III.

EQUITABLE MORTGAGE
A. DEFINITION
An equitable mortgage is 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, and contains nothing impossible or contrary to
law.
The essential requisites of an equitable mortgage are:
(1) the parties enter into what appears to be a contract of sale,
(2) but their intention is to secure an existing debt by way of mortgage.
B. Instances when a contract shall be deemed an equitable
mortgage:
ART. 1602. The contract shall be presumed to be an equitable
mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually
inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase,
another instrument extending the period of redemption or granting a new
period is extended;
(4) When the purchaser retains for himself a part of the purchase
price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the payment of
a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to
be received by the vendee as rent or otherwise shall be considered as
interest which shall be subject to the usury laws.
C. Art. 1604. The provisions of Article 1602 shall also apply to a contract
purporting to be an absolute sale.
No equitable mortgage in the case of Dorado vda. De Delfin v. Dellota,
2008 where:
The petitioner failed to prove that there was a gross inadequacy in the
price given by the defendant to make it an equitable mortgage. Further,
there is no evidence herein whatsoever to show that the petitioner did
not understand the ramifications of her signing the Deed of Sale with
Right of Redemption.
In De Ocampo and Custodio v. Lim, the Supreme Court held that
in sales denominated as pacto de retro, the price agreed upon should
not generally be considered as the just value of the thing sold, absent
other corroborative evidence. This is because, on the part of the vendor,
the right to repurchase the land makes it immaterial to him whether or
not the price of the sale is the just value thereof. As for the vendee, the
price does not induce him to enter into the contract as he does not
acquire the thing irrevocably, but subject to repurchase at the stated
period. Rather, the vendee pins his hope on the expectancy that he will
acquire the thing absolutely at a favorable price should the vendor fail to
redeem the thing sold. Subsequently, in Buenaventura v. Court of
Appeals, this Court ruled that there is no requirement in sales that the
price be equal to the exact value of the thing subject matter of the sale.
GOVERNING LAWS AND RULES ON LEASE
A. LEASE OF LANDS
The Civil Code provides:
Art. 1646. The persons disqualified to buy referred to in Articles
1490 and 1491, are also disqualified to become lessees of the
things mentioned therein.
Art. 1490. The husband and the wife cannot sell property to
each other, except:
(1) When a separation of property was agreed upon in the
marriage settlements; or
(2) When there has been a judicial separation or property
under Article 191.
Art. 1491. The following persons cannot acquire by
purchase, even at a public or judicial auction, either in
person or through the mediation of another:
(1) The guardian, the property of the person or persons who
may be under his guardianship;
(2) Agents, the property whose administration or sale may
have been entrusted to them, unless the consent of the
principal has been given;
(3) Executors and administrators, the property of the estate
under administration;
(4) Public officers and employees, the property of the State
or of any subdivision thereof, or of any government-owned or
controlled corporation, or institution, the administration of
which has been intrusted to them; this provision shall apply
to judges and government experts who, in any manner
whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior
and inferior courts, and other officers and employees
connected with the administration of justice, the property and
rights in litigation or levied upon an execution before the
court within whose jurisdiction or territory they exercise their
respective functions; this prohibition includes the act of
acquiring by assignment and shall apply to lawyers, with
respect to the property and rights which may be the object of
any litigation in which they may take part by virtue of their
profession.
(6) Any others specially disqualified by law.
Art. 1647. If a lease is to be recorded in the Registry of Property,
the following persons cannot constitute the same without proper
authority: the husband with respect to the wife's paraphernal real
estate, the father or guardian as to the property of the minor or
ward, and the manager without special power.

B. LEGAL BASIS
The Civil Code provides:
Art. 1648. Every lease of real estate may be recorded in the
Registry of Property. Unless a lease is recorded, it shall not be
binding upon third persons.
C. REGISTRATION
PD. 1529 provides:
Section 60. Mortgage or lease of registered land. Mortgage and
leases shall be registered in the manner provided in Section 54 of
this Decree. The owner of registered land may mortgage or lease it
by executing the deed in a form sufficient in law. Such deed of
mortgage or lease and all instruments which assign, extend,
discharge or otherwise deal with the mortgage or lease shall be
registered, and shall take effect upon the title only from time of
registration.
No mortgagee's or lessee's duplicate certificate of title shall
hereafter be issued by the Registers of Deeds, and those issued
prior to the effectivity of this Decree are hereby deemed canceled
and the holders thereof shall immediately surrender the same to
the Register of Deeds concerned.
D. LACK OF REGISTRATION
Despite lack of registration, the lease contract is still binding
between the parties. Registration serves as a notice to the whole world
to bind third parties to the lease contract, thus, the lack of it would not
invalidate the lease, since the parties would have knowledge over the
lease.