Dacquel v. Spouses Sotelo, G.R. No. 203946, (August 4, 2021)

11/5/23, 1:55 PM E-Library - Information At Your Fingertips: Printer Friendly
SECOND DIVISION
[ G.R. No. 203946. August 04, 2021 ]
ARTURO A. DACQUEL, PETITIONER, VS. SPOUSES ERNESTO
SOTELO AND FLORA DACQUELSOTELO, REPRESENTED BY
THEIR ATTORNEY-IN-FACT, IMELDA SOTELO, RESPONDENTS.
DECISION
HERNANDO, J.:
This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assails the
July 12, 2012 Decision[2] and the October 10, 2012 Resolution[3] of the Court of Appeals
(CA) in CA-G.R. CV No. 93939.
The Antecedents:
Subjet of the case is a parcel of land located in Malabon City formerly covered by Transfer
Certificate of Title (TCT) No. 738[4] in the names of respondents-spouses Ernesto and
Flora Sotelo (the Sotelos), later registered und er TCT No. M-10649[5] under the name of
petitioner Arturo Dacquel (Dacquel). Established facts show that in 1994, the Sotelos
began the construction of a 7-door apartment on the subject land. Due to budget
constraints, the Sotelos had to borrow the amount of P140,000.00 from Dacquel, who was
Flora Sotelo's (Flora) brother. The construction of the apartment was completed in 1997.[6]
The parties hereafter part versions.
The Sotelos claimed that the debt of P140,000.00 was agreed to be payable in double the
said amount or P280,000.00, to be collected from the rental income of four out of the
seven apartment units. There was no agreed period within which to pay the loan and the
interests. Dacquel also required the Sotelos to cede to him the subject land as security for
the loan.
Consequently, on September 1, 1994, the parties executed a Deed of Sale[7] in

