Chingkoe vs. Chingkoe

A notarized document enjoys the presumption of regularity, authenticity, and due execution that can be overturned only by clear and convincing evidence, and the testimony of a witness who did not understand the document's contents, was not present during its execution, and had no part in its preparation is insufficient to overcome that presumption.

Faustino Chingkoe and his wife Gloria were the registered owners of a parcel of land in Lopez Jaena St., Ayala Heights, Quezon City, covered by TCT No. 8283. Faustino's brother Felix occupied the subject property beginning in 1989 or 1990. Their mother, Tan Po Chu, played a mediating role between the brothers and was involved in the circumstances surrounding the execution of a Deed of Sale over the property. Faustino had mortgaged the property to Rizal Commercial Banking Corporation (RCBC), a fact later discovered by Felix and which prompted the filing of the suit.

Faustino Chingkoe and his wife Gloria were the registered owners of a parcel of land located at Lopez Jaena St., Ayala Heights, Quezon City, covered by Transfer Certificate of Title No. 8283. Sometime in 1989 or 1990, Faustino allowed his brother Felix to occupy the subject property. According to Faustino, upon the request of their mother, Tan Po Chu, he signed an undated Deed of Sale over the subject property in favor of Felix. Tan Po Chu assured Faustino that she would keep the undated Deed of Sale because she merely wanted to appease Felix, who was then becoming an alcoholic.

Felix, for his part, averred that he had been in possession of the subject property since 1989. After five years of occupation, or on October 10, 1994, Felix purchased the property from Faustino for P3,130,000.00. Both parties signed the Deed of Sale before notary public Atty. Reynaldo Z. Calabio. Despite repeated demands, Faustino refused to surrender the Owner's Duplicate of TCT No. 8283, which prevented Felix from having the title transferred to his name. Felix later discovered that Faustino had mortgaged the subject property to Rizal Commercial Banking Corporation (RCBC).

This discovery prompted Felix to file a complaint for specific performance with damages to compel Faustino to turn over the TCT and facilitate its transfer pursuant to the Deed of Sale. The RTC ruled in favor of Felix, finding that the testimony of Tan Po Chu failed to overturn the presumption of regularity of the notarized Deed of Sale, and that the notary public, Atty. Calabio, testified that both parties appeared before him when he notarized the document. The CA reversed, giving credence to Tan Po Chu's testimony that Faustino signed the Deed only to appease Felix without intention to sell, and holding that Felix failed to prove payment of the contract price, rendering the contract void for lack of consideration.

• Credibility of Tan Po Chu's Testimony: Petitioner argued that the CA erred when it considered Tan Po Chu's testimony as "critical" without elaborating how the trial court misjudged in its assessment of her credibility as a witness.
• Weight of Evidence: Petitioner maintained that the CA did not explain how Tan Po Chu's testimony outweighed Felix's testimony as to the signing of the Deed of Sale and payment of the purchase price, as well as Atty. Calabio's testimony regarding the appearance of the parties before him to acknowledge the Deed of Sale.
• Actual Damages: Petitioner insisted that he be awarded actual damages because of lost business opportunity which he could have pursued had he been able to secure a mortgage over the subject property.

• Simulation of Contract: Respondent contended, through the testimony of Tan Po Chu, that Faustino only signed the Deed of Absolute Sale to appease Felix without any intention to sell the subject property.
• Lack of Consideration: Respondent argued that Felix failed to prove that he paid the contract price of P3,130,000.00, rendering the contract void for lack of consideration.
• Contemporaneous Acts: Respondent maintained that the contemporaneous and subsequent acts of both parties pointed to Faustino's intention to sign the Deed of Sale only to give in to the request of his mother.

• Presumption of Regularity: Whether the CA erred in overturning the presumption of regularity of the notarized Deed of Sale based on the testimony of Tan Po Chu.
• Simulation of Contract: Whether the Deed of Sale was an absolutely simulated or fictitious contract void for lack of intention to be bound.
• Effect of Non-Payment: Whether Felix's supposed failure to prove payment of the purchase price renders the Deed of Sale void.
• Actual Damages: Whether Felix is entitled to actual damages for lost business opportunity.

• Presumption of Regularity: Yes, the CA erred. The presumption of regularity in favor of the notarized Deed of Sale was not overcome, Tan Po Chu's testimony being insufficient, unresponsive, and based on matters she did not personally perceive or understand.
• Simulation of Contract: No. The Deed of Sale was not an absolutely simulated contract; Faustino's own testimony showed he fully intended to be bound by it, and the main characteristic of absolute simulation—the absence of intent to produce legal effect—was absent.
• Effect of Non-Payment: No. Failure to pay consideration is different from lack of consideration; non-payment does not render a contract void but merely gives the injured party the remedy of demanding fulfillment or rescission under Article 1191 of the Civil Code.
• Actual Damages: No. Felix's claim for actual damages based on unrealized profits was supported only by his own testimony, without receipts, documents, or other competent proof, and thus cannot be awarded.

