Mendezona vs. Ozamiz

A notarized deed of absolute sale enjoys the presumption of regularity and due execution, and the burden of proving its invalidity—whether by simulation, lack of consideration, or the grantor's mental incapacity—rests on the party assailing it, who must adduce clear, convincing, and more than merely preponderant evidence. Absent such proof, the deed stands, and the vendor is presumed to have been of sound mind at the time of execution.

The petitioners are nephews of Carmen Ozamiz and their spouses, who purchased three parcels of residential land in the Banilad Estate, Lahug, Cebu City from Carmen Ozamiz under a Deed of Absolute Sale dated April 28, 1989 for ₱1,040,000.00, with Carmen Ozamiz reserving usufructuary rights during her lifetime. The respondents are relatives of Carmen Ozamiz who, on January 15, 1991, filed a petition for guardianship over her person and properties before the RTC of Oroquieta City, alleging that after an illness in July 1987 she had become disoriented and unable to manage her affairs. In the course of the guardianship proceeding, joint guardians caused a notice of lis pendens to be inscribed on the petitioners' titles, prompting the petitioners to file a suit for quieting of title before the RTC of Cebu City. The dispute thus centers on whether the sale was valid or simulated, and whether Carmen Ozamiz possessed the mental capacity to execute the deed.

On April 28, 1989, Carmen Ozamiz, then 86 years old, sold three parcels of residential land in the Banilad Estate, Lahug, Cebu City to her nephews Mario, Antonio, and Luis Mendezona under a notarized Deed of Absolute Sale for ₱1,040,000.00, with the reservation of usufructuary rights in her favor during her lifetime. The deed was notarized by Atty. Asuncion Bernades, and the instrumental witnesses thereto were Carmencita Cedeno and Martin Yungco. The capital gains tax was paid on May 5, 1989, and the Bureau of Internal Revenue issued a certificate authorizing the Register of Deeds to transfer the property to the vendees. The three parcels were subsequently transferred to the names of the three vendees under TCT Nos. 108729, 108730, and 108731, and a partition agreement was thereafter entered into by the three vendees, resulting in the parcels being titled in the names of the petitioners: Mario Mendezona under TCT No. 116834, Luis Mendezona under TCT No. 116835, and Antonio Mendezona under TCT No. 116836. The reservation of usufructuary rights was confirmed by the petitioners in a sworn statement executed on October 15, 1990, duly annotated on the titles.

On January 15, 1991, the respondents—relatives of Carmen Ozamiz—filed a petition for guardianship over her person and properties with the RTC of Oroquieta City (Special Proceeding No. 1250), alleging that after an illness in July 1987, Carmen Ozamiz had become disoriented, could no longer recognize most of her friends, and could not manage her properties. The petitioners, who are nephews of Carmen Ozamiz, together with Pilar Mendezona, a sister of Carmen Ozamiz, opposed the guardianship petition. In the course of the proceeding, the parties agreed that Carmen Ozamiz needed a guardian, and Paz O. Montalvan was designated guardian over her person while Mario Mendezona, Roberto J. Montalvan, and Julio H. Ozamiz were designated joint guardians over her properties. On August 6, 1991, joint guardians Roberto Montalvan and Julio Ozamiz filed their "Inventories and Accounts" listing Carmen Ozamiz's properties, including the 10,396-square-meter Lahug property—the same property covered by the April 28, 1989 deed. They caused a notice of lis pendens to be inscribed on the petitioners' titles on August 13, 1991, prompting the petitioners to file the suit for quieting of title on September 25, 1991.

The respondents opposed the petitioners' claim of ownership, alleging that the titles were defective and illegally acquired in bad faith and without value, the consideration being grossly inadequate and unconscionable. They further alleged that at the time of the sale, Carmen Ozamiz was already ailing and not in full possession of her mental faculties, and that with her properties placed in administration, she was effectively incapacitated to contract. At trial, the petitioners and their witnesses testified that Carmen Ozamiz was of sound mind and voluntarily executed the deed. The respondents presented witnesses including Paz Montalvan, Concepcion Agac-ac (an assistant of Carmen Ozamiz), Carolina Lagura (a househelper), Julio Ozamiz, Joselito Gunio (a land appraiser), Nelfa Perdido (a part-time bookkeeper), and the deposition of Dr. Faith Go (Carmen Ozamiz's physician). The petitioners presented Dr. William Buot, a neurologist, as a rebuttal witness to counter aspects of Dr. Go's deposition on Carmen Ozamiz's mental capacity. The RTC found the sale valid and ruled in favor of the petitioners. The Court of Appeals reversed, declaring the deed simulated and Carmen Ozamiz mentally incapacitated. The petitioners sought to introduce the testimony of Judge Teodorico Durias—given in Special Proceeding No. 1250—regarding Carmen Ozamiz's mental condition a month before the execution of the deed, but the appellate court denied the motion, finding the testimony was not newly discovered evidence.