consideration of the amount of P140,000.00. TCT No. 738 in the names of the Sotelos was
thereafter cancelled and TCT No. M-10649 was issued, constituting Dacquel as the new
registered owner of the subject land. In March 2000, when Dacquel had collected the full
amount of P280,000.00 in rental income from the four apartment units, the Sotelos asked
for the return of the subject lot. Dacquel, however, allegedly held on to the title and
refused to yield the subject lot to the Sotelos.[8]
https://elibrary.judiciary.gov.ph/thebookshelf/showdocsfriendly/1/67448 1/15
Thus, on May 29, 2000, the Sotelos filed a Complaint[9] for annulment of title and
reconveyance against Dacquel before the Regional Trial Court (RTC), Branch 74 of
Malabon City. The Sotelos alleged in their Complaint that Dacquel held the title to the
subject land only as security for the loan and in trust for the Sotelos, who remained the
beneficial owners of the subject lot. Upon Dacquel's receipt of more than the amount he
had loaned to the Sotelos, the former was legally obligated to reconvey the property to the
latter. The building permits for the 7-door apartment, as well as the original registration of
the electric and water meters of all seven units, were issued in Ernesto Sotelo's (Ernesto)
name and that the construction expenses were paid for by Ernesto's checks.
Anent the September 1, 1994 Deed of Sale, Ernesto claimed that he could not remember
having signed the document as he was too sick at the time, and that Flora's signature
thereon was forged. The market value of the subject property in 1994 was P1,750,000.00
and not just P140,000.00. Also, in order to fund the apartment construction expenses,
Ernesto had even mortgaged the subject property to a bank for P500,000.00 and the
mortgage had been annotated to the title. The title to the subject property should not and
could not have been transferred to Dacquel's name since the latter was a foreigner despite
having misrepresented his nationality as a Filipino in the disputed Deed of Sale. The
Sotelos likewise prayed for moral damages and attorney's fees.[10]
The Sotelos presented the following pertinent documents: official receipts issued by
Ernesto acknowledging rental payments made to him by the lessees of the three apartment
units; building and electrical permits intended for the construction of the apartment,
Meralco service deposit receipts, and Maynilad Water billings, all in the name of Ernesto;
checks issued by Ernesto, which constituted as payments to the professionals who worked
on the apartment construction; and copies of contracts of lease executed between Ernesto
and the lessees of the three apartment units. Testifying for the Sotelos were Ernesto and
Imelda Sotelo, the Sotelos' daughter and attorney-in-fact.[11]
Dacquel, on the other hand, asserted that the Sotelos's debts to him totaled P1,000,000.00,
which he had recorded in a black diary. As payment for their debts, the Sotelos had
actually offered to sell to him the subject land and he had accepted their offer. They
reduced the said agreement into writing as a Deed of Sale on September 1, 1994 for the
true consideration of P1,000,000.00, and the amount of P140,000.00 was indicated on the
Deed of Sale only for the purpose of reducing the tax liabilities for the transaction.
The Sotelos were allegedly estopped from questioning the validity of the Deed of Sale
because of their acquiescence to the subject property's transfer unto Dacquel's name. Also,
Dacquel caused the construction of the apartment using the sum he inherited from one
Richmond Lloyd Wilcox. He did not authorize the Sotelos to lease and collect rental
payments from the three apartment units. By way of counterclaim, Dacquel sought moral
and exemplary damages against the Sotelos, as well as reimbursement of attorney's fees.
[12]
Dacquel offered the following as proof, among others: copy of the Deed of Sale dated
September 1, 1994; copy of TCT No. M-10649 registered in Dacquel's name; last will and
testament of one Richmond Lloyd Wilcox; the black diary; a Dacion en Pago undertaken
but unsigned by Dacquel; and contracts of lease executed between Dacquel and different
lessees over the apartment units.[13] Dacquel took the witness stand, as well as Carmencita
Balajadia (Carmencita)who was Dacquel and Flora's niece. Carmencita narrated that the
Sotelos signed the Deed of Sale voluntarily as she allegedly facilitated the execution of the
Deed of Sale.[14]
Ruling of the
Regional
Trial Court:
The RTC ruled in favor of Dacquel. It held that there was no evidence that Dacquel was of
foreign citizenship who was disqualified to own lands in the Philippines as of the date of
sale. It also discounted the checks issued and presented by Ernesto, since there was
nothing on the face of the said checks to show that these were intended to finance the
construction of the apartment, more so that these were issued to pay to the order of "Cash".
The RTC also ruled that the registration of property in one's name for billing purposes,
when in reality the same property is owned by another, is common practice in the country
In its May 27, 2009 Decision,[15] the RTC dismissed the Sotelos' Complaint as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of

defendant Arturo A. Dacquel and against plaintiffs spouses Ernesto and Flora
Sotelo. The complaint for Annulment of Title and Reconveyance of Instrument
is DENIED for lack of sufficient evidence.
SO ORDERED.[16]
The Sotelos appealed to the CA.
Ruling of the Court of Appeals:
The CA reversed the RTC and decided in favor of the Sotelos. Applying the provisions of
Articles 1602 and 1604 of the Civil Code, the CA declared the September 1, 1994 Deed of
Sale to be one of equitable mortgage. It found two badges of fraud: gross inadequacy of
the price and the continued possession by the Sote1os of the subject property.[17]
According to the CA, the first badge of fraud was extant as the undisputed market value of
the 350-square meter subject property in 1994 was P1,750,000.00 at P5,000.00 per square
meter, but was sold in the Deed of Sale for only P140,000.00. Dacquel failed to
substantiate the Sotelos' indebtedness of P1,000,000.00 to justify the allegation that the
Deed of Sale was subjected to a dation in payment.
Even if the amount js so proven, the Deed of Sale did not show that the subject property
was being conveyed for a consideration other than the amount of P140,000.00. There was
also no proof that the parties consented to the supposed dation in payment in the amount
of P1,000,000.00. From these, the CA concluded that there was gross inadequacy of the
purchase price as indicated in the Deed of Sale and the actual price of the subject property.
[18]
The CA likewise found the Sotelos to have continued their actual possession over the
subject property, taking into consideration their supervision of the apartment's