• Presumption of Regularity: The Deed of Sale, being duly notarized, carries the presumption of regularity, authenticity, and due execution, which can be overturned only by clear and convincing evidence. The CA overturned this presumption based solely on Tan Po Chu's testimony. However, her testimony consisted of repetitive and unresponsive answers; she could not read the document, did not know the contract price, was not present when the Deed was signed and notarized, and had no part in its preparation. She admitted she "did not pay too much attention to it." A witness may testify only on facts of her own personal knowledge; testimony based on what she merely learned or heard is hearsay. The trial court, which had the unique opportunity to observe the witness firsthand, correctly found her testimony insufficient. In contrast, the notary public, Atty. Calabio, attested in open court that both parties appeared before him, and Faustino himself admitted that his staff prepared the Deed and that he and his wife voluntarily signed it. One who signs a contract is presumed to know its contents, especially if he caused its preparation.

• Simulation of Contract: Articles 1345 and 1346 of the Civil Code distinguish absolute from relative simulation; an absolutely simulated or fictitious contract is void. The main characteristic of absolute simulation is that the apparent contract is not really desired or intended to produce a legal effect. Faustino's own testimony contradicted the claim of absolute simulation: he stated that "the intention has always been there," that he committed to his mother that "this house will go to him once we have fully satisfied the obligation of the house," and that he delivered the original Deed to his mother with instructions regarding eventual transfer of title. These admissions show he intended to be bound by the Deed. His excuses were therefore flimsy and specious.

• Effect of Non-Payment: The CA erred in declaring that Felix's supposed failure to prove payment renders the Deed void. Failure to pay consideration is different from lack of consideration; actual payment is not one of the three essential requisites of a valid contract under Article 1318 (consent, object certain, and cause). Non-payment does not render a contract void but gives the injured party the remedy of demanding fulfillment or rescission under Article 1191. In any case, the Deed of Sale itself states that the purchase price of P3,130,000.00 was "paid in full" by the vendee, with receipt acknowledged by the vendors. Given that Faustino failed to overturn the presumption of regularity, the attestation of payment in the notarized deed sufficiently proves full payment. Faustino cannot be allowed to disavow the contractual effects of the notarized deed through flimsy protestations unsubstantiated by compelling evidence. The law will not relieve parties from the effects of an unwise or disastrous agreement entered into with all required formalities and full awareness.

• Actual Damages: Felix's claim for actual damages based on unrealized profits has no merit. Article 2199 of the Civil Code provides that one is entitled to adequate compensation only for such pecuniary loss as he has duly proved. Actual or compensatory damages cannot be presumed but must be proved with a reasonable degree of certainty, relying on competent proof rather than speculation, conjectures, or guesswork. Felix's testimony of unrealized profits alone, without receipts, documents, or other similar evidence, cannot be a basis for the award of actual damages.

• Presumption of Regularity of Notarized Documents — A notarized document enjoys the presumption of regularity, authenticity, and due execution, which can be overturned only by clear, convincing, and more than preponderant evidence. The evidentiary weight conferred upon a public document with respect to its execution, the statements therein, and the authenticity of the signatures stands absent such evidence. In this case, Tan Po Chu's testimony—given by a witness who could not read the document, did not know the contract price, was not present during execution or notarization, and admitted she "did not pay too much attention to it"—was insufficient to overcome the presumption.

• Absolute vs. Relative Simulation of Contracts — Under Articles 1345 and 1346 of the Civil Code, simulation may be absolute (when parties do not intend to be bound at all) or relative (when parties conceal their true agreement). An absolutely simulated contract is void; a relative simulation binds the parties to their real agreement when it does not prejudice a third person and is not contrary to law, morals, good customs, public order, or public policy. The main characteristic of absolute simulation is that the apparent contract is not really desired or intended to produce a legal effect. The Court found no absolute simulation because Faustino's own testimony showed he fully intended to be bound by the Deed of Sale.

• Failure to Pay Consideration vs. Lack of Consideration — Failure to pay consideration is different from lack of consideration. Actual payment of the obligation is not one of the three essential requisites of a valid contract under Article 1318 (consent, object certain, and cause). Non-payment does not render a contract void; the remedy of the injured party is to demand fulfillment or rescission under Article 1191. The Court applied this distinction to reject the CA's conclusion that Felix's failure to prove payment rendered the Deed void.

• Proof of Actual Damages — Actual or compensatory damages cannot be presumed but must be proved with a reasonable degree of certainty. A court cannot rely on speculation, conjectures, or guesswork as to the fact of damage but must depend on competent proof and the best evidence obtainable as to the actual amount. The injured party must point out specific facts that could gauge the damages suffered. Felix's bare testimony of unrealized profits, without receipts or documents, was insufficient.

