G.R. No. 240947 - Josue vs. People

Case Summary (G.R. No. 240947)

Factual Background

The petitioners trace their title to three adjoining parcels in the Banilad Estate, Lahug, Cebu City, by virtue of a notarized Deed of Absolute Sale dated April 28, 1989, by which Carmen Ozamiz purportedly sold parcels to her nephews for One Million Forty Thousand Pesos (P1,040,000.00) while reserving usufruct for life. The parcels were transferred and titled in the names of the vendees and later partitioned so that the three petitioners held the respective parcels recorded under specific Transfer Certificates of Title. In January 1991 respondents instituted Special Proceeding No. 1250 in the RTC of Oroquieta City seeking guardianship over the person and properties of Carmen Ozamiz on grounds of mental and physical incapacity. Inventories filed by court-appointed guardians listed the Lahug property and a Notice of Lis Pendens was inscribed on the petitioners’ titles in August 1991. The petitioners filed Civil Case No. CEB-10766 in the RTC of Cebu City to remove the cloud on title.

Trial Court Proceedings

At pretrial, the issues were framed to include the propriety of resorting to quieting of title, the validity of the April 28, 1989 Deed of Absolute Sale, whether plaintiffs’ titles should be maintained or cancelled, and issues as to damages and attorneys’ fees. Trial on the merits proceeded with petitioners presenting the vendees and instrumental witnesses and the notary public who executed the deed. Respondents relied on testimony from relatives, household staff, a physician, an appraiser, and account personnel to show alleged incapacity and absence of payment. The RTC found as fact that the sale was validly entered into by Carmen Ozamiz while of sound mind, that usufruct was reserved, that capital gains tax was paid, that the Lahug property was included in the guardianship inventories but opposed by one guardian, and that powers of attorney and other instruments had been granted. The trial court rendered judgment on September 23, 1992, declaring the sale valid, ordering the respondents to recognize the plaintiffs’ titles, directing the Register of Deeds to correct a mis-titled one-third share, and ordering the expungement of the Notice of Lis Pendens.

Court of Appeals Ruling

On appeal the Court of Appeals reversed the RTC. The appellate court concluded that the April 28, 1989 Deed of Absolute Sale was a simulated contract because petitioners allegedly failed to prove actual payment of the consideration. The appellate court further found that the mental faculties of Carmen Ozamiz were seriously impaired at the time of the transaction. On that basis it declared the deed null and void, ordered cancellation of the certificates of title issued to the petitioners, and directed issuance of new titles in favor of Carmen Ozamiz or her estate. The Court of Appeals denied petitioners’ motions for reconsideration and for new trial and/or reception of evidence, including the request to receive testimony of Judge Teodorico Durias as newly discovered evidence.

Issues on Review in the Supreme Court

The petitioners advanced two principal grounds on certiorari: that the Court of Appeals gravely erred in ruling that the April 28, 1989 Deed of Absolute Sale was a simulated contract, and that the appellate court gravely erred in ruling that Carmen Ozamiz lacked mental capacity when she executed the deed. Sub-issues included the application of the presumption of regularity attaching to notarized instruments, the allocation of burden of proof on allegations of fraud or nonpayment, the failure to admit proffered checks, the alleged improper weight given to hearsay medical testimony, and the contention that Judge Durias’ testimony constituted newly discovered evidence warranting a new trial.

Standard for Newly Discovered Evidence and Application

The Supreme Court reviewed the requisites for a motion for new trial based on newly discovered evidence: that the evidence was discovered after trial, could not have been produced with reasonable diligence during trial, and was material and of such weight that its admission would probably alter the result. The Court found that the petitioners failed the reasonable diligence requirement. The name and potential testimony of Judge Durias had been known as early as pretrial and his testimony could have been elicited at trial. The Court therefore refused to treat Judge Durias’ testimony as newly discovered evidence and denied the ground for a new trial.

Standard of Review on Factual Findings

The Supreme Court reiterated that appellate courts’ factual findings are generally final, but that the exception arises where such findings are unsupported or are so glaringly erroneous as to constitute grave abuse of discretion. The Court applied that standard to the Court of Appeals’ determinations that the deed was simulated and that Carmen Ozamiz lacked capacity.

