Topic: Article 1361.

When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement, said instrument may be reformed. Title: Lynn Maagad and Director of Lands vs Juanito Maagad Facts: - The parcel of land in dispute (Lot 6297) located in Bulua, Cagayan de Oro City, formed part of the estate of Proceso Maagad. Upon his death, he was survived by his children Amadeo, Adelo (father of petitioner Lynn), Loreto and Juanito). - The heirs executed an Extrajudicial Partition of Real Estate dividing among themselves their father's properties. Lot 6297 was conveyed to Adelo while Lot 6270 was allotted to respondent Juanito. - Juanito claimed that there was a mistake in the allotment, wherein Lot 6270 was supposed to be allotted to Adelo and Lot 6297 to him for the following reasons: he had been in continuous possession of Lot 6297 even before Proceso's death, the lot was given to him when he got married in 1952, he had been religiously paying the realty taxes, Adelo (up to his death in 1989) possessed and paid the realty taxes for Lot 6271 and recognized and respected Juanito's possession and ownership of Lot 6297. - To rectify the mistake, Juanito and the children of Adelo (Dina, Ely, Lynn) executed a memorandum of exchange. However, due to a mistake in the assignment of the "Party of the First Part" and the "Party of the Second Part," Lot 6297 was again allotted to the heirs of Adelo and Lot 6270 to Juanito (as if no exchange happened). Juanito only found out about the mistake when Lynn caused the publication of the partition in a local newspaper. - Without Juanito's knowledge, Lynn, representing his siblings, applied for a free patent over Lot 6297. Subsequently, he demanded from Juanito that he surrender the possession of Lot 6297 which was ignored by Juanito, believing that the demand had no basis. The free patent application was granted in the name of 'Heirs of Adelo Maagad represented by Lynn Maagad.' - Juanito filed a complaint for Annulment of Title with damages, which was later amended to include a prayer for alternative relief of reconveyance of title. Lynn filed a demurrer to evidence. - RTC granted the demurrer and dismissed the case for lack of evidence. RTC stated in its decision that the allegation of the witnesses for Juanito that Lot 6297 was only mistakenly adjudicated to Adelo is belied by the fact that he signed the extrajudicial partition. He waived whatever right he may have had to the lot by signing the document. Although a Deed of Exchange was executed, it was done so 18 years after the partition, and it clearly stated that Lot 6297 belonged to Adelo and Lot 6270 to Juanito. The parol evidence rule forbids any addition to or contradiction of the terms of a written agreement by testimony purporting to show that at or before the signing of the document, other or different terms were orally agreed upon by the parties. Evidence falls short of justifying the reformation. - CA reversed RTC decision Issue: - Whether Juanito has a superior right over Lot 6297 (whether a reformation of the instrument by reason of mutual mistake is justified, making him rightful owner of the lot)

Held: - Yes, Juanito has a superior right over the lot in dispute. Ratio: SC cites the ruling of the CA which states that the records show that the Deed of Extrajudicial Partition contained a mistake by the adjudication of Lot 6297 to Adelo and of Lot 6270 to Juanito, and the necessity to rectify the error arose. A Memorandum of Exchange was executed, however, for reasons beyond the intervention of the parties, the memorandum had the same mistake and no exchange was effected. However, the voluntary and active participation in the execution of the memorandum clearly demonstrated a recognition of the mistake in the instrument of partition. The intent to effect the exchange was strongly manifested in the voluntary subscription to the instrument. By this voluntary subscription, Lynn is estopped from negating the existence of a mistake in the partition. SC agrees with the CA in stating that it would be highly illogical and absurd for the parties to execute a memorandum of exchange if there was nothing to exchange at all. The purpose was precisely to rectify and effect the correct adjudication of the two lots. The parol evidence rule, as applied by the RTC, is not absolute and has exceptions. A party may present evidence to modify, explain, or add to the terms of the agreement if he puts in his pleading a mistake in the written agreement. The elements of a mistake are: the mistake should be of fact, it should be mutual or common to both parties to the instrument, and it should be alleged and proved by clear and convincing evidence. In this case, all three elements are present, and there was a mistake in the partition. The mere fact of execution of a memorandum of exchange indicates the existence of a mistake in the partition which the parties sought to correct. The strongest evidence of mistake is the admission by Lynn in his petition for review on certiorari, wherein he states that because of mutual mistake, the memorandum failed to express the agreement of the parties to exchange the properties. A judicial admission conclusively binds the party making it unless it was shown that the admission was made through palpable mistake or that no admission was made. Other issue (just in case it will be asked) whether the free patent granted to Lynn over Lot 6297 should be declared null and void. Yes it should. SC affirmed CA decision to declare free patent grant null and void. The requirements of free patent are that the applicant must have continuously occupied and cultivated, either by himself or through his predecessors-in-interest, the tract or tracts of agricultural public lands, that the applicant shall have paid the real estate tax, and that the land has not been occupied by any person. Although Lynn’s petition was granted wherein it was stated that the applicant complied with all the

requirements for the issuance of the patent, he is not entitled to apply, much less be granted a free patent over Lot 6297. He was not in possession, much less occupation of the Lot and he had knowledge that it was occupied by another person, contrary to his claims in his application for free patent. Likewise, his claims of paying the realty taxes for the Lot is belied by evidence which only states that Lynn paid for taxes for the months of Sept and Oct. Prior to these dates, it was Juanito who paid the realty taxes. Lynn committed fraud and gross misrepresentation in his application for free patent. A free patent granted on the basis of fraud and misrepresentation is null and void.

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