Mendoza vs. Palugod

A notarized deed of sale bears the disputable presumption of sufficient consideration under Article 1354 of the Civil Code and Section 3(r), Rule 131 of the Rules of Court; the party alleging lack of consideration must prove it by preponderance of evidence. A vendee’s admission that consideration was not paid in the presence of the notary public does not, without more, establish simulation, where sworn testimony explains that payment was made earlier. The absence of receipts is not fatal when the sworn testimony is credible and subjected to cross-examination. Where the evidence is in equipoise, the complaint fails for want of preponderance.

Jasminia Palugod, a Traffic Supervisor at PLDT, and petitioner Lolita Espiritu Santo Mendoza, a businesswoman, were close friends. In 1991, they jointly purchased on installment a 120-square-meter lot in Sagana Remville Homes, Habay, Bacoor, Cavite; a house was built on the lot in 1996, with Lolita allegedly contributing to the construction costs. Jasminia was diagnosed with breast cancer in 1995 and later separated from service in December 1998, receiving retirement pay of P1,383,773.59 in January 1999. On May 11, 2004, while undergoing daily radiation therapy at Makati Medical Center, Jasminia executed a notarized Deed of Absolute Sale (DAS) in favor of Lolita over the property for a stated consideration of P400,000.00. Lolita subsequently mortgaged the property to co-petitioners spouses Alexander and Elizabeth Gutierrez on November 19, 2004 to secure a P800,000.00 loan. Jasminia died on September 26, 2004. Her parents, respondents Ramon, Sr. and Natividad Palugod, recorded an adverse claim and filed a complaint for declaration of nullity of the DAS and the real estate mortgage, asserting the sale was simulated and without consideration because Lolita was financially dependent on Jasminia and could not have paid the price.

• The Deed of Absolute Sale: On May 11, 2004, Jasminia Palugod executed a unilateral Deed of Absolute Sale (DAS) in favor of petitioner Lolita Espiritu Santo Mendoza, notarized in Pasay City. The DAS stated that for and in consideration of P400,000.00, receipt of which was acknowledged, Jasminia sold, transferred, and conveyed the 120-square-meter lot and house in Habay, Bacoor, Cavite. Lolita thereafter caused the issuance of Transfer Certificate of Title No. T-1077041 in her name. On November 19, 2004, Lolita mortgaged the property to co-petitioners spouses Alexander and Elizabeth Gutierrez to secure an P800,000.00 loan.

• Respondents’ Allegations of Simulation: Respondents, the parents of Jasminia, filed a complaint for nullity of the DAS and the real estate mortgage. They alleged that Lolita, a lesbian, was financially dependent on Jasminia, had no work or means of livelihood of her own, and could not have paid the P400,000.00 consideration. Respondent Natividad Palugod testified that before her death, Jasminia told her the house and lot would go to her brother Ramonito, with Lolita merely allowed to stay. Respondents further claimed that Jasminia, being afflicted with end-stage cancer and bone metastasis, was physically incapable of travelling from Bacoor to Pasay City to acknowledge the DAS. Their evidence consisted solely of Natividad’s testimony and the Affidavit of Adverse Claim.

• Petitioner Lolita’s Evidence of Financial Capacity: Lolita testified she was a businesswoman engaged in catering, selling food, and acting as a sales agent for a realty corporation. She presented documentary evidence that respondents never rebutted: (a) Certifications from E.B. Loredo Realty Corporation (2001-2002) and Cesar C. Cruz & Partners Law Offices (1982-1988) showing her income-generating activities; (b) a Certification from Chinabank, SM City Bacoor Branch, that she maintained savings and time deposit accounts since 1998; and (c) two notarized Memoranda of Agreement with MMG International Holdings Co., Ltd. dated June 26, 2002, showing she invested P200,000.00 individually and P800,000.00 jointly with Jasminia as capitalists, with 2.5% monthly compensation. Lolita also identified her own purchase of other properties.

• Testimony on Payment of Consideration: Lolita admitted on direct examination that she did not pay Jasminia the consideration “in the presence of Atty. Bongon [the notary public].” On re-direct, however, she clarified that the full P400,000.00 had been paid prior to the deed’s execution: P200,000.00 came from her own funds, given in staggered amounts of P20,000.00 to P40,000.00 as Jasminia needed money for treatment, until the sum reached P200,000.00; the remaining P200,000.00 was sourced from a loan extended to Jasminia by Lolita’s sister in Australia, with an initial P50,000.00 handed directly and the balance sent through Lolita’s mother. No receipts were issued for these payments, a circumstance Lolita attributed to their close friendship.

