Sales v. Court of Appeals
REITERATIONFacts
The Antecedents: Severo Sales owned an unregistered parcel of land in Pangasinan. He mortgaged this property in 1955. In 1958, he donated a portion of this land to his daughter, Esperanza Sales Bermudez. Subsequently, to prevent foreclosure of the mortgage, Sales requested a friend, Ernesto Gonzales, to pay his debt. Around this time, a deed of sale was executed by Severo Sales in favor of Leonilo Gonzales, son of Ernesto Gonzales, for the same property. Procedural History: Leonilo Gonzales later claimed ownership of the land in an estate proceeding and subsequently filed an illegal detainer case against Severo Sales. In response, Severo Sales and Esperanza Sales Bermudez filed a complaint for annulment of the deed of sale, alleging fraud, in the Court of First Instance of Tarlac. The Court of First Instance dismissed the annulment complaint, upholding the validity of the deed of sale. This decision was affirmed by the Court of Appeals, with an additional award of attorney's fees. The Petition: Petitioners Severo Sales and Esperanza Sales Bermudez seek review on certiorari of the Court of Appeals' decision. They primarily invoke Article 1332 of the Civil Code, arguing that respondent Leonilo Gonzales failed to prove that the terms of the deed of sale were fully explained to Severo Sales, who they claim is illiterate. Additionally, they contend that the earlier deed of donation in favor of Esperanza Sales Bermudez should prevail over the later deed of sale, as is purportedly the rule for unregistered lands.
Issue(s)
Whether the respondent Leonilo Gonzales failed to prove that the terms of the deed of sale were fully explained to petitioner Severo Sales, an alleged illiterate, as required by Article 1332 of the Civil Code. Whether the earlier deed of donation, though unregistered, should prevail over the registered deed of sale concerning unregistered land.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals, upholding the validity of the deed of sale and dismissing the petition. The Court ruled that the petitioners failed to sufficiently prove that Severo Sales was unable to read or understand the deed of sale, and that the respondent successfully established the validity of the transaction. The Court also held that the registered deed of sale, even if executed after the deed of donation, binds third parties and prevails over the unregistered donation.
Ratio Decidendi
On the issue of Article 1332 of the Civil Code: The Court held that for Article 1332 to apply, it must be convincingly established that the disadvantaged party is unable to read or that the contract is in a language not understood by him. The burden of proof rests on the party invoking the article, which is Severo Sales in this case. The records showed that Sales had previously entered into contracts written in English and that his signatures on the deed of sale exhibited intelligence. Furthermore, the notarial acknowledgment contained a statement that the contents were explained and voluntarily executed, and the notary public testified to the appearance and acknowledgment of Sales. The Court found the petitioners' denial of execution to be weak against the testimony of the notary public and the presumption of regularity of a notarized document. On the issue of the deed of donation versus the deed of sale: The Court clarified that while the deed of donation was valid between the donor and donee, it did not bind third parties like Leonilo Gonzales because it was not registered. The Court noted that Act 3344 requires express agreement for registration of unregistered lands, and the deed of donation was not registered. In contrast, the deed of sale was registered. The Court emphasized that for unregistered lands, registration of the deed of sale binds third parties ignorant of a previous transaction, and the issue of good faith is relevant for registered land, not unregistered land. The Court also pointed out that a tax declaration does not constitute constructive notice to the whole world, unlike a Torrens title.
Main Doctrine
For unregistered lands, the registration of a deed of sale, even if executed after a deed of donation, binds third parties who are ignorant of the prior transaction, provided the deed of sale is validly executed and registered. The presumption of regularity of a notarized deed of sale, coupled with its registration, prevails over an unregistered deed of donation, especially when the party invoking the donation fails to prove that the terms of the deed of sale were not explained to them as required by Article 1332 of the Civil Code.