construction, their execution of lease contracts over the units, and Dacquel's failure to
prove that he had instructed the Sotelos to act in his stead. Having remained a mortgagee
in the transaction, the issuance of a TCT in favor of Dacquel did not vest upon him
ownership of the property and does not preclude its cancellation. The CA granted
attorney's fees to the Sotelos while denying their prayer for moral damages.[19] The July
12, 2012 CA Decision[20] disposed of the Sotelos' appeal in the following manner:
WHEREFORE, premises considered, the appeal is GRANTED. The Decision

of the Regional Trial Court, Branch 74, Malabon City in Civil Case No. 3099-
MN is hereby ANNUL[L]ED and SET ASIDE. Judgment is hereby rendered
declaring that the Deed of Sale executed between the parties is an equitable
mortgage rather than one of absolute sale over the subject property, and that the
obligation for which it has been constituted has been extinguished. Appellee
Arturo Dacquel is hereby ordered to reconvey the subject property to
appellants, and to cease and desist from collecting rentals thereon. The Register
of Deeds of Malabon City is hereby ordered to cancel TCT No. M-10649
issued to appellee and to issue a new TCT in the name of appellants, while the
City Assessor of Malabon is hereby ordered to cancel the Tax Declarations in
the name of appellee Arturo Dacquel. Finally, appellee Arturo Dacquel is
hereby ordered to pay appellants attorney's fees in the amount of
Php100,000.00.
SO ORDERED.[21]
Finding a reiteration of the issues raised in the appeal, the CA likewise denied[22]
Dacquel's Motion for Reconsideration.[23] Thus, this Petition.
Petitioner Dacquel's Arguments:
Dacquel insists on the validity of the September 1, 1994 Deed of Sale. He asserts his
lawful ownership over the subject property, and that the Decision declaring the nullity of
his title and ordering the reconveyance of the subject property to the Sotelos is grave error
on the part of the CA. The parties clearly intended to be bound by the Deed of Sale and
what was concealed was only the actual price of the subject property. Dacquel puts
premium on the notarial seal on the Deed of Sale, which gave the document the
presumption of regularity.
The price of P140,000.00 was not a grossly inadequate price for the sale of the subject
property as there were no improvements at the time of the transaction. All the requisites of
dacion en pago attended their contract. Moreover, the absence of his authorization
empowering Ernesto to construct and manage the apartment was on account of their
relationship, being brothers-in-law. Dacquel remained in constructive possession of the
subject property as he collected in his name the rental for four apartment units and even
claimed the other three units in the same manner. He also asserts that the permits, billings,
and checks in the name of Ernesto likewise did not prove the Sotelos' ownership of the
subject property. As regards the award of attorney's fees, Dacquel disputes the same as he
was not guilty of bad faith in litigating his case against the Sotelos.[24]
Respondents-
Spouses
Sotelo's
Position.
The Sotelos maintain that the transaction was an equitable mortgage. They rest their claim
with the findings by the CA that gross inadequacy of the price and the continued
possession by the Sotelos of the subject property constituted as badges of fraud under
Articles 1602 and 1604 of the Civil Code against Dacquel, negating the veracity of the
September 1, 1994 Deed of Sale.[25]
Issues:
The main issues to be resolved are (1) whether or not the September 1, 1994 Deed of Sale
between petitioner and respondents-spouses constituted an equitable mortgage; and (2)
whether petitioner's title to the subject property should be nullified and reconveyed to
respondents-spouses, and (3) whether or not respondents-spouses are entitled to attorney's
fees.
Our Ruling
The Petition is meritorious in part.
The
transaction
between
petitioner and
respondents-
spouses was
an equitable
mortgage.
The relevant provisions of the Civil Code read:
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 a 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
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;
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.
Art. 1604. The provisions of Article 1602 shall also apply to a contract
purporting to be an absolute sale.
The CA correctly declared the subject transaction between petitioner and respondents-
spouses as an equitable mortgage.
Decisive for the proper determination of the true nature of the transaction between the
parties is their intent, shown not merely by the contract's terminology but by the totality of
the surrounding circumstances, such as the relative situations of the parties at that time; the
attitudes, acts, conduct, and declarations of the parties; the negotiations between them
leading to the deed; and generally, all pertinent facts having a tendency to fix and
determine the real nature of their design and understanding.[26] When in doubt, courts are
generally inclined to construe a transaction purporting to be a sale as an equitable
mortgage, which involves a lesser transmission of rights and interests over the property in
controversy.[27]
Here, the CA applied these principles and aptly found two badges of fraud against
petitioner - gross inadequacy of price in the Deed of Sale and continued possession of the
subject property by respondents-spouses as debtors of petitioner. The court a quo
discussed its own findings of fact at length, which this Court deems already sufficient and
persuasive, viz.:
First, there was gross inadequacy in the purchase price. The Deed of Absolute
Sale shows that the consideration for the subject property was only
Php140,000.00. While no evidence definitely establishes this as the market
value of the property for 1994, both parties agree that the proper consideration
for the same should be in the amount of at least Php 1 Million: [respondents-‐
spouses] averred that the price per square meter of the 350 square meter was
Php5,000.00, while [petitioner] stressed that the property was transferred to
him in satisfaction of [respondents-spouses] debts to him amounting to more
that Php 1 Million. It is also noteworthy that the property was mortgaged for
the amount of Php500,000.00, which [petitioner] did not contest, and for which
an annotation has been made on [respondents-spouses'] title. Furthermore, We
observed that the stated Php140,000.00 included the improvements already
constructed at the time. Thus, in light of these, that only Php140,000.00 was
the agreed upon consideration for the subject property strikes Us as suspect and
grossly inadequate.
Relevantly, [petitioner's] version that the [respondents-spouses] owed him

