Catalan vs. Basa

A person suffering from schizophrenia is presumed capable of giving valid consent to contracts unless sufficient proof establishes incapacity at the precise moment of execution; a diagnosis of mental illness alone, even when followed by a later judicial declaration of incompetency, does not rebut the presumption of sanity at a prior date.

Feliciano Catalan was a former military serviceman discharged on October 20, 1948 after the Board of Medical Officers of the Department of Veteran Affairs found him unfit due to "schizophrenic reaction, catatonic type." He married Corazon Cerezo on September 28, 1949 and owned a parcel of land in Barangay Basing, Binmaley, Pangasinan. On December 22, 1953, the Court of First Instance of Pangasinan declared him an incompetent and appointed People's Bank and Trust Company (now Bank of the Philippine Islands) as his guardian. His sister Mercedes Catalan received a donation of half his property in 1951 and, decades later, sold it to her children Delia and Jesus Basa.

On October 20, 1948, Feliciano Catalan was discharged from active military service after the Board of Medical Officers of the Department of Veteran Affairs found him unfit due to "schizophrenic reaction, catatonic type, which incapacitates him because of flattening of mood and affect, preoccupation with worries, withdrawal, and sparce (sic) and pointless speech." On September 28, 1949, Feliciano married Corazon Cerezo. On June 16, 1951, a document titled "Absolute Deed of Donation" was executed, wherein Feliciano allegedly donated to his sister Mercedes Catalan one-half of a parcel of land located at Barangay Basing, Binmaley, Pangasinan, containing 801 square meters. The donation was registered with the Register of Deeds; the Bureau of Internal Revenue cancelled Tax Declaration No. 2876 and issued Tax Declaration No. 18080 to Mercedes for the 400.50 square meters donated, while the remaining half stayed in Feliciano's name under Tax Declaration No. 18081.

On December 11, 1953, People's Bank and Trust Company (now BPI) filed Special Proceedings No. 4563 before the Court of First Instance of Pangasinan to declare Feliciano incompetent. On December 22, 1953, the trial court issued an Order for Adjudication of Incompetency and appointed People's Bank and Trust Company as Feliciano's guardian the following day. On November 22, 1978, Feliciano and Corazon donated Lots 1 and 3 of their property under Original Certificate of Title No. 18920 to their son Eulogio. On March 26, 1979, Mercedes sold the property in question to her children Delia and Jesus Basa. The Deed of Absolute Sale was registered with the Register of Deeds on February 20, 1992 — after Mercedes had already died — and Tax Declaration No. 12911 was issued in the respondents' names. On February 14, 1983 and June 24, 1983, Feliciano and Corazon donated other lots from the same OCT to their children.

On April 1, 1997, BPI, acting as Feliciano's guardian, filed a complaint for Declaration of Nullity of Documents, Recovery of Possession and Ownership, and damages against the respondents. BPI alleged that the deed of donation was void ab initio because Feliciano never donated the property to Mercedes and, alternatively, that even if he had intended to, the donation was void for lack of capacity to give consent. On August 14, 1997, Feliciano died and his heirs were substituted as complainants. The trial court found the evidence insufficient to overcome the presumption that Feliciano was sane at the time of donation and upheld the presumption of due execution. The Court of Appeals affirmed, holding that petitioners failed to prove Feliciano's insanity at the precise moment of donation and that all elements for validity of contracts were present.

• Presumption of Competence Rebutted: Petitioners argued that the presumption of Feliciano's competence was rebutted by more than preponderance of evidence, citing the October 20, 1948 Certificate of Disability for Discharge issued by the Board of Medical Officers and the December 22, 1953 judicial declaration of incompetency by the Court of First Instance of Pangasinan. They contended that Feliciano had been suffering from a mental condition since 1948 that incapacitated him from entering into any contract thereafter until his death in 1997.
• Other Contracts Do Not Prove Competency: Petitioners contended that Feliciano's marriage to Corazon Cerezo in 1949 did not prove he was sane at the time of the 1951 donation, and that his other donations to successors could not prove competency because those donations were approved and confirmed in the guardianship proceedings.
• Simulated Sale: Petitioners claimed the Deed of Absolute Sale executed by Mercedes on March 26, 1979 was simulated and fictitious, as borne out by its registration only on February 20, 1992, more than ten years after Mercedes had died. They argued that Delia and Jesus Basa could not claim to be innocent purchasers because they knew Feliciano was incompetent.
• Prescription and Laches: Petitioners asserted the case was not barred by prescription or laches under Article 1391 of the New Civil Code because they filed on April 1, 1997, before the four-year period after Feliciano's death on August 14, 1997 had begun.

