ONG CHUA v. CARR.pdf

ONG CHUA v. CARR 

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January 17, 1929 | Ostrand,  J. | Reformation of Instruments: When Available PETITIONER : Ong Chua RESPONDENTS: Edward Carr, et al. SUMMARY: Henry Teck and Magdalena Lim owns some land which they sold to Ong Chua, with the right to repurchase within 4 years. The land was later sold to Edward Carr. In the deed of sale however, the right to repurchase was removed, without the knowledge of Ong. This was made in order for Carr to obtain a loan to ZBLA using the land. The loan from the ZBLA became unnecessary, but instead of redrafting the deed, it was agreed that Moore would keep the deed and would not deliver them to any one until the expiration of the period for repurchase. Moore then became ill and while under medical treatment, Carr demanded the documents be delivered to him and to escape further annoynces, Moore surrendered the deed to Carr who almost immediately presented it to the registry for registration. Henry offered to repurchase the property but Carr refused to reconvey it, claiming he had an absolute right to the title. The CFI ruled in Ong Chua’s favor which was then affirmed by the SC.

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DOCTRINE: Reformation of a deed will be granted where there is a mistake on one side and fraud or unfair dealing on the other and the defrauded party comes into court with clean hands FACTS: Spouses Henry Teck and his wife Magdalena sold their parcels of land in question • to Ong Chua. On June 17, 1923. Ong Chua executed a public document granting the spouses the right to repurchase said lots. But neither one of the documents was  placed on record record with the the register of deeds. Carr went to the office of Moore in Zamboanga (a practicing attorney in their • town) and sought the advice and assistance of Moore with regard to purchasing coconut lands. Moore then called Carr’s attention to the questioned lots and told him he could •  purchase the lots. Carr entered into negotiations negotiations with Ong Chua and Moore. Moore informed Carr that Spouses Henry and Magdalena had the right to repurchase said lots that would expire on June 1927. • Before drafting the deed of sale, Ong Chua told Moore that he consented to sale of the properties to Carr on the condition that the sale should be subject of the rights of the spouses to have the property reconveyed to them, and said rights should be respected. The purchase price was P20k. When the deed of sale was about to be drafted, Carr • told Moore that he only had P13.5k on hand and he was to obtain a loan of P6.5k from the Zamboanga Building & Loan Association (ZBLA), in which Moore was the secretary.

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Moore informed Carr that the loan could not be made upon the properties, the titles to which were not clear and that the right of the spouses to repurchase was not entered upon the certificates to said titles. Moore also told Carr that the deed of sale could be made in such a form that Carr’s title to the purchased lots would appear to be absolute but Carr had to bear in mind that the right of the spouses to repurchase still existed and that the documents should be left in Moore’s possession until the expiration of the term for the right of repurchase and that, if the deed were made in that form, the loan of P6.5k could  be obtained. Moore instructed his clerk, Darlucio, to prepare and typewrite the deed of sale without including therein the condition that the sale was subject to Teck's and Lim's rights to repurchase. repurchase. The dee d was signed b y Ong Chua in the presence of Dar lucio and dul y acknowledged before Moore as notary public. But it should be noted that Ong Chua did not understand English and was ignorant of the arrangement between Moore and Carr in connection with the loan. Also, he asked Moore if the document contained the conditions in reference to Teck's right to repurchase the  property and was was told that that the document document was sufficient. sufficient. After the deed was prepared and signed, Ong Chua told Carr and Moore that lot  No. 137 was mortgaged by him to the BPI for P6,500, the rate of interest being 10 per cent per annum. Moore stated that the ZBLA could not lend money at less than 13 per cent per annum. Ong Chua then stated that he was willing to let the mortgage on the lot given to the bank stand until the expiration of the term for the repurchases. As this arrangement would save Carr a considerable sum of money, he agreed and  paid only P13.5K and promised, in writing, to pay the balance of the purchase  price, P6.5K, P6.5K, with interest interest at 10 per cent per annum, annum, on or or before July 1, 1927. The loan from the ZBLA thus became unnecessary, unnecessary, but instead of redrafting the deed, it was agreed that Moore would keep the deed and the other documents in his custody and would not deliver them to any one until the expiration of the  period for repurchase. repurchase. In 1926, Moore was taken critically ill, and while he was under medical treatment in the Zamboanga Hospital, Carr came to him on various occasions and demanded that the documents be delivered to him. At first Moore refused to make the delivery on the ground that it was contrary to their agreement and might result to the prejudice of the rights of Teck and Lim,  but Carr continued to molest Moore with his demand for the delivery of the  papers, and finally, finally, in order order to escape further annoyances and insinuations of Carr, Carr, he surrendered the deed to the latter, who almost immediately presented it to the register of deeds for registration. In July, 1926, Teck offered to repurchase the property in question from Ong Chua who the reupon demanded o f Carr the rec onveyance of the th e  property to the spouses, but Carr Carr refused to do so, claiming claiming that he had an an absolute absolute