debts amounting to more than Php 1 Million, with the amount only being stated
in the Deed of Sale as a tax evasion device, fails to inspire belief. The alleged
debts have not been duly proved. [Petitioner's] only evidence of such
obligations were statements in a diary which he himself made. There are
several reasons why We find such statements inadequate to prove the supposed
indebtedness. First, there exists no proof that these amounts were actually sent
to and received by [respondents-spouses]. Second, [petitioner] never even
detailed how he transmitted these to [respondents-spouses], which could have
lent his testimony some credibility. Third, there is also no proof that these diary
entries were even indeed made on the dates these loans were purportedly
contracted, so as to show that these diary entries were not merely fabricated or
made at a later date to conform to [petitioner's] position. Without such crucial
proof, these entries are thus merely self-serving, and consequently, have no
probative value to show that [respondents-spouses] were indeed indebted to
[petitioner] in those amounts.
As a consequence, [petitioner's] failure to prove [respondents-spouses]

indebtedness of more than Php 1 Million eliminates the construction that the
Deed of Sale was one of dacion en pago for such a substantial obligation x x x.
However, it bears stressing that the non-existence of the debt does not prevent
Us from noting that [petitioner] likewise agreed that the P140,000.00 expressed
in the Deed was too low to correspond to the actual market value of the
property.
Moreover, even granting that the [respondents-spouses] were indeed indebted

to [petitioner] in the amount insisted by the latter, a reading of the Deed shows
that the subject property was clearly conveyed to [petitioner] for only
Php140,000.00. Nothing in the Deed shows that the property was conveyed for
a consideration other than the amount appearing thereon. x x x
xxxx
Second, the [respondents-spouses], as vendors of the subject property.

