G.R. No.

132415 January 30, 2002

MIGUEL KATIPUNAN, INOCENCIO VALDEZ, EDGARDO BALGUMA and

LEOPOLDO BALGUMA, JR. vs. BRAULIO KATIPUNAN, JR.

SANDOVAL-GUTIERREZ, J.:

DISPOSITIVE:

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals
dated July 3, 1997 in CA-GR CV No. 45928 is AFFIRMED with MODIFICATION in the
sense that petitioners Edgardo Balguma and Leopoldo Balguma, Jr., are ordered to turn
over to respondent Braulio Katipunan, Jr. the rentals they received for the five-door
apartment corresponding to the period from January, 1986 up to the time the property
shall have been returned to him, with interest at the legal rate. Costs against petitioners.
SO ORDERED.

FACT:

Before us is a petition for review on certiorari 1 assailing the Decision2 of the Court of
Appeals dated July 31, 1997 in CA-GR CV No. 45928, "Braulio Katipunan, Jr. vs.
Miguel Katipunan, Inocencio Valdez, Atty. Leopoldo Balguma, Sr., Edgardo Balguma
and Leopoldo Balguma, Jr." which set aside the Decision of the Regional Trial Court
(RTC) of Manila, Branch 28, in Civil Case No. 87-39891 for annulment of a Deed of
Absolute Sale.

Respondent Braulio Katipunan, Jr. is the owner of a 203 square meter lot and a five-
door apartment constructed thereon located at 385-F Matienza St., San Miguel, Manila.
The lot is registered in his name under TCT No. 109193 3 of the Registry of Deeds of
Manila. The apartment units are occupied by lessees.

Respondent, assisted by his brother, petitioner Miguel Katipunan, entered into a

Deed of Absolute Sale4 with brothers Edgardo Balguma and Leopoldo Balguma,
Jr. (co-petitioners), represented by their father Atty. Leopoldo Balguma, Sr.,
involving the subject property for a consideration of ₱187,000.00. Consequently,
respondent’s title to the property was cancelled and a new title was registered
and issued in the names of the Balguma brothers. Atty. Balguma, then still alive,
started collecting rentals from the lessees of the apartments.

Respondent filed with the RTC a complaint for annulment of the Deed of Absolute
Sale. He averred that his brother Miguel, Atty. Balguma and Inocencio Valdez
(defendants therein, now petitioners) convinced him to work abroad. They even
brought him to the NBI and other government offices for the purpose of securing
clearances and other documents which later turned out to be falsified. Through
insidious words and machinations, they made him sign a document purportedly a
contract of employment, which document turned out to be a Deed of Absolute
Sale. By virtue of the said sale, brothers Edgardo and Leopoldo, Jr. (co-
defendants), were able to register the title to the property in their names.
Respondent further alleged that he did not receive the consideration stated in the
contract. He was shocked when his sister Agueda Katipunan-Savellano told him
that the Balguma brothers sent a letter to the lessees of the apartment informing
them that they are the new owners. Finally, he claimed that the defendants, now
petitioners, with evident bad faith, conspired with one another in taking
advantage of his ignorance, he being only a third grader.

Twice respondent moved to dismiss his complaint (which were granted) on the grounds
that he was actually instigated by his sister to file the same; and that the parties have
reached an amicable settlement after Atty. Balguma, Sr. paid him P2,500.00 as full
satisfaction of his claim. In granting his motions for reconsideration, the trial court was
convinced that respondent did not sign the motions to dismiss voluntarily because of his
poor comprehension, as shown by the medical report, the trial court noted that
respondent was not assisted by counsel in signing the said motions, thus it is possible
that he did not understand the consequences of his action.9

Trial court dismissed the complaint, holding that respondent failed to prove his causes
of action since he admitted that: (1) he obtained loans from the Balgumas; (2) he signed
the Deed of Absolute Sale; and (3) he acknowledged selling the property and that he
stopped collecting the rentals.
the Court of Appeals, on July 31, 1997, rendered a judgment appealed reversing and
setting aside the lower court’s decision.

In reversing the RTC Decision, the Court of Appeals, it is a proven fact that Braulio
reached only Grade III due to his very low IQ; that he is illiterate; and that he can not
read and is slow in comprehension. His mental age is only that of a six-year old child.
On the other hand, the documents presented by the appellees in their favor, i.e., the
deeds of mortgage and of sale, are all in English. There is no showing that the contracts
were read and/or explained to Braulio nor translated in a language he understood.

