Reyes v Asuncion 196083

FACTS:

Petitioner claimed that since the early 80s, she and her late husband were the owners,
with the right to occupy and possess a parcel of land (subject land), which is also a
sugarcane plantation, with an area of more or less 3.5 hectares located at Patling,
Capas, Tarlac and forms part of a U.S. Military Reservation. Sometime in 1986,
petitioner hired respondent as a caretaker of the subject land. In 1997, the Bases
Conversion and Development Authority (BCDA) launched a resettlement program for
the victims of the Mt. Pinatubo eruption and began to look for possible resettlement
sites in Tarlac and the subject lot was among those considered. Thereafter, according to
petitioner, in order to prevent the BCDA from converting her property into a
resettlement site, she and respondent executed a contract, antedated on June 15,
1993, transferring her rights over the subject land to the respondent.

ISSUE:

Whether or not petitioner can assail the validity of their contract invoking that what
they have executed is an absolute simulated contract.

RULING:

The court answered in the negative.

In an absolutely simulated contract is consent which is essential to a valid and

enforceable contract.13 Thus, where a person, in order to place his property beyond the
reach of his creditors, simulates a transfer of it to another, he does not really intend to
divest himself of his title and control of the property; hence, the deed of transfer is but
a sham.
Thereafter, according to petitioner, in order to prevent the BCDA from converting her
property into a resettlement site, she and respondent executed a contract, antedated
on June 15, 1993, transferring her rights over the subject land to the respondent.

The primary consideration in determining the true nature of a contract is the intention
of the parties. If the words of a contract appear to contravene the evident intention of
the parties, the latter shall prevail. Such intention is determined not only from the
express terms of their agreement, but also from the contemporaneous and subsequent
acts of the parties.15

The burden of proving the alleged simulation of a contract falls on those who impugn its
regularity and validity. A failure to discharge this duty will result in the upholding of the
contract. The primary consideration in determining whether a contract is simulated is
the intention of the parties as manifested by the express terms of the agreement itself,
as well as the contemporaneous and subsequent actions of the parties. The most
striking index of simulation is not the filial relationship between the purported seller and
buyer, but the complete absence of any attempt in any manner on the part of the latter
to assert rights of dominion over the disputed property.

petitioner failed to present evidence to prove that respondent acted in bad faith or
fraud in procuring her signature or that he violated their real intention, if any, in
executing it.

So far, appellant's averments evince an obvious knowledge and voluntariness on her

part to enter into the alleged simulated contract. Without the slightest doubt, appellant,
as plaintiff in the court below, utterly foiled to adduce any evidence of appellee's bad
faith or fraud in procuring her signature to the contract or that he violated their real
intention, if any, in executing it. It must be stressed that the determination of whether
one acted in bad faith is evidentiary in nature. Indeed, the unbroken jurisprudence is
that "[b]ad faith [or fraud] under the law cannot be presumed; it must be established
by clear and convincing evidence. The allegation of simulation of contract as well as
lack of consent and/or vitiated consent remains to be proven. As it stands, We perceive
that the contract by its very terms and conditions, on June 15, 1993, appellant simply
intended to transfer the subject land to appellee. It is a cardinal rule that if the terms of
a contract are clear and leave no doubt as to the intention of the contracting parties,
the literal meaning of its stipulation shall control.

Manila Banking Corp Vv. Silverio 132887

FACTS:

Purificacion Ver owned

two parcels of land in La
Huerta, Paranaque
City, which she sold
for 1,036,475 to
Ricardo C. Silverio, Sr.
The₱
transaction's absolute
deed of sale was not
registered, therefore title
remained with the seller,
Ver. The Manila Banking
Corporation (TMBC) filed
a case with the Makati City
Regional Trial Court
(RTC) for the collection of
a sum of money, along
with an application for
the issuing of a writ of
preliminary attachment
against Ricardo, Sr. and
the Delta Motors
Corporation
Purificacion Ver owned
two parcels of land in La
Huerta, Paranaque
City, which she sold
for 1,036,475 to
Ricardo C. Silverio, Sr.
The₱
transaction's absolute
deed of sale was not
registered, therefore title
remained with the seller,
Ver. The Manila Banking
Corporation (TMBC) filed
a case with the Makati City
Regional Trial Court
(RTC) for the collection of
a sum of money, along
with an application for
the issuing of a writ of
preliminary attachment
against Ricardo, Sr. and
the Delta Motors
Corporation
Purificacion Ver owned
two parcels of land in La
Huerta, Paranaque
City, which she sold
for 1,036,475 to
Ricardo C. Silverio, Sr.
The₱
transaction's absolute
deed of sale was not
registered, therefore title
remained with the seller,
Ver. The Manila Banking
Corporation (TMBC) filed
a case with the Makati City
Regional Trial Court
(RTC) for the collection of
a sum of money, along
with an application for
the issuing of a writ of
preliminary attachment
against Ricardo, Sr. and
the Delta Motors
Corporation
Purificacion ver owned two parcels of land in La Huerta, Parañaque City, which she sold for 1M to
Ricardo C. Silverio. Sr. The transaction’s absolute deed of sale was not registered, therefore the title
remained with the seller, Ver. The Manila Banking Corporation (TMBC) filed a case with the Makati City
Regional Trial Court (RTC) for the collection of a sum of money, along with an application for the issuing
of a writ of preliminary attachment against Ricardo, Sr. and the Delta Motors Corporation.