• Presumption of Regularity of Notarized Deed: Petitioners argued that the Court of Appeals gravely erred in ignoring the statutory presumptions of actual and sufficient consideration and of the regularity and truthfulness of the notarized Deed of Absolute Sale, which enjoys the presumption of regularity and due execution.
• Burden of Proof: Petitioners maintained that the appellate court erred in imposing on them the burden of proving payment, when the burden properly belonged to the respondents as the parties assailing the deed, who failed to discharge their burden of proving that there was no consideration.
• Suppression of Check Evidence: Petitioners argued that the appellate court erred in refusing to receive in evidence the three checks proving payment of the purchase price, after itself challenging petitioners to produce them and then cooperating with respondents' efforts to suppress them.
• Presumption of Sound Mind: Petitioners contended that the appellate court ignored the statutory presumption that Carmen Ozamiz was of sound mind and had the requisite capacity to contract when she executed the deed, and that the respondents, as the parties alleging mental incapacity, failed to discharge their burden of rebutting that presumption.
• Unrefuted Evidence of Voluntary Execution: Petitioners argued that the appellate court erred in refusing to give due weight to the unrefuted testimonies of the instrumental witnesses and the notary public that Carmen Ozamiz executed the deed freely, voluntarily, knowingly, and intelligently.
• Hearsay Testimony of Dr. Faith Go: Petitioners maintained that the appellate court erred in giving weight to the hearsay testimony of Dr. Faith Go on Carmen Ozamiz's mental condition on the date of execution.
• Judge Durias's Testimony: Petitioners argued that the appellate court erred in refusing to receive Judge Durias's testimony—showing Carmen Ozamiz was of sound mind barely a month before the deed was executed—on the ground that it was merely "forgotten evidence."

• Rebuttal of Presumptions: Respondents contended that clear and convincing evidence refuted the presumptions of regularity of execution of the Deed of Absolute Sale and the existence of consideration.
• Mental Incapacity: Respondents averred, relying on the testimonies of Paz O. Montalvan, Concepcion Agac-ac, Carolina Lagura, and Dr. Faith Go, that Carmen Ozamiz was already physically and mentally incapacitated since the latter part of 1987 and could not have executed the deed on April 28, 1989.
• Impeachment of Petitioners' Witnesses: Respondents alleged that no error is ascribable to the appellate court for not considering the allegedly rehearsed testimonies of the instrumental witnesses and the notary public.

• Newly Discovered Evidence: Whether the testimony of Judge Teodorico Durias constitutes newly discovered evidence warranting a new trial.
• Simulation of Contract: Whether the Deed of Absolute Sale dated April 28, 1989 was a simulated contract for failure to prove payment of consideration.
• Burden of Proof: Whether the burden of proving payment of consideration rested on the petitioners or on the respondents assailing the deed.
• Mental Capacity: Whether Carmen Ozamiz's mental faculties were seriously impaired at the time she executed the Deed of Absolute Sale on April 28, 1989.
• Exception to Conclusiveness of Factual Findings: Whether the appellate court's factual findings were so devoid of support in the record or so glaringly erroneous as to constitute grave abuse of discretion, warranting departure from the rule that the CA's factual findings are conclusive on the Supreme Court.

• Newly Discovered Evidence: No. Judge Durias's testimony cannot be considered newly discovered evidence because the facts to be testified to existed before and during trial and could have been presented by petitioners with reasonable diligence; all three requisites for newly discovered evidence were not satisfied.
• Simulation of Contract: No. The Deed of Absolute Sale was not a simulated contract; none of the requisites of simulation—an outward declaration of will different from the parties' true will, mutual agreement to create a false appearance, and intent to deceive third persons—were clearly shown.
• Burden of Proof: No. The burden did not rest on the petitioners to prove payment; the notarized deed enjoyed the presumption of regularity and acknowledged receipt of consideration on its face, placing the burden on the respondents to prove non-payment by clear, convincing, and more than merely preponderant evidence, which they failed to do.
• Mental Capacity: No. Carmen Ozamiz's mental faculties were not shown to be seriously impaired at the time of execution; the respondents' witnesses made sweeping, inconsistent statements insufficient to rebut the presumption of soundness of mind, and advanced age or physical infirmity alone does not incapacitate a person from contracting absent proof of impaired mental faculties.
• Exception to Conclusiveness of Factual Findings: Yes. The exception applies because the appellate court's findings were totally devoid of support in the record or so glaringly erroneous as to constitute grave abuse of discretion, warranting the Supreme Court's departure from the general rule of conclusiveness.

