SECOND DIVISION

[G.R. No. 115734. February 23, 2000]

RUBEN LOYOLA, CANDELARIA LOYOLA, LORENZO LOYOLA, FLORA LOYOLA, NICANDRO LOYOLA, ROSARIO LOYOLA, TERESITA LOYOLA and VICENTE LOYOLA, petitioners, vs. THE HONORABLE COURT OF APPEALS, NIEVES, ROMANA, ROMUALDO, GUILLERMO, LUCIA, PURIFICACION, ANGELES, ROBERTO, ESTRELLA, all surnamed ZARRAGA and THE HEIRS OF JOSE ZARRAGA, namely AURORA, MARITA, JOSE, RONALDO, VICTOR, LAURIANO, and ARIEL, all surnamed ZARRAGA, respondents.

D E C I S I O N

QUISUMBING, J.:

For review on certiorari is the decision of the Court of Appeals in CA-G.R. No. CV 36090, promulgated on August 31, 1993, reversing the judgment of the Regional Trial Court of Biñan, Laguna, Branch 24, in Civil Case No. B-2194. In said decision, the appellate court decreed:

"PREMISES CONSIDERED, the decision appealed from is hereby REVERSED and a new judgment rendered as follows:

1. Dismissing the plaintiff’s Complaint;

2. Declaring the "Bilihang Tuluyan ng Kalahati (1/2) ng Isang (1) Lagay na Lupa" dated August 24, 1980 (Exhibit 1) as well as Transfer Certificate of Title No. T-116067 of the Registry of Deeds for the Calamba Branch to be lawful, valid, and effective.

"SO ORDERED."[1]

The RTC decision reversed by the Court of Appeals had disposed of the complaint as follows:

"WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows:

1. Declaring the simulated deed of absolute sale purportedly executed by the late Gaudencia Zarraga on August 24, 1980 as well as the issuance of the corresponding certificate of title in favor of the defendants null and void from the beginning;

2. Ordering the Register of Deeds of Laguna, Calamba Branch to cancel Transfer Certificate of Title No. T-116087 issued in favor of the defendants and to issue another one, if feasible, in favor of the plaintiffs and the defendants as co-owners and legal heirs of the late Gaudencia Zarraga;

3. Order(ing) the defendants to reconvey and deliver the possession of the shares of the plaintiff on (sic) the subject property;

4. Ordering the defendants to pay the amount of P20,000 as and for attorney’s fees and the costs of this suit.

5. As there is no preponderance of evidence showing that the plaintiffs suffered moral and exemplary damages, their claim for such damages is hereby dismissed.

The plaintiffs’ claim under the second cause of action is hereby dismissed on the ground of prescription.

Likewise, the defendants’ counterclaim is hereby dismissed for lack of merit.

"SO ORDERED."[2]

We shall now examine the factual antecedents of this petition.

In dispute here is a parcel of land in Biñan, Laguna, particularly described as follows:

"A PARCEL OF LAND (Lot 115-A-1) of the subdivision plan (LRC) Psd-32117), being a portion of Lot 115-A, described on Plan Psd-55228, LRC (GLRO) Record No. 8374), situated in the Poblacion, Municipality of Biñan, Province of Laguna, Island of Luzon. Bounded on the NE., points 3 to 4 by the Biñan River; on the SE., points 4 to 1 by Lot 115-A-2 of the subd. Plan; on the SW., points 1 to 2 by the Road and on points 2 to 3 by Lot 115-B, Psd-55228 x x x containing an area of SEVEN HUNDRED FIFTY THREE (753) SQ. METERS, more or less x x x."[3]

Originally owned in common by the siblings Mariano and Gaudencia Zarraga, who inherited it from their father, the parcel is covered by Transfer Certificate of Title (TCT) No. T-32007. Mariano predeceased his sister who died single, without offspring on August 5, 1983, at the age of 97.

Victorina Zarraga vda. de Loyola and Cecilia Zarraga, are sisters of Gaudencia and Mariano. Victorina died on October 18, 1989, while Civil Case No. B-2194 was pending with the trial court. Cecilia died on August 4, 1990, unmarried and childless. Victorina and Cecilia were substituted by petitioners as plaintiffs.

