FACTS:

In this case, petitioner Julia Ang Eng Mariano claims that the appellate court erred in declaring the Deed of Sale executed in her favor by the private respondents, the spouses Faustino, as null and void and cancelling the Transfer Certificate of Title (TCT) in her name. The private respondents, on the other hand, claim that they were tricked by petitioner into signing over their property to her.

Petitioner alleges that the private respondents approached her for a loan of P250,000.00 on the security of their property. They secured another loan of P250,000.00 on the same security. Due to their inability to pay, the private respondents sold the property to petitioner for an additional P320,550.00. A Deed of Sale was executed, and a new TCT was issued in petitioner's name. However, the private respondents refused to turn over the land to petitioner and instead filed a complaint for annulment of the deed of sale.

The private respondents claim that their intention was to transform their inherited land into a subdivision. They sought a financier, and petitioner expressed her desire to help them. Trusting petitioner completely, they signed mortgage forms and received loans. Petitioner then told them that she could secure a bank loan for their project, but they had to sign over their property to her. They signed a prepared deed of sale on September 29, 1987. When they discovered that there was no loan and that they were being asked to vacate their land, they filed a lawsuit.

The trial court dismissed the complaint, but the appellate court reversed the decision. The appellate court declared the deed of sale null and void, cancelled the TCT in petitioner's name, and ordered the issuance of a new TCT in the name of the private respondents. Petitioner now appeals these decisions and raises errors of the appellate court.

The main issue is whether parol evidence is admissible to show that the deed of sale was a sham transaction, as claimed by the private respondents. The appellate court ruled that it is admissible, and the petitioner relies heavily on the notarial certification of the deed of sale. However, the private respondents present evidence showing that their intention was to seek a financier for their subdivision project, and they were tricked into signing over their property to petitioner.

ISSUES:

1. Can parol evidence be admitted to prove that the Deed of Sale executed between the parties is a sham transaction?

RULING:

1. Yes, parol evidence can be admitted to establish the illegality or fraud in the validity of the agreement. A contract may be annulled if consent was procured by mistake, fraud, intimidation, violence, or undue influence. Even if the Deed of Sale was properly notarized, it can still be scrutinized for fraud through extrinsic evidence.

PRINCIPLES:

• The rule on parol evidence recognizes exceptions when the validity of the agreement is in dispute.

• A contract may be annulled if consent was procured by mistake, fraud, intimidation, violence, or undue influence.

• Even if a document is properly notarized, it can still be subject to scrutiny for fraud through extrinsic evidence.