Case Summary (G.R. No. 211153)
Key Dates
Execution of the extrajudicial settlement: July 31, 1986.
Filing of complaint in RTC: August 17, 1998 (docketed April 6, 1999 as Amended Complaint).
RTC decision: June 1, 2010.
Court of Appeals decision: June 25, 2013 (reversed RTC and annulled the settlement).
Supreme Court decision resolving the petition: February 28, 2018.
(Constitutional basis for judicial review: 1987 Philippine Constitution.)
Applicable Law and Authorities
- 1987 Constitution (applicable to this decision).
- Civil Code provisions cited: Articles 24, 980, 1015, 1018–1020 (succession and accretion rules), Article 1144 (10-year prescription for actions upon written contract), Article 1332 (protection of persons unable to read or not understanding language of contract), Article 1410 (on declaration of inexistence/nullity).
- Rules of Court: Rule 74, Section 1 (effect and publication of extrajudicial settlements).
- Relevant jurisprudence cited by the courts: Bautista v. Bautista; Segura v. Segura; Neri v. Heirs of Hadji Yusop Uy; Rural Bank of Caloocan, Inc. v. Court of Appeals; Remalante v. Tibe; Gerona v. De Guzman; The Roman Catholic Bishop of Tuguegarao v. Prudencio.
Factual Background
The heirs of Felix and Felisa Cruz executed an extrajudicial settlement in 1986 dividing a 940-square-meter lot among heirs. The complainants (respondents before the Supreme Court) alleged that when subdivision was later undertaken, it became apparent that Antonia (one of the co-heirs) had been allotted two lots while other heirs, including Concepcion, received only one lot each. Concepcion, who had only a Grade 3 education and did not understand English, claimed she was induced to sign the English-language deed without explanation and thereby deprived of her equal share. Antonia later died, and her heirs are the petitioners in this case, now in possession of the two lots.
Relief Sought at Trial
Plaintiffs (respondents here) sought: (1) declaration that the July 31, 1986 extrajudicial settlement was null and void; (2) declaration that one of the lots adjudicated to Antonia belonged to the common fund; (3) other just and equitable relief; and (4) costs.
Defendants’ (Petitioners’) Answer and Counterclaim
Petitioners denied vitiated consent, asserted the extrajudicial settlement was voluntarily executed, and pleaded prescription (10-year prescriptive period under Article 1144 for written contracts), failure to state a cause of action, and lack of earnest compromise efforts. They counterclaimed for moral and exemplary damages, attorney’s fees, and costs.
RTC Ruling and Reasoning
The RTC dismissed the complaint. Key points in the RTC reasoning:
- It acknowledged conflicting dates but treated the action as not barred by prescription under a theory that the person obtaining property by fraud is an implied trustee and actions run from registration. The RTC nonetheless concluded plaintiffs failed to prove fraud with the particularity required by Sec. 5, Rule 8; fraud must be pleaded specifically.
- The court found that Concepcion, despite limited education, could read and write and thus should have understood consequences; her long delay in raising objections (over ten years) suggested laches and a belated afterthought.
- The RTC gave weight to the notarized extrajudicial settlement as a public document and emphasized the rule that fraud must be shown by clear and convincing evidence; because plaintiffs produced no corroborating independent evidence, the complaint failed (allegata et non probata). Each party was to bear their own costs.
Court of Appeals Decision and Rationale
The Court of Appeals reversed the RTC and annulled and set aside the extrajudicial settlement. Its principal findings and reasoning included:
- Characterized the action as essentially one for annulment of contract for vitiated consent (fraud, mistake, undue influence), even if the pleadings captioned it as a declaration of nullity; substance of allegations controls.
- Applied Article 1332 to protect a signatory unable to read or who did not understand the language of the document. The CA accepted Concepcion’s testimony that she did not understand English and trusted her younger sister; thus she could not have given free, intelligent, and spontaneous consent.
- Held the presumption under Article 1332 (presumption of mistake or fraud when a person unable to read signs a document in a language not understood) applied and that the defendants failed to prove the document’s contents were fully explained to Concepcion in a language she understood.
- Relied on jurisprudence recognizing annulment for vitiated consent in circumstances of illiteracy and deception.