Private respondents, children of Mariano excepting those denominated as the "Heirs of Jose Zarraga," are first cousins of petitioners. Respondents designated as the "Heirs of Jose Zarraga" are first cousins once removed of the petitioners.

Private respondents allege that they are the lawful owners of Lot 115-A-1, the one-half share inherited by their father, Mariano and the other half purchased from their deceased aunt, Gaudencia. Transfer Certificate of Title No. 116067 was issued in their names covering Lot 115-A-1.

The records show that the property was earlier the subject of Civil Case No. B-1094 before the then Court of First Instance of Laguna, Branch 1, entitled "Spouses Romualdo Zarraga, et al. v. Gaudencia Zarraga, et al." Romualdo Zarraga, one of the private respondents now, was the plaintiff in Civil Case No. B-1094. The defendants were his siblings: Nieves, Romana, Guillermo, Purificacion, Angeles, Roberto, Estrella, and Jose, all surnamed Zarraga, as well as his aunt, the late Gaudencia. The trial court decided Civil Case No. B-1094 in favor of the defendants. Gaudencia was adjudged owner of the one-half portion of Lot 115-A-1. Romualdo elevated the decision to the Court of Appeals and later the Supreme Court. The petition, docketed as G.R. No. 59529, was denied by this Court on March 17, 1982.

The present controversy began on August 24, 1980, nearly three years before the death of Gaudencia while G.R. No. 59529 was still pending before this Court. On said date, Gaudencia allegedly sold to private respondents her share in Lot 115-A-1 for P34,000.00. The sale was evidenced by a notarized document denominated as "Bilihang Tuluyan ng Kalahati (1/2) ng Isang Lagay na Lupa."[4] Romualdo, the petitioner in G.R. No. 59529, was among the vendees.

Meanwhile, the decision in Civil Case No. B-1094 became final. Private respondents filed a motion for execution. On February 16, 1984, the sheriff executed the corresponding deed of reconveyance to Gaudencia. On July 23, 1984, however, the Register of Deeds of Laguna, Calamba Branch, issued in favor of private respondents, TCT No. T-116067, on the basis of the sale on August 24, 1980 by Gaudencia to them.

On January 31, 1985, Victorina and Cecilia filed a complaint, docketed as Civil Case No. B-2194, with the RTC of Biñan, Laguna, for the purpose of annulling the sale and the TCT. The trial court rendered judgment in favor of complainants.

On appeal, the appellate court REVERSED the trial court. On September 15, 1993, herein petitioners (as substitute parties for Victorina and Cecilia, the original plaintiffs) filed a motion for reconsideration, which was denied on June 6, 1994.

Hence, the instant petition.

Petitioners submit the following issues for resolution by this Court:

1. WHETHER OR NOT THERE ARE STRONG AND COGENT REASON(S) TO DISTURB THE FINDINGS AND CONCLUSIONS OF THE TRIAL COURT THAT THE CONTRACT DENOMINATED AS DEED OF ABSOLUTE SALE IS SIMULATED AND THEREFORE NULL AND VOID.

2. WHETHER THE ACTS OF PRIVATE RESPONDENTS IS (SIC) CONSISTENT WITH THE ACTS OF VENDEES WHEN THEY DEFIED LOGIC AS FOUND BY THE TRIAL COURT...