remained in possession of the same. Since the Deed was signed in I 994,
[respondents-spouses} possessed the property by actual possession thereof, as
when they had supervised the construction of the apartment, and subsequently,
as lessors, when they entered into lease contracts with tenants and received
payment [therefor].
x x x [Petitioner] averred that he had authorized [Ernesto] to supervise the

construction and the management of the apartment. Again, however,
[petitioner] presented no proof of such authorization, or details as to the date,
time, and place when he made such authorization, which he should have
recalled x x x as this was a matter of utmost importance. [Petitioner] never
even demanded an accounting of the expenses for the construction. x x x We
note that the building and electricity permits for the property were in
[Ernesto's] name, and that when the apartment was finished, [Ernesto] first
managed the same. The inevitable conclusion that emerges is that [Ernesto]
independently carried out his plan to build and finish the apartment, with
[petitioner] only as a creditor who lent him some funds for the projects.
In addition, [respondents-spouses] have proved, and [petitioner] even

confirmed, that when the apartment was constructed, [respondents-spouses]
collected payment, and only from three doors, which is in accord with the
arrangement between the parties. It is a glaring inconsistency that [petitioner]
vehemently alleges ownership of the subject property and the apartment and
yet allowed [respondents-spouses] for years to collect from three doors of the
apartment, and even enter into lease contracts with tenants. Such details only
persuade Us that it was [petitioner's right to collect which has been authorized
by [respondents-spouses], and which has now been extinguished, with the debt
of Php280,000.00 (Php140,000.00 with 100% interest) having been completely
paid.[28]
Even after the supposed execution of the Deed of Sale, respondents-spouses persisted in
exercising the foregoing acts assertive of their ownership over the subject property. In Sps.
Raymundo v. Sps. Bandong,[29] it was observed that it is contrary to human experience that
a person would easily part with his property after incurring a debt.[30] Rather, he would
first find means to settle his obligation, and the selling of a property on which the house
that shelters him and his family stands, would only be his last resort.[31]
The actuations of respondents-spouses persuade that they were preserving their hold on
the subject property and had no intent at all to relinquish their ownership over the same by
sale. Moreover, petitioner cannot simply claim that respondent Ernesto had been acting
only in representative capacity on the sole premise that they are brothers-in-law. Close-
knit familial relationships, whether by consanguinity or by affinity, are not presumptive
evidence of a contract of agency on their lonesome.
Also, petitioner cannot correctly argue that his agreement with respondents-spouses
constituted dation in payment or dacion en pago. The case of Filinvest Credit Corporation
v. Philippine Acetylene Co. Inc.[32] defined this contract, viz.:
Dacion en pago, according to Manresa, is the transmission of the ownership of

a thing by the debtor to the creditor as an accepted equivalent of the
performance of obligation. In dacion en pago, as a special mode of payment,
the debtor offers another thing to the creditor who accepts it as equivalent
of payment of an outstanding debt. The undertaking really partakes in one
sense of the nature of sale, that is, the creditor is really buying the thing or
property of the debtor, payment for which is to be charged against the debtor's
debt. As such, the essential elements of a contract of sale, namely, consent,
object certain, and cause or consideration must be present. In its modem
concept, what actually takes place in dacion en pago is an objective novation
of the obligation where the thing offered as an accepted equivalent of the
performance of an obligation is considered as the object of the contract of sale,
while the debt is considered as the purchase price.[33] (Emphasis supplied.)
Glaring legal and factual reasons debunk petitioner's claim of dacion en pago.
First, the March 1999 Dacion en Pago[34] submitted by petitioner apparently pertains to
another debt that was not proven to have transpired. The relevant stipulations in the
Dacion en Pago are hereafter reproduced:
WHEREAS, I, ARTURO A. DACQUEL xxx am the registered owner of the

parcel of residential lot with improvement situated in Malabon, Metro Manila,
more particularly described [under TCT No. M-10649];
WHEREAS, I acquired by purchase, the above parcel of land from the spouses
ERNESTO SOTELO and FLORA DACQUEL for a consideration of ONE
MILLION FOUR HUNDRED FIFTY THOUSAND PESOS (P1,450,000.00),
of which amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00)
remains as balance which I have not yet paid to the spouses;
WHEREAS, I have constructed a seven-door apartment building on the said

