JULIA ANG ENG MARIANO, PETITIONER, VS. THE COURT OF APPEALS, JUANITO FAUSTINO AND TERESITA FAUSTINO, RESPONDENTS.

Petitioner, Julia Ang Eng
Mariano, claims that the appellate court erred in declaring the Deed of
Sale dated September 29, 1987 executed in her favor by the private respondents, the spouses Faustino, as
null and void and TCT No. 156493 in her name cancelled. Emphasizing that the trial court’s findings
of fact carry more weight on appeal than those of public respondent, petitioner
asks Us to reverse the questioned
decision^[1] and resolution^[2]. Private respondents claim, however, that they were tricked by petitioner
into signing over their property to her. A question arises: Is parol
evidence admissible to resolve the controversy between the parties? Yes, it is admissible.

Petitioner claims that
the private respondents approached her on October 28, 1986 for a loan of
P250,000.00 on the security of a
mortgage on their lot with an area of 2,035 square meters located at
Deparo, Kalookan City and covered by TCT No. 129613 in their names. On January
15, 1987, they secured another loan of P250,000.00 on the basis of the same
security. Forseeing their inability to
pay this when they become due, private respondents sold the same parcel of land mortgaged to petitioner for an
additional P320,550.00 on September 29, 1987. Thus, a deed of sale was drawn up on said date and a new TCT No. 156493
issued in petitioner’s name.. However,
the private respondents refused to turn over possession of the land to her and
instead sued her for annulment of deed of sale and damages.

On the other hand,
private respondents’ story is that all they wanted was to transform their small
piece of land, which they had inherited from their parents, into a
subdivision. They looked for financiers
who would be able to lend them money for their project and petitioner expressed
her desire to help them.

Being unschooled farmers,
and relying completely on the trust and confidence they have on
petitioner, they signed the prepared mortgage forms that petitioner told them
to sign. They first mortgaged their
land on October 28, 1986 for P250,000.00 with the condition that they were to
construct a house on said lot so that they would be able to secure another
P250,000.00 with the house and lot as security. They received, however, only P150,000.00 for the first
mortgage. After the house was
constructed, they were made to sign another document for another P250,000.00 on
January 15, 1987 for which they received again only P150,000.00. Thereafter, petitioner told them that she
could easily secure a bank loan of P1,000,000.00 for their project but they had
to sign over their property to her as the bank would require that the property
be in her name for the loan to be processed. Thus, trusting her completely, they signed on September 29, 1987 a
prepared deed of sale which petitioner handed over to them for their signature. When they discovered that there was no loan
and that they were being asked to vacate their land, they took petitioner to
court.

Private respondents sued
petitioner for annulment of the deed of sale and the cancellation of the
Transfer Certificate of Title in her name. The trial court, however, dismissed their complaint relying on the validity of the deed of sale as the best
evidence of the transaction between the parties.

On appeal, the appellate
court saw otherwise and ruled as follows:

“WHEREFORE, the appealed decision is reversed and set aside. The deed of sale dated September 29, 1987 is declared null and void and
TCT No. 156493 in the name of Julia Ang Eng Mariano is cancelled. The Register of Deeds is ordered to issue a
new one in lieu thereof in the name of Juanito Faustino, married to Teresita R.
Faustino. Further, the appellee is
ordered to pay attorney’s fees of P10,000.00.^[3]“

Petitioner now comes to Us raising as errors of the appellate
court the following:

“I

“X X X IN ANNULLING THE QUESTIONED
DEED CONSIDERING THAT THERE IS NEED FOR A MORE CONVINCING PROOF, GREATER THAN
PREPONDERANCE OF EVIDENCE TO ANNUL AND SET ASIDE THE EFFICACY OF THE DULY
EXECUTED AND ATTESTED PUBLIC DOCUMENTS; and

“II

“X X X IN ARRIVING AT FACTUAL
CONCLUSIONS BASED ON FALLACIOUS PREMISES WHICH ARE NOT BORNE BY THE RECORDS OF
THE CASE.”^[4]

“I

Behind this flowery
legalese is the simple question adverted to at the start of this decision: can parol evidence be admitted to show that
the Deed of Sale, which petitioner claims truly represented the contract between
the parties and “drawn up with all the solemnities prescribed by law”^[5] and properly notarized, a sham transaction
as claimed by the private
respondents?