3. WHETHER THE ALLEGED VENDORS (SIC) GAUDENCIA ZARRAGA WHO WAS THEN 94 YEARS OLD, ALREADY WEAK AND WHO WAS UNDER THE CARE OF ONE OF THE VENDEES PRIVATE RESPONDENT ROMANA ZARRAGA, SINGLE AND WITHOUT ANY CHILD BUT HAS SISTERS AND OTHER NEPHEWS AND NIECES WILL SELL HER PROPERTY THEN WORTH P188,250.00 IN 1980 FOR ONLY P34,000, AND WHETHER A CONTRACT OF SALE OF REALTY IS PERFECTED, VALID AND GENUINE WHEN ONE OF THE VENDEES ROMUALDO ZARRAGA DOES NOT KNOW OF THE TRANSACTION, THE OTHER VENDEE JOSE ZARRAGA WAS ALREADY LONG DEAD BEFORE THE EXECUTION OF THE BILIHAN IN QUESTION AND YET WAS INCLUDED AS ONE OF THE VENDEES, LIKEWISE, OTHER SUPPOSED VENDEES NIEVES ZARRAGA AND GUILLERMO ZARRAGA ASIDE FROM ROMUALDO WERE NOT PRESENT WHEN THE TRANSACTION TOOK PLACE.

4. THE LEGAL MEANING AND IMPORT OF SIMULATED CONTRACT OF SALE WHICH INVALIDATES A TRANSACTION IS ALSO A LEGAL ISSUE TO BE THRESHED OUT IN THIS CASE AT BAR.

5. WHETHER PETITIONERS HAVE THE LEGAL PERSONALITY TO SUE.[5]

Notwithstanding petitioners’ formulation of the issues, we find the only issue for resolution in this case is whether or not the deed of absolute sale is valid.

Petitioners vigorously assail the validity of the execution of the deed of absolute sale suggesting that since the notary public who prepared and acknowledged the questioned Bilihan did not personally know Gaudencia, the execution of the deed was suspect. However, the notary public testified that he interviewed Gaudencia prior to preparing the deed of sale.[6] Petitioners failed to rebut this testimony. The rule is that a notarized document carries the evidentiary weight conferred upon it with respect to its due execution,[7] and documents acknowledged before a notary public have in their favor the presumption of regularity.[8] By their failure to overcome this presumption, with clear and convincing evidence, petitioners are estopped from questioning the regularity of the execution of the deed.[9]

Petitioners also charge that one of the vendees, Jose Zarraga, was already dead at the time of the sale. However, the records reveal that Jose died on July 29, 1981.[10] He was still alive on August 24, 1980, when the sale took place.

Petitioners then contend that three of the vendees included in the deed, namely, Romualdo, Guillermo, and Nieves, were not aware of the transaction, which casts doubt on the validity of the execution of the deed. Curiously, Romualdo who questioned Gaudencia’s ownership in Civil Case No. B-1094, was one of those included as buyer in the deed of sale. Romana, however, testified that Romualdo really had no knowledge of the transaction and he was included as a buyer of the land only because he was a brother.

Petitioners suggest that all the aforecited circumstances lead to the conclusion that the deed of sale was simulated.

Simulation is "the declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for the purposes of deception, the appearances of a juridical act which does not exist or is different what that which was really executed."[11] Characteristic of simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of the parties. Perusal of the questioned deed will show that the sale of the property would convert the co-owners to vendors and vendees, a clear alteration of the juridical relationships. This is contrary to the requisite of simulation that the apparent contract was not really meant to produce any legal effect. Also in a simulated contract, the parties have no intention to be bound by the contract. But in this case, the parties clearly intended to be bound by the contract of sale, an intention they did not deny.

The requisites for simulation are: (a) an outward declaration of will different from the will of the parties; (b) the false appearance must have been intended by mutual agreement; and (c) the purpose is to deceive third persons.[12] None of these are present in the assailed transaction.

Anent Romualdo’s lack of knowledge and participation in the sale, the rule is that contracts are binding only upon the parties who execute them.[13] Romualdo had no knowledge of the sale. He was a stranger and not a party to it. Article 1311 of the Civil Code[14] clearly covers this situation.

Petitioners fault the Court of Appeals for not considering that at the time of the sale in 1980, Gaudencia was already 94 years old; that she was already weak; that she was living with private respondent Romana; and was dependent upon the latter for her daily needs, such that under these circumstances, fraud or undue influence was exercised by Romana to obtain Gaudencia’s consent to the sale.

