G.R. No. 132415 - Katipu vs. Katipu, Jr.

Case Summary (G.R. No. 132415)

Procedural Posture and Relief Sought

Respondent filed a complaint in the Regional Trial Court (RTC), later docketed as Civil Case No. 87-39891, seeking annulment of a Deed of Absolute Sale executed December 29, 1985 and subsequent cancellation of TCT No. 168394 that had been issued in the names of the Balguma brothers. The RTC initially dismissed the complaint, later reinstated it and, after trial, dismissed the complaint again. On appeal, the Court of Appeals reversed and annulled the deed, directing restoration of the original title. Petitioners sought review by certiorari before the Supreme Court, attacking the Court of Appeals’ factual findings and its annulling of the sale.

Factual Background: Execution of Deed and Transfer of Title

On December 29, 1985, respondent, allegedly assisted by his brother Miguel and by Atty. Balguma and Inocencio Valdez, executed a document represented to him as a contract of employment but which was a Deed of Absolute Sale for P187,000. Title in the property was cancelled and TCT No. 168394 was issued in the names of the Balguma brothers. Atty. Balguma began collecting rentals in January 1986. Respondent alleged he did not understand the document, did not receive the stated consideration, and was induced by trickery and machination to sign. Petitioners denied fraud, asserting respondent knew the sale’s contents, received the consideration, and acquiesced to the Balgumas’ collection of rents.

Trial Court Proceedings, Pretrial Events, and Evidentiary Actions

Respondent twice moved to dismiss his complaint, motions the trial court granted but later reconsidered on the court’s own inquiry into respondent’s comprehension. The trial court appointed a guardian ad litem for respondent and set the case for pretrial. During proceedings, a medical report from a Resident Psychiatrist (Dr. Annette Revilla) was presented to the trial court concerning respondent’s mental capacity. After hearing, the RTC dismissed the complaint on the basis that respondent had admitted signing the deed, obtaining loans from the Balgumas, acknowledging the sale, and having ceased collecting rentals — factual findings supporting the sale’s validity.

Court of Appeals’ Findings and Legal Reasoning

The Court of Appeals reversed the RTC and annulled the Deed of Absolute Sale. The CA gave decisive weight to psychiatrist Dr. Ana Marie Revilla’s certification and expert testimony (certification dated August 4, 1987) establishing respondent’s very low IQ, illiteracy, inability to read, and mental age equivalent to a six-year-old. The CA concluded that respondent was incapable of giving rational consent and therefore fell within the category of “incompetent” under Sec. 2, Rule 92, and that consent was vitiated by undue influence and probable fraud. The CA found the contract voidable under Article 1390 and invoked Article 1332’s protection where the contract is in a language the party does not understand, noting the documents were in English and there was no showing they were explained or translated. The CA also credited evidence that Miguel received the consideration while respondent was given only small coins, and that petitioners did not rebut the expert findings.

Issues Raised on Appeal to the Supreme Court

Petitioners primarily argued that the RTC’s factual findings — entitled to high deference because of its opportunity to observe witness demeanor — were supported by the record and should not have been overturned. They urged that the CA improperly disregarded the RTC’s credibility assessments. The petition thus presented the question whether the appellate court erred in reversing the trial court’s factual conclusions and annulling the deed.

Supreme Court Standard of Review and Applicable Exceptions

The Supreme Court acknowledged the general rule that trial-court findings deserve deference because of the trial judge’s direct observation of witnesses. It reiterated recognized exceptions permitting appellate factual reappraisal: where the trial court overlooked, misunderstood, or misapplied material facts or circumstances; where the trial-court findings contradict the appellate court’s; and where an independent factual review is warranted. The Court explained that when such exceptions obtain, appellate and supreme review can reassess the record and weigh expert evidence and other material facts.

Supreme Court Analysis of Mental Capacity and Expert Testimony

The Court found the case to fall within the exception warranting factual reexamination. It accepted and gave substantial weight to Dr. Revilla’s psychiatric findings (as presented at the trial-court hearings) showing respondent’s low intellect, illiteracy, inability to read and understand the English-language instruments, and mental age comparable to a six-year-old. The Court held that the trial court erred in disregarding that expert testimony without reason and that petitioners failed to rebut it. The Court noted that while trial-judge impressions of witness demeanor are important, they are not dispositive when contradicted by uncontradicted expert findings that bear directly on decisional capacity.

Supreme Court Findings on Vitiated Consent, Undue Influence, and Nonpayment of Consideration

Applying Civil Code provisions, the Court concluded respondent’s consent was vitiated and the sale was voidable under Article 1390 because one party was incapable of giving valid consent and because consent was tainted by undue influence and probable fraud. The Court emphasized Article 1332 — the duty to show that contract terms were fully explained where the party is unable to read or the contract is in an unfamiliar language — and found no evidence that the English-language deed was explained or translated to respondent. The Court credited testimony that Miguel accepted the consideration from Atty. Balguma and that respondent received only token coins; petitioners did not satisfactorily demonstrate that respondent received the purchase price.

