Jaime v.

Salvador
December 29, 1930 | Romualdez, J.

FACTS:
1. Severino Jayme and Leonarda Ramos (plaintiffs) owed Presentation Hofilena de
Evangelista P14,381.13 with interest at 12 per cent per annum. The payment is
secured by mortgage upon realty covered by transfer certificate of title No. 2336.
2. Upon being pressed for payment, they obtained a loan of P18,000 through Abaya
which led them to the defendant Juan Salvador (defendant)
3. The loan amounted to P18,000 on condition that the plaintiff’ realty should
appear to have been sold to defendants [defendants bc maraming involvesd na
defendant sa case talaga]). for P26,000.00 and the plaintiffs would purchase lot
no. 69-c (Tansa Lot) of the cadastre of Iloilo of the defendants and the plaintiffs
would appear as lessees of Supang estate at an annual rate of P3,120.
a. The parties agreed on this condition although in reality, the conveyance of
land is not the real intention of the parties and the rental is in fact the
interest at 12 per cent per annum on the sum of P26,000 stated as the
selling price of the said estate.
4. The parties also agreed that the plaintiffs may repurchase the estate by returning
the principal amount that they loaned plus interest. The defendants agreed to this
and to the return of the said lot no. 69-c.
5. The plaintiff spouses paid Presentacion Hofilena de Evangelista. The mortgage
on Supang estate was cancelled.
6. A few days later, Severino asked defendant to increase the loan but defendant
said he has no money so he suggested that he should loan from other people
upon the security of lot 69-c which Severino obtained a Transfer Certificate to his
name. True enough, Severino obtained loans from:
a. Go Tiang Tin for a loan of P600 and P320 . He mortgaged the lot to him.
7. Defendants obtained the TCT of the Supang estate and they succeeded in
mortgaging the said property to the PNB in the amount of P20,000.
8. When Severino had the money to pay the defendants. In his mind, his debt to the
defendant was only P18,000.00 plus the interest amounting to P3,120 but to the
defendant the sum due was P29,320. Severino did not agree. Therefore, he filed
a case.
9. Defendants answer/position:
a. plaintiff spouses voluntarily entered to the said contracts. The contracts
the parties entered into were deeds of final sale and contract of lease for
their transactions. According to the defendants, these documents shall be
taken literally because they do not leave a room for interpretation.
b. Regarding their true intention in entering the said contracts, the plaintiff’s
first intention was to obtain a loan secured by a mortgage but defendants
 disagreed so the latter offered to plaintiffs to purchase the Supang Estate
which the plaintiffs allegedly agreed.
c. The parties made a donation to the municipality of Buenavista of the
25,000 sqm of the land in Supang
d. Defendant paid land tax upon the Supang estate
ISSUE
Whether or not the transactions entered into by the parties constitute a loan.

HELD: Yes.
Plaintiffs did not intend to sell the Supang estate. The contracts they entered into did not
show the real intention of their transaction which is indeed a loan. This was evidenced
by the following circumstances:
1. Severino paid the land tax upon the Tansa lot, according to him, with money
furnished him, by the defendant Juan D. Salvador.
2. The Tansa Lot that was mortgaged to Go Tiang Tin was made because it was
suggested by the defendant himself. Defendant devised a way to substitute lot
69-c for his other land located in Bamban, San Pedro, municipality of Buenavista,
with an area of 83.3156 hectares, to secure the payment of the yearly rental of
said contract of lease.
3. The donation of the 25,000 sqm in Supang in favor of the municipality of
Buenavista was proven by evidence that this gift was an offer made by the
plaintiffs in exchange of the condition that the residential part of the municipality
of Buenavista should be transferred to the barrio of Supang, where said estate of
the plaintiffs is situated. The plaintiffs promised the municipality before May 22,
1928 that after the transactions with the defendants, plaintifss will convey a part
of the estate gratis as also the use of the building of strong materials located
thereon; and this donation and cession was respected by the defendants, being
the ones who executed Exhibits 7 and 8, in compliance with a promise not made
by them, but by the plaintiffs, this act of theirs constituting an open
acknowledgment of the fact that said estate belonged to said plaintiffs.
e. This is the most salient fact proving the intention of both parties in
executing the contracts.
How about the mortgage before the PNB?
1. It must be respected because PNB is an innocent creditor. The whole P20,000
must be noted because even if it true that the loan they had with the defendants
was only P18,000, between the plaintiffs and the bank, the bank’s rights must be
deemed preferential because it was innocent.