Spouses De Vera vs. Catungal

When one of the contracting parties is unable to read and fraud or mistake is alleged, a presumption of fraud or mistake arises under Article 1332 of the Civil Code, shifting the burden to the party enforcing the contract to show by clear and convincing evidence that its terms were fully explained to the illiterate party. The presumption of regularity accorded to notarized documents cannot override this presumption where the consent of one party is proven to have been vitiated.

Vicente Catungal owned two parcels of unregistered land in Macabito, Calasiao, Pangasinan. He died on December 1, 1944, survived by five children, two of whom were Fausta Catungal and Genaro Catungal. Eugenio de Vera, one of the petitioners, is a grandchild of Vicente, making him a legal and compulsory heir of the decedent. The dispute centers on a Deed of Extrajudicial Settlement Among Heirs with Absolute Sale executed on July 23, 1994, by which Fausta and Genaro purportedly adjudicated Vicente's two parcels between themselves and sold them to the Spouses De Vera for P30,000.00.

Vicente Catungal owned two parcels of unregistered land located in Macabito, Calasiao, Pangasinan. He died on December 1, 1944, survived by five children, among them Fausta Catungal and Genaro Catungal. After their parents' death, Fausta took possession of the two parcels and continued residing on them.

On July 23, 1994, Fausta and Genaro executed a Deed of Extrajudicial Settlement Among Heirs with Absolute Sale, adjudicating between themselves the two parcels owned by Vicente and transferring ownership to the Spouses Eugenio de Vera and Rosalia Padilla for a consideration of P30,000.00. Fausta affixed her thumbmark in lieu of her signature. The Deed was signed in the presence of witnesses Teodoro de Vera and Valentino de Vera, siblings of Eugenio. New tax declarations were subsequently issued in the name of the Spouses De Vera. Eugenio is a grandchild of Vicente, making him a legal and compulsory heir of the decedent. After the transaction, the Spouses De Vera allowed Fausta to stay and continue residing on the parcels.

On July 23, 1997, Fausta filed before the RTC a complaint for Declaration of Nullity of Documents, Recovery of Ownership, Reconveyance, and Damages. She alleged that the Spouses De Vera took advantage of her illiteracy and old age, succeeding in making her affix her thumbmark on the Deed by employing deceit, false pretenses, and false misrepresentations. She claimed that the petitioners represented the Deed as merely evidence of her indebtedness to them, when in fact it transferred ownership of the parcels. She further alleged that she did not appear before the notary public who notarized the Deed, did not secure a community tax certificate as indicated therein, and remained in actual physical possession of the properties. She also asserted that the Deed did not reflect the true agreement of the parties and that the signatories were not the only surviving legal and compulsory heirs of Vicente.

The petitioners initially filed a Motion to Dismiss and an Opposition to the Issuance of a Writ of Preliminary Injunction. The RTC denied the motion to dismiss on December 3, 2002, and granted a temporary restraining order on the same day. The parties subsequently agreed to dispense with the issuance of a writ of preliminary injunction. Petitioners filed their Answer, contending that the Deed was valid and binding, that there was compliance with the requirements of publication and registration of extrajudicial settlement of estates, and that the allegations of deceit were mere conjectures. They also noted that Genaro signed the Deed as Fausta's co-vendor and that none of the other allegedly preterited heirs joined Fausta in filing the case.

Fausta died on October 30, 2002, during the pendency of the case. On June 1, 2004, the RTC granted the motion to revive the case and substitute Fausta's heirs — Gaudencio G. Diaz, Sr., Alfonso C. Diaz, and Lourdes C. Lopez — as parties. Fausta had testified on January 19, 2000, by virtue of a granted motion to take advance testimony, which alleged that she was already 88 years old, weak, sickly, and might collapse at any time. She stated that she was illiterate, had been in possession of the two parcels since the death of their parents, denied selling the properties to the Spouses De Vera or receiving any amount from them, and stated that her children were not present when petitioners deceived her into affixing her thumbmark. Lourdes corroborated Fausta's testimony, adding that she was not present during the execution of the Deed and only learned from her mother that the properties had already been bought.