- On prescription, the CA applied the four-year prescriptive period for annulment from discovery of fraud but also concluded the action had not prescribed because appellants obtained constructive notice only upon publication in 1995; thus the 1998 filing was timely.
Issues Presented to the Supreme Court
Petitioners asked the Supreme Court to set aside the CA judgment on two principal grounds:
- The CA erred in holding that the action for annulment had not prescribed; petitioners maintained the 10-year prescription under Article 1144 should apply to the notarized written extrajudicial settlement (or, if four years applied, the claim accrued earlier upon discovery in 1986).
- The CA disregarded contemporaneous and subsequent acts (occupation, house construction, attendance at family gatherings, prior sales or renunciations) that evidences absence of fraud or vitiated consent.
Parties’ Contentions before the Supreme Court
- Petitioners reiterated that the action was time-barred under Article 1144 (ten years) or, alternatively, under the four-year prescriptive period for annulment if that applied; they emphasized the notarized document’s presumption of regularity and the RTC’s factual findings which should be accorded weight.
- Respondents defended the CA ruling, stressing the deed was written in English and not explained to Concepcion, who trusted her sisters; they argued the deed was effectively fraudulent and that the four-year period applied counting from discovery in 1998.
Supreme Court Analysis and Holding
The Supreme Court denied the petition and affirmed annulment and setting aside of the July 31, 1986 extrajudicial settlement. Key points of the Court’s analysis:
- The Court framed the case as one of exclusion in legal succession: an extrajudicial settlement written in a language not understood by one co-heir led to an allocation that deprived that co-heir of her rightful equal share.
- The Court recognized the relevance of Concepcion’s literacy and educational attainment: because the document was in English and she had only elementary education, the protections of Article 1332 applied to the extent that her consent was vitiated by a substantial mistake or inability to understand the document.
- The Supreme Court agreed with the CA that the extrajudicial settlement should be annulled and set aside because Concepcion’s consent lacked the requisite intelligence and voluntariness, and because the notarizing officer did not show the document’s contents were explained to her in a language she understood.
- Critically, the Supreme Court corrected the CA’s application of prescriptive rules: the CA erred in treating the action as one grounded in fraud with a four-year prescriptive period. Instead, unde
Case Syllabus (G.R. No. 211153)
Nature of the Case and Relief Sought
- Petition for Review on Certiorari to the Supreme Court seeking to set aside the Court of Appeals (CA) Decision dated June 25, 2013 and CA Resolution dated January 29, 2014 in CAA G.R. CV. No. 96345.
- The assailed CA dispositions had granted respondents’ appeal, reversed the June 1, 2010 Decision of the Regional Trial Court (RTC), Branch 75, San Mateo, Rizal, in Civil Case No. 1380-98 SM, and denied petitioners’ motion for reconsideration.
- The relief originally prayed for by respondents in the RTC case included: (1) declaration that the extrajudicial settlement executed on July 31, 1986 was null and void; (2) declaration that one of the lots adjudicated to Antonia Cruz be declared common fund; (3) other equitable reliefs; and (4) costs.
Parties
- Petitioners: Amparo S. Cruz; Ernesto Halili; Alicia H. Florencio; Donald Halili; Editha H. Rivera; Ernesto Halili, Jr.; Julito Halili (heirs and successors of Antonia Cruz).
- Respondents (plaintiffs in RTC): Angelito S. Cruz; Concepcion S. Cruz (also referenced as Concepcion Cruz-Enriquez); Serafin S. Cruz; Vicente S. Cruz (co-heirs who initiated the RTC action).
- Other relevant persons: Antonia Cruz (deceased heir whose two lots are in controversy) and decedents/spouses Felix and Felisa Cruz (original owners of the subject property).
Factual Antecedents
- The disputed property: a 940-square-meter parcel covered by Original Certificate of Title No. ON-658, inherited from Felix and Felisa Cruz by their children.
- On July 31, 1986, the heirs executed a deed of extrajudicial settlement of estate over the subject property purportedly allocating shares among heirs.
- Allegation by respondents: the heirs had agreed to equal shares, but in a subdivision shown in 1998 respondents discovered that Antonia was allocated two lots while each respondent received one lot.
