Elements of valid contract

SPOUSES NORA SAGUID and ROLANDO P. SAGUID vs. SECURITY FINANCE, INC., G.R. No. 159467, December 9, 2005

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To ascertain whether or not petitioners are bound by the promissory note and chattel mortgage, it must be established that all the elements of a contract of loan are present. Like any other contract, a contract of loan is governed by the rules as to the requisites and validity of contracts in general. It is basic and elementary in this jurisdiction that what determines the validity of a contract, in general, is the presence of the elements constituting the same, namely: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established.[26] In this case, petitioners insist the third element is lacking since they never transacted with respondent for the proceeds of the loan which were used in purchasing the subject motor vehicle.

The Court of Appeals ruled that petitioners transacted with respondent and are bound by the promissory note and chattel mortgage they signed. It anchored its ruling on the admission of petitioner Rolando Saguid that he signed said documents. Citing Section 4, Rule 129[27] of the Rules of Court, it reasoned out that petitioner Rolando Saguids bare denial cannot qualify the admission he made during pre-trial and during trial that they transacted with respondent and executed the aforesaid documents. It brushed aside the explanation made by petitioner Rolando Saguid that he signed the same in blank and only as preparation for a loan application presented to him by Sonny Quijano.

From the record, it is clear that what petitioner Rolando Saguid admitted was only his signatures in the aforementioned documents and not the contents thereof. In petitioners Answer, Rolando Saguid admitted signing the promissory note in preparation for an application for loan upon the request of Sonny Quijano who promised to facilitate the same for the purchase of another motor vehicle to be converted into a taxicab, but not with respondent. During trial, Rolando Saguid explained the circumstances under which he signed the documents with emphasis that he signed them in blank.

We find that the Court of Appeals committed an error when it closed its eyes to the clarification made by petitioner Rolando Saguid on the ground that same belied his admission. The rule that an admission cannot be contradicted unless it can be shown that it was made through palpable mistake or that no such admission was made will not apply under the circumstances obtaining in this case. It does not follow that the admission of the signatures carries with it the admission of the contents of the documents especially when the person who affixed his signatures thereon questions its execution and the veracity of the details embodied therein. Petitioners could have been bound by the terms and conditions of the promissory note and chattel mortgage if petitioner Rolando Saguid admitted not only his signatures but also as to what are contained therein. This is not to be in the case before us. Petitioners can therefore adduce evidence that would nullify or invalidate both the promissory note and the chattel mortgage. In other words, they can show that the elements of the contract of loan are wanting.

The Court of Appeals held that it was not in a proper position to entangle itself in resolving the matter as regards the qualification made by petitioner Rolando Saguid on his admission because whatever the documents he signed in favor of Mr. Quijano is not the concern of the court as the same is not one of the issues presented before it, and that Mr. Quijano is not a party in the case. Petitioners claim that if only the Court of Appeals ruled on the matter, it could have ruled in their favor and sustained the decision of the trial court.

The Court of Appeals should have ruled on the same it being the primal defense of petitioners. It should not have wholly disregarded the qualification made by petitioner Rolando Saguid considering that said defense can easily be supported by other competent evidence. Instead of relying heavily on the admitted signatures, it should have evaluated other evidence that could have either bolstered or disproved the defense of petitioners.

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