G.R. No. 103038 March 31, 1993.
JULIA ANG ENG MARIANO, petitioner, vs. THE COURT OF APPEALS, JUANITO FAUSTINO and TERESITA FAUSTINO, respondents.

FACTS

Petitioner Julia Ang Eng Mariano claims that private respondents, spouses Juanito and Teresita Faustino, approached her for a loan of P250,000.00 on October 28, 1986, secured by a mortgage on their land in Deparo, Kalookan City. On January 15, 1987, they secured another loan of P250,000.00 on the same security. Foreseeing inability to pay, the private respondents sold the land to petitioner for an additional P320,550.00 on September 29, 1987, evidenced by a deed of sale and a new TCT issued in her name. The private respondents refused to turn over possession and sued for annulment of the deed of sale and damages.
Private respondents, unschooled farmers, claim they sought a financier to develop their inherited land into a subdivision. Petitioner promised to help. They signed mortgage documents on October 28, 1986 and January 15, 1987, but received only P150,000.00 each time. Petitioner later told them she could secure a P1,000,000.00 bank loan for the project, but the property needed to be in her name. Trusting her, they signed a prepared deed of sale on September 29, 1987. Upon discovering no loan was forthcoming and they were being asked to vacate, they sued.
The trial court dismissed the complaint, upholding the deed of sale. The Court of Appeals reversed, declaring the deed null and void, ordering the cancellation of TCT No. 156493 in petitioner’s name, and directing the issuance of a new title in the Faustinos’ names, plus attorney’s fees.

ISSUE

Whether parol evidence is admissible to prove that the notarized Deed of Absolute Sale was a sham transaction procured by fraud.

RULING

Yes, parol evidence is admissible. The rule that a writing is the exclusive evidence of the agreement does not apply when the validity of the agreement is in dispute. A contract may be annulled if consent was procured by fraud. Parol evidence may be introduced to establish fraud, and no instrument is beyond scrutiny when tainted with fraud.
The Court found private respondents’ version credible and corroborated by petitioner’s own testimony on cross-examination, where she admitted the real intention was to secure a P1,000,000.00 loan in her name, with the Faustinos’ debt to be deducted from the proceeds. This admission made out a case of fraud. Petitioner failed to rebut the Faustinos’ claims by presenting the notary public or witnesses to the deed. Furthermore, the deed of sale did not mention the prior mortgage encumbrances, nor did it account for the P500,000.00 in mortgage amounts as part of the consideration, which contradicted business common sense. The appellate court’s finding that the deed was a sham transaction was upheld. The decision of the Court of Appeals was affirmed.