In a significant ruling, the Supreme Court affirmed the validity of a Deed of Absolute Sale (DAS) despite the absence of receipts demonstrating direct monetary exchange at the time of notarization. This decision underscores the legal principle that a contract is presumed to have sufficient consideration unless compelling evidence proves otherwise. The court emphasized that the burden of proving the lack of consideration rests heavily on the party challenging the contract. This ruling has far-reaching implications, particularly in transactions between individuals with close relationships, where traditional documentation may be less formal. It highlights the importance of the disputable presumption of consideration inherent in every contract, as articulated in Article 1354 of the Civil Code. The Court’s decision serves as a reminder that the absence of receipts does not automatically invalidate a sale, especially when other evidence supports the existence of consideration.

From Friendship to Feud: Can a Verbal Agreement Trump a Signed Deed?

The case revolves around a property dispute between Lolita Espiritu Santo Mendoza and the spouses Ramon and Natividad Palugod, the parents of the late Jasminia Palugod. Lolita and Jasminia were close friends. Before her death, Jasminia executed a Deed of Absolute Sale (DAS) in favor of Lolita. After Jasminia’s passing, her parents questioned the validity of the DAS, alleging it was simulated due to lack of consideration. The Regional Trial Court (RTC) and the Court of Appeals (CA) sided with the parents, declaring the DAS void. The core legal question is whether the respondents successfully presented preponderant evidence to overturn the disputable presumption of consideration inherent in the DAS.

The Supreme Court (SC) reversed the lower courts’ decisions, underscoring that the factual findings of the CA affirming those of the RTC are generally final and conclusive. However, the SC recognized exceptions where it may review questions of fact, particularly when the judgments are based on a misapprehension of facts, when the findings of fact are contradicted by evidence on record, or when certain relevant facts are overlooked. In this case, the SC found that the CA and RTC decisions were indeed based on such exceptions, justifying a review of the factual findings.

The SC emphasized the disputable presumption of consideration in contracts, as stated in Article 1354 of the Civil Code. This article states:

Although the cause is not stated in the contract, it is presumed that it exists and is lawful, unless the debtor proves the contrary.

Section 3, Rule 131 of the Rules of Court reiterates this, adding:

That there was a sufficient consideration for a contract.

This presumption means that the DAS itself serves as proof that the sale of the property was supported by sufficient consideration.

Building on this principle, the burden of proof rested on the respondents to demonstrate the lack of consideration by preponderance of evidence. The SC found that the respondents’ assertion that the DAS lacked consideration was insufficient to overcome this presumption. The court also emphasized that the basic rule in civil cases is that the party having the burden of proof must establish his case by a preponderance of evidence. This means evidence that is of greater weight, or more convincing, than that which is offered in opposition to it.

The RTC and CA relied on Lolita’s admission that the consideration was not paid in the presence of the notary public. However, the SC pointed out that Lolita’s testimony was that she had paid the consideration to Jasminia in partial payments of Php20,000 to Php40,000 until Php200,000 was reached, and the other Php200,000 was borrowed by Jasminia from Lolita’s sister in Australia. This admission was misapprehended and misinterpreted by the lower courts. The High Court noted that the law does not require the price to be paid in the presence of the Notary Public.

The High Court found several glaring inconsistencies in the testimony of respondent Natividad, particularly regarding the source of funds for the purchase of the lot and the construction of the house. According to Natividad, Jasminia used her retirement pay to acquire the property. However, the SC highlighted that Jasminia received her retirement pay after the purchase of the lot and construction of the house. Additionally, Natividad claimed that Jasminia and Lolita used the retirement pay for trips abroad. However, Lolita presented a conflicting account that the mother of Jasminia was with them on their trips, and that the said trips were done prior to her separation from the company.

The SC further noted that Natividad testified that Jasminia could not travel from Bacoor to Pasay City to acknowledge the DAS due to her illness. To counter this, Lolita presented Dr. Teresa Sy Ortin, who testified that Jasminia underwent radiation treatment during the time the DAS was notarized and Jasminia was physically and mentally capable of going to Makati Medical Center and Pasay City.

In its analysis, the High Court emphasized the importance of assessing the credibility of witnesses. A witness’ credibility is determined by the probability or improbability of his testimony and their means and opportunity of knowing the facts. In this case, the inconsistencies in Natividad’s testimony raised doubts about her credibility. Consequently, the SC concluded that the respondents failed to discharge their burden of proof to rebut the presumption of sufficient consideration and Lolita’s evidence weighed superior.

Thus, given the failure of the respondents to establish their claims by preponderance of evidence, the Supreme Court declared the Deed of Absolute Sale executed by Jasminia in favor of Lolita over the subject property valid. This also applies to the Real Estate Mortgage between Lolita and the spouses Alexander and Elizabeth Gutierrez.

FAQs

What was the key issue in this case?	The central issue was whether the Deed of Absolute Sale (DAS) between Jasminia Palugod and Lolita Espiritu Santo Mendoza was valid, considering the respondents’ claim of lack of consideration. The court had to determine if the respondents successfully overturned the legal presumption that a contract has sufficient consideration.
What is the presumption of consideration in contracts?	Article 1354 of the Civil Code presumes that every contract has a lawful cause or consideration, even if it is not explicitly stated in the contract. This means that a contract is assumed to be valid unless proven otherwise by the party challenging its validity.
Who has the burden of proof in cases involving lack of consideration?	The party alleging the lack of consideration bears the burden of proving it by preponderance of evidence. In this case, the respondents, as the ones questioning the validity of the DAS, had the responsibility to prove that no consideration was given.
What evidence did the respondents present to prove lack of consideration?	The respondents primarily relied on the testimony of Natividad Palugod, who claimed that Lolita had no income and was entirely dependent on Jasminia. They also highlighted Lolita’s admission that she did not pay the consideration in the presence of the notary public.
What evidence did the petitioner present to prove consideration?	Lolita presented the Deed of Absolute Sale itself, which stated that consideration was received. She also offered testimony explaining the manner of payment and presented documents showing her sources of income.
Why did the Supreme Court reverse the decisions of the lower courts?	The Supreme Court found that the lower courts misapprehended certain facts and overlooked relevant evidence. The court emphasized that the respondents failed to provide sufficient evidence to overcome the presumption of consideration and that the lower courts erred in discrediting the petitioner’s evidence.
What is the significance of a witness’ credibility in court decisions?	A witness’ credibility is crucial, as it is determined by the probability of their testimony, their means of knowing the facts, and their overall demeanor. The Supreme Court noted inconsistencies in the respondent’s testimony, which affected her credibility and, consequently, the weight of her evidence.
What are the implications of this ruling for future contracts?	This ruling reinforces the importance of the presumption of consideration in contracts. It also underscores that the absence of receipts does not automatically invalidate a sale, especially when there is other evidence supporting the existence of consideration.
Is it necessary for the payment to be made before a Notary Public to be considered valid?	No, there is no legal requirement that consideration of a sale to be paid in the presence of the Notary Public.

This case clarifies the application of the presumption of consideration in contracts and emphasizes the need for concrete evidence to challenge the validity of a signed agreement. It serves as a reminder that absent compelling evidence, courts will uphold the sanctity of contracts and the legal presumptions that support them.

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: LOLITA ESPIRITU SANTO MENDOZA VS. SPS. RAMON, SR. AND NATIVIDAD PALUGOD, G.R. No. 220517, June 20, 2018