Oberes vs. Oberes

An action for annulment of a voidable contract based on fraud prescribes four years from the time of discovery of the fraud, and discovery is established when the plaintiffs acquire knowledge of facts constituting the fraud, such as when a party refuses to acknowledge a waiver of rights and asserts ownership based on a prior questionable transaction.

The late spouses Francisco Oberes and Catalina Larino died intestate in 1946 and 1948, respectively, leaving five children: Ciriaco, Cesario, Gaudencio, Adriano, and Domingo. Among the properties they left were Lot No. 5306 (registered under Francisco's name) and Lot No. 11450. The siblings orally partitioned the estate, assigning Lot No. 11450 to Domingo, Ciriaco, and Cesario, and Lot No. 5306 to Gaudencio and Adriano. In 1973, Adriano claimed to have purchased Gaudencio's share in Lot No. 5306 through a Deed of Sale, which Gaudencio later claimed he never executed, being illiterate.

• The Inheritance and Oral Partition: The late spouses Francisco Oberes and Catalina Larino died intestate, leaving five children: petitioners Ciriaco, Cesario, and Gaudencio; respondent Adriano; and Domingo. They left two parcels of land in Vito, Minglanilla, Cebu: Lot No. 11450 and Lot No. 5306 (covered by TCT No. 3794, registered in Francisco's name, 3,461 sqm). The siblings orally partitioned the estate, assigning Lot No. 11450 to Domingo, Ciriaco, and Cesario, while Lot No. 5306 was assigned to Gaudencio and Adriano as their shares.
• The Alleged Sale: In 1973, Adriano claimed that Gaudencio sold his undivided share in Lot No. 5306 to him for P1,000.00, evidenced by a notarized Deed of Sale. Adriano took possession of the entire lot, declared it under his name (Tax Declaration No. 0128-23030), and paid real property taxes.
• The 1994 Waiver and Discovery of Fraud: On May 17, 1994, Domingo, Ciriaco, and Cesario executed an Affidavit of Waiver assigning their rights over Lot No. 5306 to Gaudencio. However, Adriano refused to sign the waiver, insisting that he had already purchased Gaudencio's share in 1973. This refusal and assertion of full ownership constituted the discovery of the alleged fraud.
• Gaudencio's Illiteracy: Gaudencio was unlettered and could not read, write, or understand English. During trial, he demonstrated that he could only mechanically copy writings when instructed, without understanding the content. The Deed of Sale was written in English.
• Prior Sales by Co-Heirs: Ciriaco and Cesario had previously sold their respective shares in Lot No. 11450 to third parties (Alisa E. Inoc, Carlos Abella, Dulce Dugaduga, Alfredo Carcueva, and Felicisima Carcueva), who declared the properties for tax purposes under their names.
• Filing of Action: Petitioners filed the complaint for annulment on May 23, 2002, more than eight years after the 1994 discovery of fraud.

• Improper Application of Prescription: Petitioners argued that the CA improperly applied prescription to dismiss their complaint despite finding fraud on the part of the respondent. They contended that allowing prescription to bar their action effectively rewarded the respondent's fraudulent conduct and penalized them for attempting to settle the dispute amicably with their brother.
• Nullity of the Deed: Petitioners maintained that the Deed of Sale was null and void, not merely voidable. They argued that when the deed was executed in 1973, Lot No. 5306 was still owned in common by all heirs; thus, the absence of consent from Ciriaco and Cesario rendered the sale void. As to Gaudencio, they insisted he never executed the deed, and his alleged signature was noticeably different from his actual handwriting.

• Prescription as Absolute Bar: Respondent countered that prescription operates as a statutory bar regardless of the equitable considerations raised by petitioners. He argued that petitioners slept on their rights for more than the four-year period allowed by law, and the CA correctly applied Articles 1391 and 1139 of the Civil Code.
• Validity of Oral Partition and Estoppel: Respondent posited that the oral partition among the siblings was valid and binding. Ciriaco and Cesario, having accepted their shares (Lot No. 11450) and sold them to third parties, were estopped from claiming rights over Lot No. 5306. He maintained that the Deed of Sale was binding unless annulled by a proper court action within the prescribed period.

• Prescription of Action for Annulment: Whether the CA gravely abused its discretion in dismissing the complaint on the ground of prescription.
• Nature of the Contract: Whether the CA gravely abused its discretion in declaring the Deed of Sale merely voidable (annullable) rather than null and void.