• Presumption of Knowledge of Contract Contents — One who signs a contract is presumed to know its contents, especially if the person who signed caused the preparation of the document. The Court applied this principle to Faustino, who admitted he initiated the drawing up of the Deed of Sale and voluntarily signed it with his wife.

• "It has been the consistent rule that without clear, convincing, and more than preponderant evidence to controvert the presumption of regularity, the evidentiary weight conferred upon such public document with respect to its execution, as well as the statements and the authenticity of the signatures thereon, stand." — This passage states the controlling standard for overturning the presumption of regularity of notarized documents, the central issue in the case.

• "Failure to pay consideration is different from lack of consideration; actual payment of the obligation is not one of the three (3) essential requisites of a valid contract." — This formulation distinguishes non-payment from lack of cause, a critical distinction in contract law that the CA erroneously conflated in declaring the Deed void.

• "The law will not relieve parties from the effects of an unwise, foolish, or disastrous agreement they entered into with all the required formalities and with full awareness of what they were doing. Courts have no power to relieve them from obligations they voluntarily assumed, simply because their contracts turn out to be disastrous deals or unwise investments." — This passage articulates the principle of sanctity of voluntary contracts, frequently cited in subsequent jurisprudence on contractual obligations.

• "Actual or compensatory damages cannot be presumed but must be proved with reasonable degree of certainty. A court cannot rely on speculations, conjectures, or guesswork as to the fact of damage but must depend upon competent proof that they have indeed been suffered by the injured party and based on the best evidence obtainable as to the actual amount thereof." — This is the canonical formulation of the standard for proving actual damages, applied to deny Felix's claim for unrealized profits.

• Heirs of Spouses Arcilla vs. Teodoro, 583 Phil. 540 (2008) — Cited for the rule that notarized documents enjoy the presumption of regularity, which can be overturned only by clear and convincing evidence. Followed as controlling precedent.
• Heirs of Spouses Liwagon vs. Heirs of Spouses Liwagon, 748 Phil. 675 (2014) — Cited for the proposition that without clear, convincing, and more than preponderant evidence, the evidentiary weight of a notarized public document stands. Followed.
• Spouses de Leon vs. Spouses dela Llana, 753 Phil. 692 (2015) — Cited for the definition of absolute simulation: the apparent contract is not really desired or intended to produce a legal effect or alter the parties' juridical situation. Followed.
• Fernandez vs. Spouses Tarun, 440 Phil. 334 (2002) — Cited for the principle that courts will not relieve parties from the effects of an unwise or disastrous agreement entered into with all required formalities and full awareness. Followed.
• Heirs of Doroteo S. Asis, Jr. vs. G.G. Sportswear Manufacturing Corporation, G.R. No. 225052, March 27, 2019 — Cited for the rule that actual or compensatory damages cannot be presumed but must be proved with a reasonable degree of certainty. Followed.
• ECE Realty and Development, Inc. vs. Mandap, 742 Phil. 164 (2014) — Cited for the rule that one who signs a contract is presumed to know its contents, especially if he caused its preparation. Followed.
• Mancol vs. Development Bank of the Philippines, 821 Phil. 323 (2017) — Cited for the rule that a witness may testify only on facts of her own personal knowledge; testimony on what she merely learned, read, or heard is hearsay. Followed.
• Navaja vs. Hon. de Castro, 761 Phil. 143 (2015) — Cited for the enumerated exceptions to the rule that the Court's review under Rule 45 is confined to errors of law, including when the CA's findings are contrary to those of the trial court. Applied.

• Article 1345, Civil Code — Defines simulation of a contract as absolute (when parties do not intend to be bound at all) or relative (when parties conceal their true agreement). Applied to determine whether the Deed of Sale was simulated; the Court found no absolute simulation.
• Article 1346, Civil Code — Declares absolutely simulated or fictitious contracts void, while relative simulation binds the parties to their real agreement if no third person is prejudiced and no lawful purpose is contravened. Applied to reject the CA's conclusion that the Deed was void.
• Article 1318, Civil Code — Enumerates the three essential requisites of a valid contract: (1) consent of the contracting parties, (2) object certain which is the subject matter of the contract, and (3) cause of the obligation which is established. Applied to show that actual payment is not among the essential requisites; thus, non-payment does not render a contract void.
• Article 1191, Civil Code — Provides the power to rescind obligations implied in reciprocal ones in case one obligor does not comply. Applied as the proper remedy for non-payment, rather than nullification of the contract.
• Article 2199, Civil Code — Provides that one is entitled to adequate compensation only for such pecuniary loss as he has duly proved. Applied to deny Felix's claim for actual damages for lack of competent proof.

Leonen (Chairperson), Lazaro-Javier, J. Lopez, and Kho, Jr., JJ., concurred. No separate concurring opinions were noted.