For the defense, Eugenio and Valentino took the witness stand. Both admitted that Fausta was unable to read and write. They likewise stated that Lourdes was present during the affixture of the thumbmark but that there was no need for her to be made a witness to the Deed or to assist Fausta in its execution. The RTC, in its July 7, 2009 Decision, found that Fausta failed to prove by preponderance of evidence that her thumbmark was procured through deceit, noting that no evidence aside from her bare denial and Lourdes's testimony was presented. The CA reversed, ruling that the presumption of mistake or fraud under Article 1332 of the Civil Code was not overcome because Fausta's illiteracy was established and the Spouses De Vera failed to show that the Deed's contents were fully explained to her.

• Insufficiency of Evidence: Petitioners contended that Fausta failed to overcome the required quantum of evidence in civil cases, as no evidence was adduced to support her complaint except for the declaration that she was illiterate at the time of signing, while the Spouses De Vera clearly showed the due execution and genuineness of the Deed.
• Contradictory Testimony: Petitioners argued that Fausta's self-serving testimony was contradicted and impeached in open court by her own daughter, Lourdes C. Lopez, who testified that the properties had already been sold, thereby contradicting Fausta's claim that she did not know the document involved a transfer of ownership.
• Improper Burden-Shifting: Petitioners maintained that the CA gravely erred in shifting the burden of proof to them when the only evidence adduced by the respondent was Fausta's self-serving testimony, which was even contradicted by Lourdes.
• Presumption of Regularity of Notarized Document: Petitioners asserted that the Deed, being notarized, enjoys a presumption of regularity that was not rebutted by Fausta's testimony, and that the CA improperly disregarded the public document evidencing the extrajudicial settlement with absolute sale notwithstanding its genuineness, due execution, and regularity.
• Inapplicability of Article 1332: Petitioners argued that Fausta was unable to substantiate her allegations of fraud or mistake, that her inability to read and write was not convincingly established, and that Article 1332 is not applicable because the Deed has two sellers — if there was fraud or deceit, Genaro should have also questioned the same to protect his and Fausta's interests.
• Incongruity of Partial Invalidity: Petitioners contended that it would be incongruous and illogical for the Deed to be considered invalid as to Fausta but valid insofar as Genaro is concerned, since both signed and executed the document and Genaro did not question its validity.
• Failure to Present Genaro: Petitioners insisted that Fausta should have presented Genaro to the witness stand to support her claims of fraud.

• Knowledge of Illiteracy: Respondents countered that the Spouses De Vera knew that Fausta was an illiterate old woman and that she was unaccompanied at the time she affixed her thumbmark on the Deed.
• Undue Influence Through Witnesses: Respondents argued that the witnesses to the Deed were siblings of Eugenio, and Fausta being alone at that time constrained her to rely on the assurance of the Spouses De Vera that the document was merely evidence of indebtedness and not an absolute sale transferring ownership.
• Absence of Notary Public's Testimony: Respondents pointed out that the notary public who notarized the Deed did not take the witness stand, which supports the claim that the Deed was not explained to Fausta.
• Failure to Rebut Article 1332 Presumption: Respondents maintained that the foregoing circumstances show that the Spouses De Vera failed to overcome the presumption in Article 1332 of the Civil Code by failing to prove that the Deed was explained to Fausta, and that as Fausta's consent was obtained through fraud, deceit, or false pretense, the Deed is null and void.
• Genaro's Unavailability: Respondents stated that Fausta failed to present Genaro as a witness because he was already dead during the pendency of the trial.

• Vitiated Consent: Whether Fausta Catungal freely gave her consent to the Deed of Extrajudicial Settlement Among Heirs with Absolute Sale, or whether her consent was vitiated by fraud.
• Applicability of Article 1332: Whether the presumption of fraud or mistake under Article 1332 of the Civil Code arises when one contracting party is illiterate, and whether the Spouses De Vera rebutted that presumption.
• Presumption of Regularity: Whether the notarized Deed enjoys the presumption of regularity notwithstanding the allegation and proof of vitiated consent.

