Mariano v. Faustino
REITERATIONFacts
The Antecedents: Petitioner Julia Ang Eng Mariano claimed that private respondents, the spouses Faustino, executed a Deed of Sale dated September 29, 1987, in her favor, which led to the cancellation of TCT No. 129613 and the issuance of TCT No. 156493 in her name. The private respondents alleged they were tricked into signing over their property. The private respondents claimed they initially sought financing for a subdivision project and approached petitioner for a loan. They alleged they signed mortgage forms for P250,000.00 on October 28, 1986, and another P250,000.00 on January 15, 1987, but only received P150,000.00 for each loan. They further claimed petitioner convinced them to sign a deed of sale, stating it was necessary for a P1,000,000.00 bank loan, which would be processed with the property in her name. They later discovered no loan was secured and were asked to vacate their land. Procedural History: The trial court dismissed the private respondents' complaint for annulment of the deed of sale, relying on the deed's validity as the best evidence. The Court of Appeals reversed this decision, declaring the deed of sale null and void and ordering the cancellation of TCT No. 156493. The Petition: Petitioner Mariano sought reversal of the appellate court's decision, arguing that the trial court's findings of fact carried more weight and that parol evidence should not have been admitted to set aside a duly executed public document.
Issue(s)
Whether parol evidence is admissible to prove that a deed of sale is a sham transaction and not reflective of the true intent of the parties. Whether the Deed of Sale dated September 29, 1987, is null and void because it was a sham transaction and no consideration passed.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals, declaring the Deed of Sale dated September 29, 1987, null and void and ordering the cancellation of TCT No. 156493. The petition was dismissed for lack of merit.
Ratio Decidendi
On the admissibility of parol evidence: The Court held that parol evidence is admissible to show that a written agreement is a sham or that its validity is in dispute. Citing Section 7, Rule 130 of the Rules of Court, the Court explained that the rule making a writing the exclusive evidence of an agreement does not apply when the validity of the agreement is put in issue. The Court reiterated the principle that where the validity of an agreement is the issue, parol evidence may be introduced to establish illegality or fraud, as no instrument is so sacred when tainted with fraud as to place it beyond the scrutiny of extrinsic evidence. This principle was applied to the case where the private respondents alleged they were victims of fraud in executing the deed of sale. On the validity of the Deed of Sale: The Court found that the appellate court's reasoning, which concluded the deed of sale was a sham transaction, was more in accord with business common sense and ordinary experience. The Court noted inconsistencies in petitioner's claims regarding the consideration and the maturity of prior loans. Crucially, the Court highlighted petitioner's own testimony on cross-examination, where she admitted that the intention was merely to secure a P1,000,000.00 loan on the property in her name, and that whatever the private respondents owed her would be deducted from the loan proceeds. This admission, coupled with the fact that the P1,000,000.00 loan never materialized and the petitioner did not take steps to gain possession of the land, led the Court to conclude that the deed of sale was a sham transaction and no consideration passed. The Court found the private respondents' version corroborated by the petitioner's own admissions, establishing fraud.
Main Doctrine
Parol evidence is admissible to prove fraud or mistake in the execution of a written instrument when the validity of the agreement itself is put in issue.