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SPS. LEHNER v. MENELIA CHUA

FACTS:

The case involves a dispute over twenty-four memorial lots located at the Holy Cross Memorial Park in Barangay Bagbag, Novaliches, Quezon City. Respondent, together with her mother, owned the disputed property. Respondent borrowed an amount of P150,000 from petitioner spouses, which was secured by a real estate mortgage over the property. However, respondent failed to fully settle her obligation. Ownership of the lots were transferred to the petitioners via a Deed of Transfer, without foreclosure of the mortgage. Respondent filed a Complaint seeking the annulment of the contract of mortgage and the transfer of ownership, alleging unjust and exorbitant interest rates. Later on, respondent included an allegation of forged documents. The trial court rendered a decision in favor of the petitioners, which was affirmed with modifications by the Court of Appeals. However, respondent filed a Motion for Reconsideration and the CA issued an Amended Decision reversing its earlier ruling.

The case involves a dispute over the ownership of a property in Quezon City. Respondent Claims ownership based on a Deed of Transfer executed by the appellant. Appellant argues that the Deed of Transfer was actually an equitable mortgage. The Court of Appeals initially ruled in favor of respondent, but upon reconsideration, reversed its decision and held that the Deed of Transfer was indeed an equitable mortgage. This was based on several findings, including inadequate consideration, execution as security for a loan, and defects in the document. The appellants filed motions for reconsideration, both of which were denied by the CA. The appellants then filed the present petition, which the CA argued was filed out of time.

ISSUES:

  1. Whether the petition was timely filed within the reglementary period.

  2. Whether there was a clear and convincing evidence to support the validity of the notarized document.

  3. Whether the agreement between the petitioners and respondent is an equitable mortgage.

  4. Whether the subsequent assignment of ownership of the subject lots to petitioners without foreclosure proceedings is a pactum commissorium.

  5. Whether the Court of Appeals (CA) has the authority to review and consider errors not assigned by the parties in the appeal.

RULING:

  1. The petition was not timely filed as it was filed beyond the 15-day reglementary period. The filing of a second motion for reconsideration is not allowed and does not toll the running of the period to file an appeal by certiorari. Failure to file the petition within the reglementary period renders the assailed decision and resolutions final and executory, depriving the court of jurisdiction to entertain an appeal.

  2. The notarization of a document carries evidentiary weight and enjoys the presumption of regularity. However, when there is a defect in the notarization, the document loses its public character and is reduced to a private instrument. In this case, the Court found dubious circumstances and irregularities in the alleged notarization of the document, including conflicting certifications and the absence of important details. The presumption of regularity could not be applied, and the validity of the document was challenged and subsequently overthrown by the questionable circumstances surrounding its execution.

  3. Yes, the agreement between the petitioners and respondent is an equitable mortgage. The intention of both parties is for the subject property to serve as security for respondent's obligation to the petitioners. The circumstances surrounding the execution of the disputed Deed of Transfer show that it was executed to circumvent the terms of the original agreement and to deprive respondent of her mortgaged property without foreclosure. The Court applied Article 1602 of the Civil Code, which provides for circumstances where a contract shall be presumed to be an equitable mortgage.

  4. Yes, the subsequent assignment of ownership to petitioners without foreclosure proceedings constitutes a pactum commissorium. Pactum commissorium is a stipulation empowering the creditor to appropriate the thing given as a guarantee in the event the obligor fails to fulfill their obligations, without the need for foreclosure proceedings and a public sale. In this case, evidence shows that the sale of the subject property was simulated to cover up the automatic transfer of ownership to petitioners. While there was no stipulation in the mortgage contract allowing petitioners' automatic appropriation of the property, the subsequent acts of the parties and the circumstances surrounding them indicate that petitioners were empowered to acquire ownership without foreclosure.

  5. Yes, the CA has the authority to review and consider errors not assigned by the parties in the appeal.

PRINCIPLES:

  • Perfection of an appeal within the reglementary period is mandatory and jurisdictional. Failure to file within the prescribed period renders the decision final and executory.

  • Notarized documents carry evidentiary weight and enjoy the presumption of regularity, but this presumption can be rebutted by clear and convincing evidence to the contrary.

  • A defective notarization strips the document of its public character and reduces it to a private instrument.

  • The presumption of regularity attached to notarized documents cannot be affirmed if there are doubts or irregularities in the notarization process.

  • The validity of a document can be challenged if there are questionable circumstances and irregularities surrounding its execution.

  • Equitable Mortgage: An equitable mortgage is one that reveals the intention of the parties to charge real property as security for a debt, even if it lacks some formalities or requirements demanded by law. The real intention of the parties is determined based on the circumstances surrounding the transaction.

  • Pactum Commissorium: Pactum commissorium is a stipulation allowing the creditor to appropriate the thing given as a guaranty without further formality, such as foreclosure proceedings and a public sale, in the event the obligor fails to fulfill their obligations. It is generally prohibited by law, and courts must exercise caution in the interpretation and resolution of contracts to prevent lenders from taking advantage of borrowers.

  • Appellate courts have broad discretionary power to waive the lack of proper assignment of errors and to consider errors not assigned.

  • Appellate courts can review rulings even if they are not assigned as errors in the appeal under certain circumstances, including (a) grounds not assigned as errors but affecting jurisdiction over the subject matter; (b) evident plain or clerical errors within the contemplation of the law; (c) matters necessary for a complete resolution of the case or to serve the interests of justice or avoid dispensing piecemeal justice; (d) matters raised in the trial court and are matters of record having some bearing on the submitted issue which the parties failed to raise or the lower court ignored; (e) matters closely related to an assigned error; and (f) matters upon which the determination of a properly assigned question is dependent.