Pan Pacific Industrial Sales Co v. Court Of Appeals

TINGA, J.:

Petitioner Pan Pacific Industrial Sales Co., Inc. (Pan Pacific) filed the instant Petition for Review on Certiorari1 assailing the Decision2 in toto the Decision3 The case arose when on 22 December 1988, private respondent Nicolas Capistrano (Capistrano) filed an Amended Complaint4 before the RTC of Manila against Severo C. Cruz III (Cruz), his spouse Lourdes Yap Miranda, and Atty. Alicia Guanzon,5 pleading two causes of action.6 The first cause of action is for the nullification, or alternatively, for the "rescission," of a Deed of Absolute Sale7 covering a parcel of land that Capistrano owned, located at 1821 (Int.), Otis Street (now Paz Guanzon Street), Paco, Manila, and covered by Transfer Certificate of Title (TCT) No. 143599 to Cruz.8 This is the subject lot. Capistrano denied having executed the deed.

The second cause of action is for the rescission of another agreement with an alternative prayer for specific performance. Capistrano alleged that he agreed to sell another parcel of land in the same vicinity to Cruz. According to Capistrano, Cruz only paid ₱100,000.00 of the stipulated purchase price, thereby leaving ₱250,000.00 still unpaid.9 The operative facts follow.

On 10 September 1982, Capistrano executed a Special Power of Attorney10 authorizing Cruz to mortgage the subject lot in favor of Associated Bank (the Bank) as security for the latter's loan accommodation.11 Shortly, by virtue of the Special Power of Attorney, Cruz obtained a loan in the amount of ₱500,000.00 from the Bank. Thus, he executed a Real Estate Mortgage12 over the subject lot in favor of the Bank.13 Capistrano and Cruz then executed a letter-agreement dated 23 September 1982 whereby Cruz agreed to buy the subject lot for the price of ₱350,000.00, of which ₱200,000.00 would be paid out of the loan secured by Cruz, and the balance of ₱150,000.00 in eight (8) quarterly payments of ₱18,750.00 within two (2) years from 30 October 1982, without need of demand and with interest at 18% in case of default.14 On 15 March 1983, Capistrano executed the Deed of Absolute Sale15 16 Following the execution of the deed of sale, Cruz continued payments to Capistrano for the subject lot.

Sometime in October 1985, Capistrano delivered to Cruz a Statement of Account17 Thus, in May 1987, with the mortgage on the subject lot then being in danger of foreclosure by the Bank, Cruz filed a case with the RTC of Manila, Branch 11, docketed as Civil Case No. 87-40647, to enjoin the foreclosure. Cruz impleaded Capistrano and his spouse Josefa Borromeo Capistrano as defendants, the title to the subject lot not having been transferred yet to his name.18 Cruz also devised a way to save the subject lot from foreclosure by seeking a buyer for it and eventually arranging for the buyer to pay the mortgage debt. Towards this end, Cruz succeeded in engaging Pan Pacific.

Thus, on 22 September 1988, Pan Pacific paid off Cruz's debt in the amount of ₱1,180,000.00.19 Consequently, on 23 September 1988, the Bank executed a Cancellation of Real Estate Mortgage.20 On even date, Cruz executed a Deed of Absolute Sale21 over the subject lot Surprisingly, on 20 October 1988, Capistrano filed a Revocation of Special Power of Attorney22 23 Before long, in November 1988, Capistrano filed the precursory complaint Pan Pacific, which bought the subject lot from the Cruz spouses, was allowed to intervene in the proceedings and joined Cruz, et al. in resisting the complaint insofar as the first cause of action on the subject lot is concerned.24 Then on 24 April 1992, a Decision WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, Severo E. (sic) Cruz III, his spouse, Lourdes Miranda Cruz, and the intervenor, Pan Pacific Industrial Sales Co., Inc., as follows: 1.

