CREGENCIA, Graciella Merill O.

Legal Research
2015010196 Atty. Steve Mercano

I. WILSONS V. FOREMAN

An equitable mortgage is one which, although lacking in some

formality, form or words, or other requisites demanded by a statute, reveals
the intention of the parties to charge a real property as security for a debt,
and contains nothing impossible or contrary to law.1 The basic rule in a
contract is that it should not be contrary to the law. With regard to contracts,
mere meeting of the minds is sufficient. The law does not state how the
contract should be made, either in form of formal writing or verbally; as long
as the requisites are present then a contract exists. In equitable mortgage, the
parties tend to use a property as a collateral in case the debt is not paid, then
the property will be the payment thereof. In the case of Fernando Mate vs
Court of Appeals and Inocencio Tan, a person named Josefina Rey used a
property in order to cover her violation of BP 22 against the private
respondent. Josefina Rey used equitable mortgage in order for her to solve
her problem with the private respondent. (GR No 120724, May 21 1998)

In the question provided for by in the said case as to whether or not

the Wilsons can claim as the possessors of the subject property even if they
never stayed on the said property. It can be claimed that the Wilsons can
rightfully claim the said property even if they have not stayed in the subject
property. The transaction that can be concluded from the case is an equitable
mortgage and falls under the purview of the Civil Code. As provided for in
the Civil Code, under Article 1602:

The contract of sale with right to repurchase shall be presumed to be

an equitable mortgage in any of the following cases:
1. When the price of the sale 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 executed;
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;
and,
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 this given provision, it clearly provides that not all the

circumstances be present, but it will be enough that one is enough that will
1
Agcaoili, O.D. (2006). Property Registration Decree and Related Laws (Land Titles and Deeds). Rex Bookstore:Manila
give rise to the given presumption that the contract is an equitable mortgage.
If the terms that has been provided for by the parties in the contract is
ambiguous or inconsistent with the theory that it is a sale, it should thus be
considered as a mortgage instead of a contract. Since it is evident in the facts
of the case that the transaction that took place between the parties is
ambiguous definitely falls under an equitable mortgage.

The deed of sale empowered Mr. Foreman to assume the rightful title
of the said property of the Wilsons. It was well settled by them that before
they have even entered into the transaction that upon completion of the
payment from the five door apartment, the property will then be turned over
to the Wilsons. But Mr. Foreman failed to do so. Upon approving of the said
loan and the Wilsons also approved of the land title be transferred to him as
a form of security. Following this, the deed of sale was written and the said
property was sold for one million to Mr. Foreman. The evidence that was
showed by that the ownership was not intended to be transferred to Mr.
Foreman, but it was meant as a form of security.

For a presumption of an equitable mortgage to arise, two requisites

must be satisfied, namely: (1) that the parties entered into a contract
denominated as a contract of sale, and (2) That their intention was to secure
an existing debt by way of mortgage.2 Therefore, should any of the
conditions are present in the previous provision of the Civil Code, then it is
considered to be an equitable mortgage. In the given case at hand, they were
able to satisfy the two requisites in order for the transaction to qualify as an
equitable mortgage rather than a sale.

Moreover, the trial court correctly found that the Deed of Assumption
of Mortgage did not actually contain all the matters agreed upon by the
parties prior to its execution.3 What was talked about between the parties is
by way of making the deed of sale as a way of security for the debt until it
has been fully satisfied by the collection of money from the apartment of the
Wilsons. That after the debt has been paid, the deed of sale will then be
transferred back to the Wilsons. The subsequent acts and conditions of the
parties were more leaning to the presumption of an equitable mortgage and
not of sale.4 That was proven by the fact of transfer of the deed of sale and
the transfer certificate title of the Wilsons to Mr. Foreman is just a way of
security for the debt owed by them as showed by the facts presented in the
case.

Laches are present when the party is aware, even in the early stages of
the proceedings, of a possible jurisdictional objection, and has every

2
Agcaoili, O.D. (2006). Property Registration Decree and Related Laws (Land Titles and Deeds). Rex Bookstore:Manila
3
Spouses Reynaldo and Editha Lopez V. Margarita Sarabia. GR No. 140357. September 24, 2004
4
Ibid.
opportunity to raise the objection, but fails to do so even on appeal.5 The
third question that was presented is suppose that Mr. Foreman argues that
the case should be dismissed for laches on the Wilson’s part, will the
argument be meritorious? Based on the circumstances present, I think that
the existence of laches on the Wilson’s part will definitely dismiss the case.
It has ruled by the Court that the existence of laches will prevent a party
from raising the court’s lack of jurisdiction; wherein there is the presence of
negligence on the party entitled to assert is abandoned or declined asserting
it.6
The fourth question in the case presented is whose version must be
upheld by the RTC in the given case? With the facts of the case that has been
presented, Mr. Foreman’s version must be upheld. This is so because, it is
specifically defined for by equitable mortgage. To further reiterate, An
equitable mortgage is one that - although lacking in some formality, forms
and words, or other requisites demanded by a statute - nevertheless reveals
the intention of the parties to charge a real property as security for a debt
and contains nothing impossible or contrary to law.7 There is no question in
this given case that the Wilson’s gave their full consent by providing the
deed of sale and the transfer certificate title to Mr. Foreman. But the Wilson’s
did not consent to permanently transferring the ownership of the subject
property for the debt that was not yet fully paid. It is considered that a
contract is made between the parties. A contract has 3 elements in order to
be considered as one. These elements are meeting of the minds between the
parties, the object to be delivered, and the payment. In this case all of the
elements are present. There was a meeting of the mind when they both
agreed to stipulate a contract of equitable mortgage. The object to be
delivered was the property in order to be the security of the debt. The
payment of the debt is the property in case there will be a failure on the part
of the Wilson’s to pay Mr. Foreman of their debts.

