FELIX GARCIA, PLAINTIFF-APPELLEE, VS. ISABEL VDA. DE ARJONA, CRISOSTOMO ARJONA, JOSE ARJONA, ORLANDO ARJONA, FELIZARDO ARJONA, FLOCERFINA ARJONA, JOSEFINA ARJONA, LUZ ARJONA, NA…

This is an action to declare that an obligation evidenced by Exhibit A, which
is said to be a deed of mortgage guaranteeing the payment of an alleged loan,
has been discharged by the judicial consignation of the sum of P4,350.02, and to
compel the widow and descendants of Marcelino Arjona, the alleged original
mortgagee, to execute the corresponding deed of release and to deliver the
mortgaged properties to the plaintiff, as well as to render accounts of the
fruits of said properties and pay the costs. The defendants denied the existence
of Exhibit A and pleaded acquisitive prescription as well as the statute of
limitations of action. After due trial, the Court of First Instance of Laguna
rendered a decision;

“(a) Declaring that the contract entered into between the plaintiff and the
deceased Marcelino Arjona, predecessor-in-interest of the defendants, was one of
loan that the document Exhibit ‘A’ is merely an equitable mortgage or
antichresis designed to guarantee the payment of the said loan of P4,350.02
contracted by the plaintiff from the deceased Marcelino Arjona;

“(b) Ordering the defendants to receive from the Clerk of Court the amount
deposited by plaintiff as payment price of the five parcels of land in question,
and to execute upon receiving the said amount responding deed reconveying the
aforesaid to the plaintiff, together with the posse the aforementioned five
parcels of land;

“(c) Declaring that the interest on the loan is considered paid by the fruits
of the land received by the deceased Marcelino Arjona and his
predecessor-in-interest, and dismissing plaintiff’s second cause of action;

“(d) Dismissing plaintiff’s third cause of action;

“(e) Dismissing defendants’ counter-claim, against the plaintiff;

Without special pronouncement as to costs” (Record on Appeal p.
42)

The appeal taken by the defendants from this decision raises the following
questions, namely: (1) Does Exhibit A evidence a mortgage or a promise to sell?
(2) Is the action barred by the statute to limitations? (3) Have the defendants
acquired title, to the properties in dispute, by adverse possession?

Said properties consist of five (5) lots situated in the sitios of Bubucal,
Canlurang Bongcol, Coloy and .Dita, municipality of Liliw, province of Laguna,
and were formerly covered by Tax Delcarations Nos. 16502, 16564, 14646 16572 and
16563, all in the name of plaintiff Felix Garcia, as early as the year 1921. To
satisfy the judgment rendered against him in civil case No. 2447 of the Court of
First Instance of Laguna, said lots were, on November 20, 1929, sold, at public
auction, to the plaintiff in said case, in whose favor the corresponding
certificate of sale was executed, by the provincial sheriff of Laguna, on
December 14, 1929, On November 20, 1930, Francisco Arjona redeemed four (4) of
said lots, and Marcelino Arjona redeemed the fifth lot, upon the request of
Felix Garcia, who promised to reimburse later on the amounts paid by the
Arjonas.

In 1932, the first four (4) lots were redeemed from Francisco Arjona, with
money borrowed by Felix Garcia from Marcelino Arjona, with the understanding
that the refund of the sums thus spent by Marcelino Arjona would be guaranteed
by a mortgage on the properties above mentioned.

Hence, on March 3,1932. Felix Garcia and Marcelino Arjona executed the deed
Exhibit A, in Tagalog, which had been prepared by Engracio Arjona, Upon the
request of his brother, Marcelino Arjona, and was notarized on October 15 of the
same year. It is stipulated therein that Marcelino Arjona owns (may inaarin)
said five (5) parcels of land, for which he had spent the aggregate sum of
P4,350.02; that whenever this amount shall be reimbursed (maisasauli), either on
installment or in lump sum, to Marcelino Arjona, the latter shall execute the
corresponding deed of sale (venta real) in favor of Felix Garcia, who would have
to pay interest, at the rate of 6% per annum, as long as the sum above mentioned
were not fully satisfied; and that if Marcelino Arjona shall find it necessary
to dispose of said lots, before full payment by Felix Garcia, the former could
sell the lots aforementioned after giving due notice to Garcia.