Article 1332 of the Civil Code provides:

‘Art. 1332. When one of the parties is unable to read, or if the
contract is in a language not understood by him, and mistake or
fraud is alleged, the person enforcing the contract must show that
the terms thereof have been fully explained to the former.’

Furthermore, if Braulio has a mental state of a six year old child, he can not be
considered as fully capacitated. He falls under the category of ‘incompetent’ as
defined in Section 2, Rule 92 of the Rules of Court, which reads:

‘Sec. 2. Meaning of Word ‘Incompetent’ - Under this rule, the word

‘incompetent’ includes persons suffering the penalty of civil interdiction or
who are hospitalized lepers, prodigals, deaf and dumb who are unable to
read and write, those who are of unsound mind, even though they have
lucid intervals, and persons not being of unsound mind, but by reason of
age, disease, weak mind, and other similar causes, can not, without
outside aid, take care of themselves and manage their property, becoming
thereby an easy prey for deceit and exploitation.’

In view of the foregoing, it is apparent that the contract entered into by Braulio
and Atty. Balguma is voidable, pursuant to the provisions of Article 1390 of the
Civil Code, to wit:
‘Art. 1390. The following contracts are voidable or annullable, even
though there may have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a
contract;
(2) Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.
‘These contracts are binding, unless they are annulled by a proper
action in court, they are susceptible of ratification.’" 11

Petitioners filed a motion for reconsideration but was denied. Hence, this petition.

ISSUE:

Whether or not the contract executed by the respondent is voidable.

RULING:

A contract of sale is born from the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the price. 14 This meeting of
the minds speaks of the intent of the parties in entering into the contract
respecting the subject matter and the consideration thereof. 15 Thus, the elements
of a contract of sale are consent, object, and price in money or its
equivalent.16 Under Article 1330 of the Civil Code, consent may be vitiated by any
of the following: (a) mistake, (2) violence, (3) intimidation, (4) undue influence,
and (5) fraud.17 The presence of any of these vices renders the contract voidable.

Here, as borne by the facts on hand, respondent signed the deed without the remotest
idea of what it was.

The circumstances surrounding the execution of the contract manifest a vitiated consent
on the part of respondent. Undue influence was exerted upon him by his brother Miguel
and Inocencio Valdez (petitioners) and Atty. Balguma. It was his brother Miguel who
negotiated with Atty. Balguma. However, they did not explain to him the nature and
contents of the document. Worse, they deprived him of a reasonable freedom of choice.
It bears stressing that he reached only grade three. Thus, it was impossible for him to
understand the contents of the contract written in English and embellished in legal
jargon. Thus, his lack of education, coupled with his mental affliction, placed him not
only at a hopelessly disadvantageous position vis-à-vis petitioners to enter into a
contract, but virtually rendered him incapable of giving rational consent. To be sure, his
ignorance and weakness made him most vulnerable to the deceitful cajoling and
intimidation of petitioners.

We are convinced that respondent was telling the truth that he did not receive the
purchase price. His testimony on this point was not controverted by Miguel.
Moreover, Atty. Balguma admitted that it was Miguel who received the money from
him.22 What Miguel gave respondent was merely loose change or "barya-barya," grossly
disproportionate to the value of his property. We agree with the conclusion of the Court
of Appeals that "it is then most probable that it was Miguel who wanted to go abroad
and needed the money for it."

A contract where one of the parties is incapable of giving consent or where

consent is vitiated by mistake, fraud, or intimidation is not void ab initio but only
voidable and is binding upon the parties unless annulled by proper Court action.
The effect of annulment is to restore the parties to the status quo ante insofar as
legally and equitably possible-- this much is dictated by Article 1398 of the Civil
Code. As an exception however to the principle of mutual restitution, Article 1399
provides that when the defect of the contract consists in the incapacity of one of
the parties, the incapacitated person is not obliged to make any restitution,
except when he has been benefited by the things or price received by him. Thus,
since the Deed of Absolute Sale between respondent and the Balguma brothers is
voidable and hereby annulled, then the restitution of the property and its fruits to
respondent is just and proper. Petitioners should turn over to respondent all the
amounts they received up to the time the property shall have been returned to the
latter.

Article 24 of the Civil Code enjoins courts to be vigilant for the protection of a party to a
contract who is placed at a disadvantage on account of his ignorance, mental weakness
or other handicap, like respondent herein. We give substance to this mandate.