The factor that needs to be taken into consideration is the intention of

the parties as shown by the surrounding circumstances like the relative
situation of the parties during that time the led them to the deed and facts
that was shown to determine the real nature of their design and
understanding.8 Mr. Foreman’s version must be upheld although they may
have not agreed on the permanent transfer of the land title after the complete
payment has been made by collecting monthly rentals from the five door
apartment that has been transferred to Mr. Foreman; they have still entered
into an equitable mortgage that although it may have lacked in formality,
there is still the presence of intention to charge a real property as a security
for the debt incurred by the Wilsons in the given case.

5
Lamsis, Mondiguing, Valdez & Heirs of Agustin Kitma, represented by Eugene Kitma V. Margarita Semon Dong-E
6
Tijam v. Sibonghanoy. GR No. L-21450. April 15, 1968
7
Ceballos v. Intestate Estate of the Late Emigdio Mercado, G.R. No. 155856, 28 May 2004, 430 SCRA 323, 335.
8
Reyes V. Court of Appeals, 393 phil. 479, 489 (2000)
 The last question to be addressed in this case is whether or not the
Regional Trial Court cancel the deed of sale as well as Mr. Foreman’s transfer
certificate title. The RTC cannot cancel the given deed of sale as well as TCT
in the case because of the presence of an equitable mortgage that has been
entered into by both parties. Both parties had the intention to enter into a
contract that will transfer the title of their property as a way of security for
the debt of the Wilsons. Moreover, Mr. Foreman is still in actual possession
of the subject property and has documents that will provide a solid proof or
foundation that will support his claim that both parties have entered into a
valid equitable mortgage. The Regional Trial Court committed an error upon
the cancelation of the deed of sale and as well as the TCT. When there is a
clear indication that a contract has been entered by the parties, it must be
honored by the court as long as the contract does not violate any laws
provided in the constitution. The elements of a contract was present. The
Wilson’s cannot invoke their right for petition for review on the grounds that
the land was acquired through fraud. There was no fraud since the parties
entered into a contract basing on their agreement about the equitable
mortgage. Mr. Foreman acquired the disputed land from the Wilson’s
through their agreement which was made into a contract. The contract was
not voidable since both the parties obliged with the stipulations in their
contract.

It is a well-settled doctrine that of the person claiming to be the owner

of the property is in actual possession thereof, the right to seek
reconveyance, which seek to quiet title to the property, does not prescribe.9
This is so because, Mr. Foreman has been in possession of the property not
only for months until the debt has been settled but also for almost ten years
when the RTC dismissed the case of the Wilsons. Since Mr. Foreman was
legally entitled to the said property since the title was transferred to him by
means of security for the debt incurred. Mr. Foreman has proofs that like the
presence of the new transfer certificate title and the deed of sale by the
Wilsons to him for the security. Mr. Foreman has the right to seek aid of the
court and has the right to institute the suit for his title cannot be barred in
the present case.

II. GUNTHER V. GEORGE MICHAEL

In the case at hand, George Michael was a coffee bean quality
personnel and was paid as a piece-rate employee for every kilo of beans
inspected by him. By being a piece-rate paid employee, he does not have any
fixed hours of work per week. The case was brought about because of the
fact that when he asked permission to seek a doctor and not be absent for a
day, Michael George was said to have abandoned his work in Central Perk

9
Lucia Carlos Alino V. Heirs of Angelica A. Lorenzo. GR No. 159550. June 27, 2008. 556 SCRA 139.
Inc. owned by Gunther. Moreover, Michael George was allege to have
cursed Gunther and his fellow workers and that he would burn the offices
of Central Perk Inc., which was then why he was banned from the premises.

In the first question raised, is that if it is possible for piece rate workers
to be classified as regular employees in this case. George is considered as an
employee, even if they were not paid based on the time spent on their job
but on the quantity or quality of their work; either way they are still
considered as an employee of Central Perk Inc. under Gunther. There are
two categories of employees as to pay by results: First is those whose time
and performance are supervised by the employer; Second is that those
whose time and performance are unsupervised.10 Based on the facts given
by George Michael’s Position paper before the NLRC, we can assume that
he is covered for by under the second category, wherein it is provided for
that the employers have control over the result of their work. However, there
is no difference in both categories on the term that they are workers that are
paid per unit based on the works they have accomplished. Payment on
‘pakyao’ and ‘takay’ basis is commonly observed in agricultural industry,
where the work to be done is performed in bulk or in volumes difficult to
quantify.11 Given that in this case, George Michael is a coffee bean quality
personnel, he falls under the second category to be able to justify him as an
employee whether or not he be a regular or a piece-rate worker.