Analysis on Simulation and Burden of Proof

The Supreme Court examined the elements of simulation and found that the requisites were not shown. The Court emphasized that a notarized instrument carries the statutory presumption of regularity as to its due execution and thus enjoys evidentiary weight on its face. The Court held that whoever alleges fraud, simulation or invalidity of a notarized document bears the burden of proving such allegations by clear and convincing evidence, and that the burden to prove nonpayment of the consideration rested on respondents. The Court found that the appellate court erred in inferring simulation from the mere non-production of checks. The notarized deed itself acknowledged receipt of the stated consideration. The Court further found the testimonies relied upon by the Court of Appeals to show nonpayment to be inconsistent and unreliable, and therefore insufficient to overcome the presumption in favor of the notarized deed.

Analysis on Mental Capacity

The Supreme Court addressed the appellate court’s finding of mental incapacity. It held that advanced age or physical infirmity alone do not render a person incapacitated to contract. Mental incapacity exists only when such infirmity prevents a person from properly and intelligently managing property rights. The Court reviewed the witnesses’ statements and medical deposition and found them inadequate to establish that Carmen Ozamiz lacked capacity on April 28, 1989. The Court stressed the statutory p

Case Syllabus (G.R. No. 240947)

Parties and Procedural Posture

Petitioners were Mario J. Mendezona and Teresita M. Mendezona, Luis J. Mendezona and Maricar L. Mendezona, and Teresita Adad Vda. de Mendezona who filed Civil Case No. CEB-10766 for quieting of title in the Regional Trial Court of Cebu City, Branch 6.
Respondents were Julio H. Ozamiz, Roberto J. Montalvan, Jose Ma. Ozamiz, Carmen H. Ozamiz, Paz O. Montalvan, Ma. Teresa O.F. Zarraga, Carlos O. Fortich, Jose Luis O. Ros, Paulita O. Rodriguez, and Lourdes O. Lon who opposed the suit and filed Special Proceeding No. 1250 in the RTC of Oroquieta City for guardianship over Carmen Ozamiz.
The RTC rendered judgment in favor of the Petitioners on September 23, 1992 and ordered expungement of the notice of lis pendens, after which the Court of Appeals reversed on July 27, 1998 in CA-G.R. CV No. 39752.
The Petitioners filed a motion for reconsideration and a motion for new trial to receive additional evidence which the Court of Appeals denied in its Resolution dated May 19, 2000.
The instant petition for review on certiorari sought review of the Court of Appeals Decision and Resolution and invoked reversal of the Court of Appeals and reinstatement of the RTC decision.

Key Factual Allegations

The Petitioners alleged ownership of three contiguous parcels in Banilad Estate, Lahug, Cebu City, with areas of approximately three thousand four hundred sixty-two, three thousand four hundred sixty-six, and three thousand four hundred sixty-eight square meters covered by Transfer Certificate of Title Nos. 116834, 116835, and 116836.
The ownership of the parcels traced to a Deed of Absolute Sale dated April 28, 1989 executed by Carmen Ozamiz in favor of the petitioners for One Million Forty Thousand Pesos (P1,040,000.00) with reservation of usufruct during the vendor's lifetime.
A petition for guardianship over Carmen Ozamiz was filed on January 15, 1991 in Special Proceeding No. 1250 alleging mental incapacity, and the court-appointed joint guardians filed inventories and accounts listing the Lahug property and caused inscription of a notice of lis pendens on the titles on August 13, 1991.
The Petitioners filed Civil Case No. CEB-10766 to remove the cloud of the lis pendens and to quiet their titles, and the respondents countered alleging simulation of the sale, nonpayment of consideration, and mental incapacity of Carmen Ozamiz at the time of the sale.

Issues Presented

Whether the Deed of Absolute Sale dated April 28, 1989 was a simulated contract and thus void.
Whether the consideration for the sale was actually paid and whether the petitioners bore the burden of proving payment.
Whether Carmen Ozamiz possessed the requisite mental capacity to execute the Deed of Absolute Sale on April 28, 1989.
Whether the testimony of Judge Teodorico Durias constituted newly discovered evidence warranting a new trial.
Whether the Court of Appeals gravely erred in reversing the RTC judgment and ordering cancellation of the petitioners’ titles.

Trial Court Findings

The trial court found that the Deed of Absolute Sale dated April 28, 1989 was validly executed with reservation of usufruct and that the sale consideration was P1,040,000.00.
The trial court found that Transfer Certificates of Title were issued in favor of the vendees and that a partition agreement and annotation of the usufruct reservation were executed leading to final titling in the plaintiffs’ names.
The trial court found that the capital gains tax was paid on May 5, 1989 and that the Bureau of Internal Revenue issued a certificate authorizing transfer to the vendees.
The trial court found that a guardianship petition and subsequent inventories and accounts listed the Lahug property and that a Notice of