The Supreme Court has affirmed that in cases involving pacto de retro sales (sales with right to repurchase), the only indispensable parties are the vendor, the vendee, and their heirs or assigns. This means that individuals who are not directly involved in the contract, even if they provided the funds for the purchase, cannot claim rights or obligations under it. The Court also reiterated the presumption of regularity for notarized documents, emphasizing that clear and convincing evidence is required to overcome this presumption.

Funds and Falsification: Who Really Controls a Pacto de Retro?

This case revolves around a dispute over a parcel of land originally owned by Juana Vda. de Rojales. Marcelino Dime claimed that Rojales sold the land to him under a pacto de retro agreement, reserving the right to repurchase it within a specified period. Rojales denied the sale, alleging that the document presented by Dime was falsified. The central legal question is whether Dime could consolidate ownership of the land, given Rojales’s denial of the sale and the claim that Dime’s common-law wife provided the funds for the purchase.

The Regional Trial Court (RTC) initially dismissed Dime’s petition for consolidation of ownership, siding with Rojales. However, the Court of Appeals (CA) reversed the RTC’s decision, ruling in favor of Dime. The Supreme Court then reviewed the CA’s decision to determine whether it correctly applied the relevant legal principles.

The Supreme Court first addressed the issue of whether Dime’s heirs could pursue the case, given their initial manifestation to dismiss it based on unjust enrichment. The Court acknowledged the principle that a client has exclusive control over their cause of action and may settle litigation without their attorney’s intervention. However, the Court clarified that the heirs’ rationale for seeking dismissal – that Dime’s common-law wife, Villamin, provided the funds – did not justify dismissing the case.

According to Article 1311 of the Civil Code, contracts take effect only between the parties, their assigns, and heirs. Furthermore, Article 1607 specifies that the consolidation of ownership in real property requires a judicial order after duly hearing the vendor. These provisions underscore the principle of relativity of contracts, which states that contracts can only bind the parties who entered into them. Therefore, a third person cannot claim rights or obligations under a contract unless it expressly confers a benefit upon them.

In this case, Villamin was not a party to the pacto de retro sale between Rojales and Dime.

Article 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.

The Court emphasized that indispensable parties in an action for consolidation of title are the vendor, the vendee, and their assigns or heirs. Villamin, not being one of these, could not maintain an action for consolidation of ownership in her name. This principle is rooted in the concept of privity of contract, which denotes succession to the rights and obligations of a contracting party.

Even the argument of unjust enrichment did not persuade the Court. Unjust enrichment occurs when a person unjustly retains a benefit at the expense of another, without just or legal ground. However, the Court found no evidence to support the claim that Villamin had indeed provided the funds and was therefore prejudiced by the consolidation of title in Dime’s name. The Court noted that Villamin, even assuming she provided the funds, had a separate cause of action against Dime, distinct from the pacto de retro sale.

Next, the Supreme Court considered the issue of verification of pleadings. Rojales argued that the motion for reconsideration filed by Dime’s heirs should not have been allowed because it lacked verification. The Court cited Section 4, Rule 7 of the Rules of Court, which states that pleadings need not be under oath unless specifically required by law or rule. While verification is intended to ensure good faith and truthfulness, non-compliance is a formal, not jurisdictional, defect. The Court may waive strict compliance to serve the ends of justice.

The Supreme Court rejected Rojales’s argument that Dime should have submitted affidavits denying the allegations in the motion to dismiss. Rule 8, Section 8 of the Rules of Court applies when contesting an action or defense based on a written instrument attached to the pleading. Here, the contested document was the motion to dismiss itself, not a written instrument upon which the action was based.

Furthermore, Rojales challenged the CA’s reliance on the NBI fingerprint examination, arguing that expert opinions are not binding on the court. However, the Court found no reason to doubt the credibility of the fingerprint examiner, who testified clearly and consistently about the process of fingerprint examination and his conclusion that the thumbmark on the pacto de retro sale belonged to Rojales. The Court also noted that Rojales’s lawyer had previously manifested that they were bound by the result of the NBI investigation.