parcel of land, each door or unit designated as "37-A", "37-B", "37-C", "37-D",
"3 7-E", "37-F", and "37-G" xxx;
WHEREAS, in full payment of the purchase price of the aforesaid lot from the
Sotelo-spouses, I, as the Vendee of the said Sotelo spouses, as the Vendors
thereof, have agreed that three (3) of the apartment units designated as 37-A, 3
7-B and 37-C which are all successive and adjoining apartments xxx shall be
ceded, conveyed, and transferred unto the said spouses xxx, together with land
on which the said apartment doors are erected;
NOW THEREFORE, for and in consideration of the foregoing premises, and

by way of my full payment of the unpaid balance for the lot equivalent to the
amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00), I,
ARTURO F. DACQUEL, hereby cede, convey, transfer by way of DACION
EN PAGO, in favor of the spouses ERNESTO SOTELO and FLORA
DACQUEL, their heirs, assigns, and successors-in-interest, THREE (3)
apartment units designated as 37-A, 37-B, and 37-C xxx, together with land on
which the said apartment doors are erected thereon, including the ground space
surrounding the 3-door apartments, in full liquidation of any indebtedness to
said spouses by way of the unpaid purchase price of the above-described land.
x x x x[35]
This Dacion en Pago constituted petitioner Dacquel as the buyer of the subject lot and the
respondents-spouses Sotelo as the vendors, whereby Dacquel allegedly owed to the
Sotelos the remaining amount of P500,000.00 out of the purported P1,450,000.00
purchase price. These stipulations were not at all shown to actually exist, or to be the
same, or at least connected to the parties' original transaction. While petitioner claims that
this dation in payment stemmed from the P140,000.00 he had loaned to respondents-
spouses, no reference to the said established debt was made in petitioner's Dacion en
Pago. If anything, the existence of the Dacion en Pago relied on the truth of the
September 1, 1994 Deed of Sale, which, unfortunately for petitioner, turned out to be not a
sale but only an equitable mortgage. Petitioner failed to adduce acceptable evidence that
this sale actually transpired, more so as respondents-spouses consistently denied that they
sold the subject property to petitioner.
Second, even if the truth of this second transaction would be sustained, both parties still
must be shown to have mutually agreed to the dation in payment. Records, however, fail to
disclose any such consent on the part of respondents-spouses. Instead of an agreement, the
said Dacion en Pago appears to be a mere unilateral affidavit executed by petitioner. That
both petitioner and respondents-spouses left this document unsigned and unnotarized does
not help the present appeal. No witnesses even attested to the alleged Dacion En Pago.
This Dacion En Pago rests on claims that are too self-serving to be considered, and bare
allegations have no probative value in court.
Title may be
nullified and
real property
may be
reconveyed in
case of
equitable
mortgage.
As the transaction between the parties herein was demonstrated to be one of equitable
mortgage, petitioner did not become owner of the subject property but a mere mortgagee
thereof. As such, petitioner was bound by the prohibition against pactum commissorium as
embodied in Article 2088 of the Civil Code:
Art. 2088. The creditor cannot appropriate the things given by way of pledge or
mortgage, or dispose of them. Any stipulation to the contrary is null and void.
The mortgagee's consolidation of ownership over the mortgaged property upon the
mortgagor's mere failure to pay the obligation is the essence of pactum commissorium.[36]
The mortgagor's default does not operate to automatically vest on the mortgagee the
ownership of the encumbered property. This Court has repeatedly declared such
arrangements as contrary to morals and public policy and thus void. If a mortgagee in
equity desires to obtain title to a mortgaged property, the mortgagee's proper remedy is to
cause the foreclosure of the mortgage in equity and buy it at a foreclosure sale.
Having proceeded to cause the cancellation of respondents-spouses title to the mortgaged

property and its transfer to his name without availing of the remedy of foreclosure,
petitioner can be concluded to have dabbled in the prohibited practice of pactum
commissorium. The transaction is consequently rendered void, and title to the subject
property should be reverted to respondents-spouses.
Attorney's
fees are
awarded only
on factual
and legal
grounds
under Article
2208 of the
Civil Code.
Article 2208 of the Civil Code provides the guidelines on recovery of attorney's fees:
Art. 2208. In the absence of stipulation, attorney's fees and expenses of