Declaring the Letter-Agreement, dated September 23, 1982, Exhibit "C", as resolved and/or rescinded; 2. Declaring both the Deed of Absolute Sale, Exhibit "H", and the document entitled, "Marital Consent", Exhibit "K", null and void; 3. Declaring the Deed of Absolute Sale executed by the spouses Severo C. Cruz, III and Lourdes Miranda Cruz in favor of the intervenor, Pan Pacific Industrial Sales, Co., Inc., Exhibit "8", null and void; 4.

Making the writ of preliminary injunction issued by this Court on November 23, 1988, permanent; 5. Ordering the intervenor, thru its legal counsel and corporate secretary, Atty. Senen S. Burgos, who has possession of the owner's copy of TCT No. 143599 of the Register of Deeds of Manila, in the name of the plaintiff, to surrender the same to this Court within ten days from finality of the decision for turn over to the plaintiff; 6. Ordering Defendant Register of Deeds of Manila to reject and not give due course to the documents submitted to it, which have for their purpose the transfer of the real estate property covered by TCT No. 143599 from the name of the plaintiff to Defendant Cruz and/or to the intervenor; and 7.

Ordering the spouses Severo C. Cruz, III and Lourdes Miranda Cruz to pay the plaintiff the sum of ₱69,561.00 as net amount due to the latter as per the computation in the end-part of this decision. The counterclaims of both Severo C. Cruz, III and spouse, and of the intervenor, Pan Pacific Industrial Sales Co., Inc., are both dismissed, for lack of merit. Double costs against the defendants-Cruz spouses.

SO ORDERED.25 To arrive at the conclusion that the first Deed of Absolute Sale and the Marital Consent Pan Pacific and the Cruz spouses26 In assailing this finding, Pan Pacific and the Cruz spouses27 The Court of Appeals affirmed the RTC Decision. Concerning the subject lot, it held that while a notarial document cannot be disproved by the mere denial of the signer, the denial in this case should be taken together with the other circumstances of the case which in sum constitute clear and convincing evidence sufficient to overcome the presumption of regularity of the documents.28 The Cruz spouses did not elevate the Court of Appeals' Decision to this Court. Thus, the RTC Decision became final as to them.

Pan Pacific, however, filed the instant Petition solely concerning the first cause of action in the Amended Complaint . Pan Pacific contends that the genuineness and due execution of the Deed of Absolute Sale29 Finally, it points out that Capistrano cannot contest the sale of the subject lot to Cruz, as the sale had already been consummated.30 For his part, Capistrano posits in his Memorandum31 that Pan Pacific is not an innocent purchaser for value and in good faith as Cruz was never the registered owner of the subject lot. Pan Pacific was bound at its peril to investigate the right of Cruz to transfer the property to it.

Moreover, Capistrano asserts that the legal presumption of regularity of public documents does not obtain in this case as the documents in question were not properly notarized. He adds that the parties never appeared before the notary public as in fact the deed Furthermore, Capistrano maintains that his spouse's signature on the Marital Consent1avvphil.net The petition is imbued with merit.

Pan Pacific disputes the common conclusion reached by the courts below that the presumption of regularity of the Deed of Absolute Sale32 Deeply embedded in our jurisprudence is the rule that notarial documents celebrated with all the legal requisites under the safeguard of a notarial certificate is evidence of a high character and to overcome its recitals, it is incumbent upon the party challenging it to prove his claim with clear, convincing and more than merely preponderant evidence.33 A notarized document carries the evidentiary weight conferred upon it with respect to its due execution, and it has in its favor the presumption of regularity which may only be rebutted by evidence so clear, strong and convincing as to exclude all controversy as to the falsity of the certificate. Absent such, the presumption must be upheld. The burden of proof to overcome the presumption of due execution of a notarial document lies on the one contesting the same.

