G.R. No. 107791 May 12, 2000
PEPITO BERNARDO, ROSITA BERNARDO and LILY BERNARDO, petitioners, vs. HON. COURT OF APPEALS and FRUCTUOSO TORRES, respondents.

FACTS

Private respondent Fructuoso Torres, owner of five parcels of land, mortgaged the property to the Development Bank of the Philippines (DBP) on June 22, 1960. Two days later, he and his wife executed a notarized Deed of Sale with Assumption of Mortgage in favor of spouses Modesto Bernardo and Cecilia Buenavides, petitioners’ predecessors-in-interest, for P9,000.00. The Bernardo spouses assumed the DBP mortgage, took possession, and cultivated the land. In 1971, Torres filed a Complaint for Annulment of Contract and Reconveyance, alleging he and his wife were illiterate and were deceived into signing a deed of sale, believing it was merely a ten-year lease or “hiraman ng lupa” agreement where the P9,000.00 was a loan to be repaid with the land’s return.
Petitioners, as heirs, countered that the transaction was a genuine sale. They asserted Torres acted in bad faith by obtaining a new agricultural loan from DBP in 1970 using the same land as collateral, which prompted them to file an adverse claim and a criminal case for estafa. The trial court dismissed Torres’s complaint, finding his verbal claim could not overcome the notarized deed and the surrounding circumstances.

ISSUE

Whether the Deed of Sale with Assumption of Mortgage is valid and binding, or whether it should be annulled on grounds of vitiated consent due to the alleged illiteracy and deception of the vendors.

RULING

The Supreme Court REVERSED the Court of Appeals and REINSTATED the trial court’s decision, upholding the validity of the Deed of Sale. The legal logic centered on the strength of a notarized document and the failure of the party seeking annulment to present clear and convincing evidence of vitiated consent. A notarized instrument enjoys the presumption of regularity and carries the evidentiary weight of a public document, which can only be overcome by strong, complete, and conclusive proof. The Court found Torres’s claim of illiteracy and deception unsubstantiated. His subsequent conduct was inconsistent with his claim of continued ownership; notably, he ceased paying real estate taxes on the property after the sale, only resuming payments in 1970 coincident with a new loan application. Petitioners’ failure to immediately transfer the title was logically explained by a clause in the deed prohibiting registration until the assumed DBP mortgage was fully paid. The Court concluded that the totality of evidence—the notarized deed, immediate transfer of possession and loan passbook, and the vendors’ tax payment history—affirmed the contract’s validity as a true sale, not a disguised loan or lease.