Title
Spouses Reyes vs. Heirs of Malance
Case
G.R. No. 219071
Decision Date
Aug 24, 2016
Benjamin Malance's heirs contested a loan agreement (Kasulatan) with the Magtalas sisters, alleging forgery and incapacity. SC upheld the contract as antichresis, ruling the Magtalas sisters could retain land until the P600,000 loan was repaid, with no interest due. Annual accounting of land yield required.

Case Summary (G.R. No. L-59743)

Petitioners

The Magtalas sisters claim they loaned P600,000 to Benjamin, that the Kasulatan was validly notarized, that they acquired rights to the fruits of the land under a contract of antichresis and had possessed and cultivated the land pursuant to that agreement, and that any recovery by the Malance heirs requires payment of the unpaid loan.

Respondents

The Malance heirs are successors-in-interest to Benjamin. They questioned the Kasulatan’s authenticity (alleging forgery and incapacity of Benjamin) and sought recovery of possession, nullity of the Kasulatan, and damages.

Key Dates and Procedural Posture

  • Kasulatan dated June 26, 2006; Benjamin died September 29, 2006.
  • Complaint filed December 1, 2006; amended December 16, 2006.
  • RTC Decision (Branch 9) dismissed Malance heirs’ complaint and upheld the Kasulatan (Aug. 31, 2010).
  • CA Decision affirmed the RTC but computed outstanding loan as P4,320.84 and ordered turnover upon payment of that amount (July 23, 2013).
  • CA denied reconsideration (June 18, 2015).
  • Petition for review to the Supreme Court followed; the Supreme Court rendered decision modifying the CA ruling (Aug. 24, 2016).

Applicable Law and Rules (1987 Constitution applies)

Relevant legal sources applied by the courts: the 1987 Philippine Constitution (applicable by virtue of the decision date), Civil Code provisions on antichresis (Arts. 2132, 2136, 2137), Section 20, Rule 132 of the Rules of Court (admission of private documents), Rule 45 principles (scope of certiorari and questions of law), and the 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC), particularly Section 12, Rule II (competent evidence of identity). Precedents and authorities cited by the Court include established rules on notarized documents, forgery, and antichresis.

Facts of the Transaction

Benjamin, owner of the subject farmland, allegedly received P600,000 from the Magtalas sisters under a written Kasulatan in which the parties agreed that the sisters would have the right to the fruits of the land for six years or until the loan was fully paid. After Benjamin’s death, the Malance heirs found the Magtalas parties cultivating the land under the Kasulatan. The Malance heirs challenged the Kasulatan as simulated, asserting Benjamin was mentally incapacitated when it was executed and claiming forgery of his signature. The Magtalas parties maintained the Kasulatan was executed before a notary when Benjamin was of sound mind, and that they had been in possession and cultivating the land pursuant to the agreement.

RTC Decision

The RTC dismissed the Malance heirs’ complaint for failure to prove forgery and upheld the Kasulatan’s validity on the ground that it was notarized and therefore presumed regular. The RTC treated the Kasulatan as creating a contract of antichresis that entitled the Magtalas sisters to retain enjoyment of the subject land until the debt was paid.

Court of Appeals Decision

The CA affirmed the RTC’s finding on the validity of the Kasulatan and characterized the instrument as an antichresis contract. However, the CA concluded that only P218,106.84 of the P600,000 had actually been received and applied to Benjamin’s expenses (hospitalization, funeral, memorial lot), with the balance allegedly held by the Magtalas sisters’ father. Using evidence on the land’s average yield (107 cavans/year at P600/cavan) and an assumed 50% cost ratio, the CA computed net annual income and determined that after 6.66 years of cultivation the outstanding loan was only P4,320.84, and directed turnover of possession upon payment of that amount.

Issues Presented to the Supreme Court

(1) Whether the CA erred in treating P218,106.84 as the only proceeds actually received from the P600,000 loan; and (2) whether legal interest is due despite the absence of an express stipulation.

Standard of Review and Exceptions Under Rule 45

The Supreme Court reiterated that certiorari under Rule 45 is limited to questions of law and generally will not reweigh factual findings, but recognized exceptions permitting reexamination where inferences from facts are manifestly mistaken or where findings are grounded on clear errors. The Court found such exception applicable here because the CA’s inference regarding the amount actually received and applied was manifestly mistaken given the totality of the record.

Notarization and Presumption of Regularity

The Court analyzed the notarization of the Kasulatan and emphasized that notarized documents enjoy a presumption of regularity unless notarization itself is shown to be defective. The Kasulatan’s notarization lacked competent evidence of identity as required by the 2004 Rules on Notarial Practice; the instrument reflected only a Community Tax Certificate number rather than an identification card containing photograph and signature. Such a deficiency renders the notarization irregular, stripping the document of its full public-document character and lowering the evidentiary standard from clear and convincing evidence to preponderance of evidence under Section 20, Rule 132.

Authentication and Proof of Execution

Once the heightened presumption attached to an otherwise regular notarization is dispensed with, the burden shifted to petitioners to prove due execution and genuineness of Benjamin’s signature by preponderance of evidence. The Court found petitioners discharged that burden: the notary (Atty. Cenon Navarro) testified that he prepared the Kasulatan according to the parties’ agreement, witnessed the exchange of money, and identified Benjamin in court as the person in the Senior Citizen ID when presented; petitioners also established Benjamin’s receipt of the P600,000. The Malance heirs’ testimony alleging forgery was uncorroborated and inconsistent with their own prior acknowledgment that Benjamin had a Senior Citizen ID. The Court therefore concluded the Kasulatan was authentic and Benjamin did receive the P600,000.

Nature of the Kasulatan — Contract of Antichresis

The Court concurred with the RTC and CA that the Kasulatan operated as a contract of antichresis within the meaning of Civil Code Art. 2132. The instrument expressly authorized the creditors (Magtalas sisters) to receive the fruits of the land and to apply them against the debt. The contemporaneous and subsequent conduct of the parties (including actual assumption of cultivation and harvesting by the Magtalas parties due to Benjamin’s incapacity) confirmed that the parties intended the lenders to take possession and apply fruits to the indebtedness. As antichretic creditors, the Magtalas sisters are entitled to retain enjoyment of the land until the debt is fully paid (Art. 2136).

Computation of Payments and Outstanding Balance

The Court rejected the CA’s conclusion that onl

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