• Presumption of Sanity: Whether the Court of Appeals erred in holding that petitioners failed to prove the insanity or mental incapacity of Feliciano Catalan at the precise moment the property was donated.
• Admissibility of Evidence: Whether the Certificate of Disability for Discharge (Exhibit "S") and the Report of a Board of Officers (Exhibits "S-1" and "S-2") are admissible in evidence.
• Validity of the Subsequent Sale: Whether the Court of Appeals erred in upholding the subsequent sale of the property by Mercedes Catalan to her children Jesus and Delia Basa.
• Prescription and Laches: Whether Civil Case No. 17666 is barred by prescription and laches.

• Presumption of Sanity: No. The evidence was insufficient to overcome the presumption that Feliciano was competent at the time of donation; schizophrenia does not necessarily destroy the capacity to give consent, and incapacity was proven only from December 22, 1953 — after the 1951 donation.
• Admissibility of Evidence: Not separately ruled upon. The Court considered the evidence but found it insufficient in weight to overcome the presumption of sanity, without expressly ruling on the admissibility question.
• Validity of the Subsequent Sale: No error. Since the donation was valid, Mercedes acquired ownership and had the right to sell the property under Article 428 of the Civil Code; the sale was legal and binding at the time of execution, and delayed registration did not render it void.
• Prescription and Laches: Moot. The issue was raised for the first time on appeal before the Supreme Court; even if the appeal had prospered, the donation was voidable, not void, and remained binding absent annulment within four years under Article 1391.

• Presumption of Sanity: The Court explained that the burden of proving incapacity rests on the party alleging it, and absent sufficient proof, capacity is presumed. Drawing on medical literature, the Court found that schizophrenia is a condition that waxes and wanes over many years, with periods of remission and relapse, and that a person suffering from schizophrenia does not necessarily lose competence to intelligently dispose of property. The 1948 diagnosis alone did not establish that Feliciano had lost total control of his mental faculties on June 16, 1951 — the precise date of the donation. The 1953 judicial declaration of incompetency established incapacity only from that date forward, postdating the donation by more than two years. The presumption of Feliciano's continued competency was bolstered by his marriage in 1949 and other donations he executed, which petitioners did not question. Competency shown to exist in other acts is presumed to continue until the contrary is shown.

• Admissibility of Evidence: The Court did not separately address the admissibility of Exhibits "S," "S-1," and "S-2." It treated the evidence as part of the record and discussed its substance, but found it insufficient to establish incapacity at the precise time of donation. The Court's analysis focused on the weight and sufficiency of the evidence rather than its admissibility.

• Validity of the Subsequent Sale: Because the donation was valid, Mercedes acquired valid title of ownership over the property. Under Article 428 of the Civil Code, an owner has the right to enjoy and dispose of a thing without limitations other than those established by law. The sale to Delia and Jesus Basa was legal and binding at the time of its execution on March 26, 1979. The fact that the deed was registered only in 1992, after Mercedes' death, did not make the sale void ab initio. As a notarized document, the deed of sale carried the presumption of regularity, and no evidence of fraud or falsehood was presented.

• Prescription and Laches: The Court noted that petitioners raised prescription and laches for the first time on appeal before the Supreme Court. More fundamentally, even if the appeal had prospered, the donation was voidable, not void, under Article 1390 of the Civil Code. A voidable contract remains binding unless annulled in a proper action in court within four years under Article 1391. Since no such annulment was timely pursued, the donation remained valid and binding.

• Presumption of Sanity — Every person is presumed to be of sound mind and capable of giving valid consent to contracts. The burden of proving incapacity rests on the party alleging it; absent sufficient proof, capacity is presumed. The presumption of sanity continues until sufficient proof to the contrary is adduced. In this case, the 1948 diagnosis of schizophrenia and the 1953 judicial declaration of incompetency did not establish incapacity at the precise time of the 1951 donation, so the presumption stood unrebutted.

• Continuity of Competency — Competency and freedom from undue influence shown to have existed in other acts or contracts are presumed to continue until the contrary is shown. Feliciano's marriage in 1949 and subsequent donations to his children bolstered the presumption of his continued competency despite his illness.

