G.R. No. 159567 ; July 31, 2007
CORAZON CATALAN, LIBRADA CATALAN-LIM, EULOGIO CATALAN, MILA CATALAN-MILAN, ZENAIDA CATALAN, ALEX CATALAN, DAISY CATALAN, FLORIDA CATALAN and GEMMA CATALAN, Heirs of the late FELICIANO CATALAN, Petitioners, vs. JOSE BASA, MANUEL BASA, LAURETA BASA, DELIA BASA, JESUS BASA and ROSALINDA BASA, Heirs of the late MERCEDES CATALAN, Respondents.

FACTS

On October 20, 1948, Feliciano Catalan was discharged from military service after a Board of Medical Officers found him unfit due to “schizophrenic reaction, catatonic type.” He married Corazon Cerezo on September 28, 1949. On June 16, 1951, Feliciano executed an “Absolute Deed of Donation” in favor of his sister, Mercedes Catalan, covering one-half of a parcel of land in Binmaley, Pangasinan. The donation was registered, and a new tax declaration was issued to Mercedes. On December 22, 1953, the Court of First Instance of Pangasinan declared Feliciano incompetent and appointed People’s Bank and Trust Company (later Bank of the Philippine Islands or BPI) as his guardian. On March 26, 1979, Mercedes sold the donated property to her children, respondents Delia and Jesus Basa. The deed of sale was registered on February 20, 1992. On April 1, 1997, BPI, as guardian, filed a complaint for Declaration of Nullity of Documents, Recovery of Possession and Ownership, and damages against the respondents, alleging the 1951 donation was void ab initio because Feliciano was not of sound mind and never intended to donate. After Feliciano died on August 14, 1997, his heirs were substituted as complainants. The Regional Trial Court dismissed the complaint, finding insufficient evidence to overcome the presumption of Feliciano’s sanity at the time of the donation. The Court of Appeals affirmed this decision. Petitioners elevated the case via a petition for review on certiorari.

ISSUE

1. Whether the Court of Appeals erred in holding that petitioners failed to prove the insanity or mental incapacity of Feliciano Catalan at the precise moment he executed the deed of donation in 1951.
2. Whether the Certificate of Disability for Discharge and the Report of a Board of Officers are admissible in evidence.
3. Whether the Court of Appeals erred in upholding the validity of the subsequent sale of the property by Mercedes Catalan to respondents Jesus and Delia Basa.
4. Whether Civil Case No. 17666 is barred by prescription and laches.

RULING

The Supreme Court DENIED the petition and AFFIRMED the assailed Court of Appeals decision.
1. On Feliciano’s Mental Capacity: The Court held that petitioners failed to prove by clear and convincing evidence that Feliciano was insane at the precise time of the donation on June 16, 1951. The Certificate of Disability for Discharge dated October 20, 1948, and the 1953 judicial declaration of incompetency are not conclusive proof of his mental state in 1951. Insanity must be proven to exist at the very moment of the transaction. The documents presented only established a prior and subsequent condition, giving rise to a mere inference, not a conclusive presumption, of insanity in 1951. This inference was sufficiently countered by evidence of Feliciano’s coherent acts after 1948, including his marriage in 1949 and execution of other valid donations of property in 1978 and 1983. The presumption of sanity and the due execution of a notarized document stand.
2. On Admissibility of Evidence: The Court found it unnecessary to rule on the admissibility of the Certificate of Disability and Board Report, as even assuming they were admissible, they were insufficient to prove insanity in 1951, as explained above.
3. On the Validity of the Subsequent Sale: Since the 1951 donation was valid, Mercedes Catalan acquired valid ownership of the property. As owner, she had the right to dispose of it. The Deed of Absolute Sale in favor of her children is a notarized document enjoying the presumption of due execution. The delay in its registration (1992) does not render the 1979 sale void ab initio.
4. On Prescription and Laches: The Court did not find it necessary to dwell on these issues, as the primary action for the declaration of the donation’s nullity had already failed. The Court noted, however, that an action for the annulment of a voidable contract (due to incapacity) prescribes in four years. The complaint filed in 1997, decades after the 1951 donation, was clearly filed out of time.