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title to said property, and Ong Chua then learned, for the first time, that the deed in question contained no reference to the rights of Teck and Lim to repurchase the  property. Hence, this action was brought, the plaintiff alleging in substance the principal facts hereinbefore stated and demanding that the deed in question be reformed in accordance therewith. Basing on the facts, the CFI of Zamboanga ordered the reformation of the deed, Exhibit A, in accordance with the plaintiff's demand.

ISSUE/s: WoN the deeds can be reformed to contain the rights of the Spouses to repurchase – YES RULING: The appealed judgment is affirmed with the costs against the appellant. So ordered. RATIO: The evidence is conclusive that the plaintiff had no clear conception of the • contents of the deed. ! He was anxious to protect the rights of redemption held by the parties who sold the land to him, is very obvious; ! the deed was written in the English language, with which the plaintiff was unfamiliar, and he had to rely on the statements of Moore as to the contents and effect of the deed and was told that the document was sufficient ! . He had confidence in Moore, with whom he had had previous business relations, and it was but natural for him to believe Moore's statement. •

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Carr, on the other hand, knew the contents of the deed and fully agreed to Moore's  plan to place it i n escrow until the expiration of the term for the repurchase repurchase or redemption of the land. ! He, nevertheless, in violation of his own agreement, harassed Moore, then a very sick man, into giving him possession of the deed prematurely. ! He took immediate advantage of that circumstance and hastened to have the document presented to the register of deeds for the i ssuance ssuance of certificates of title. ! It is elementary that such conduct constitutes fraud and was calculated to obtain an unfair advantage over the plaintiff.

UNRELATED ISSUESS DISCUSSION (Civil Pro and Evidence issue ata ‘to). Add facts: Subsequent to the filing of the answer, Carr died, and the administrator of his estate, Manuel Igual, was substituted as defendant. Defendant-appellants argued based on subsection 7 of section 383 of the Code of • Civil Procedure, which bars parties to an action or proceeding against an executor or administrator or other representative of a deceased person upon a claim or demand against the estate of such deceased person from testifying as to any matter of fact occurring before the death of such deceased person. ! But it has generally been given a liberal construction to promote justice, and it is held that it never was intended to serve as a shield for fraud. ! In this case a number of credible witnesses testified to facts which conclusively showed that Carr's conduct was tainted with fraud. The Ong Chua did not take the witness stand until after the existence of fraud on the  part of Carr had been established beyond a doubt and not by a mere  preponderance  preponderance of evidence. evidence. In these circumstances circumstances,, we cannot cannot hold that the trial court erred in not excluding the plaintiff's testimony. Defendant-appellant Defendant-appellant also argued that the facts proven do not justify the • reformation of the deed in question. ! It will be noted that counsel admits that the deed was left in escrow with Moore, and if it were true that there was no mistake on the part of the Ong Chua at the time of the execution of the deed, a suit for reformation would hardly be appropriate. But that would not improve the appellant's position. ! It is well settled that the condition upon which a deed is delivered in escrow may be proved by parol evidence and that ordinarily the statute of frauds has no application to such an agreement, nor is it affected by the rule of evidence, which prohibits a written contract from being contradicted or varied by parol evidence. ! It is also well established that an escrow delivered without authority or obtained fraudulently passes no title. That is what occurred here; Moore had no authority whatever to deliver the deed in escrow to Carr before the expiration of the time for redemption. It follows that the certificates of title issued to Carr were of no legal effect and that the suit for the rescission of the deed and the cancellation of the corresponding certificates of title would  be in order.

Reformation will be given "where there is a mistake on one side and fraud or unfair dealing on the other.”

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