The rule on fraud is that it is never presumed, but must be both alleged and proved.[15] For a contract to be annulled on the ground of fraud, it must be shown that the vendor never gave consent to its execution. If a competent person has assented to a contract freely and fairly, said person is bound. There also is a disputable presumption, that private transactions have been fair and regular.[16] Applied to contracts, the presumption is in favor of validity and regularity. In this case, the allegations of fraud was unsupported, and the presumption stands that the contract Gaudencia entered into was fair and regular.

Petitioners also claim that since Gaudencia was old and senile, she was incapable of independent and clear judgment. However, a person is not incapacitated to contract merely because of advanced years or by reason of physical infirmities.[17] Only when such age or infirmities impair his mental faculties to such extent as to prevent him from properly, intelligently, and fairly protecting his property rights,[18] is he considered incapacitated. Petitioners show no proof that Gaudencia had lost control of her mental faculties at the time of the sale. The notary public who interviewed her, testified that when he talked to Gaudencia before preparing the deed of sale, she answered correctly and he was convinced that Gaudencia was mentally fit and knew what she was doing.

On whether or not Gaudencia was under the undue influence of the private respondents, Article 1337 of the Civil Code states:

"There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: confidential, family, spiritual, and other relations between the parties, or the fact that the person alleged to have been unduly influenced was suffering from mental weakness, or was ignorant or in financial distress."

Undue influence depends upon the circumstances of each case[19] and not on bare academic rules.[20] For undue influence to be established to justify the cancellation of an instrument, three elements must be present: (a) a person who can be influenced; (b) the fact that improper influence was exerted; (c) submission to the overwhelming effect of such unlawful conduct.[21] In the absence of a confidential or fiduciary relationship between the parties, the law does not presume that one person exercised undue influence upon the other.[22] A confidential or fiduciary relationship may include any relation between persons, which allows one to dominate the other, with the opportunity to use that superiority to the other’s disadvantage.[23] Included are those of attorney and client,[24] physician and patient,[25] nurse and invalid,[26] parent and child,[27] guardian and ward,[28] member of a church or sect and spiritual adviser,[29] a person and his confidential adviser,[30] or whenever a confidential relationship exists as a fact.[31] That Gaudencia looked after Romana in her old age is not sufficient to show that the relationship was confidential. To prove a confidential relationship from which undue influence may arise, the relationship must reflect a dominant, overmastering influence which controls over the dependent person.[32] In the present case, petitioners failed to show that Romana used her aunt’s reliance upon her to take advantage or dominate her and dictate that she sell her land. Undue influence is not to be inferred from age, sickness, or debility of body, if sufficient intelligence remains.[33] Petitioners never rebutted the testimony of the notary public that he observed Gaudencia still alert and sharp.

In Bañez v. Court of Appeals, 59 SCRA 15 (1974), we had occasion to say that solicitation, importunity, argument, and persuasion are not undue influence. A contract is not to be set aside merely because one party used these means to obtain the consent of the other. We have likewise held in Martinez v. Hongkong and Shanghai Bank, 15 Phil. 252 (1910), that influence obtained by persuasion, argument, or by appeal to the affections is not prohibited either in law or morals, and is not obnoxious even in courts of equity. Absent any proof that Romana exerted undue influence, the presumption is that she did not.

Petitioners also seek the annulment of the sale due to gross inadequacy of price. They contend that Gaudencia, in her right senses, would never have sold her property worth P188,250.00 in 1980 for only P34,000.00. The records show that much of petitioners’ evidence was meant to prove the market value of the lot at the time of the sale.[34] A review of the records will show that lesion was not an issue raised before the lower courts. An issue which was neither averred in the complaint nor raised in the court below, cannot be raised for the first time on appeal. To do so would be offensive to the basic rules of fair play.

Petitioners seem to be unsure whether they are assailing the sale of Lot 115-A-1 for being absolutely simulated or for inadequacy of the price. These two grounds are irreconcilable. If there exists an actual consideration for transfer evidenced by the alleged act of sale, no matter how inadequate it be, the transaction could not be a "simulated sale."[35] No reversible error was thus committed by the Court of Appeals in refusing to annul the questioned sale for alleged inadequacy of the price.