• Vitiated Consent: No. Fausta's consent was vitiated by fraud, rendering the Deed voidable. The presumption under Article 1332 of the Civil Code arose because Fausta was illiterate, and the Spouses De Vera failed to rebut it by clear and convincing evidence that the Deed's contents were fully explained to her.
• Applicability of Article 1332: Yes. The presumption of fraud or mistake under Article 1332 becomes operative when the contracting party alleging fraud establishes by clear and convincing evidence that she was unable to read at the time of execution. Fausta's illiteracy was established by her own testimony, corroborated by Lourdes, and admitted by Eugenio and Valentino. The burden shifted to the Spouses De Vera, who failed to show that the Deed's terms were explained to Fausta.
• Presumption of Regularity: No. The presumption of regularity accorded to notarized documents finds no application where the regularity of execution is challenged and the consent of one party is proven to have been vitiated. The Deed, despite being notarized, was defective and cannot enjoy the presumption of regularity.

• Vitiated Consent: The essential requisites of a contract under Article 1318 of the Civil Code include consent of the contracting parties, object certain, and cause of the obligation. Consent must be free, voluntary, willful, and with a reasonable understanding of the obligations assumed. Under Article 1330, consent may be vitiated by mistake, violence, intimidation, undue influence, or fraud, rendering the contract voidable under Article 1390. Courts are given wide latitude in weighing the circumstances — including age, physical infirmity, intelligence, relationship, and conduct of the parties — in determining whether consent was vitiated. Fausta was 84 years old at the time of execution, illiterate, and unaccompanied by her children. She testified that the contents of the Deed were not explained to her and that she was deceived into affixing her thumbmark. The Spouses De Vera admitted knowing she was illiterate. Because consent was vitiated by fraud, the Deed is voidable and was properly annulled.

• Applicability of Article 1332: Article 1332 provides that when one of the parties is unable to read, or if 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 thereof have been fully explained to the former. This provision modifies the general principle that a party is presumed to know the contents of a document to which he affixed his signature. For the protection to be operative, the party alleging the defect must first establish by clear and convincing evidence that she was unable to read at the time of execution. Fausta testified that she was illiterate, which was corroborated by Lourdes and admitted by both Eugenio and Valentino. Once illiteracy was established, the presumption of fraud or mistake arose and the burden shifted to the Spouses De Vera to show by clear and convincing evidence that the Deed's contents were fully explained to Fausta. They failed to do so. Fausta testified that her children were not present and that the contents were not explained. The mere presence of Lourdes during the execution, as the defense claimed, did not establish that the Deed was explained to Fausta. The notary public did not testify. Accordingly, the presumption stands unrebutted and controlling.

• Presumption of Regularity: Notarized documents enjoy the presumption of regularity and are accorded evidentiary weight as regards their due execution. However, this presumption may be rebutted by clear and convincing evidence. The Court agreed with the CA that the presumption finds no application in this case because the regularity of the execution of the Deed was challenged. Fausta proved her illiteracy and that the contents were not explained to her, making the presumption of fraud or mistake under Article 1332 operative. The Spouses De Vera failed to rebut this presumption. Consequently, fraud or mistake was present, and the Deed, despite being notarized, was defective. The Deed cannot enjoy the presumption of regularity when it is alleged and proven that the consent of one of the parties was vitiated.

• Presumption of Fraud or Mistake under Article 1332 of the Civil Code — When one of the parties to a contract is unable to read, or if 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 thereof have been fully explained to the former. The protection is operative only after the contracting party who alleges fraud or mistake establishes by clear and convincing evidence that she was unable to read at the time of execution. Once established, the presumption of fraud or mistake arises and the burden shifts to the party enforcing the contract to rebut it by clear and convincing evidence that the terms and contents were fully explained. If the enforcing party fails to prove this, the presumption of mistake or fraud stands unrebutted and controlling. In this case, Fausta's illiteracy was established by her testimony, corroborated by Lourdes, and admitted by Eugenio and Valentino. The Spouses De Vera failed to show that the Deed's contents were explained to Fausta, so the presumption operated and the Deed was annulled.

• Presumption of Regularity of Notarized Documents — Notarized documents enjoy the presumption of regularity and are accorded evidentiary weight as regards their due execution. However, this presumption may be rebutted by clear and convincing evidence. Where the regularity of execution is challenged and the consent of one party is proven to have been vitiated, the presumption of regularity finds no application. In this case, because Fausta's illiteracy was proven and the contents of the Deed were not explained to her, the notarized Deed was defective and could not enjoy the presumption of regularity.

