Lazatin v.

Court of Appeals: As is well-known, it is only where

payment of taxes is accompanied by actual possession of the land
covered by the tax declaration that such circumstance may be
material in supporting a claim of ownership.

1.

It is a basic fundamental rule in the interpretation of a contract that if the terms thereof are clear and leave
no doubt upon the intention of the contracting parties the literal meaning of the stipulation shall control, 5 but
when the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the
former. 6

In Quinga v. Court of Appeals, et al., 1961, although the contract between the parties upon its face was one of
sale, nevertheless, this Court upheld the findings of the Court of Appeals that the transaction was not a sale but a
loan secured by an equitable mortgage under the prevailing circumstances of the case, such as, that the price of the
land was grossly inadequate and the vendor remained in possession of the land and enjoyed the fruits. 10

3 SCRA 666. See also de la Paz, et al. v. Garcia, et al., 18 SCRA 779; Gotamco Hermanos v.
Shotwell, 38 SCRA 107; Lanuza v. de Leon, 20 SCRA 369.

Finally, We have the rule that in case of any doubt concerning the surrounding circumstances in the execution of a
contract, the least transmission of rights and interests shall prevail if the contract is gratuitous, and, if onerous the
doubt is to be settled in favor of the greatest reciprocity of interest. 12
Art. 1378, New Civil Code

In deciding the conflict of allegations between the parties, this Court, through Justice Florentino Torres, considered
the transaction over the property as a loan, reasoning that "such a contract involves a smaller transmission of rights
and interests, and the debtor does not surrender all rights to his property but simply confers upon the creditor the
right to collect what is owing from the value of the thing given as security, there existing between the parties a greater
reciprocity of rights and obligations.

13 Phil. 379, 382, 383, citing Article 1289, Old Civil Code; underline supplied. See also Cuyugan v. Santos (1916) 34
Phil. 100; Macapinlac v. Gutierez Repide, 43 Phil. 770 (1922).

When in doubt, courts are generally inclined to construe a transaction purporting to

be a sale as an equitable mortgage, which involves a lesser transmission of rights
and interests over the property in controversy.
Citing legaspi case (
BENJAMIN BAUTISTA vs. NACHURA, and SHIRLEY G. UNANGST and OTHER
UNKNOWN PERSONS, G.R. No. 173002, July 4, 2008

Apparently, the deed purports to be a sale with right to purchase. However, since it
was executed in consideration of the aforesaid loans and/or indebtedness, said
contract is indubitably an equitable mortgage. 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.
Ramos v. Court of Appeals, G.R. No. 42108,

December 29, 1989, 180 SCRA 635, 645.

That a contract where the vendor remains in physical possession

of the land, as lessee or otherwise, is an equitable mortgage is
well-settled.[14] The reason for this rule lies in the legal reality that
in a contract of sale, the legal title to the property is immediately
transferred to the vendee; retention by the vendor of the
possession of the property is inconsistent with the vendees
acquisition of ownership under a true sale. [15] It discloses, in the
alleged vendee, a lack of interest in the property that belies the
truthfulness of the sale.[16]

ROCKVILLE EXCEL
INTERNATIONAL EXIM
CORPORATION vs. SPOUSES
OLIGARIO CULLA and

BERNARDITA MIRANDA,
October 2, 2009, G.R. No. 155716