Furthermore, an allegation of forgery must be proved by clear and convincing evidence, and whoever alleges it has the burden of proving the same.34 Evidently, as he impugns the genuineness of the documents, Capistrano has the burden of making out a clear-cut case that the documents are bogus. The courts below both concluded that Capistrano had discharged this burden. However, this Court does not share the conclusion.

Indeed, Capistrano failed to present evidence of the forgery that is enough to overcome the presumption of authenticity. To support the allegation of the spuriousness of his signature on the Deed of Absolute Sale Sy Tiangco v. Pablo and Apao, ,35 "that the execution of a document that has been ratified before a notary public cannot be disproved by the mere denial of the alleged signer." The case of Chilianchin v. Coquinco 36 also finds application in this regard wherein we stated that: As the lower court correctly said, the plaintiff did not even present a sample of his authentic signature to support his contention that it is not his the (sic) signature appearing in said document.

He did not call a handwriting expert to prove his assertion. His attorney, at the beginning of the trial, made it of record that if the defendant present an expert in hand-writing to show that the signature in question is genuine, the plaintiff will also present an expert to the contrary, as if it were incumbent upon the defendant to show that the signature of the plaintiff in Exhibit A is genuine . .

. .37 Corollarily, he who disavows the authenticity of his signature on a public document bears the responsibility to present evidence to that effect. Mere disclaimer is not sufficient.

At the very least, he should present corroborating witnesses to prove his assertion. At best, he should present an expert witness. On the other hand, the Court cannot understand why an unfavorable inference arose not from Capistrano's but from Cruz's failure to have the documents examined by an expert witness of the National Bureau Investigation (NBI) and to present the notary public as witness.

Specifically, the courts below took Cruz's inability to obtain the NBI examination of the documents as he had somehow undertaken as an indication that the documents are counterfeit.38 The courts below may have forgotten that on Capistrano lies the burden to prove with clear and convincing evidence that the notarized documents are spurious. Nothing in law or jurisprudence reposes on Cruz the obligation to prove that the documents are genuine and duly executed. Hence it is not incumbent upon Cruz to call the notary public or an expert witness.

In contrast, Capistrano should have called the expert witness, the notary public himself or the witnesses to the document to prove his contention that he never signed the deed of sale , that its subscribing witnesses never saw him sign the same, and that he never appeared before the notary public before whom the acknowledgment was made.

In fact, there is no evidence that the notarization of the documents did not take place. All that Capistrano could say on this matter was that he had not seen Benedicto, the notary public.39 The assertion that the parties to the deed40 That is not a reasonable deduction to make as it is plainly conjectural. No conclusion can be derived therefrom which could destroy the genuineness of the deed.

The testimony means what it declares: that the copy of the deed was dropped at the house of Cruz's mother. That is all. Nor can the Court lend credence to the thinking of the courts below that since Cruz had a balance of ₱132,061.00 owing to Capistrano as of the date of the deed of sale, the latter could not have possibly executed the deed.

This is plain guesswork. From the existence of Cruz's outstanding balance, the non-existence of the deed of sale does not necessarily follow. Indeed, a vendor may agree to a deed of absolute sale even before full payment of the purchase price.

Article 1478 of the Civil Code states that "the parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price." A sensu contrario , the parties may likewise stipulate that the ownership of the property may pass even if the purchaser has not fully paid the price. The courts below also assigned an adverse connotation to Cruz's impleading of the Capistrano spouses as party-defendants in the action against the Bank to enjoin the foreclosure of the mortgage on the subject lot.

Cruz's move is congruent with both his strong desire to protect his interest in the subject lot and the reality that there was an existing deed of sale in his favor. Precisely, his interest in the lot is borne out and had arisen from the deed of sale. As purchaser of the lot, he had to avert the foreclosure of the mortgage thereon.