• Nature of Schizophrenia and Contractual Capacity — Schizophrenia is a condition that waxes and wanes over many years, with periods of remission and relapse. Sufferers may appear relatively normal during remission. Antipsychotic medications can reduce symptoms and chances of relapse. A person suffering from schizophrenia does not necessarily lose competence to intelligently dispose of property. Mere allegation of the existence of schizophrenia, without substantial proof of loss of mental control at the specific time of contracting, is insufficient to invalidate a contract.

• Voidable vs. Void Contracts — A contract entered into by a person incapable of giving consent is voidable, not void, under Article 1390 of the Civil Code. It remains binding and susceptible of ratification unless annulled in a proper action in court within four years under Article 1391. The distinction is critical because a voidable contract cannot be attacked collaterally and produces legal effects until properly annulled.

• "From these scientific studies it can be deduced that a person suffering from schizophrenia does not necessarily lose his competence to intelligently dispose his property. By merely alleging the existence of schizophrenia, petitioners failed to show substantial proof that at the date of the donation, June 16, 1951, Feliciano Catalan had lost total control of his mental faculties." — This passage states the ratio decidendi: a diagnosis of schizophrenia alone does not establish incapacity to contract at a specific time, and the presumption of sanity requires proof of incapacity at the precise moment of execution.

• "Sufficient proof of his infirmity to give consent to contracts was only established when the Court of First Instance of Pangasinan declared him an incompetent on December 22, 1953." — This establishes the temporal boundary of proven incapacity, which postdated the 1951 donation by more than two years, leaving the donation valid.

• "even if the present appeal had prospered, the Deed of Donation was still a voidable, not a void, contract. As such, it remained binding as it was not annulled in a proper action in court within four years." — This distinguishes voidable from void contracts and explains that a contract entered into by an incapacitated person remains binding absent timely annulment.

• Miguela Carillo vs. Justimiano Jaojoco, 46 Phil 957 (1924) — Cited for the rule that the burden of proving incapacity rests on the party alleging it, and absent sufficient proof, capacity is presumed. The Court applied this principle to hold that petitioners failed to discharge their burden.

• Mendozana, et al. vs. Ozamiz, et al., G.R. No. 143370, February 6, 2002, 376 SCRA 482 — Cited for the doctrine that competency shown to have existed in other acts or contracts is presumed to continue until the contrary is shown. Applied to bolster the presumption of Feliciano's continued competency through his marriage and other donations.

• Garrido vs. CA, 236 SCRA 450 — Cited by the Court of Appeals for the evidentiary weight conferred upon notarized documents with respect to their due execution. Applied to uphold the presumption of regularity of the notarized Deed of Absolute Sale.

• Salame vs. CA, 239 SCRA 256 — Cited for the presumption of regularity of documents acknowledged before a notary public, which can only be contradicted by clear, convincing, and more than preponderant evidence. Applied to the notarized deed of sale.

• Article 725, Civil Code — Defines donation as an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another who accepts it. Applied to characterize the 1951 deed as a donation inter vivos.

• Article 1318(1), Civil Code — Consent is an essential requisite of contracts. Applied to test whether Feliciano's consent to the donation was validly given.

• Article 1327(2), Civil Code — Incapacitated persons cannot give consent to a contract. Applied in relation to Article 1318(1) to frame the issue of Feliciano's capacity.

• Article 1330, Civil Code — A contract where consent is vitiated by mistake, violence, intimidation, undue influence, or fraud is voidable. Applied to characterize the effect of incapacity on consent.

• Article 428, Civil Code — The owner has the right to enjoy and dispose of a thing without other limitations than those established by law. Applied to uphold Mercedes' right to sell the donated property to her children.

• Article 1390, Civil Code — Contracts where one party is incapable of giving consent are voidable, not void; they are binding unless annulled and are susceptible of ratification. Applied to characterize the donation as voidable even if incapacity had been proven, and to explain that it remained binding absent timely annulment.

• Article 1391, Civil Code — The action for annulment must be brought within four years, reckoned from the time guardianship ceases in cases involving incapacitated persons. Applied to the prescription issue; the Court noted that no annulment was timely pursued.

Angelina Sandoval-Gutierrez, Renato C. Corona, Adolfo S. Azcuna, and Cancio C. Garcia — all concurred without separate opinions.