NATURE
Petition for review on certiorari assailing the Decision of the Court of Appeals which set aside the Decision of the Regional Trial Court (RTC) of Manila, Branch 28, in Civil Case No. 87-39891 for annulment of a Deed of Absolute Sale.
FACTS
- Respondent Braulio Katipunan, Jr. is the owner of a 203 square meter lot and a five-door apartment constructed thereon located at 385-F Matienza St., San Miguel, Manila. The lot is registered in his name under TCT No. 109193 of the Registry of Deeds of Manila. The apartment units are occupied by lessees.
- On December 29, 1985, respondent, assisted by his brother, petitioner Miguel Katipunan, entered into a Deed of Absolute Sale with brothers Edgardo Balguma and Leopoldo Balguma, Jr. (co-petitioners), represented by their father Atty.
Leopoldo Balguma, Sr., involving the subject property for a consideration of P187,000.00. Consequently, respondent’s title to the property was cancelled and in lieu thereof, TCT No. 168394 was registered and issued in the names of the Balguma brothers. In January, 1986, Atty. Balguma, then still alive, started collecting rentals from the lessees of the apartments.
- On March 10, 1987, respondent filed with the RTC of Manila, Branch 21, a complaint for annulment of the Deed of Absolute Sale, docketed as Civil Case No. 87-39891.He averred that his brother Miguel, Atty. Balguma and Inocencio Valdez (defendants therein, now petitioners) convinced him to work abroad. They even brought him to the NBI and other government offices for the purpose of securing clearances and other documents which later turned out to be falsified. Through insidious words and machinations, they made him sign a document purportedly a contract of employment, which document turned out to be a Deed of Absolute Sale. By virtue of the said sale, brothers Edgardo and Leopoldo, Jr. (co-defendants), were able to register the title to the property in their names. Respondent further alleged that he did not receive the consideration stated in the contract. He was shocked when his sister Agueda Katipunan-Savellano told him that the Balguma brothers sent a letter to the lessees of the apartment informing them that they are the new owners. Finally, he claimed that the defendants, now petitioners, with evident bad faith, conspired with one another in taking advantage of his ignorance, he being only a third grader.
- In their answer, petitioners denied the allegations in the complaint, alleging that respondent was aware of the contents of the Deed of Absolute Sale and that he received the consideration involved; that he also knew that the Balguma brothers have been collecting the rentals since December, 1985 but that he has not objected or confronted them; and that he filed the complaint because his sister, Agueda Savellano, urged him to do so.
- Twice respondent moved to dismiss his complaint (which were granted) on the grounds that he was actually instigated by his sister to file the same; and that the parties have reached an amicable settlement after Atty. Balguma, Sr. paid him P2,500.00 as full satisfaction of his claim. In granting his motions for reconsideration, the trial court was convinced that respondent did not sign the motions to dismiss voluntarily because of his poor comprehension, as shown by the medical report of Dr. Annette Revilla, a Resident Psychiatrist at the Philippine General Hospital.
- The trial court noted that respondent was not assisted by counsel in signing the said motions, thus it is possible that he did not understand the consequences of his action.
- The trial court set the case for pre-trial. The court likewise granted respondent’s motion to appoint Agueda Savellano as his guardian ad litem.
- The trial court dismissed the complaint, holding that respondent failed to prove his causes of action since he admitted that: (1) he obtained loans from the Balgumas; (2) he signed the Deed of Absolute Sale; and (3) he acknowledged selling the property and that he stopped collecting the rentals.
- Court of Appeals reversed
ISSUE
WON the consent of Braulio Katipunan, Jr., in the sale of his property was vitiated rendering the Deed of Absolute sale voidable
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Prof. Labitag
HELD
YES
- A contract of sale is born from the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. This meeting of the minds speaks of the intent of the parties in entering into the contract respecting the subject matter and the consideration thereof. Thus, the elements of a contract of sale are consent, object, and price in money or its equivalent. Under Article 1330 of the Civil Code, consent may be vitiated by any of the following: (a) mistake, (2) violence, (3) intimidation, (4) undue influence, and (5) fraud. The presence of any of these vices renders the contract voidable.
