In the case of Spouses Marcelian and Alice Tapayan v. Ponceda M. Martinez, the Supreme Court affirmed the enforceability of a Deed of Undertaking, compelling the Tapayan spouses to fulfill their obligation to either execute a mortgage on their property or reimburse Martinez for payments she made on their behalf. The court emphasized that failure to object to the admissibility of a document during trial constitutes a waiver of the right to do so, and that a notarized document carries a presumption of regularity that can only be overturned by clear and convincing evidence. This decision reinforces the importance of upholding contractual obligations and adhering to procedural rules in legal proceedings, highlighting how critical it is for parties to understand their responsibilities within signed agreements, and act accordingly to protect their rights.

Mortgaged Promises: Can a Deed of Undertaking Compel a Second Mortgage?

The case revolves around a property dispute between the Spouses Tapayan and Ponceda Martinez, who are related by affinity. Martinez agreed to mortgage her property to secure a loan for the Tapayans, with the understanding that they would execute a second mortgage on their own property as security. When the Tapayans failed to pay the loan, Martinez was forced to pay to prevent foreclosure. The central legal question is whether the Deed of Undertaking, which stipulated the Tapayans’ obligation to execute a second mortgage, is legally binding and enforceable.

The petitioners, Spouses Tapayan, contested the authenticity and admissibility of the Deed of Undertaking, arguing that it was a falsity and that they were merely accommodation borrowers acting on behalf of a joint venture. They also claimed that the best evidence rule was violated when a plain copy of the Deed was admitted as evidence. The Supreme Court, however, found these arguments unpersuasive. The Court emphasized the importance of timely objecting to the admissibility of evidence. According to the Court in Lorenzana v. Lelina:

The best evidence rule requires that when the subject of inquiry is (sic) the contents of a document, no evidence is admissible other than the original document itself except in the instances mentioned in Section 3, Ru1e 130 of the Revised Rules of Court. As such, mere photocopies of documents are inadmissible pursuant to the best evidence rule. Nevertheless, evidence not objected to is deemed admitted and may be validly considered by the court in arriving at its judgment. Courts are not precluded to accept in evidence a mere photocopy of a document when no objection was raised when it was formally offered.

Since the Tapayans failed to object to the admission of the plain copy of the Deed of Undertaking during the trial, they waived their right to invoke the best evidence rule on appeal. This procedural lapse was critical to the Court’s decision. Building on this principle, the Court addressed the presumption of regularity afforded to notarized documents. The Deed of Undertaking, having been notarized, carried a presumption of regularity that the Tapayans failed to overcome. The Court, citing Spouses Santos v. Spouses Lumbao, stated:

It is well-settled that a document acknowledged before a notary public is a public document that enjoys the presumption of regularity. It is a prima facie evidence of the truth of the facts stated therein and a conclusive presumption of its existence and due execution. To overcome this presumption, there must be presented evidence that is clear and convincing.

The Tapayans’ bare denial of participation in the execution of the Deed, without any supporting evidence, was insufficient to overturn this presumption. This underscores the high evidentiary threshold required to challenge the validity of a notarized document. In addition to challenging the document’s validity, the Tapayans argued that they were merely accommodation borrowers acting on behalf of a joint venture. They presented a Joint Affidavit and testimony to support this claim, asserting that the loan proceeds were used for the benefit of the joint venture. However, the Court found this argument unconvincing due to lack of sufficient evidence. Despite their claims of acting as accommodation borrowers, the Tapayans themselves made payments on the loan without seeking reimbursement from the alleged joint venturers. This behavior indicated a direct interest in the loan, undermining their claim that they were acting solely for the benefit of the joint venture.

Moreover, the Court identified an error in the computation of the amount due to Martinez. The Deed of Undertaking specifically stipulated that any payments made to PNB should be deducted from the Tapayans’ total liability. The Regional Trial Court (RTC) failed to account for this deduction, an oversight that the Court of Appeals (CA) adopted when it affirmed the RTC decision. The Supreme Court corrected this error, emphasizing that Respondent must honor the entirety of the Deed of Undertaking, including provisions that operate against her interests. This correction highlights the principle that contracts must be enforced in their entirety, with all provisions given due consideration. The Court modified the CA decision to reflect the deduction of P65,320.55, representing the amount paid by the Tapayans to PNB, from their total liability. Consequently, the amount they were required to reimburse Martinez was reduced to P1,114,879.55. The Supreme Court’s decision clarifies the enforceability of contracts and underscores the importance of adhering to procedural rules in legal proceedings. Parties are expected to raise timely objections and provide clear and convincing evidence to support their claims. The decision also serves as a reminder that contracts must be interpreted and enforced in their entirety, taking into account all relevant provisions.

FAQs

What was the key issue in this case?	The key issue was whether the Deed of Undertaking was a valid and binding contract that could compel the Tapayan spouses to execute a second mortgage on their property in favor of Martinez.
What is the best evidence rule?	The best evidence rule requires that the original document be presented when its contents are the subject of inquiry, unless certain exceptions apply. Failure to object to a copy waives this rule.
What is the presumption of regularity for notarized documents?	A document acknowledged before a notary public is presumed to be regular and truthful, requiring clear and convincing evidence to overcome this presumption.
What does it mean to be an accommodation borrower?	An accommodation borrower is someone who lends their name and credit to a loan for the benefit of another party, without directly benefiting from the loan proceeds.
Why did the Supreme Court modify the lower court’s decision?	The Supreme Court modified the decision because the lower courts failed to deduct the amount previously paid to PNB from the total liability, as stipulated in the Deed of Undertaking.
What is the significance of a Deed of Undertaking?	A Deed of Undertaking is a legal document that outlines specific obligations and agreements between parties, making it a crucial instrument for ensuring compliance and protecting rights.
What should you do if you believe a contract is not being honored?	If you believe a contract is not being honored, you should seek legal advice to understand your rights and options for enforcing the contract or seeking damages.
How does this case affect future contract disputes?	This case reinforces the importance of clear and comprehensive contractual agreements, timely objections in legal proceedings, and the enforceability of notarized documents.

The Supreme Court’s decision in this case serves as a crucial reminder of the binding nature of contractual agreements and the importance of fulfilling one’s obligations as outlined in such documents. The court’s meticulous review and clarification of the financial obligations involved ensures a fair and just outcome for all parties. This decision underscores the necessity for all parties entering into contracts to fully understand their obligations and to seek legal counsel when disputes arise.

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: SPOUSES MARCELIAN TAPAYAN AND ALICE TAPAYAN, PETITIONERS, VS. PONCEDA M. MARTINEZ, RESPONDENT., G.R. No. 207786, January 30, 2017