And to ensure against the dismissal of the action for failure to join a real party-in-interest, he had to implead Capistrano in whose name the title to the subject lot was registered still. Apart from Capistrano's abject failure to overcome the presumption of regularity and genuineness with which the Deed of Absolute Sale First is the letter-agreement41 dated 23 September 1982 made and signed by Capistrano in favor of Cruz, which the latter also signed subsequently, stating that Cruz will, as he did, purchase the subject lot for ₱350,000.00 to be paid according to the terms provided therein. Second is the Statement of Account42 Third is Capistrano's Amended Complaint43 -evidently, a self-defeating recognition of the contract.

In asking for "rescission," Capistrano obviously was invoking Article 1191 of the Civil Code which provides that the "power to rescind," which really means to resolve or cancel, is implied in reciprocal obligations "in case one of the obligors should not comply with what is incumbent upon him."

When a party asks for the resolution or cancellation of a contract it is implied that he recognizes its existence. A non-existent contract need not be cancelled. These are unmistakable written admissions of Capistrano that he really intended to sell the subject lot to Cruz and that he received payments for it from the latter as late as the year 1985.

It is thus a little baffling why in 1988, he decided to disown the Deed of Absolute Sale. The most plausible explanation for his sudden change of mind would be his belated realization that he parted with the subject lot for too small an amount (₱350,000.00), compared to the price pegged by Cruz (₱1,800,000.00) in the sale to Pan Pacific. Now, to the Marital Consent.

The fact that the document . In this instance, a jurat suffices as the document only embodies the manifestation of the spouse's consent,44 a mere appendage to the main document.

The use of a jurat, instead of an acknowledgement does not elevate the Marital Consent to the level of a public document but instead consigns it to the status of a private writing.45 The lack of acknowledgment, however, does not render a deed invalid. The necessity of a public document for contracts which transmit or extinguish real rights over immovable property, as mandated by Article 1358 of the Civil Code, is only for convenience; it is not essential for validity or enforceability.46 From the perspective of the law on evidence, however, the presumption of regularity does not hold true with respect to the Marital Consent which is a private writing. It is subject to the requirement of proof under Section 20, Rule 132 of the Rules of Court which states: Section 20.

Proof of private document. - Before any private document offered as authentic is received in evidence, its due execution and authenticity must be proved either: (a) By anyone who saw the document executed or written; or (b) By evidence of the genuineness of the signature or handwriting of the maker. Any other private document need only be identified as that which is claimed to be.

The requirement of proof of the authenticity of the Marital Consent47 Viewed against this positive declaration, Capistrano's negative and self-serving assertions that his wife's signature on the document was forged because "(i)t is too beautiful" and that his wife could not have executed the Marital Consent That the Marital Consent With respect to whatever balance Cruz may still owe to Capistrano, the Court believes that this is not a concern of Pan Pacific as the latter is not a party to the Deed of Absolute Sale1avvphil.net WHEREFORE, the Petition is GRANTED. The Decision dated 4 June 1996 of the Court of Appeals in CA-G.R. CV No. 41112 is REVERSED and SET ASIDE.

Respondent Nicolas Capistrano is ordered to surrender the owner's duplicate certificate of Transfer of Certificate of Title No. 143599 to the Register of Deeds of Manila to enable the issuance of a new title over the subject lot in the name of petitioner Pan Pacific Industrial Sales, Inc. Costs against respondent Nicolas Capistrano. SO ORDERED. DANTE O. TINGA Associate Justice WE CONCUR: LEONARDO A. QUISUMBING Associate Justice Chairman ANTONIO T. CARPIO Associate Justice CONCHITA CARPIO-MORALES Asscociate Justice A T T E S T A T I O N I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

LEONARDO A. QUISUMBING Associate Justice Chairman, Third Division C E R T I F I C A T I O N Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairman's Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ARTEMIO V. PANGANIBAN Chief Justice Footnotes 1 Rollo, pp. 22-49; Dated 30 July 1996. 2 Id.

at 51-61; Penned by Associate Justice Hector L. Hofileña with the concurrence of Associate Justices Jainal D. Rasul and Hilarion L. Aquino. 3 Id. at 62-74; Penned by Judge Perfecto A.S. Laguio, Jr. 4 RTC Records, pp. 167-181; Dated 21 December 1988.