Respondent signed the deed without the remotest idea of what it was.The circumstances surrounding the execution of the contract manifest a vitiated consent on the part of respondent. Undue influence was exerted upon him by his brother Miguel and Inocencio Valdez (petitioners) and Atty. Balguma. It was his brother Miguel who negotiated with Atty. Balguma. However, they did not explain to him the nature and contents of the document. Worse, they deprived him of a reasonable freedom of choice. It bears stressing that he reached only grade three. Thus, it was impossible for him to understand the contents of the contract written in English and embellished in legal jargon. His lack of education, coupled with his mental affliction, placed him not only at a hopelessly disadvantageous position vis- à-vis petitioners to enter into a contract, but virtually rendered him incapable of giving rational consent. To be sure, his ignorance and weakness made him most vulnerable to the deceitful cajoling and intimidation of petitioners.
- A contract where one of the parties is incapable of giving consent or where consent is vitiated by mistake, fraud, or intimidation is not void ab initio but only voidable and is binding upon the parties unless annulled by proper Court action. The effect of annulment is to restore the parties to the status quo ante insofar as legally and equitably possible-- this much is dictated by Article 1398 of the Civil Code. As an exception however to the principle of mutual restitution, Article 1399 provides that when the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution, except when he has been benefited by the things or price received by him. Thus, since the Deed of Absolute Sale between respondent and the Balguma brothers is voidable and hereby annulled, then the restitution of the property and its fruits to respondent is just and proper. Petitioners should turn over to respondent all the amounts they received starting January, 1986 up to the time the property shall have been returned to the latter.
- Article 24 of the Civil Code enjoins courts to be vigilant for the protection of a party to a contract who is placed at a disadvantage on account of his ignorance, mental weakness or other handicap, like respondent herein. We give substance to this mandate.
MARTINEZ V HSBC
;
19, 1910
MORELAND February
NATUREAn action to annul a contract on the ground that plaintiff's consent thereto was obtained under duress
FACTS
- Under the contract, she agreed to a conveyance of several properties to Aldecoa & Co. and the Hongkong and Shanghai Bank as settlement of their claims against her and her husband who in order to escape criminal charges had escaped to Macao, a territory no covered by any extradition treaty.
- It was established at the trial that during the period of negotiation, representations were made to her by the defendants and concurred in by her lawyers, that if she assented to the requirements of the defendants, the civil suit against herself and her husband would be dismissed and the criminal charges against the latter withdrawn; but if she refused, her husband must either spend the rest of his life in Macao or be criminally prosecuted.
ISSUE
WON there was duress, which would invalidate the contract
HELD
- In order that this contract can be annulled it must be shown that the plaintiff never gave her consent to the execution thereof. It is however necessary to distinguish between real duress and the motive which is present when one gives his consent reluctantly. A contract is valid even though one of the parties entered into it against his wishes and desired or even against his better judgment. Contracts are also valid even though they are entered into by one of the parties without hope of advantage or profit.
- A contract whereby reparation is made by one party for injuries which he has willfully inflicted upon another is one which from its nature is entered into reluctantly by the party making the reparation. He is confronted with a situation in which he finds the necessity of making the reparation or of taking the consequences, civil or criminal, of his unlawful acts. He makes the contract of reparation with extreme reluctance and only by the compelling force of the punishment threatened. Nevertheless, such contract is binding and enforceable. - It is disputed that the attorneys for the plaintiff in this case advised her that, from the facts which they had before them, facts of which she was fully informed, her husband had been guilty of embezzlement and misappropriation in the management of the business of Aldecoa & Co. and that, in their judgment, if prosecuted therefore, he would be convicted. In other words, under the advice of her counsel, the situation was so presented to her that it was evident that in signng the agreement, she had all to gain and nothing tolose, whereas in refusing to sign said agreement, she had all to lose and nothing to gain. In the one case, she would lose her property to save her husband. In the other, she would lose her property and her husband, too. The argument this presented to her by her attorneys addressed itself to judgment and not to fear. If appealed to reason and not to passion. It asked her to be moved by common sense and not by love of family. It spoke to her own interests as much as to those of her husband. The argument went ot her financial interests as well as to those of the defendants. It spoke to her business judgment as well as to her wifely affections.
