Mortgage Made to Appear an Absolute Sale to Illegally Acquire Properties
This is only my opinion on the topic at hand. Take care and enjoy! God Bless
Since at this time I am working closely with mortgage and loans at the office, I found it interesting to discuss the common problem with mortgage as contradistinguished from absolute sale.
Many evil minded individuals take advantage on the misfortunes of others. There are cases wherein, because of desperate need of money, especially on emergency, people are induced to execute an absolute sale with right to repurchase of their property (i.e. house) for a very low value. For instance, a house that is worth PhP 720,000.00 would be sold at a low price of PhP 120,000.00. This occurs because the seller has no other choice, but to sign such agreement, in order to have the money he terribly needs. Eventually since he is in financial difficulties, he cannot repurchase the said property and the greedy buyer would then acquire the property, to the seller's disadvantage.
Now, I have arrived to the query as to whether or not the law provided safeguards to this kind of malicious sale?
The law has given freedom to the seller and buyer to decide on the consensual price of the property to be sold. The seller will give his offer to the buyer, and upon meeting of the minds, they will execute the sale. The law must respect the agreement of the parties, as to the price and terms of the contract.
Notwithstanding this well founded doctrine, the law has provided an exception where, “the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy (ART. 1306). I believe that the price, being iniquitous or unconscionable, is against public morals.
The law, likewise, legally considers this kind of sale as equitable mortgage and not as absolute sale. An absolute sale gives an effect of totally transferring the right of ownership from one person to another, in exchange of value. On the other hand, an equitable mortgage is a contract of loan, wherein the property is subjected only as a security for a debt.
In the case at bar, it could be presumed that the agreement of parties has the intention of mortgage rather that absolute sale. The law can not cater such malicious advantage and unjust gain. The law provides that “the contract shall be presumed to be an equitable mortgage… when the price of the sale with the right to repurchase is unusually inadequate (ART. 1602, 1).” The inadequacy of the price must be so gross and unconscionable that a reasonable man would neither directly nor indirectly be likely consent to it (Aguilar vs. Rubiato, 40 Phil. 570). Since PhP 120,000.00 is grossly inadequate as compared to PhP 720,000.00 actual price, the sale is presumed to be a loan with the property as its security.
