ESTATE OF RODOLFO JALANDONI, REPRESENTED BY HIS JUDICIAL ADMINISTRATOR, BERNARDO JALANDONI, PETITIONER, VS. THE HONORABLE COURT OF APPEALS, FRANCISCO D. PALANCA AND LOURDES MONT…

Estate of Jalandoni versus Court of Appeals

The Case

This is a petition brought by the Estate of Rodolfo Jalandoni, represented by his judicial administrator Bernardo Jalandoni, against the Court of Appeals, Francisco Palanca, and Lourdes Montañer. The estate asks the Supreme Court to overturn the appellate resolution that upheld the validity of three transactions entered into by Rodolfo Jalandoni: two lease contracts and a deed of absolute sale over his property in Manila. The estate's central claim is that Rodolfo was of unsound mind when he entered into these agreements, rendering them void. The case matters because it is a clean illustration of two enduring rules: that the insanity of a contracting party is a question of fact, and that the factual findings of the Court of Appeals are final and generally beyond the reach of a petition for review.

Procedural History

Three separate actions were filed in the Court of First Instance of Manila. The first was brought by the lessees, the Jurado group and Sampaguita Crafts Center, Incorporated, to enforce their leasehold rights or recover damages. The second was brought by Lourdes Montañer to collect her real estate commission. The third was brought by Bernardo Jalandoni as judicial guardian of Rodolfo, praying that the sale to Palanca be declared legally inexistent on account of Rodolfo's insanity. The three cases were consolidated and jointly tried. Rodolfo died during the pendency of the cases.

The trial court rendered judgment on December 10, 1971, overruling the plea of insanity and upholding all three transactions. On appeal, the Court of Appeals reversed in a decision promulgated on June 7, 1977, finding that Rodolfo's mental incompetence had been duly established and declaring the authority to sell and the deed of sale null and void. Palanca moved for reconsideration, and after oral argument and the constitution of a special division of five justices, the Court of Appeals reversed its own decision by a resolution promulgated on September 12, 1978, affirming the trial court in full. Two motions for reconsideration were denied. The estate then came to the Supreme Court by petition for review, asking that the September 12, 1978 resolution be overturned.

Facts

Rodolfo Jalandoni owned two lots and the building standing on them at A. Mabini and Sta. Monica Streets in Manila. During the shelling in 1944, while residing at Pennsylvania Street in Manila, he was struck in the right temple by a bullet. The injury appeared slight at the time, but a mental derangement gradually and progressively worsened despite medical treatment. In 1961 the family initiated proceedings to place him under guardianship, and on September 19, 1964, the Juvenile and Domestic Relations Court of Manila declared him incompetent.

In the meantime, Rodolfo continued to manage his own affairs. On November 2, 1959, he entered into a written lease with the Jurado group over the ground floor and mezzanine of his building for five years. On November 14, 1963, before the first lease expired, he entered into a second lease over the same premises with the corporation the original lessees had formed, Sampaguita Crafts Center, Incorporated, also for five years, providing that neither lease would be affected by any transfer or sale of the building. On December 2, 1963, he sold the land and building to Francisco Palanca by deed of absolute sale, through the real estate broker Lourdes Montañer, binding himself to pay her a commission of five percent and any overprice above 140,000 pesos. Palanca then wrote to the lessees increasing the rentals and terminating the lease, prompting the lessees to sue.

At trial, the evidence divided sharply. Bernardino Jalandoni testified to his brother's progressive mental decline. Doctor Romeo Gustilo, a neurosurgeon who had performed a pre-frontal lobotomy on Rodolfo, declared him to have a psychological imbalance. Doctor Lourdes Lapuz, a psychiatrist who examined him in 1964, declared him a chronic schizophrenic and expressed doubts about his competency in 1963. Against this, Palanca and Montañer testified to his soundness of mind, and Doctor Manuel Pardo, an American-trained psychiatrist, concluded that it was entirely possible Rodolfo had sufficient mental capacity to understand the nature and effects of his acts.

Issues

• Whether or not Rodolfo Jalandoni was so mentally ill at the time of the transactions as to be incapable of understanding their nature and consequences or giving consent to them.
• Whether or not the Court of Appeals erred in reversing its earlier decision and upholding the validity of the lease contracts, the authority and option to sell, and the deed of absolute sale.
• Whether or not the factual findings of the Court of Appeals on Rodolfo Jalandoni's mental condition may be reviewed by the Supreme Court on petition for review.

Applicable Provisions

Section 2 of Rule 45 of the Rules of Court, as invoked by the Court, provides:

The findings of fact of the Court of Appeals are final and may not be reviewed even by this Court.

This is the procedural rule that governs the whole petition, because the estate's appeal rests entirely on a question of fact.

Ruling

On the first issue, the Court held that the question of Rodolfo Jalandoni's mental condition is an issue of fact, not of law, determinable only by and after a study and appraisal of the evidence adduced by the parties. The question of the legal effects of insanity, assuming it were satisfactorily proven, would be a question of law, but no such controversy existed here, because the whole dispute lay in whether Rodolfo was in fact insane at the execution of the transactions. That issue had been the subject of extensive proof, considered and assessed in detail both by the trial court and by the Court of Appeals.

On the second issue, the Court found no reason to disturb the appellate resolution. The special division had relied on two compelling reasons. First, more than nine months before Rodolfo was declared incompetent, he had sold the property through Montañer, giving every reason to believe that on that date he possessed the mental capacity to transact ordinary business. Doctor Pardo had testified that even the severest schizophrenics are not demented, and had pointed to Rodolfo's own conduct: haggling over the price, arranging the manner of payment, directing how the checks were to be paid out, and noticing that one check had been crossed and asking that it be cancelled and another issued. Second, after authorizing the sale for 160,000 pesos, Rodolfo voluntarily accepted the amount and used it for his personal benefit, paying off his mortgage with the second check and opening a new account with the balance. Having accepted the amount and benefited from it, he and his heirs were estopped from repudiating the sale.

On the third issue, the Court held that the appellate court's findings on the insanity issue cannot and will not be reviewed by the Supreme Court. It quoted the rule:

The findings of fact of the Court of Appeals are final and may not be reviewed even by this Court.

The Court acknowledged that there are exceptions to this rule, but the record did not show that the case fell within any of them. In any event, the Court's own study of the record convinced it that the factual findings in the September 12, 1978 resolution were entirely correct and adequately demonstrated by preponderance of evidence.

Doctrine

First, the insanity or mental incapacity of a party at the time of contracting is a question of fact, to be resolved only upon a study and appraisal of the evidence. The legal effects of insanity, once established, are questions of law. Second, findings of fact of the Court of Appeals are final and may not be reviewed even by the Supreme Court, save only in the recognized exceptions, which the party invoking them must show to be present. Third, a person who accepts the benefits of a transaction and uses the consideration for his own benefit, and his heirs after him, are estopped from repudiating that transaction on the ground of insanity. These rules tie directly to Section 2 of Rule 45, which fixes the finality of the appellate court's factual findings.

Disposition

The Supreme Court affirmed in full the appealed resolution of the Court of Appeals of September 12, 1978, with costs against the petitioners. The estate lost, and the transactions in favor of Palanca and Montañer stood.

Remember This

The single line worth memorizing is that insanity is a question of fact, and the factual findings of the Court of Appeals are final and binding even on the Supreme Court. Examiners like to use this case to test the finality of appellate factual findings under Rule 45, and to test the doctrine of estoppel against a party who has accepted and enjoyed the benefits of a contract he later seeks to void.