Upon the execution of Exhibit A, Felix Garcia – who, despite the auction sale
in 1929 and the redemption by the Arjonas in 1930, had remained in possession of
the properties in question – delivered the same to Marcelino Arjona, in whose
name new tax declarations were issued subsequently. Upon the death of Marcelino
Arjona on February 8, 1941, said lots were held by the judicial administrator of
his estate, his above mentioned brother Engracio Arjona. In 1951, the latter
asked Felix Garcia to redeem the properties for P10,000.00, and delivered to him
a copy of Exhibit A. Before any definite agreement could be reached, Engracio
Arjona died in August of the same year. Several months later, or on February 6,
1952, Felix Garcia offered to redeem the lots in dispute, but the widow and the
children of Marcelino Arjona, who succeeded Engracio Arjona, in the possession
of said lots, rejected the offer. So Felix Garcia made a judicial consignation
of the sum of P4,350.02 and instituted this case in the Court of First Instance
of Laguna on March 5, 1952.

Although, at first, the defendants denied the authenticity of Exhibit A, its
genuineness is now admitted. However, they claim that the contract incorporated
therein is not a loan guaranteed by an equitable mortgage, but a mere promise to
sell, the enforcement of which by action is barred by the statute of limitations
and by the acquisition of title to the lots in question by adverse
possession.

With reference to the nature of the agreement between the parties, the lower
court had the following to say;

“In the light of the forgoing facts and circumstances, what was the nature of
the contract entered into between the plaintiff and the deceased Marcelino
Arjona, predecessor-in-interest of the defendants? What was the true intention
of the parties at the time of the execution of this instrument Exhibit A, also
Exhibit 3?

“The terms used in the instrument, as well as the circumstances surrounding
the contract between the plaintiff and the deceased Marcelino Arjona, show
clearly that the transaction was one of loan and that Exhibit A was executed by
the parties for the purpose of securing the payment by the plaintiff of the loan
of P4,350,02 which he obtained from the deceased Marcelino Arjona, as shown by
the following circumstances;

“1. That the terms used in the instrument strongly indicate that the
transaction was one of loan secured by mortgage, by the use of words and
phrases, as: ‘the amount spent by Marcelino Arjona on the said property’, ‘that
anytime that the said amount can be returned (maisasauli) to Mr. Marcelino
Ajona’, ‘either through installments or in lump sum’, ‘the amount … shall bear
on interest of 6% per annum’, ‘and this shall continue until there is still an
amount left with Mr. Garcia’, ‘should time come when Mr. Garcia has not yet
returned (nasasaulan)’, that even if the enjoyment (pakikinabang) of Mr. Arjona
is going on. (patuloy) on the said properties, the said Mr, Garcia shall
continue also to pay the interest of 6% per annum, on all sums which he should
pay or should be paid.’

“2. That the plaintiff was in urgent need of money. When the plaintiff asked
for the loan in 1932 he was in urgent need of money to repay Francisco Arjona
who had redeemed in 1930 the four parcels of land. To the amount of the loan was
also included the sum advanced by Marcelino Arjona to redeem the fifth parcel of
land.

“3. That the price in relation to the value of the property is grossly
inadequate. In 1932 the five parcels of land had a total assessed value of
P9,050.00 as shown by the tax declarations presented in evidence. Their market
value was considerably higher. The sum of P4,350.02 was, therefore, grossly
inadequate in relation to the value of the property.

“4. That the said amount of P4,350.02 was invested in the property involved –
it was used by the plaintiff to repay Francisco Arjona who had previously
redeemed four parcels, and said loan included the sum of money which Marcelino
Arjona had advance, to redeem the fifth parcel plus the sum he paid for land
taxes.

“5. That the transaction had its origin in a borrowing of money. The five
parcels of land of the plaintiff were sold at a Sheriff’s sale because he was
unable to satisfy the judgment in Civil Case No. 2447. Unable to redeem, his
property within the legal period of redemption, the plaintiff asked the Arjonas
to redeem the property promising to repay them. Two years later, the plaintiff
finding himself without funds to repay the Arjonas, and in order not to lose his
property altogether, the plaintiff had to ask for the loan of P4,350.02 in order
to repay Francisco Arjona and include in said loan the sum previously advanced
by Marcelino Arjona to redeem the fifth parcel.