- From the opinions of her attorneys as they were presented to her upon facts assumed by all to be true, the SC did not see how she could reasonably have reached a conclusion other than that which she did reach. It is of no consequence here whether, as a matter of law, she would have been deprived of her alleged interests in the properties mentioned in the manner described and advised by her attorneys. The important thing is that she believed and accepted their judgment and acted upon it. The question is not did she make a mistake; but did she consent;
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Prof. Labitag
not was she wrongly advised, but was she coerced; not was she wise, but was she under duress.
Disposition
- From the whole case SC was of the opinion that the finding of the court below that the plaintiff executed the contract in suit of her own free will and choice and not from duress is fully sustained by the evidence.
- The judgment of the court below was affirmed with cost against the appellant.
HILL V VELOSO
;
24, 1915
ARELLANO July
NATURE
Appeal from a judgment of the CFI absolving defendants from the complaint
FACTS
- Defendant Veloso and Domingo Franco jointly and severally executed a
promissory note in the amount of P6,319 on behalf of Michael & Co. for goods to be received by the former’s company, La Cooperativa Filipina
- Goods were proven to have been delivered to La Cooperativa - P2,000 was already paid.
- Promissory note was indorsed to Plaintiff Hill.
- Hill brought the present suit to recover the P4,319 balance.
- Veloso alleged that she was deceived by Franco into signing a blank sheet of paper by saying that it was for a promissory note to be executed by Veloso for P8,000 for the benefit of the minor children of one Ricablanca, mother and former guardian of said children
- The new guardian is one Levering, to whom Veloso thought the obligation was due as guardian of the estate of the minor children.
- Upon Franco’s death, Veloso alleged that she discovered that the former apparently used her signature to execute the contract with Michael & Co, now indorsed to Hill.
- Therefore, she alleges that she has no transaction with Michael & Co. nor with the plaintiff, and as they had not received any kind of goods whatever from said firm. - During the pendency of the suit initiated by Hill, Levering commenced proceedings to recover the P8,000.
- Veloso answered that her debt was to Ricablanca in her own right, and not in her capacity as guardian of her minor children.
ISSUE
WON the promissory note is binding on the defendants
HELD
NO
Ratio There is no other signed document than the promissory note presented with
the intention, on its being signed, of securing the payment of the goods sold to the La Cooperativa. And the facts constituting the consideration for the contract contained in the promissory note are fully proven.
Reasoning
- With regard to the P8,000, what is natural and logical is that Veloso would have refused to execute her obligation to Levering in the first instance (i.e. when she
signed the blank sheet of paper thinking it was for the P8,000) as she did reject it in 1912 saying she did not consider herself in debt to the minors, but to their mother. - It is of no importance whether La Cooperativa exclusively belonged to Veloso or Franco, the obligation being joint.
- Deceit alleged could not annul the consent of the contracting parties to the promissory note, nor exempt Veloso from the obligation incurred.
- There is deceit when by words or insidious machinations on the part of one of the contracting parties, the other is induced to execute a contract which without them he would not have made.
- Franco is not one contracting party with regard to Veloso as the other. They are both but one single contracting party in a relation with or against Michael & Co. - Franco could be as a third person inducing deceit. But, there is no reason for making one of the parties suffer for the consequences of the act of a third person in whom the other contracting party may have reposed an imprudent confidence. - It has been fully proven that the goods, the consideration for the debt, were received by La Cooperativa. It was likewise proven that La Cooperativa belonged to the defendant, and that the goods came from Michael & Co.
Disposition Judgment appealed from is reversed against defendant Veloso
ordering the payment of the P4,319 with the stipulated interest.