No. L-36821. June 22, 1978

MAIN TOPIC – Contracts – Classification  


Petitioner Jose P. Dizon was the owner of the three (3) parcels of land situated in Pampanga. He  constituted mortgage lien in favor of the Development Bank of the Philippines and Philippine  National Bank to secure his indebtedness. Petitioner Dizon having defaulted in the payment of  his debt, the Development Bank of the Philippines foreclosed the mortgage and executed  “Certificate of Sale,” in favor of the said bank. Alfredo G. Gaborro became interested in the  lands of Dizon. They entered into a contract of “Deed of sale with assumption of mortgage” and  “Option to Purchase Real Estate” After the execution of said contracts, Alfredo G. Gaborro took  possession of the three parcels of land. Gaborro made several payments to the DBP and PNB and introduced improvements, cultivated the lands, raised sugarcane and other crops and  appropriated the produce to himself. He also paid the land taxes thereon. 

In 1961, Jose P. Dizon, wrote a letter to Gaborro informing him that he is formally offering to  reimburse Gaborro of what he paid to the banks but without, however, tendering any cash, and  demanding an accounting of the income and of the property, contending that the transaction  they entered into was one of antichresis. He instituted a complaint that their real agreement was  not an absolute sale of the said parcels of land but merely an equitable mortgage or conveyance  by way of security for the reimbursement or refund Gaborro nd all sums which the latter may  have paid on account of the mortgage debts in favor of the DBP and the PNB.


Whether or not the documents Deed of Sale With Assumption of Mortgage and the Option to  Purchase Real Estate did not express the true intention and agreement between the parties.


Yes. the true intention of the parties is that respondent Gaborro would assume and pay the  indebtedness of petitioner Dizon to DBP and PNB, and in consideration therefor, respondent  Gaborro was given the possession, the enjoyment and use of the lands until petitioner can  reimburse fully the respondent the amounts paid by the latter to DBP and PNB, to accomplish  the following ends: (a) payment of the bank obligations; (b) make the lands productive for the  benefit of the possessor, respondent Gaborro; (c) assure the return of the land to the original  owner, petitioner Dizon, thus rendering equity and fairness to all parties concerned. 

In view of all these considerations, the law and jurisprudence, and the facts established, We  find that the agreement between petitioner Dizon and respondent Gaborro is one of those  innominate contracts under Art. 1307 of the New Civil Code whereby petitioner and respondent  agreed “to give and to do” certain rights and obligations respecting the lands and the mortgage debts of petitioner which would be acceptable to the bank, but partaking of the nature of  antichresis insofar as the principal parties, petitioner Dizon and respondent Gaborro, are  concerned. 


WHEREFORE, the judgment appealed from is hereby affirmed with the modification that  petitioner Dizon is granted the right within one year from finality of this decision to a  reconveyance of the properties in ligitation upon payment and reimbursement to respondent  estate of Alfredo G. Gaborro of the amounts actually paid by Gaborro or his estate on account of  the principal only of Dizon’s original loans with the Development Bank of the Philippines and  Philippine National Bank in and up to the total amount of P131,831.91, under the terms and  conditions set forth in the preceding paragraph with sub-paragraphs (a) to (d), which are hereby  incorporated by reference as an integral part of this judgment, and upon the exercise of such right,  respondent estate shall forthwith execute the corresponding deed of reconveyance in favor of  petitioner Dizon and deliver possession of the properties to him. Without pronouncement as to costs.