Moreover, as provided for in a case decided for by the Supreme Court,

the mere fact that they were paid on a piece-rate basis does not negate their
status as a regular employee.12 Wherein it was defined for by in Article 97 of
the Labor Code of the Philippines, as “remuneration or earnings, capable of
being expressed in terms of money whether fixed or ascertained on a time,
task, piece or commission basis.” Under this payment by the piece, it is just
considered as a method of compensation and does not define the essence of
relations.13 There is no difference if the employee is piece rate worker or
regular employee, since both are said to have been directly hired by the
employer himself. He is an employee regardless he be a piece-rate worker or
a regular employee. Article 280 of the Labor Code provides that:

Art. 280. Regular and casual employment. The provisions of written

agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific

10
Lambo & Belocura V. NLRC. GR No. 111042. October 26, 1999
11
Ibid.
12
Ibid.
13
Ibid.
 project or undertaking the completion or termination of which has
been determined at the time of the engagement of the employee or
where the work or service to be performed is seasonal in nature and
the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the

preceding paragraph: Provided, That any employee who has rendered
at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue
while such activity exists.

This provision of the Labor Code, will guarantee that piece rate
workers can be classified as regular employees where they are considered to
be doing a work that is necessary in the business of the employer. The
quantity and time of work that is spent by the employee in his job does not
have any bearing in the case, because they are still considered as an
employee by the employer which is expressly provided for by in the Labor
Code.

In the second question, is whether or not George abandoned his work;

there are considered to be two requisites which constitute abandonment of
work. These requisites are as follows: first, the employee must have failed to
report for work or must have been absent without justifiable reason; and
second, there must have been a clear intention on the part of the employee
to sever the employer-employee relationship as manifested by overt acts.14
According to the position paper before the NLRC by George Michael, he was
able to prove that the action he did, does not constitute an abandonment of
work. First requisite is that George asked permission from Gunther to see a
doctor, given his sickness. Although George did not ask permission to ask
for a bed rest from Gunther, that was required by the doctor. But the
prescription of the doctor for a 24 hour bed rest is the necessary and logical
consequence of his sickness and upon the recommendation because of the
visit to the doctor. There is a justifiable reason to be concluded from this
requisite, because George was not feeling well when he asked permission
from Gunther.

With regards to the second requisite, although George may have

cursed at Gunther and his fellow workers and made a statement that he
would burn the offices of Central Perk Inc., does not complete that he totally
abandoned his work. Both first and second requisite must be present in order
to constitute abandonment in his work. Abandonment as a just ground for
dismissal requires deliberate, unjustified refusal of the employee to resume
14
RP Dinglasan Construction, Inc. V. Atienza & Asi. GR No. 156104. June 29, 2004
his employment; mere absence or failure to report for work, is not enough to
amount to abandonment.15 In the present case, Gunther reported for work
the next day after being asked by the doctor to take a bed rest. But what took
place when he arrived to work passed as a requisite that can constitute as a
ground to abandon his work. Abandonment of work is a matter of intention;
it cannot be inferred or presumed from equivocal acts.16 It must be shown
and proven by the employer that there is intention on the part of the
employee to discontinue his employment along with his actions that he
wants to discontinue working with the company.

Lastly is that in case of doubt between the employer and employee,

whose version of the events must be upheld? It has been a well settled rule
that every employer has the right to dismiss its erring employees as a
measure of self-protection.17 This rule is inherent in the employer; to dismiss
anyone in service that the employer sees as unfit in service. Our constitution
is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every labor dispute will be
automatically be decided in favor of labor; the management also has its
rights that are entitled to great respect and enforcement in the interest of
simple fair play.18

The Supreme Court is inclined towards the worker and upholds his
cause with his cause with his conflicts with the employer; but this favoritism
has not blinded the Court to rule that justice is for the deserving and to be
dispensed in the light of the established facts.19 The employer’s version must
be upheld in any event but it must coincide with the provisions of the labor
code. The Supreme Court said that the employer’s rules cannot preclude the
State from inquiring whether the strict and rigid application or
interpretation would be harsh to the employee.20 The courts still has the last
say regarding the case at hand. Even if there are rules that have been set by
the employer, the court may still look upon the issue if the employee have
been

15
Ibid.
16
Lambo & Belocura V. NLRC. GR No. 111042, October 26, 1999
17
Reyes vs. Minister of Labor, G. R. No. 48705, February 9, 1989.
18
Sime Darby Pilipinas, Inc. vs. NLRC, 119205, April 15, 1998.
19
Sime Darby Pilipinas, Inc. vs. NLRC, 119205, April 15, 1998.
20
Farrol V. CA. GR No. 133259. February 10, 2000