instance of Pasay City docketed as Civil Case No. 272-R for the recovery of the
possession and ownership of the said property; that when they learned of the issuance of the certificate
of title to the land in the petitioners' names, they also filed the instant petition for review. The previous
complaint, Civil Case No. 272-R, was subsequently dismissed on a joint petition filed by the parties after
they agreed to have the determination of the question of ownership resolved in the registration
proceedings.

In their answer, the spouses Ramirez denied the material allegations of the petition, they based their
claim to the land on two deeds of sale allegedly executed on April 15, 1937 and April 23, 1937 which
they allegedly found accidentally in March 1960.

After trial, the court found that deeds of sale spurious. It further found that the respondents took
possession of the land as owners after the death of Agapita Bonifacio and in 1938, mortgaged it to the
spouses Ramirez to secure the payment of a loan in the amount of P400. It was agreed that the
respondents could not redeem the property within a period of five years and that the petitioners would
take possession of the land, enjoy its fruits, and pay the land taxes thereon. The written agreement was
kept by the petitioners as creditors. The trial court appreciated the fact of the petitioners' failure,
despite formal request, to produce the document in court in favor of the respondents. The decision was
affirmed by the Court of Appeals.

Issue: W/N the possession of petitioners of the questioned land can ripen into ownership
Ruling:
Negative; The petitioners in this case did not merely omit a statement of the respondents' interest in the
land. They positively attested to the absence of any adverse claim therein. This is clear
misrepresentation. The omission and concealment, knowingly and intentionally made, of an act or of a
fact which the law requires to be performed or recorded is fraud, when such omission or concealment
secures a benefit to the prejudice of a third person.

There is no merit in the third assigned error. While there was an admission that the petitioners have
been in actual possession of the disputed land since 1938, it was made to show and prove the fact that
the petitioners are only antichretic creditors. The respondents never admitted that they have not
possessed the land at all. On the contrary, they alleged that they and their predecessors-in-interest
namely Gregoria Pascual and Agapita Bonifacio have been in possession of the land since time
immemorial and that the petitioners were placed in possession of the land pursuant to a contract of
antichresis.

The court below found that the petitioners are merely antichretic creditors. This finding and its factual
bases were affirmed by the Court of Appeals. On the basis of the evidence supporting this conclusion,
this finding is binding on us as it is not our duty to weigh evidence on this point all over again. This court
has on several occasions held that the antichretic creditor cannot ordinarily acquire by prescription the
land surrendered to him by the debtor. The petitioners are not possessors in the concept of owner but
mere holders placed in possession of the land by its owners. Thus, their possession cannot serve as a
title for acquiring dominion (See Art. 540, Civil Code).

The argument of laches is explained and countered by the close relationship of the parties and the
nature of a contract of antichresis. The private respondents are nephews and nieces, with their spouses,
of the petitioners. Moreover, there is evidence to show that long before the filing of the cases, there
had been attempts to recover the property.

In view of the foregoing, we are constrained to affirm the appellate court's decision. We note, however,
that in spite of the finding of an existing contract of antichresis between the parties, the two courts
below did not order the payment of the principal amount of mortgage. Under Article 2136 of the Civil
Code, the debtor cannot reacquire the enjoyment of the immovable without first having totally paid
what he owes the creditor.
 Dizon v. Gaborro

Facts:
Petitioner Jose P. Dizon was the owner of the three (3) parcels of land. He constituted a first mortgage
lien in favor of the Development Bank of the Philippines (DBP) in order to secure a loan in the sum of
P38,000.00 trial a second mortgage lien in favor of the Philippine National Bank (PNB) to cure his
indebtedness to said bank in the amount of P93,831.91. Petitioner Dizon having defaulted in the
payment of his debt, the DBP foreclosed the mortgage extrajudicially. Sometime prior to October 6,
1959 Jose P. Dizon met Gaborro became interested in the lands of Dizon. Dizon originally intended to
lease to Gaborro the property which had been lying idle for some time. But as the mortgage was already
foreclosed by the DPB the bank in fact purchased the lands at the foreclosure sale on May 26, 1959,
they abandoned the projected lease. Dizon and Gaborro. on the same day, October 6, 1959, constitute
in truth and in fact an absolute sale of the three parcels of land therein described or merely an equitable
mortgage or conveyance thereof by way of security for reimbursement or repayment by petitioner
Dizon of any and all sums which may have been paid to the DBP and the PNB by Gaborro. Said
documents were executed by the parties and the payments were made by Gaborro for the debt of Dizon
to said banks after the DBP had foreclosed the mortgage executed by Dizon and during the period of
redemption after the foreclosure sale of the mortgaged property to said creditor bank.

Gaborros contention;
Deed of Sale with Assumption of Mortgage Option to Purchase Real Estate

Dizon’s contention:
Merely an equitable mortgage or conveyance thereof by way of security for reimbursement, refund or
repayment by petitioner Dizon

Issue: W/N the deed was of a Deed of Sale with Assumption of Mortgage', Option to Purchase Real
Estate or merely an equitable mortgage or conveyance thereof by way of security for reimbursement,
refund or repayment by petitioner Dizon

Ruling:
In the light of the foreclosure proceedings and sale of the properties, a legal point of primary
importance here, as well as other relevant facts and circumstances, We agree with the findings of the
trial and appellate courts that the true intention of the parties is that respondent Gaborro would
assume and pay the indebtedness of petitioner Dizon to DBP and PNB, and in consideration therefor,
respondent Gaborro was given the possession, the enjoyment and use of the lands until petitioner can
reimburse fully the respondent the amounts paid by the latter to DBP and PNB, to accomplish the
following ends: (a) payment of the bank obligations; (b) make the lands productive for the benefit of the
possessor, respondent Gaborro, (c) assure the return of the land to the original owner, petitioner Dizon,
thus rendering equity and fairness to all parties concerned. In view of all these considerations, the law
and Jurisprudence, and the facts established We find that the agreement between petitioner Dizon and
respondent Gaborro is one of those inanimate contracts under Art.1307 of the New Civil Code whereby
petitioner and respondent agreed "to give and to do" certain rights and obligations respecting the lands
and the mortgage debts of petitioner which would be acceptable to the bank but partaking of the nature
of the antichresis insofar as the principal parties, petitioner Dizon and respondent Gaborro, are
concerned.