The Supreme Court upheld the presumption of regularity accorded to a notarized document.

Generally, a notarized document carries the evidentiary weight conferred upon it with respect to its due execution, and documents acknowledged before a notary public have in their favor the presumption of regularity.

This means that absent clear and convincing evidence to the contrary, a notarized document is presumed to be genuine and truthful. Rojales failed to present such evidence. She submitted a specimen signature of the notary public but did not authenticate it or present it during the trial. After admitting to being bound by the NBI’s conclusion regarding the thumbmark, Rojales presented no evidence to rebut the due execution of the notarized contract.

The Supreme Court also pointed out inconsistencies in Rojales’s claims. While she admitted in the pre-trial order to mortgaging the property, she later denied this during the trial. She also claimed that Dime borrowed the title, while her daughter testified that Barcelon borrowed it. These inconsistencies undermined Rojales’s credibility and weakened her attempt to disprove the pacto de retro sale.

The Supreme Court emphasized that the intention of the contracting parties, as shown by their conduct and words, is the decisive factor in determining the nature of a contract. While Rojales claimed she never intended to sell the property, she failed to specifically allege this in her pleadings. Instead, she focused on the alleged falsification of the thumbmark and notary public’s signature. She should have raised the issue that Dime merely borrowed the title and promised to pay her in her pleadings and not belatedly claimed the same after the NBI ruled that the thumbmark in the contract was hers.

Because of Rojales’s inconsistent allegations, conflicting witness testimony, and the failure to overcome the presumption of regularity of the notarized contract, the Supreme Court affirmed the CA’s decision, ordering the consolidation of ownership over the property in Dime’s name. This ruling reinforces the importance of clearly establishing one’s claims in legal pleadings and providing credible evidence to support those claims.

FAQs

What is a pacto de retro sale?	It is a sale with the right of repurchase, where the seller has the option to buy back the property within a specified period. If the seller fails to repurchase the property, the buyer can consolidate ownership.
Who are indispensable parties in a case involving a pacto de retro sale?	The indispensable parties are the vendor (seller), the vendee (buyer), and their respective heirs or assigns. These are the individuals who have direct rights and obligations under the contract.
What happens if a party who is not indispensable is involved in the case?	If a non-indispensable party is involved, such as someone who provided funds for the purchase but is not named in the contract, they cannot claim rights or obligations under the pacto de retro sale. They may have separate causes of action, but not related to the consolidation of ownership.
What is the presumption of regularity for notarized documents?	Notarized documents are presumed to be authentic and truthful, and they carry significant evidentiary weight. This means that courts generally accept them as valid unless there is strong evidence to the contrary.
How can the presumption of regularity be overcome?	The presumption of regularity can be overcome by presenting clear and convincing evidence that the document was not properly executed, that there was fraud or mistake, or that the parties did not intend to enter into the agreement.
What is unjust enrichment?	Unjust enrichment occurs when someone benefits unfairly at the expense of another, without any legal or equitable justification. The law seeks to prevent unjust enrichment by requiring the person who benefited to return what they gained.
What is the role of expert testimony in court?	Expert testimony can be used to provide specialized knowledge or opinions that help the court understand complex issues. However, the court is not bound by expert opinions and can consider other evidence in making its decision.
Why was the fingerprint examiner’s testimony considered credible in this case?	The fingerprint examiner provided a clear and consistent explanation of the fingerprint examination process and his conclusion that the thumbmark on the sale document matched Rojales’s thumbprint. There was also no evidence of bias or improper motive on the part of the examiner.
What inconsistencies in testimony weakened Rojales’s case?	Rojales contradicted her pre-trial admissions about mortgaging the property and gave conflicting accounts with her daughter about who borrowed the title. These inconsistencies undermined her credibility.

This case clarifies the importance of privity of contract and the presumption of regularity in notarized documents. It highlights the need for parties to present clear and convincing evidence to support their claims and overcome legal presumptions.

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: JUANA VDA. DE ROJALES vs. MARCELINO DIME, G.R. No. 194548, February 10, 2016