G.R. No. 13300 ; September 29, 1919
BASILIA BOUGH and GUSTAVUS BOUGH, plaintiffs-appellants, vs. MATILDE CANTIVEROS and PRESBITERA HANOPOL, defendants-appellees.

FACTS:
Matilde Cantiveros, a wealthy resident of Carigara, Leyte, owned numerous parcels of land valued at over ₱30,000. In December 1912, she and her husband executed a marital contract of separation. Basilia Bough, a cousin and protégée of Matilde, lived with her, and Basilia’s husband, Gustavus Bough, enjoyed Matilde’s confidence. In December 1913, Gustavus falsely represented to Matilde that her husband was in town and might contest the separation of conjugal property, thereby inducing her to sign a deed of sale (Exhibit A) conveying all her properties to Basilia for a stated consideration of ₱10,000. No actual payment was made. To reassure Matilde, the Boughs executed another document (Exhibit 1) purporting to donate the properties back to her should they and their children predecease her. Matilde remained in possession of the properties. The Boughs later filed an action to recover possession based on the deed of sale and sought damages. Matilde, in her answer, sought a declaration of nullity of the sale, alleging fraud. The trial court declared the deed fictitious and null, absolving the defendants. The plaintiffs appealed.

ISSUE:
1. Whether the defendants, having failed to deny under oath the genuineness and due execution of the written instrument (Exhibit A) as required under Section 103 of the Code of Civil Procedure, are barred from presenting evidence to impugn it on grounds of fraud and want of consideration.
2. Whether the deed of sale is valid or void due to fraud and lack of consideration.

RULING:
The Supreme Court affirmed the trial court’s judgment, holding the deed of sale null and void.

1. On the procedural issue: The Court ruled that while Section 103 of the Code of Civil Procedure deems the genuineness and due execution of a written instrument admitted if not specifically denied under oath, this does not preclude a party from raising defenses such as fraud, mistake, illegality, or want of consideration. The failure to deny under oath merely admits that the document is not spurious or counterfeit on its face, but does not estop the defendant from proving that the instrument was executed through fraud or without consideration. Thus, the trial court correctly allowed evidence on fraud and want of consideration.

2. On the substantive issue: The Court found that the deed of sale was procured by fraud and was without consideration. Gustavus Bough exploited Matilde’s trust and induced her to execute the deed by fabricating a threat of litigation from her husbanda threat that was non-existent. The stated consideration of ₱10,000 was never paid, and the conveyance, covering properties worth over ₱30,000, was grossly inequitable. The subsequent “donation” document (Exhibit 1) was merely a device to lull Matilde into a false sense of security. The transaction was fraudulent and against public policy. Although Matilde was in delicto for participating in a simulated sale intended to defraud a potential creditor, she was not in pari delicto with the Boughs, who were the active perpetrators of the fraud. As there was no actual creditor prejudiced, equity required restoring Matilde to her original position.

The Court cited analogous cases where conveyances induced by false representations of nonexistent legal threats were set aside. The decision in Hibberd v. Rohde and McMillian (32 Phil. 476) was referenced as supporting the principles applicable here.

DISPOSITIVE PORTION:
The judgment of the trial court is affirmed. The deed of sale (Exhibit A) is declared fictitious, null, and without effect. The defendants are absolved from the complaint. Costs against the appellants.