A similar question
cropped up in Pagsuyuin vs. Intermediate Appellate Court^[6] where
this Court ruled as follows:

“The rule on parol evidence recognizes the following
exceptions:

(a) where a mistake or imperfection of the writing, or its
failure to express the true intent and agreement of the parties, or the
validity of the agreement is put in issue by the pleadings;

(b)     xxxx xxx (Sec. 7, Rule 130).

As can be clearly gleaned from the foregoing, the rule making a
writing the exclusive evidence of the agreement therein stated, is not
applicable when the validity of such agreement is the fact in dispute. A contract may be annulled where the consent
of one of the contracting parties was procured by mistake, fraud, intimidation,
violence or undue influence (Art. 1330, New Civil Gode). In fact, as early as 1919 in the case of
Bough v. Cantiveros, 40 Phil. 209, this Court laid down the rule that where the
validity of the agreement is the issue, parol evidence may be introduced to
establish illegality or fraud.

x x x            x
x x     x x x

“While the writing itself may have been accompanied by the
most solemn formalities, no instrument is so sacred when tainted with fraud as
to place it beyond the scrutiny of extrinsic evidence. This evidence overcomes the known
presumption fraus est odiosa et non praesumenda (Yturralde v. Vagilidad,
28 SCRA 393 [1969]).”^[7]

In the case at bar,
petitioner relies heavily^[8] on the notarial certification of the
Deed of Absolute Sale by Notary
Public Alfonso B. Capacillo on September 24, 1987 that said document was executed
by the parties named therein in the presence of witnesses
Juanito Chan and Gaspar Dandan.^[9]

On the other hand,
private respondents’ evidence clearly shows that all they wanted was to contact
a financier^[10] who
would lend them money to finance the transformation of their inherited
agricultural land^[11] in Deparo, Caloocan City into a
subdivision. In the meantime they had
already spent P6,000.00^[12] for the subdivision survey.^[13]
A certain person approached them and told them that a certain Julia Ang could
help them in the development of their subdivision.^[14]
After private respondent Juanito Faustino was introduced to Julia Ang, the
latter promised him that he will be given a loan of P250,000.00 to start the
development of his subdivision.^[15]
After the private respondents signed the mortgage document for P250,000.00,
petitioner gave them only P150,000.00 saying that the balance covered interest
and other expenses.^[16]
Private respondents, however, had to construct a house on the property as
required by petitioner to be able to get additional loans for the development
of their subdivision.^[17]
Thereafter, an additional mortgage document was prepared for P250,000.00 but,
as before they were only given P150,000.00.^[18]

When pressed for the P1,000,000.00 loan that petitioner promised
them for the development of their proposed subdivision, petitioner allegedly
told private respondents that the bank required that the title to their house
and lot be transferred to her name as she is known to the bank as a
businesswoman of repute with capital which the bank could run after in case the mortgage loan
would not be paid.^[19] The
private respondents, therefore, signed the Deed of Sale over their property in favor of petitioner.^[20]

Private respondents’
version was, in fact, corroborated by petitioner when she testified on cross-examination
that the real intention of the parties in the execution of the deed of sale was
to secure a loan of P1,000,000.00 on the property in her name and that whatever
private respondents owed her would be deducted from the proceeds of the loan
with the private respondents assuming the payment thereof.^[21] Her own words make out a case of
fraud which she practised upon the private respondents.

Moreover, petitioner
could have easily rebutted and belied private respondents’ negative
averment^[22]
in the trial court. All she had to do
was to present the Notary Public who notarized the Deed of Sale and the two witnesses to the deed. Upon their word that private
respondents had signed the deed of sale in their presence and had received the consideration of P320,550.00,^[23]
private respondents would have had to kiss their cause of action goodbye.

No such testimony was
given by the petitioner in the
trial court and her corroborating testimony cited in the footnote shows why —
there is no such loan, the deed of sale was a scheme to get the property from
private respondents.

II

The first mortgage
document was executed on October 28, 1986^[24]
while the second was executed on January 15, 1987.^[25]
On both deeds the following provision, common to both, is written, to wit:

“It is of the essence of this contract that if the mortgagor
fails to pay the principal obligation within One Year (1), then this mortgage
shall be foreclosed and the abovementioned property shall be sold in accordance
with law; but if the Mortgagor pays said obligation together with the interest,
then this mortgage shall become null and void and of no effect.”