5 In her capacity as Register of Deeds of Manila. 6 RTC Records, p. 168; Rollo, p.

276. 7 Exhibit H; id. at 375-376; Dated 15 March 1983.

8 Rollo, p. 276. 9 Id.

at 62. 10 Exhibit 2-Cruz; RTC Records, p. 449-450; Dated 10 September 1982.

11 Ibid. 12 Exhibit E-3; Id. at 366-368; Dated 22 September 1982.

13 Rollo, p. 170. 14 Exhibit C; RTC Records, pp. 168 and 360; Id.

at 276. 15 Exhibit H; RTC Records, pp. 375-376. 16 Exhibit K; Id.

at 384. 17 Exhibit 5-Cruz; Id. at 454.

18 Exhibit 14-Cruz; Id. at 464-471; Dated 28 May 1987. 19 Exhibits 7 and 7-A-Panpisco; Id.

at 500-501. 20 Exhibit 6-Panpisco; Id. at 499.

21 Exhibit 8-Cruz; Id. at 457-458. 22 Exhibits F and F-1; Id.

at 371-373; Dated 8 September 1988.

23 Letter dated 26 October 1988; Exhibit I; Id. at 379-380. 24 Rollo, p.

54. 25 Id. at 73-74.

26 Id. at 56. 27 Ibid.

28 Id. at 56-59. 29 Id.

at 168-192. 30 Id. at 169 and 189.

31 Id. at 246-274; Dated 24 May 1999. 32 Federal Express Corporation v. American Home Assurance Company, G.R. No. 150094, 18 August 2004, 437 SCRA 50, 55 citing Pilar Development Corporation v. Intermediate Appellate Court, No. L-72283, 12 December 1986, 146 SCRA 215, 220-221; See Dissenting Opinion of J. Tinga in Alonso v. Cebu Country Club, 5 December 2003, G.R. No. 130876, 417 SCRA 115, 138.

33 R.J. Francisco, Evidence Rules of Court In the PhilippineS Rules, 128-34, (3rd ed., p. 517 citing Mendezona v. Philippine Sugar Estates Development Co., 41 Phil. 475. 34 Basilio v. Court of Appeals, G.R. No. 125935, 29 November 2000, 346 SCRA 321, 324; De la Cruz v. Sison, G.R. No. 163770, 17 February 2005, 451 SCRA 754, 762; See also Medina v. Greenfield Development Corporation, G.R. No. 140228, 19 November 2004, 443 SCRA 150, 160; Vda.

de Jayme v. Court of Appeals, 439 Phil. 192, 206 (2002); Loyola v. Court of Appeals, 383 Phil. 171, 181 (2000); Romualdez-Licaros v. Licaros, 449 Phil. 824, 837 (2003); Naguiat v. Court of Appeals, G.R. No. 118375, 3 October 2003, 412 SCRA 591, 596-597. 35 59 Phil. 119, 122 (1933). 36 84 Phil. 714 (1949).

37 Id. at 718-719. 38 Rollo, pp. 13 and 278.

39 TSN, 25 September 1989, p. 14. 40 Rollo, p.

279. 41 Exhibit C; RTC Records, p.360. 42 Exhibit 5-Cruz; Id.

at 454 43 Id. at 171. 44 See Article 166 of the Civil Code which reads as follows: Art. 166.

Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership without the wife's consent. If she refuses unreasonably to give her consent, the court may compel her to grant the same. This article shall not apply to property acquired by the conjugal partnership before the effective date of this Code.

45 Tigno v. Aquino, G.R. No. 129426, 25 November 2004, 444 SCRA 61, 77. 46 Id. at 76.

47 Records, p. 430; Affidavit in Lieu of Oral Testimony on Direct Examination of Severo C. Cruz III, 23 August 1990.