• Voidable Contracts — A contract whose consent is vitiated by mistake, violence, intimidation, undue influence, or fraud is voidable under Articles 1330 and 1390 of the Civil Code. A voidable contract is valid and binding until annulled in a proper court action. In this case, because Fausta's consent was vitiated by fraud, the Deed was voidable and was properly annulled.

• "When one of the contracting parties is unable to read or is otherwise illiterate, and fraud is alleged, a presumption that there is fraud or mistake in obtaining consent of that party arises. Article 1332 offers protection to contracting parties that are unfortunate and disadvantaged to be illiterate and unable to read." — This passage articulates the rationale and protective purpose of Article 1332, explaining why the presumption arises and whom it is designed to protect.

• "It is only then that the presumption in Article 1332 will arise and the burden will shift to the other contracting party to rebut it. To rebut the presumption, the other contracting party must show, by clear and convincing evidence, that the terms and contents of the contract were explained to the contracting party who is unable to read." — This passage sets out the two-stage burden framework under Article 1332: first, the alleging party must establish illiteracy by clear and convincing evidence, and second, the enforcing party must rebut the presumption by the same standard.

• "Although notarized documents enjoy the presumption of regularity and are accorded evidentiary weight as regards their due execution, this presumption, however, may be rebutted by clear and convincing evidence. Nevertheless, we agree with the CA's pronouncement that this presumption finds no application in this case because the regularity of the execution of the Deed was challenged." — This passage defines the limits of the presumption of regularity for notarized documents, clarifying that it yields when vitiated consent is alleged and proven.

• Leonardo vs. Court of Appeals, 481 Phil. 520 (2004) — Controlling authority on the application of Article 1332. The Court relied on this case for the rule that when a party is unable to read and fraud is alleged, the burden shifts to the enforcing party to show that the contract's terms were fully explained; failure to do so leaves the presumption of mistake or fraud unrebutted and controlling. The case also provided the framework that the alleging party must first establish by clear and convincing evidence that she was unable to read before the presumption arises.

• Mayor vs. Belen, 474 Phil. 630 (2004) — Cited for the principle that Article 1332 modifies the general rule that a party is presumed to know the contents of a document to which he affixed his signature, and that the burden to show that the other party fully understood the contract is on the party seeking to enforce it. Also cited for the proposition that the presumption of regularity of notarized documents finds no application when the regularity of execution is challenged.

• Mangahas vs. Brobio, 648 Phil. 560 (2010) — Cited for the principle that courts are given wide latitude in weighing facts and circumstances — including age, physical infirmity, intelligence, relationship, and conduct of the parties — in determining whether consent was vitiated, irrespective of whether the contract is in a public or private writing.

• Repuela vs. Spouses Larawan, 802 Phil. 821 (2016) — Cited in support of the requirement that the enforcing party must show by clear and convincing evidence that the terms and contents of the contract were explained to the contracting party who is unable to read.

• Article 1305, Civil Code — Defines a contract as a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Applied to establish the foundational concept of contract formation at issue.

• Article 1318, Civil Code — Provides the essential requisites of a 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 identify consent as the requisite that was defective in this case.

• Article 1319, Civil Code — Provides that consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. Applied to frame the inquiry into whether Fausta's consent was genuinely given.

• Article 1330, Civil Code — Provides that consent may be vitiated by mistake, violence, intimidation, undue influence, or fraud. Applied to classify the defect in Fausta's consent as fraud.

• Article 1332, Civil Code — Provides that when one of the parties is unable to read, or if 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 thereof have been fully explained to the former. The central provision of the case; applied to shift the burden to the Spouses De Vera after Fausta's illiteracy was established.

• Article 1390, Civil Code — Provides that contracts where consent is vitiated by mistake, violence, intimidation, undue influence, or fraud are voidable, and that they are valid and binding until annulled in a proper court action. Applied to classify the Deed as voidable and to justify its annulment.

Leonen (Chairperson), Inting, Delos Santos, and J. Lopez, JJ., concurred. No separate concurring opinions were written.