- Concepcion was alleged to be illiterate and unable to read the English-language deed; she was induced by Amparo and Antonia to sign without a prior reading or explanation in a language she understood.
- Antonia later died and her heirs (petitioners in this Petition for Review) are in possession of the two lots that were adjudicated to Antonia in the extrajudicial settlement.
- Respondents discovered allocation disparity when the subdivision survey plan was shown to them in 1998 and thereafter filed the complaint in the RTC on August 17, 1998 (also referenced as August 14, 1998 in RTC decision).
RTC Pleadings and Prayer (Amended Complaint)
- Respondents filed an Amended Complaint on April 6, 1999 (docketed as Civil Case No. 1380-98 SM).
- Allegations included: agreement among heirs for equal shares; execution of extrajudicial settlement on July 31, 1986; discovery in 1998 of Antonia’s allocation of two lots contrary to the equal-share agreement; fraud perpetrated by Amparo and Antonia by inducing illiterate Concepcion to sign an English document without explanation; and consequent damage.
- Prayer sought: nullification of the extrajudicial settlement; declaration that one of Antonia’s lots be declared common fund; other just and equitable reliefs; and payment of costs.
Petitioners’ Answer and Counterclaim
- Petitioners (heirs of Antonia and those in possession of the two lots) answered and prayed for dismissal.
- Main defenses: deed was voluntarily and freely executed; consent was not vitiated; cause of action had prescribed; complaint failed to state a cause of action; no earnest compromise efforts had been made.
- Counterclaim sought moral and exemplary damages, attorney’s fees, and costs of suit.
RTC Decision (June 1, 2010) — Trial Court Ruling
- Main issue considered: whether the extrajudicial settlement was null and void on grounds of fraud, deceit, misrepresentation, or mistake.
- RTC noted discrepancies in dates in the record but considered that the extra-judicial settlement was executed July 31, 1986.
- RTC prescription analysis:
- Recognized Article 1144 Civil Code (10-year prescription for actions upon a written contract) but applied Article 1456 Civil Code analogy for implied trustee doctrine and reckoned some aspects not barred by prescription.
- Ultimately held that petition was not barred by prescription and laches had not set in.
- Evidentiary findings on fraud:
- Found that fraud was not alleged with requisite particularity under Sec. 5 Rule 8.
- Found lack of clear and convincing evidence to substantiate allegations of fraud.
- Observed Concepcion had some ability to read and write and could understand English “albeit not fully,” and given her deep interest in the inheritance, she was aware of consequences of what she signed.
- Noted respondents’ long period of passive acquiescence (attending reunions, occupying allotted lots, not complaining while defendants built houses) inconsistent with present claim of fraud.
- Held that notarization produced a presumption of regularity and that a public document prevailed over mere allegations.
- Concluded that plaintiffs failed to carry burden of proving fraud or vitiated consent.
- RTC disposition: Complaint dismissed; costs de officio; each party to bear their own costs of litigation and defense.
Court of Appeals Decision (June 25, 2013) — Appellate Ruling
- CA reversed and set aside the RTC Decision and annulled and set aside the extrajudicial settlement.
- CA characterized the plaintiffs’ action as, in substance, an action to annul the extrajudicial settlement for vitiated consent, rather than a mere declaration of nullity for illegality.
- Distinction explained:
- Annulment (voidable contract): remedy when consent is vitiated by mistake, violence, intimidation, undue influence, or fraud; prescriptive period is four years.
- Declaration of nullity (void contract): where cause/object/purpose is contrary to law or public policy; imprescriptible as a rule.
- Court should grant the relief warranted by allegations even if caption mismatches.
- CA’s factual findings and legal application:
- Found that Concepcion denied knowledge of the document’s import, asserted she did not understand English, and trusted her younger sister Amparo.
- Relied upon Concepcion’s testimony that she signed without understanding and without asking Amparo to read it.
- Invoked Articles 24 and 1332 Civil Code for protection of disadvantaged contracting parties; emphasized Article 1332’s presumption where one is unable to read or the contract is in a language not understood and fraud is alleged.
- Held that the burden shifted to appellees (petitioners here) to show t