Emilio v. Rapal
REITERATIONFacts
The Antecedents: Flordeliza Emilio (petitioner) obtained a grant from the National Housing Authority (NHA) for a parcel of land in Caloocan City, upon which she constructed a house. She leased a portion of this house to Bilma Rapal (respondent) since 1989, and an additional room in 1993. In early 1996, petitioner borrowed P10,000 from respondent and subsequently accepted an additional P60,000 loan, with the condition that respondent would not pay monthly rentals from February 1996 to December 1998, totaling P70,000, which would serve as advance rentals. Procedural History: Petitioner later signed a document, notarized by Atty. Patricio Balao-Ga, entitled "Sale and Transfer of Rights over a Portion of a Parcel of Land," selling 27 sq. m. of her lot and the house thereon to respondent for P90,000. Petitioner claimed she signed without understanding the contents and filed a complaint for reformation of document with the Regional Trial Court (RTC) of Caloocan on July 11, 2002. Respondent moved to dismiss, arguing the action was for annulment and had prescribed. The RTC denied the motion to dismiss, declared respondent in default for late filing of an Answer, and allowed petitioner to present evidence ex parte. By Decision of January 26, 2005, the RTC ruled in favor of petitioner, declaring the deed of sale null and void as it did not reflect the parties' true intention, which was a loan. On appeal, the Court of Appeals reversed the RTC decision on September 27, 2007, holding that while the action for reformation had not prescribed, petitioner failed to prove fraud or mistake in the execution of the deed. The Petition: Petitioner filed a motion for reconsideration with the Court of Appeals, attaching an affidavit from her daughter stating petitioner's limited education and inability to fully understand English, and that she did not sell the property. The appellate court denied this motion. Petitioner then filed the present petition for review on certiorari with the Supreme Court, arguing that the deed of sale should be reformed to reflect the true intention of the parties as a loan, not a sale. The Supreme Court, however, found that petitioner failed to discharge the burden of proof required for reformation, noting that notarized documents carry a presumption of regularity and that the submitted affidavit was hearsay and filed out of time. The Court also pointed to the lawyer-notary's certification that the deed was one of sale and petitioner's own pleadings and testimony in English as evidence against her claim of misunderstanding.
Issue(s)
Whether the Court of Appeals erred in reversing the RTC decision; specifically, whether the deed of sale should be reformed to reflect the true intention of the parties as a loan agreement. Whether petitioner sufficiently proved mistake, fraud, inequitable conduct, or accident in the execution of the deed of sale. Whether the affidavit executed by petitioner's daughter is admissible and carries significant weight as evidence, and whether the petitioner's claim of not understanding the deed holds merit.
Ruling
The petition is denied. The Court of Appeals' decision reversing the RTC ruling is affirmed.
Ratio Decidendi
On the reformation of instrument, burden of proof, and evidence: The Court reiterated that for an action for reformation of instrument to prosper, three requisites must concur: (1) there must have been a meeting of the minds of the parties to the contract; (2) the instrument does not express the true intention of the parties; and (3) the failure of the instrument to express the true intention of the parties is due to mistake, fraud, inequitable conduct, or accident. The burden of proof rests upon the party who insists that the contract should be reformed, which in this case was the petitioner. The petitioner failed to discharge the burden of proving that the deed of sale did not express the true intention of the parties or that it was due to mistake, fraud, inequitable conduct, or accident. Notarized documents, such as the deed in question, enjoy the presumption of regularity, which can only be overturned by clear, convincing, and more than merely preponderant evidence. The petitioner's claim that she did not understand the contents of the deed was not sufficiently substantiated. On the admissibility and weight of evidence: The affidavit executed by petitioner's daughter, submitted only during the motion for reconsideration, was deemed procedurally irregular and hearsay, as it contained "what I know" statements. Furthermore, the petitioner failed to present crucial witnesses like the PAO lawyer-notary public Atty. Balao-Ga or the witnesses to the deed. Atty. Balao-Ga's certification explicitly stated that the deed was one of sale, not a real estate mortgage, contradicting the petitioner's claim. On the petitioner's capacity and understanding: The appellate court correctly brushed aside petitioner's claim of not understanding the deed. The Court noted that petitioner's pleadings were in English, she testified in English, and her demand letters were also in English, all of which indicated her ability to understand and use the English language, contrary to her assertion of limited understanding.
Main Doctrine
For an action for reformation of instrument to prosper, there must be a meeting of the minds, the instrument must not express the true intention of the parties, and this failure must be due to mistake, fraud, inequitable conduct, or accident. The burden of proof rests upon the party seeking reformation, and notarized documents are presumed regular and can only be overturned by clear and convincing evidence.