litigation, other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate
with third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the

plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to
satisfy the plaintiff's plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and
skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's

liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that
attorney's fees and expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.
The Court explained the duality of attorney's fees in Benedicto v. Villaflores:[37]
Attorney's fees, as part of damages, are not necessarily equated to the amount
paid by a litigant to a lawyer. In the ordinary sense, attorney's fees represent the
reasonable compensation paid to a lawyer by his client for the legal services he
has rendered to the latter; while in its extraordinary concept, they may be
awarded by the court as indemnity for damages to be paid by the losing party
to the prevailing party. Attorney's fees as part of damages are awarded only in
the instances specified in Article 2208 of the Civil Code. As such, it is
necessary for the court to make findings of fact and law that would bring the
case within the ambit of these enumerated instances to justify the grant of such
award, and in all cases it must be reasonable.[38]
The general rule is that attorney's fees cannot be recovered as part of damages because of
the policy that no premium should be placed on the right to litigate.[39] They are not to be
awarded every time a party wins a suit.[40] Being the exception rather than the rule, an
award of attorney's fees requires compelling reason before it may be granted. Parties still
are allowed to stipulate on it beforehand. In the absence of any agreement, however,
factual, legal, and equitable justification must be established to avoid speculation and
conjecture surrounding the grant of attorney's fees by the courts.[41]
While the CA declared that petitioner's acts forced respondents-spouses to litigate, records
show scant reason to consider the case within the said exception cited under Article 2208.
Even when a claimant is compelled to bring his cause to court or incur expenses to protect
his rights, attorney's fees still may not be awarded as part of damages where no sufficient
showing of bad faith could be reflected in a party's persistence in a case other than an
erroneous conviction of the righteousness of his cause.[42]
No such bad faith was proven against petitioner. On the contrary, both parties were
impelled by the honest belief that their respective actions were justified. The entire legal
ruckus was sparked by a series of undocumented transactions over the subject property,
driving both parties into deeper misunderstandings that ended up too complicated and far
too late to be clarified. Yet, in the records, both petitioner and respondents-spouses
appeared to be merely in pursuit of their own interests. Respondents-spouses' victory
should not earn petitioner an automatic label of bad faith and a correlative award of
attorney's fees.
WHEREFORE, the Petition is GRANTED IN PART. The July 12, 2012 Decision and
the October 10, 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 93939 are
AFFIRMED with MODIFICATION in that the award for attorney's fees in favor of
respondents-spouses Ernesto and Flora Sotelo is DELETED.
SO ORDERED.
Perlas-Bernabe, Senior Associate Justice, (Chairperson), Inting, Gaerlan, and Rosario,*

JJ., concur.
* Designated as additional Member per S.O. No. 2835 dated July 15, 2021.
[1] Rollo, pp. 12-46.
[2]
Id. at 51-68; penned by Associate Justice Marlene Gonzales-Sison and concurred in by
Associate Justices Hakim S. Abdulwahid and Edwin D. Sorongon.
[3] Id. at 48-49.
[4] Id. at 75.
[5] Id. at 77.
[6] Id. at 52.
[7] Id. at 75.
[8] Id. at 52-55.
[9] Records, pp. 2-6.
[10] Id.
[11] Id. at 161-170.
[12] Id. at 12-17.
[13] Id. at 308-315.
[14] Id. at 23-26.
[15] Rollo, pp. 70-73.
[16] Id. at 74.
[17] Id. at 58-59.
[18] Id. at 59-60.
[19] Id. at 60-66.
[20] Id. at 52-67.
[21] Id. at 67.
[22] Id. at 48-49.
[23] CA rollo, pp. 175-194.
[24] Rollo, pp. 24-42.
[25] Id. at 194-209.
[26] Legaspi v. Spouses Ong, 498 Phil. 167, 182 (2005).
[27] Id.
[28] Rollo, pp. 59-61.
[29] Sps. Solitarios v. Sps. Jaque, 746 Phil. 852, 876 (2014).
[30] Id.
[31] Id.
[32] 197 Phil. 394-406 (1982).
[33] Id. at 402-403.
[34] Records, pp. 291-292.
[35] Id.
[36] Sps. Solitarios v. Sps. Jaque, supra note 29.
[37]646 Phil. 733, 741-742 (2010); cited in Philippine National Construction Corporation
v. APAC Marketing Corporation, 710 Phil. 389, 395-396 (2013).
[38] Benedicto v. Villaflores, 646 Phil. 733, 741-742 (2010).
[39]Philippine National Construction Corporation v. APAC Marketing Corporation, supra