• Newly Discovered Evidence: A motion for new trial on the ground of newly discovered evidence requires the concurrence of three requisites: (a) the evidence was discovered after trial; (b) it could not have been discovered and produced during trial even with reasonable diligence; and (c) it is material and not merely corroborative, cumulative, or impeaching, and of such weight that if admitted, it would probably alter the result. The Court found that the requirement of reasonable diligence was not met. Judge Durias's name cropped up as early as pre-trial as a possible witness, and his testimony in another case had been in existence, waiting only to be elicited. The facts to be testified to existed before and during trial and could have been presented below. A lack of diligence is exhibited where a party fails to make inquiry of persons likely to know the facts, fails to seek evidence available through public records, or fails to utilize available discovery procedures. The testimony therefore could not be considered newly discovered evidence.

• Simulation of Contract: Simulation is the declaration of a fictitious will, deliberately made by agreement of the parties, to produce the appearance of a juridical act that does not exist or is different from what was really executed. Its requisites are: (a) an outward declaration of will different from the will of the parties; (b) the false appearance must have been intended by mutual agreement; and (c) the purpose is to deceive third persons. None of these were clearly shown. The appellate court erred in inferring simulation from the mere non-production of checks. The notarized deed enjoyed the presumption of regularity and due execution, was admissible without further proof of authenticity, and was entitled to full faith and credit upon its face. The deed showed on its face that the consideration of ₱1,040,000.00 was acknowledged to have been received by Carmen Ozamiz. The burden fell upon the respondents to prove their allegations attacking the validity and due execution of the deed by clear, convincing, and more than merely preponderant evidence. They failed to discharge that burden. The testimonies of Concepcion Agac-ac and Nelfa Perdido, upon which the appellate court relied, were unreliable and inconsistent: Agac-ac admitted that not all income of Carmen Ozamiz passed through her, and Perdido recorded only rental income and expenses reported to her by Agac-ac, not deposits or withdrawals. Between inconsistent oral testimonies and a duly notarized document enjoying the presumption of regularity, the latter should have been given more weight.

• Burden of Proof: Whoever alleges the fraud or invalidity of a notarized document bears the burden of proving the same by clear, convincing, and more than merely preponderant evidence. The appellate court erred in imposing on the petitioners the burden of proving payment. The notarized deed acknowledged receipt of the consideration, and the statutory presumption of regularity placed the burden on the respondents. The appellate court should not have placed undue emphasis on the checks, the presentation of which was not necessary given the acknowledgment on the face of the deed.

• Mental Capacity: A person is not incapacitated to contract merely because of advanced years or physical infirmities; incapacity arises only when such age or infirmities impair mental faculties to the extent of preventing the person from properly, intelligently, and fairly protecting property rights. The respondents' witnesses made sweeping statements that failed to show the true state of mind of Carmen Ozamiz at the time of execution. Carolina Lagura's testimony was internally inconsistent: she stated that Carmen Ozamiz understood questions in January 1989 when confronted about the sale, yet also claimed that since 1988 Carmen Ozamiz could not fully understand things around her or recognize visitors—an inconsistency left unexplained, and one that was further undermined by the fact that the sale occurred three months after the alleged January 1989 confrontation. Dr. Faith Go's testimony at best revealed certain physical infirmities and occasional forgetfulness, with no categorical statement that Carmen Ozamiz succumbed to her alleged "second childhood" as early as 1987. Dr. William Buot, the rebuttal witness, testified that no conclusion of mental incapacity could be inferred from Dr. Go's clinical notes or from the mere prescription of medication for episodic memory loss. A person is presumed to be of sound mind at any particular time, and that condition is presumed to continue in the absence of proof to the contrary. Competency and freedom from undue influence, shown to have existed in other acts or contracts, are presumed to continue until the contrary is shown. The respondents did not assail nine other important documents signed by Carmen Ozamiz before or after April 28, 1989, contrary to their assertion of complete incapacity since 1987. The trial court's assessment that it was unfair for respondents to claim soundness of mind when it benefits them and incapacity when it disadvantages them was adopted.

• Exception to Conclusiveness of Factual Findings: While factual findings of the Court of Appeals are generally conclusive on the Supreme Court, the rule admits of exception where the findings are totally devoid of support in the record or are so glaringly erroneous as to constitute grave abuse of discretion. The Court found that the exception applied, as the appellate court's conclusions on simulation and mental incapacity were unsupported by clear and convincing evidence and rested on inconsistent oral testimonies that could not overcome the presumptions attaching to a notarized document.

• Presumption of Regularity of Notarized Documents — A notarized document is admissible in evidence without further proof of its authenticity and is entitled to full faith and credit upon its face. It enjoys the presumption of regularity and due execution. The burden of proving its invalidity—whether by fraud, simulation, or lack of consideration—rests on the party assailing it, who must adduce clear, convincing, and more than merely preponderant evidence. In this case, the respondents failed to discharge that burden, and the presumption in favor of the notarized Deed of Absolute Sale stood.