• Jasminia’s Physical and Mental Capacity: Respondents’ claim that Jasminia could not travel to Pasay City was rebutted by Dr. Teresa Sy Ortin, Jasminia’s radiation oncologist at Makati Medical Center. Dr. Ortin testified that Jasminia underwent daily outpatient radiation therapy from April 16 to May 13, 2004; travel from Bacoor to her clinic at Makati Medical Center was routine. Treatment sessions lasted about fifteen minutes, and while Jasminia used a wheelchair and experienced pain, the side effects were not significantly debilitating. Dr. Ortin opined that there was no medical impediment to Jasminia going to a notary public or handling important decisions; her mental capacity was clinically unaffected.

• Glaring Inconsistencies in Natividad’s Testimony: The trial record revealed inconsistencies in the respondent-mother’s account. She testified that Jasminia used her PLDT retirement pay to buy the lot and build the house, but the retirement pay was proved to have been received only on January 18, 1999—years after the lot was purchased in 1991 and the house built in 1996. She also claimed that retirement funds financed the couple’s trips to Hong Kong, Norway, and Australia, while Lolita documented, and Natividad herself partly admitted, that the Hong Kong and Norway trips occurred before Jasminia’s separation from PLDT, and that Natividad accompanied them on the Hong Kong trip.

• Lower Courts’ Findings: The RTC and CA both declared the DAS void for absolute simulation under Article 1471 of the Civil Code, reasoning that Lolita’s admission of non-payment before the notary public, coupled with the absence of receipts, proved lack of consideration by preponderance of evidence. Neither court discussed or weighed respondents’ evidence, referred to Natividad’s testimony, or considered the documentary exhibits and Dr. Ortin’s medical testimony.

• Presumption of Consideration: Petitioners maintained that the notarized DAS, expressly acknowledging receipt of P400,000.00, is itself proof of sufficient consideration by virtue of the disputable presumption under Article 1354 of the Civil Code and Rule 131, Section 3(r) of the Rules of Court; respondents’ bare assertions could not overcome that presumption.

• Misappreciation of Lolita’s Admission: Petitioners argued that the lower courts excised Lolita’s testimony from its full context. Her admission that she did not pay before the notary public did not equate to an admission of total want of consideration, because she consistently testified that the entire consideration had already been delivered prior to the deed’s execution, and no law requires that the price be paid in the very presence of the notary.

• Innocence of Mortgagees: Petitioners spouses Gutierrez contended they were mortgagees in good faith who relied on the clean title in Lolita’s name and should not be held jointly and severally liable for attorney’s fees absent any evidence of bad faith.

• Absolute Simulation for Want of Consideration: Respondents countered that the DAS was a simulated and fictitious sale because Lolita, who had no independent income or livelihood and was wholly dependent on Jasminia, could not have paid the P400,000.00 consideration. They insisted that the deed was a mere paper transfer executed to deprive respondents of their inheritance.

• Physical Incapacity of the Vendor: Respondents argued that Jasminia, given her advanced metastatic bone cancer, confinement to a wheelchair, and extreme weakness, could not possibly have travelled from Bacoor, Cavite to Pasay City on May 11, 2004 to acknowledge the DAS, indicating the document was fabricated.

• Contrary Expression of Testamentary Intent: Respondent Natividad asserted that Jasminia, nearing death, told her that the property would go to her brother Ramonito, allowing Lolita only to remain in the house, thus contradicting any intention to sell.

• Presumption and Proof of Consideration: Whether respondents, as plaintiffs, had overcome by preponderance of evidence the disputable presumption that the Deed of Absolute Sale was supported by sufficient consideration.

• Appreciation of Lolita’s Admission and Overlooked Evidence: Whether the RTC and CA misapprehended petitioner Lolita’s admission regarding non-payment before the notary public and manifestly overlooked her sworn explanation of prior payment and unrebutted documentary evidence of her financial capacity.

• Equipoise of Evidence: Whether the evidence, after proper evaluation, was at least in equipoise, thereby warranting dismissal of the complaint for failure of respondents to discharge their burden of proof.

• Presumption and Proof of Consideration: The presumption of sufficient consideration was not overcome. Article 1354 of the Civil Code and Rule 131, Section 3(r) of the Rules of Court clothe a contract with the presumption that consideration exists and is lawful; the party alleging lack of consideration bears the burden of proving it by preponderance of evidence. Respondents’ only evidence—the testimony of Natividad Palugod—was riddled with patent inconsistencies (e.g., claiming retirement pay bought the lot when payment was received years after acquisition) and was categorically rebutted by Lolita’s unrebutted documentary proof of income and investments. A mere assertion of simulation cannot overthrow the presumption.

