The Supreme Court ruled that a person’s capacity to enter into a contract is presumed until proven otherwise. Specifically, a prior finding of incompetence does not automatically invalidate contracts entered into before that declaration. This means individuals challenging the validity of a sale due to the seller’s alleged incompetence must provide concrete evidence proving the seller’s incapacity at the precise moment the contract was executed, not just at a later date. Otherwise, the transaction remains valid.

From Guardianship to Land Dispute: Did a Seller’s Later Incompetence Void a Prior Sale?

This case involves a dispute over a piece of land in Calamba, Laguna, previously owned by Nelly S. Nave (Nave). Nave entered into two sales agreements: first with Sesinando M. Fernando (Fernando) and subsequently with siblings Rommel, Elmer, Erwin, Roiler, and Amanda Pabale (the Pabale siblings). Lolita R. Alamayri (Alamayri) later claimed ownership of the land as Nave’s successor-in-interest. The central legal question is whether Nave’s subsequent declaration of incompetence, in guardianship proceedings, could retroactively invalidate the deed of sale she executed in favor of the Pabale siblings before that declaration.

The Regional Trial Court (RTC) initially ruled in favor of Alamayri, declaring both sales agreements null and void. However, the Court of Appeals reversed this decision, upholding the validity of the sale to the Pabale siblings. The appellate court reasoned that the RTC’s finding of Nave’s incompetence in a later guardianship case did not automatically invalidate the prior sale. Dissatisfied, Alamayri brought the case to the Supreme Court, arguing that the principle of res judicata, specifically conclusiveness of judgment, should apply. She asserted that the prior finding of Nave’s incompetence should be binding in the present case. This doctrine prevents the re-litigation of facts already decided in a previous case between the same parties.

The Supreme Court disagreed with Alamayri, explaining that conclusiveness of judgment requires identity of parties and issues between the two cases. In this instance, the guardianship proceeding (SP. PROC. No. 146-86-C) and the land dispute case (Civil Case No. 675-84-C) lacked both elements. The guardianship case involved the determination of Nave’s competence to manage her affairs at the time of the proceeding, while the land dispute case concerned her competence at the time of the sale to the Pabale siblings. While the cases involved similar facts, the issues were not identical.

Importantly, the Supreme Court emphasized that the law presumes every person to be competent to manage his affairs, until the contrary is shown by sufficient proof. The Court noted the RTC’s finding that Nave’s condition was considered severe since 1980, but the evidence presented did not give this finding any basis. Therefore, it cannot be said that Nave’s capacity can be considered unfit even before Nave was examined.

The Court further clarified that because the RTC decision stated, ‘her condition having become severe since the year 1980’, it would imply that that the previous evaluation conducted in 1986-1987 was the only indicator for evidence of the aforementioned condition. There were no supporting evidence, nor the evidence previously obtained was clear and convincing to the same claim.

Because of the previously stated claim, capacity is presumed until evidence to the contrary is presented. Thus, it has not been sufficiently established that Nave was mentally incapacitated. Consequently, The Court underscored that any person challenging the presumption of capacity to enter into a contract bears the burden of proving the lack of such capacity at the time of the contract’s execution. Since Alamayri failed to present compelling evidence demonstrating Nave’s incompetence on February 20, 1984, the date of the sale to the Pabale siblings, the Supreme Court upheld the validity of the deed of sale.

FAQs

What was the key issue in this case?	The key issue was whether a person’s subsequent declaration of incompetence could retroactively invalidate a deed of sale executed prior to that declaration. The court focused on whether the seller had the capacity to contract at the time of the sale.
What is the principle of res judicata?	Res judicata prevents the re-litigation of issues already decided in a previous case. It has two aspects: “bar by prior judgment” and “conclusiveness of judgment”, which this case centers on.
What is “conclusiveness of judgment”?	Conclusiveness of judgment means that a fact or question already decided by a competent court cannot be re-litigated in a future action between the same parties or their privies. It requires identity of issues and parties, but not of causes of action.
Why didn’t “conclusiveness of judgment” apply here?	Conclusiveness of judgment didn’t apply because there was no identity of parties or issues between the guardianship proceeding and the land dispute case. They were two separate cases with different goals.
What is the legal presumption regarding a person’s capacity to contract?	The law presumes that every person has the capacity to enter into contracts unless proven otherwise. The burden of proving incapacity lies with the person alleging it.
What evidence is needed to prove a person’s lack of capacity to contract?	To prove a lack of capacity, one must present concrete evidence demonstrating the person’s incapacity at the specific time the contract was executed. A later declaration of incompetence is insufficient.
What was the significance of the date of the sale in this case?	The date of the sale (February 20, 1984) was critical because the court needed to determine if Nave was incompetent on that specific date. Evidence of her incompetence at a later date (in 1986 or 1988) was not sufficient to invalidate the sale.
Who were the parties involved in the sale agreement?	The parties involved in the sale agreement were Nelly S. Nave, who sold the land, and Rommel, Elmer, Erwin, Roiler, and Amanda Pabale, the siblings who purchased the land. Later disputed by Lolita Alamayri as the valid heir to the land, thus the issue was questioned.
Can you summarize the SC Decision?	The SC denied the Petition for Review and thereby upheld the ruling that the date on which Nave sold the land, she was under no pretenses or conditions, both physically and mentally to invalidate the transfer of deed.

This case highlights the importance of proving a person’s incapacity to contract at the precise moment of the transaction. The presumption of capacity remains strong unless overcome by clear and convincing evidence. In property sales, this means carefully assessing the seller’s mental state at the time of the agreement and documenting any concerns. Failing to do so can result in the upholding of the transaction, even if the seller is later declared incompetent.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Alamayri v. Pabale, G.R. No. 151243, April 30, 2008