note 34.
[40] Id.
[41] Sps. Timado v. Rural Bank of San Jose, Inc., 789 Phil. 453, 460 (2016).
[42] Id.
Source: Supreme Court E-Library

This page was dynamically generated
by the E-Library Content Management System (E-LibCMS)

Dacquel v. Spouses Sotelo, G.R. No. 203946, (August 4, 2021)

Uploaded by

Copyright:

Available Formats

Dacquel v. Spouses Sotelo, G.R. No. 203946, (August 4, 2021)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Dacquel v. Spouses Sotelo, G.R. No. 203946, (August 4, 2021)

Uploaded by

Copyright:

Available Formats

11/5/23, 1:55 PM E-Library - Information At Your Fingertips: Printer Friendly

The parties hereafter part versions.

Consequently, on September 1, 1994, the parties executed a Deed of Sale[7] in

WHEREFORE, premises considered, judgment is hereby rendered in favor of

The Sotelos appealed to the CA.

Ruling of the Court of Appeals:

subject property, taking into consideration their supervision of the apartment's

WHEREFORE, premises considered, the appeal is GRANTED. The Decision

Petitioner Dacquel's Arguments:

The Petition is meritorious in part.

The relevant provisions of the Civil Code read:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any

1. When the price of a sale with a 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

Relevantly, [petitioner's] version that the [respondents-spouses] owed him

As a consequence, [petitioner's] failure to prove [respondents-spouses]

Moreover, even granting that the [respondents-spouses] were indeed indebted

Second, the [respondents-spouses], as vendors of the subject property.

x x x [Petitioner] averred that he had authorized [Ernesto] to supervise the

In addition, [respondents-spouses] have proved, and [petitioner] even

Dacion en pago, according to Manresa, is the transmission of the ownership of

WHEREAS, I, ARTURO A. DACQUEL xxx am the registered owner of the

WHEREAS, I have constructed a seven-door apartment building on the said

NOW THEREFORE, for and in consideration of the foregoing premises, and

Having proceeded to cause the cancellation of respondents-spouses title to the mortgaged

Art. 2208. In the absence of stipulation, attorney's fees and expenses of

(1) When exemplary damages are awarded;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the

(6) In actions for legal support;

(8) In actions for indemnity under workmen's compensation and employer's

(10) When at least double judicial costs are awarded;

The Court explained the duality of attorney's fees in Benedicto v. Villaflores:[37]

Perlas-Bernabe, Senior Associate Justice, (Chairperson), Inting, Gaerlan, and Rosario,*

[1] Rollo, pp. 12-46.

[3] Id. at 48-49.

[4] Id. at 75.

[5] Id. at 77.

[6] Id. at 52.

[7] Id. at 75.

[8] Id. at 52-55.

[9] Records, pp. 2-6.

[11] Id. at 161-170.

[12] Id. at 12-17.

[13] Id. at 308-315.

[14] Id. at 23-26.

[15] Rollo, pp. 70-73.

[16] Id. at 74.

[17] Id. at 58-59.

[18] Id. at 59-60.

[19] Id. at 60-66.

[20] Id. at 52-67.

[21] Id. at 67.

[22] Id. at 48-49.

[23] CA rollo, pp. 175-194.

[24] Rollo, pp. 24-42.

[25] Id. at 194-209.

[26] Legaspi v. Spouses Ong, 498 Phil. 167, 182 (2005).