On the other hand, the
Deed of Sale dated September 29, 1987 simply stated, as follows:

x x x

‘That for and in consideration
of the sum of THREE HUNDRED TWENTY FIVE THOUSAND FIVE HUNDRED FIFTY PESOS
(P325,550.00), Philippine Currency, receipt of which is hereby acknowledged and
confessed by the VENDOR from the VENDEE, the VENDOR does hereby by these
presents SELL, CEDE, TRANSFER and CONVEY in a manner
absolute and irrevocable, the property above-described together with all the
improvements built thereon, unto the said VENDEE,
his heirs, assigns and successors.

‘That the VENDOR hereby
warrant(s) his title over the property above-described, with full power and
authority to dispose of the same, free from all liens and encumbrances, and
that henceforth, full ownership and possession shall pertain to the VENDEE.

In the light of the fact
that petitioner is admittedly a businesswoman of repute, managing a profitable
business, the following questions come to mind:

1.       Why were the encumbrances of October 28,
1986 and January 15, 1987 not mentioned in the deed of sale as pre-existing
encumbrances, although said encumbrances, by way of mortgages, may have been
made in petitioner’s favor?

2.       Should not the prior mortgage amounts of
P500,000.00 have been included together with the additional cash price of
P320,550.00 to make a total consideration of P820,550.00 with the added
explanation that by the execution
of the deed of sale said P500,000.00 would have been considered fully paid, as
was petitioner’s contention?

Considering these
unanswered questions in relation to the deed of sale and mortgage proviso above
quoted, We find that the appellate court’s ratiocination — on why this deed of
sale is, in reality, a sham transaction — more in accord with business common
sense and ordinary experience of mankind, which We quote with approval:

“Were reliance to be placed exclusively on the deed of sale,
there is no doubt that appellants’ protests would have to be rejected. However, in cases such as this one where the
parties are seriously at odds on the nature of the transaction between them,
the circumstances, before and after, must be scrutinized.

“1. Appellee has stated
below –

‘x x defendant testified that previous to the sale, the lot in question
was twice mortgaged to her to secure two loans of P250,000.00 each both maturing
within one (1) year. When their
aggregate obligation of
P500,000.00 matured, plaintiffs could not pay the same. They thus decided to sell the land to
defendant for an additional amount of P320,550.00.’ (Memorandum, p. 4,
Record, p. 86).

The argument is repeated, almost verbatim,
in the brief (at p. 16).

“The fallacy of the argument is readily apparent. The first of the two mortgages was executed
on October 28, 1986, the second, on January 15, 1987. The deed of sale was executed on September 29, 1987. Both mortgage accounts therefore were not
yet due on the date of the deed of sale, consequently the motivation for the
sale stated by the appellee is not true.

“2. Appellee says in her
brief –

‘The consideration of P320,550.00 stated in the deed of sale is
more consistent with the claim of the appellee that it is in addition to the
previous loans of appellants in the aggregate amount of P500,000.00′ (at pp. 13-14)

In the course of her testimony however, the
appellee said the only consideration for the deed of sale was the P320,550.00
‘because the P500,000.00 is considered as a mortgage.’ (tsn, January 4, 1990,
p. 7)

“3. Appellee herself revealed the true nature of
the deed of sale when she said, on cross-examination, that the intention was
merely to secure a loan of P1M on the property, on her credit as a
businesswoman and that whatever the appellants owed her would be deducted from
the proceeds, to be paid to her, the appellants to assume the P1M mortgage (ibid., pp. 10-11). Additionally, as stated earlier, the P1M
mortgage loan never materialized.

“Finally, having ostensibly acquired full ownership of the
land on September 29, 1987, appellee has not taken any step to get possession,
although the appellants stay on the premises. As a matter of fact, her answer dated November 22, 1988 did not even
interpose any counterclaim on possession.

“These circumstances taken together lead to the conclusion
espoused by the appellants, that the deed of sale is a sham transaction, not
representing the true intent of the parties and that no consideration passed or
was received. x x x.

WHEREFORE, finding no reversible error in the decision
appealed from the petition is hereby DISMISSED for lack of merit. This is without prejudice to whatever action
the petitioner may take on the actual amount loaned to private
respondents. We AFFIRM the questioned
public respondent’s decision and resolution in toto. Costs against the petitioner.

SO ORDERED.

Narvasa, C.J., (Chairman), Padilla, Regalado, and Campos, Jr., JJ., concur.