Remedy, Restitution, and Accounting of Rents

The Court affirmed the CA’s annulment of the deed and declared the title registered in TCT No. 168394 null and void, directing

Case Syllabus (G.R. No. 132415)

Case Caption, Docket and Dispositive Information

G.R. No. 132415; Decision dated January 30, 2002 by the Supreme Court, Third Division; penned by Justice Sandoval-Gutierrez.
Petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended.
Petitioners: Miguel Katipunan, Inocencio Valdez, Edgardo Balguma and Leopoldo Balguma, Jr.
Respondent: Braulio Katipunan, Jr.
Relief sought below: annulment of a Deed of Absolute Sale (Civil Case No. 87-39891, RTC of Manila, initially Branch 21, later re-raffled to Branch 28).
Registry of Deeds titles involved: original title in respondent’s name under TCT No. 109193; after sale TCT No. 168394 registered in names of the Balguma brothers.
Supreme Court disposition: petition DENIED; Court of Appeals Decision (dated in the record as July 31, 1997) reversed the RTC and annulled the Deed of Sale; Supreme Court AFFIRMED the Court of Appeals with MODIFICATION ordering turnover of rentals and awarding interest; costs against petitioners. (The Supreme Court opinion also refers to "the assailed Decision of the Court of Appeals dated July 3, 1997" in confirming and modifying the CA judgment.)

Factual Background — Property, Parties and Transaction

Respondent Braulio Katipunan, Jr. was owner of a 203-square-meter lot with a five-door apartment at 385-F Matienza St., San Miguel, Manila; lot registered under TCT No. 109193.
The apartment units were occupied by lessees who paid rentals.
On December 29, 1985, respondent, assisted by his brother Miguel Katipunan, executed a Deed of Absolute Sale with Edgardo Balguma and Leopoldo Balguma, Jr., represented by their father Atty. Leopoldo Balguma, Sr., for a consideration of P187,000.00.
Consequent to the transaction, respondent’s original title (TCT No. 109193) was cancelled and TCT No. 168394 issued in favor of the Balguma brothers.
In January 1986, Atty. Balguma, Sr. began collecting rentals from the apartment lessees.

Respondent’s Allegations (Complaint for Annulment)

On March 10, 1987, Braulio filed Civil Case No. 87-39891 for annulment of the Deed of Absolute Sale.
Alleged inducement: Miguel Katipunan, Atty. Leopoldo Balguma, Sr., and Inocencio Valdez convinced Braulio to work abroad, brought him to the NBI and other government offices to secure clearances/documents which later proved falsified.
Alleged deception in execution: by "insidious words and machinations" they made Braulio sign a document purportedly a contract of employment that turned out to be a Deed of Absolute Sale.
Alleged non-receipt of consideration: Braulio claimed he did not receive the consideration stated in the Deed.
Discovery of transfer: Braulio learned from his sister, Agueda Katipunan-Savellano, that the Balguma brothers sent a letter to the lessees claiming ownership.
Claim of incapacity and exploitation: Braulio asserted defendants conspired to take advantage of his ignorance, being only a third grader.

Petitioners’ Answer and Contentions Below

Petitioners denied respondent’s allegations.
They alleged respondent was aware of the Deed’s contents and that he received the consideration.
They alleged respondent knew the Balguma brothers were collecting rentals since December 1985 and did not object; respondent filed suit influenced by his sister Agueda Savellano.
Admission noted in the record that Miguel and Braulio received considerations, but petitioners contested the amount and distribution.

Trial Court Proceedings, Motions and Interim Orders

Respondent twice moved to dismiss his complaint; motions were granted initially.
Trial court, upon motions for reconsideration, reinstated the complaint after finding the motions to dismiss may not have been voluntarily signed by Braulio, relying on a medical report by Dr. Annette Revilla (Resident Psychiatrist, Philippine General Hospital).
Trial court granted respondent’s motion to appoint Agueda Savellano as guardian ad litem.
After pre-trial and hearing, the trial court dismissed the complaint on the merits, holding respondent failed to prove his causes of action because he admitted: (1) he obtained loans from the Balgumas; (2) he signed the Deed of Absolute Sale; and (3) he acknowledged selling the property and stopped collecting rentals.

Court of Appeals Decision (Assailed Judgment)

The Court of Appeals, in CA-GR CV No. 45928, reversed and set aside the trial court judgment; it entered a new judgment annulling the Deed of Sale, declaring TCT No. 168394 null and directing the Register of Deeds to restore TCT No. 109193 in the name of Braulio Katipunan.
The CA placed significant weight on a psychiatric certification dated August 4, 1987 by Dr. Ana Marie Revilla (UP-PGH), presented as an expert witness.
The CA found Dr. Revilla’s findings explained Braulio’s inconsistencies on the stand, showing Braulio was slow in comprehension with a very low IQ, illiterate, and had a mental age of a six-year-old.
CA faulted the trial court for disregarding the expert opinion and for relying solely on the trial judge’s personal observation of the witness’ demeanor without conformity with relevant facts and expert findings.
Citing Article 1332 Civil Code, CA emphasized that when a contract is in a language not understood by a party, the person enforcing the contract must show that the terms were fully explained to that party.
CA further invoked Rule 92, Sec. 2 definition of "incompetent" to place Braulio in a category of persons unable to protect themselves and thus vulnerable to deceit and exploitation.
CA noted Miguel’s admission that he and Braulio received consideration but observed no explanation as to distribution; emphasized Miguel profited and gave only small amounts to Braulio.
CA concluded the contract was voidable under Article 1390 of the Civil Code (incapacity, vitiated consent by mistake, violence, intimidation, undue influence or fraud).

Trial Testimony and Recorded Evidence on Execution and Consent

Trial transcript excerpts show Braulio testified he was forced to sign at the house of "Sencio," did not know the nature of the document, was pushed aside by Sencio and Miguel, and that Atty. Balguma asked him to sign; he could not read or understand what he signed.
Trial court clarified Braulio’s confusion, forgetfulness or inability to comprehend at various points in proceedings.
Record shows Braulio only reached Grade III; he was i