• Presumption of Soundness of Mind — A person is presumed to be of sound mind at any particular time, and that condition is presumed to continue to exist in the absence of proof to the contrary. Competency and freedom from undue influence, shown to have existed in other acts done or contracts executed, are presumed to continue until the contrary is shown. The respondents failed to rebut this presumption, as their witnesses' testimonies were inconsistent and fell short of clear and convincing proof that Carmen Ozamiz's mental faculties were impaired at the time of execution.

• Capacity to Contract Despite Advanced Age or Infirmity — A person is not incapacitated to contract merely because of advanced years or physical infirmities. Incapacity arises only when such age or infirmities impair mental faculties to such extent as to prevent the person from properly, intelligently, and fairly protecting property rights. The respondents failed to show adequate proof that Carmen Ozamiz had lost control of her mental faculties at the time of the sale.

• Requisites of Simulation — Simulation is the declaration of a fictitious will, deliberately made by agreement of the parties, to produce the appearance of a juridical act that does not exist or is different from what was really executed. The requisites are: (a) an outward declaration of will different from the will of the parties; (b) the false appearance must have been intended by mutual agreement; and (c) the purpose is to deceive third persons. None of these were shown to exist.

• Requisites for Newly Discovered Evidence — A motion for new trial on the ground of newly discovered evidence requires the concurrence of: (a) the evidence was discovered after trial; (b) it could not have been discovered and produced during trial even with reasonable diligence; and (c) it is material and not merely corroborative, cumulative, or impeaching, and of such weight that if admitted, would probably alter the result. All three requisites must concur; failure to meet any one is fatal.

• Exception to Conclusiveness of CA Factual Findings — While factual findings of the Court of Appeals are generally conclusive on the Supreme Court, the rule yields where the findings are totally devoid of support in the record or are so glaringly erroneous as to constitute grave abuse of discretion. In such cases, the Supreme Court must discard the erroneous findings.

• "Whosoever alleges the fraud or invalidity of a notarized document has the burden of proving the same by evidence that is clear, convincing, and more than merely preponderant." — This passage states the evidentiary standard for impeaching a notarized document, a principle central to the Court's reversal of the appellate court's finding of simulation.

• "A person is not incapacitated to contract merely because of advanced years or by reason of physical infirmities. Only when such age or infirmities impair her mental faculties to such extent as to prevent her from properly, intelligently, and fairly protecting her property rights, is she considered incapacitated." — This formulation defines the doctrinal boundary between age-related infirmity and legal incapacity to contract, and was applied to reject the respondents' claim of mental incapacity.

• "Simulation is defined as 'the declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for the purposes of deception, the appearances of a juridical act which does not exist or is different from what that which was really executed.'" — This passage provides the canonical definition and requisites of simulation, which the Court found were not satisfied by the evidence.

• "It is unfair for the [respondents] to claim soundness of mind of Carmen Ozamiz when it benefits them and otherwise when it disadvantages them." — Adopted from the trial court, this observation underscores the respondents' selective invocation of Carmen Ozamiz's mental capacity and the inconsistency of their position given the nine other unassailed documents she signed.

• Loyola vs. Court of Appeals, 326 SCRA 285 (2000) — Cited for the definition of simulation and the requisites thereof, and for the principle that advanced age or physical infirmity alone does not incapacitate a person from contracting.
• Caoili vs. Court of Appeals, 314 SCRA 345 (1999) — Cited for the rule that the burden of proving the invalidity of a notarized document rests on the party assailing it, requiring clear, convincing, and more than merely preponderant evidence.
• Lao vs. Villones-Lao, 306 SCRA 387 (1999) — Cited for the presumption of regularity and due execution of notarized documents and their admissibility without further proof of authenticity.
• Heirs of Cesario Velasquez vs. Court of Appeals, 325 SCRA 552 (2000) — Cited for the exception to the rule that the Court of Appeals' factual findings are conclusive on the Supreme Court.
• Arce vs. Arce, 106 Phil. 630 (1959) — Cited for the principle that evidence existing before and during trial, which could have been discovered and produced with reasonable diligence, cannot qualify as newly discovered evidence.

• Rules of Court — Motion for New Trial on Newly Discovered Evidence — Applied to determine that Judge Durias's testimony did not qualify as newly discovered evidence, as the requisites of discovery after trial, inability to discover with reasonable diligence, and materiality were not all satisfied.
• Civil Code — Presumption of Sound Mind and Capacity to Contract — Applied through the principle that a person is presumed to be of sound mind at any particular time and that competency shown in other acts is presumed to continue, placing the burden on the respondents to rebut the presumption, which they failed to do.

Bellosillo (Chairman), Mendoza, Quisumbing, and Buena, JJ., concurred.