WHEREFORE, the petition is DENIED, and the assailed decision of the Court of Appeals AFFIRMED. Costs against petitioners.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, and De Leon, Jr., JJ., concur.

Buena, J., on leave.

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[1] Rollo, pp. 46-47.

[2] Id. at 34-35.

[3] Records, p. 172.

[4] Supra note 2 at 14.

[5] Id. at 23-24.

[6] TSN, September 17, 1990, pp. 10-13.

[7] Garrido v. Court of Appeals, 236 SCRA 450, 457 (1994).

[8] Ramirez v. Ner, 21 SCRA 207, 210 (1967).

[9] Salame v. Court of Appeals, 239 SCRA 356, 359 (1994).

[10] Supra note 3 at 169.

[11] A.M. Tolentino, IV Civil Code of the Philippines 516 (1991).

[12] RB. Rodriguez, Absolutely or Relatively Simulated Contracts, 159 SCRA 186, 187-188 (1988).

[13] Smith, Bell & Co., Inc. v. Court of Appeals, 267 SCRA 530, 538-539 (1997).

[14] "Art. 1311. Contracts take effect only between the parties, their assigns and heirs...

"If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person."

[15] Cuizon v. Court of Appeals, 260 SCRA 645, 670-671 (1996).

[16] Rules of Court, Rule 131, sec. 3, par. (p).

[17] Alberts v. Dunlavey (Coshocton Co), 54 Ohio App. 111, 7 Ohio Ops. 432, 6 NE 2d 26.

[18] Monroe v. Shrivers (Morgan Co), 29 Ohio App. 109, 162 NE 780.

[19] Verner v. Mosely, 221 Ala. 36, 127 So. 527, Harris v. Harris, 154 Ga 271, 114 SE 333.

[20] Mead v. Smith, 106 Cal App. 2d 1, 234 P2d 705.

[21] Johnson v. Tomlinson, 100 NW2d 49.

[22] Umbstead v. Preachers Aid Soc. Of Northwest Indiana Conference of Methodist Episcopal Church, 223 Ind. 96, 58 NE 2d 441.

[23] Union Trust Co. v. Cwynar, 388 Pa 644, 131 A2d 133. C.f. Taylor v. Welch, 609 So 2d 1225; In re Estate of Meyers, 434 Pa Super 165, 642 A2d 525; Robinson v. Robinson, 517 SW 2d 202.

[24] In Re Bamberger, 49 Phil. 962, 964 (1924). See also CODE OF PROFESSIONAL RESPONSIBILITY, Canon 17.

[25] Tvedt v. Haugen, 70 ND 338, 294 NW 187, 132 ALR 379; Cambell v. Oliva, 424 F2d 1244; In Re Hendrick’s Estate, 110 NW2d 417; Clinton v. Miller, 77 Okla 173, 186 P 932; Moore v. Webb, 345 SW2d 239.

[26] Faulkner v. Beatty, 161 Cal App 2d 547, 327 P2d 41; Estate of Bliss, 199 Cal App 2d 630, 18 Cal Rptr 821.

[27] Hensan v. Cooksey, 237 Ill 620, 86 NE 1107; Smith v. Smith, 84 Kan 242, 114 P 245, Gilliam v. Schoen, 176 Or 356, 157 P2d 682; Weitz v. Moulden, 109 Okla 119, 234 P 583.

[28] De Guzman v. Aquino, 34 SCRA 236 (1970); Salas-Gatlin v. Agrava, 21 SCRA 272 (1967).

[29] In re The Bible Speaks, 869 F2d 628, cert den 493 US 816, 107 L.Ed 2d 34, 110 S. Ct. 67.

[30] Peck v. Williams (Hamilton Co), 82 Ohio App 35, 79 NE.2d 562.

[31] Fisher v. Burgiel, 382 Ill 42, 46 NE.2d 380.

[32] Taylor v. Welch, supra

[33] Smith’s Ex’r v. Smith, 67 Vt 445, 32 A 255.

[34] TSN November 11, 1988, p. 7; February 10, 1989, pp. 10-13.

[35] Caster v. Miller, 39 F. Supp. 120.