Dear Atty. Gab,

Musta Atty! I’m writing to you because I’m in a really confusing situation and I don’t know what to do. A few years ago, I needed money urgently to pay off some debts. A friend, let’s call her Marissa, offered to lend me the money. As collateral, she asked me to sign a Special Power of Attorney so she could get the title to my small land in Bulacan, promising it was just for security. She even made me sign a lease agreement for my own land! I thought it was weird, but I trusted her.

Now, she’s saying I owe her so much money in rent, and she’s threatening to evict me from my own property! I recently found out she even transferred the title to her name. I feel cheated and taken advantage of. Is this even legal? Can she just take my land like this? I’m worried about losing my home. Any advice you can give would be a huge help. Salamat po!

Sincerely,
Elena Reyes

Dear Elena Reyes,

Musta Elena! Thank you for reaching out. I understand your distress regarding your property and the loan agreement with Marissa. It sounds like you’re facing a challenging situation, and it’s good you’re seeking clarification on your rights. Based on your letter, it appears there might be an issue with how your land was used as collateral and the subsequent lease agreement. Let’s explore the legal principles at play to help you understand your situation better.

Is Your Loan Agreement a Disguised Property Grab?

It’s crucial to examine whether the arrangement you had with Marissa constitutes what we call a pactum commissorium. Philippine law, specifically Article 2088 of the Civil Code, prohibits creditors from automatically appropriating or disposing of collateral given as security for a loan. This prohibition exists to protect borrowers from unfair practices where lenders might take undue advantage of their financial vulnerability. The Supreme Court has consistently struck down agreements that effectively allow a creditor to seize property without going through proper foreclosure procedures.

In your case, the fact that you signed a Special Power of Attorney allowing Marissa to obtain your title and then entered into a lease agreement for your own property raises red flags. The court has emphasized that the essence of pactum commissorium lies in the automatic appropriation of the collateral by the creditor upon the debtor’s failure to pay. Consider this excerpt from a Supreme Court decision:

“The existence of the loan and the transfer of the property from x x x Bobier to x x x Eupena lead to no other conclusion but that the latter appropriated the property when the former failed to pay his indebtedness.”

This statement highlights the Court’s concern about situations where the transfer of property title appears directly linked to a loan and the debtor’s potential inability to repay. If the transfer of your title to Marissa’s name was intended to automatically vest ownership in her upon your failure to repay the loan, regardless of the lease agreement, this could be deemed an invalid pactum commissorium.

Furthermore, the Court has considered the validity of lease agreements entered into under circumstances suggestive of pactum commissorium. Even if a lease agreement exists, its validity can be questioned if it’s found to be a tool to facilitate the illegal appropriation of property. The Court has stated:

“Because Eupena illegally obtained TCT No. 698957, the lease agreement becomes void following Article 1409(1) of the Civil Code. Under Article 1409(1), contracts whose purpose is contrary to law are void and inexistent from the beginning. Here, the lease agreement is the result of a pactum commissorium, resulting in its invalidity for violating Article 2088 of the Civil Code.”

This means that if the court determines that the lease agreement was a consequence of an illegal pactum commissorium arrangement, the lease itself could be declared void from the start. This is a significant point because Marissa is using the lease agreement as the basis for demanding rent and threatening eviction.

The fact that you were made to sign a lease for your own property after providing the SPA is particularly suspicious. The Supreme Court has recognized that:

“[A]ll persons in need of money are liable to enter into contractual relationships whatever the condition if only to alleviate their financial burden albeit temporarily. Hence, courts are duty bound to exercise caution in the interpretation and resolution of contracts lest the lenders devour the borrowers like vultures do with their prey.”

This underscores the court’s awareness of the power imbalance in lending situations and its willingness to scrutinize contracts to protect vulnerable borrowers. Your signing of the lease agreement under financial pressure might be viewed in this light.

It’s also important to note that while a lease agreement typically prevents a tenant from denying their landlord’s title, this principle might not apply if the title itself was acquired through questionable means, such as a pactum commissorium. The Court acknowledges that in ejectment cases where ownership is disputed, a provisional determination of ownership is necessary to resolve the issue of possession. In such cases, the defense of ownership is not considered a collateral attack on the plaintiff’s title, especially when fraud or illegality in acquiring the title is alleged.

Therefore, Elena, based on the information you’ve provided, there is a strong possibility that the arrangement with Marissa constitutes a pactum commissorium, and the lease agreement may be invalid. This means Marissa may not have the right to demand rent or evict you based on that lease.

Practical Advice for Your Situation

• Gather all documents: Collect all documents related to the loan, the Special Power of Attorney, the lease agreement, and any communication with Marissa. These documents are crucial evidence in establishing your case.
• Consult with a lawyer immediately: It’s essential to seek professional legal advice as soon as possible. A lawyer specializing in property and contract law can thoroughly assess your situation and advise you on the best course of action.
• Consider filing a case for Reconveyance: Your lawyer might recommend filing a case for Reconveyance of Property to legally challenge Marissa’s title and reclaim ownership of your land. This type of case directly addresses the issue of improper title transfer.
• Explore options to nullify the Lease Agreement: Simultaneously, you can explore legal avenues to have the lease agreement declared void due to its connection to a potentially illegal pactum commissorium.
• Do not vacate your property: Unless there is a lawful court order for eviction, you have the right to remain on your property while pursuing legal remedies.
• Document everything: Keep a record of all interactions and communications with Marissa, including dates, times, and details of conversations. This documentation can be valuable evidence.
• Be prepared for court proceedings: Legal disputes can be lengthy and complex. Be prepared for potential court proceedings and work closely with your lawyer to build a strong case.

Remember, Elena, the principles discussed here are based on established Philippine jurisprudence aimed at protecting individuals in situations similar to yours. It is crucial to seek personalized legal advice to navigate the specifics of your case effectively. Do not hesitate to ask if you have further questions.

Sincerely,
Atty. Gabriel Ablola

For more specific legal assistance related to your situation, please contact me through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This correspondence is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please schedule a formal consultation.