• Appreciation of Lolita’s Admission and Overlooked Evidence: The lower courts misapprehended the admission and ignored material evidence. Lolita’s sworn testimony, subjected to cross-examination, explained that she had paid the P400,000.00 consideration—P200,000.00 from her own funds and P200,000.00 through a sister’s loan—well before the DAS was notarized. There is no legal requirement that consideration be delivered in the presence of the notary public at the time of acknowledgment. The absence of receipts, while relevant to weight, did not nullify the sworn account, especially when the close friendship between the parties made the lack of documentary formality plausible. The trial court further disregarded Lolita’s corroborating financial documents and Dr. Ortin’s medical testimony establishing Jasminia’s physical ability to travel and mental capacity to execute the deed.

• Equipoise of Evidence: Even assuming the testimonies of respondent Natividad and petitioner Lolita were equally credible, the evidence would, at the very least, be in equipoise. In civil cases, if the evidence is evenly balanced or doubt exists as to which side preponderates, the party holding the burden of proof—here, respondents as plaintiffs—fails to establish a cause of action. Consequently, the complaint should have been dismissed. Because respondents did not carry their burden, the deed of sale remains valid, and with it, the real estate mortgage executed by Lolita in favor of the Gutierrez spouses.

• Presumption of Consideration in Contracts (Article 1354, Civil Code; Rule 131, Sec. 3(r), Rules of Court) — A contract is presumed to have sufficient consideration. This disputable presumption stands unless the party alleging lack of consideration proves the contrary by preponderance of evidence; a bare assertion is not enough. The presentation of a notarized deed of sale containing an acknowledgment of receipt of the price attracts the presumption in favor of the vendee.

• Preponderance of Evidence and Equipoise Rule (Rule 133, Sec. 1, Rules of Court) — Preponderance of evidence is evidence of greater weight or which is more convincing than that offered in opposition. Where the evidence on an issue of fact is in equipoise—i.e., neither side’s evidence preponderates—the party bearing the burden of proof on that issue loses. In such a case, the court must dismiss the complaint, as the plaintiff has failed to make out a cause of action.

• Sworn Testimony as Proof — Testimony given under oath and subjected to cross-examination constitutes proof, even in the absence of corroborating receipts. The credibility of testimonial evidence is assessed by considering the witness’s means of knowledge, the probability or improbability of the account, and its consistency with the surrounding circumstances.

• Exceptions to Conclusiveness of Factual Findings — The factual findings of the Court of Appeals affirming those of the trial court are generally final and conclusive in a Rule 45 petition. However, review is permitted when the findings are based on a misapprehension of facts, when the conclusions are contradicted by evidence on record, or when relevant undisputed facts were manifestly overlooked which, if properly considered, would justify a different conclusion.

• “A contract is presumed to be supported by cause or consideration. The presumption that a contract has sufficient consideration cannot be overthrown by a mere assertion that it has no consideration. To overcome the presumption, the alleged lack of consideration must be shown by preponderance of evidence. The burden to prove lack of consideration rests upon whoever alleges it.”

• “Where the evidence on an issue of fact is in equipoise or there is doubt on which side the evidence preponderates, the party having the burden of proof fails upon that issue. Therefore, as neither party was able to make out a case, neither side could establish its cause of action and prevail with the evidence it had. They are thus no better off than before they proceeded to litigate, and, as a consequence thereof, the courts can only leave them as they are. In such cases, courts have no choice but to dismiss the complaints/petitions.”

• “Testimony, given under oath, and subjected to cross-examination is proof.”

• Mangahas v. Brobio, 648 Phil. 560 (2010) — Cited as controlling authority on the presumption of sufficient consideration in contracts and the quantum of proof needed to rebut it.
• Rivera v. CA, 348 Phil. 734 (1998) — Relied upon for the equipoise rule: where the evidence is balanced, the party with the burden of proof fails and the complaint must be dismissed.
• Pascual v. Burgos, 776 Phil. 167 (2016) — Used to articulate the exceptions allowing the Supreme Court to review factual findings in a Rule 45 petition, such as misapprehension of facts or overlooked evidence.

• Article 1354, Civil Code — Provides that although the cause is not stated in a contract, it is presumed to exist and is lawful unless the debtor proves the contrary. Applied to uphold the presumption of consideration in the Deed of Absolute Sale, placing the burden on respondents to prove lack of consideration.
• Section 3(r), Rule 131, Rules of Court — Enumerates the disputable presumption that there was sufficient consideration for a contract. The Court treated the notarized deed’s acknowledgment of payment as activating this presumption in favor of petitioner Lolita.
• Section 1, Rule 133, Rules of Court — Governs the determination of preponderance of evidence in civil cases. Applied in weighing the parties’ testimonies and in concluding that respondents failed to carry their burden, whether on preponderance or, alternatively, under the equipoise rule.

Carpio, Senior Associate Justice (Chairperson), Peralta, Perlas-Bernabe, Reyes, Jr., JJ., concurred. No separate concurring opinions were registered.