^[1]
“Faustino vs. Mariano,”
CA-G.R. CV No. 25535, May 15, 1991, Camilon, J., ponente, Magsino and Luna, JJ.,
concurring; Rollo, pp. 43-47.

^[2]
Ibid., November 25, 1991, Camilon J., ponente, Magsino and Luna, JJ., concurring;
Rollo, p. 48.

^[3]
Rollo, pp. 45-47.

^[4]
Rollo, p. 138.

^[5]
Petitioner’s Memorandum, p. 6; Rollo,
p. 139.

^[6]
193 SCRA 547.

^[7]
Ibid., at pp. 552-554.

^[8]
TSN, January 4, 1990, p. 4, petitioner
Julia Ang Eng Mariano on direct examination.

^[9]
Exhibit “3”, Original
Records, pp. 26-27.

^[10]
TSN, February 27, 1989, p. 5, private
respondent Juanito Faustino on direct examination.

^[11]
TSN, February 27, 1989, p. 20, private
respondent Juanito Faustino on cross examination.

^[12]
Comment, p. 5; Rollo, p. 59.

^[13]
TSN, February 27, 1989, p. 14; private
respondent Juanito Faustino on direct examination.

^[14]
Ibid., p. 5; private respondent Juanito Faustino
on direct examination.

^[15]
Ibid., pp. 5-6; private respondent Juanito
Faustino on direct examination.

^[16]
TSN, February 27, 1989, p. 23; private respondent Juanito Faustino on cross
examination.

^[17]
TSN, January 4, 1990, p. 8; petitioner Julia Ang Eng Mariano on
cross-examination.

^[18]
Op. cit.

^[19]
TSN, February 27, 1989, p. 25; private respondent Juanito Faustino on
cross-examination.

^[20]
Ibid.

^[21]
“Q 
Is it not a fact that after the
second mortgage, you were trying to collect interest from the Faustinos and
they could not pay the interest that is why you convinced them to make a loan
for which you told them you will help them in getting that loan?

“A Yes, sir. At that time
the economy of our country is down so I was unable to secure a loan from the
bank.

“Q In your desire to help them in
getting a loan, you showed them your capacity as a businesswoman so that you
can immediately get a loan for
them for P1 Million Pesos, you showed them your business
name, your auditor’s certificate and your trucking business?

“A   Yes,
sir.

“Q   But
you were not able to get that loan?

“A   Yes,
sir.

“Q Now, your understanding then was that when you will be able to get
that loan, whatever is owed by them to you will be deducted from that loan and they will assume the
mortgage?

“A   Yes,
sir.”

(TSN, January 4, 1990, pp. 10-11; petitioner
Julia Ang Eng Mariano under
cross-examination; Italics supplied)

^[22]
“x x x when a negative is averred in pleading, or plaintiff’s case
depends upon the establishment of a negative and the means of proving the
fact are equally within the control of each party, then the burden of proof is
upon the party averring the negative; but when the opposite party must, from the nature of
the case, himself be in possession of full and plenary proof to disprove the negative proof, then it is
manifestly just and reasonable that the party which is in possession of the
proof should be required to adduce it; or, upon his failure to do so, we must presume it
does not exist which of itself established a negative. x x x” (United States vs. Denver
& Rio Grande Railroad Company, 191 U.S. 84; 48 L. Ed 106, at US 91, 92; L.
Ed. 109; italics supplied)

^[23]
Almendra vs. IAC, 204 SCRA 142, cited by petitioner in her Memorandum on
page 9 (Rollo, p. 142) is very applicable in the case at bar, to wit:

“While petitioners’
contention is basically correct, we agree with the appellate court that there
is no valid, legal and convincing reason for nullifying the questioned deeds of
sale. Petitioner had not presented any
strong, complete and conclusive proof to override the evidentiary value of the
duly notarized deeds of sale. Moreover,
the testimony of the lawyer who notarized the deeds of sale that he saw not
only Aleja signing and affixing her thumbmark on the questioned deeds but also
Angeles and Aleja counting money between them, deserves more credence than the
self-serving allegations of the petitioners. Such testimony is
admissible as evidence without further proof of the due execution of the deeds
in question and is conclusive as to the truthfulness of their contents in the
absence of clear and convincing evidence to the contrary.” (At p. 148;
italics supplied)

^[24]
Rollo, pp. 36-37.

^[25]
Ibid., pp. 38-39.