• Prescription of Action for Annulment: The dismissal on the ground of prescription was proper. The Deed of Sale, though executed in 1973, was voidable due to vitiated consent, not void ab initio. Under Article 1391 of the Civil Code, the action for annulment based on fraud must be brought within four years from the time of discovery. Discovery occurred on May 17, 1994, when Adriano refused to sign the Affidavit of Waiver and asserted his claim of ownership based on the 1973 sale. The complaint filed on May 23, 2002 was filed eight years after discovery, well beyond the four-year prescriptive period. The application of prescription neither penalized petitioners nor rewarded respondent; it merely enforced the statutory time limit for seeking redress.
• Nature of the Contract: The Deed of Sale was correctly declared voidable, not null and void. While Gaudencio was illiterate and the deed was in English, creating a presumption of fraud under Article 1332, the fraud vitiated consent rather than rendered the contract totally inexistent. The absence of consent from Ciriaco and Cesario did not nullify the sale because the oral partition of the inheritance was valid, and they had already accepted their respective shares (Lot No. 11450) and sold them to third parties, thereby waiving any claim to Lot No. 5306.

• Presumption of Fraud in Contracts with Illiterate Parties (Article 1332, Civil Code) — When one party is unable to read or the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms were fully explained to the former. Failure to overcome this presumption establishes that consent was not intelligently given, constituting fraud that makes the contract voidable.
• Prescription of Actions for Annulment (Article 1391, Civil Code) — The action for annulment of contracts where consent is vitiated by fraud must be brought within four years from the time of discovery of the fraud. The period commences when the party learns of facts constituting the fraud, not necessarily when the contract was executed.
• Validity of Oral Partition of Estate — An oral partition of an intestate estate among heirs is valid and binding upon the parties who have accepted and acted upon it. Heirs who have received their shares under such partition and subsequently alienated them are estopped from questioning the partition or claiming shares in property allocated to others.

• "To overcome this presumption [under Article 1332], it is incumbent upon the respondent to show to the satisfaction of the court that he fully explained to petitioner Gaudencio the contents of the deed of sale in the dialect known to him. Unfortunately, there is no evidence that was presented to show that respondent did so. As such, the presumption that the execution of the deed of sale was attended by fraud stands." — Establishes the burden of proof on the party enforcing a contract against an illiterate person.
• "Respondent's failure to disclose the consequences and significance of the deed of sale despite his clear duty to do so constitutes fraud." — Defines fraud under Article 1339 as including failure to disclose facts when there is a duty to reveal them.
• "In dismissing the complaint on the ground of prescription, the CA neither penalized the petitioners nor rewarded the respondent. It simply applied Articles 1391 and 1139 of the Civil Code that the right of the petitioners to seek redress for the fraudulent acts of the respondent had been lost by the mere passage of time fixed by law." — Clarifies that prescription is a statutory limitation, not a moral judgment on the parties' conduct.

• Casilang, Sr. v. Casilang-Dizon, 704 Phil. 397 (2013) — Cited for the doctrine that oral partition of estate is valid and binding upon heirs who have accepted their shares.
• Leonardo v. Court of Appeals, 481 Phil. 520 (2004) — Applied regarding the requisites of consent and the presumption under Article 1332 for illiterate parties.
• Clemente v. Court of Appeals, 771 Phil. 113 (2015) — Referenced for the principle that the absence of one requisite in Article 1318 renders a contract void.

• Article 1318, Civil Code — Enumerates the three requisites for the existence of a contract: consent of the contracting parties, object certain, and cause or consideration.
• Article 1332, Civil Code — Establishes the presumption of mistake or fraud when one party is unable to read or the contract is in a language not understood by him, placing the burden on the enforcing party to prove full explanation of terms.
• Article 1339, Civil Code — Defines fraud as including failure to disclose facts when there is a duty to reveal them.
• Article 1390, Civil Code — Lists contracts where consent is vitiated by mistake, violence, intimidation, undue influence, or fraud as voidable or annullable.
• Article 1391, Civil Code — Prescribes the four-year period for bringing actions for annulment, reckoned from the time of discovery of fraud or mistake.
• Article 1139, Civil Code — States that actions prescribe by the mere lapse of time fixed by law.

Carpio (Chairperson), Caguioa, Lazaro-Javier, and Zalameda, JJ.