“6. That the plaintiff remained bound for the repayment of the money
received. This circumstance, clearly stated in the document, strongly tends to
show that a mortgage only was intended.

“7. That the plaintiff was, under the terms of the agreement, obligated to
pay interest on the loan at the rate of 6% per annum. Payment of interest is a
usual condition in loan transactions,

“8. That the instrument provides for the return of the amount ‘either through
installments or in lump sum’. Payment by installments is, likewise,
characteristic of loan transactions.

“Furthermore , uncontradicted evidence shows that the instrument in question
was prepared by Engracio Arjona at the behest of the deceased Marcelino Arjona,
one of the parties to the instrument.

“The party who draws up a contract in which obscure terms or clauses appear,
is the one responsible for the obscurity or ambiguity; they must therefore, be
construed against him. (Erlanger & Galinger vs. Suarez [C.A.] 35 Off. Gaz.
2082).

“In the light of the foregoing authority, Exhibit A should be interpreted
against the interests of the deceased Marcelino Arjona and given a construction
favorable to the plaintiff.” (Record on Appeal, pp. 32-35.)

We agree with the conclusion thus reached by His Honor the Trial Judge.

Appellants insist that Felix Garcia could not have constituted the mortgage
in favor of Marcelino Arjona, because the latter owned the lots in dispute, ever
since he redeemed one (1) lot from the purchaser at the auction sale and four
(4) lots from Francisco Arjona. However, this argument begs the very question in
dispute, for it assumes precisely the correctness of appellants’ pretense. What
is more, it is contrary to the uncontradicted evidence of record, which shows
that Marceiino Arjona made said redemption because Felix Garcia requested him to
supply, by way of loan, the amount necessary therefor, with the understanding
that its reimbursement ‘would be guaranteed by a mortgage on the properties in
dispute. Indeed, appellants’ pretense is refuted, not only by the circumstances
pointed out in the decision appealed from, but, also, by the following facts,
namely: (1) Despite the auction, sale effected on November 20, 1929, and the
redemption made by Francisco Arjona and Marcelino Arjona on November 20, 1930,
Felix Garcia remained in possession of the properties in litigation up to March
3,1932, when Exhibit a was executed, (2) In 1951, Engracio Arjona, as judicial
administrator of the estate of the deceased Marcelino Arjona, asked Felix Garcia
to redeem said properties, which is inconsistent with the alleged promise
to sell.

It is urged, also, that the present action is barred by the statute of
limitations over 20 years having elapsed since the execution of Exhibit a. It
appearing, however, that the intention of the parties thereto was merely to
constitute a mortgage in order to guarantee the payment of a loan, we must
conclude that Marcelino Arjona held the properties in dispute, from 1932 to
1941, in conformity with the terms of said agreement, that is to say, as a mere
mortgagee, in the absence of satisfactory evidence to the contrary, and no such
evidence has been introduced, or even offered by appellants herein.

Neither is there any evidence to the effect that the possession of Engracio
Arjona from 1941 to 1951 – as administrator of the estate of Marcelino Arjona –
was adverse to plaintiff Felix Garcia. In fact, considering that Exhibit A had
been prepared precisely by Engracio Arjona, he must be deemed to be aware of the
intent of the parties thereto and to have held said properties in conformity
with such intent. For this reason, and because his possession must be regarded a
continuation of that of Marcelino Arjona, the possession of Engracio Arjona must
be held to be identical in nature to that of Marcelino Arjona , namely, as agent
of the mortgagee, not adverse to plaintiff herein.

In other words, the possession of Marcelino Arjona and Engracio Arjona was
not in derogation of the rights of plaintiff herein. Accordingly, the latter had
no cause of action against them and the statute of limitations could not have
run against him for said statute begins to run only from the accrual of the
cause of action.

It is, likewise, apparent, from the foregoing, that appellants’ plea of
acquisitive prescription can not be sustained, for said possession of Marcelino
Arjona and Engracio Arjona from 1932 to 1951 was not adverse in character, and
the possession of defendants herein, after the death of Engracio Arjona in
August, 1951, even if adverse, could not have ripened into a title before the
institution of this case on March 5, 1952.

WHEREFORE, the decision appealed from is hereby affirmed, with costs against
the defendants-appellants.

Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, Jugo, Bautista Angelo,
Labrador, and Reyes, J.B.L., JJ., concur.