Respondent Edmundo, the nephew of Ricardo Sr. filed a case in Makati City RTC for “Cancellation of
Notice of Levy on Attachment and Writ of Attachment on Transfer Certificates of Titles”. Claiming that
Ricardo, Sr. sold him the properties in question as early as September 1989. Hence, on July 1990, these
properties could not be levied upon to answer for the debt of Ricardo, Sr., who was no longer the
owner.

ISSUE:

Whether or not the contract of sale between Edmundo and Ricardo, Sr. is valid?

RULING:
No. An indication of simulation of contract is the complete absence of an attempt in any manner on
the part of the ostensible buyer to assert rights of ownership over the subject properties. In herein
case, Edmundo did not attempt to have the 1989 deed of sale registered until 1993. He was not in
possession of the properties. He did not have a contract of lease with the actual occupant of the
properties. As late as 1991, it was Ricardo, Sr. who was claiming to be the rightful owner of the
properties in connection with an ejectment case he filed against third persons. Edmundo's failure to
exercise acts of dominium over the subject properties buttresses TMBC's position that the former did
not at all intend to be bound by the contract of sale.

Considering that an absolutely simulated contract is not a recognized mode of acquiring

ownership, the levy of the subject properties on 02 July 1990 pursuant to a writ of preliminary
attachment duly issued by the RTC in favor of TMBC and against its debtor, Ricardo, Sr., was validly
made as the properties were invariably his. Consequently, Edmundo, who has no legal interest in
these properties, cannot cause the cancellation of the annotation of such lien for the reasons stated in
his petition.

Heir of Balite v. Lim 152168

FACTS:
Spouses Aurelio and Esperanza Balite were the owners of a parcel of land, located at Northern
Samar. When Aurelio died Esperanza Balite, and their children, became co-owners thereof.

Esperanza became ill and was in dire need of money for her hospital expenses through her daughter
offered to sell to Rodrigo Lim, her undivided share worth 1M. Both parties agreed that it will be made
to appear that the purchase price of the property would be P150,000.00, although the actual price
was P1,000,000.00. They also executed, on the same day, a "Joint Affidavit" under which they
declared that the real price of the property was P1,000,000.00, payable to Esperanza by
installments.

Rodrigo took actual possession of the property and introduced improvements thereon. He remitted
to Esperanza and Cristeta sums of money in partial payments of the property.

Later on, the other children learned of the sale, they wrote a letter to the Register of De saying that
they were not informed of the sale of a portion of the said property by their mother nor did they give
their consent thereto, and requested the [RD] to hold processal or approval of any application for
registration of title of ownership in the name of the buyer of said lot.

On 1996 Esperanza signed a letter addressed to Rodrigo informing the latter that her children did
not agree to the sale of the property to him and that she was withdrawing all her commitments until
the validity of the sale is finally resolved. Later on, Esperanza died and was survived by her children.

Antonio received payments from Rodrigo as deemed payments for the property.

On June 1997, [petitioners] filed a complaint against Rodrigo with the Regional Trial Court of
Northern Samar, for "Annulment of Sale, Quieting of Title, Injunction and Damages 

ISSUE:
Whether or not the Deed of Absolute Sale dated April 16, 1996 is null and void on the grounds that it
is falsified; it has an unlawful cause; and it is contrary to law and/or public policy. (because the
undervalued consideration indicated therein was intended for an unlawful purpose -- to avoid the
payment of higher capital gains taxes on the transaction.)

RULING:

No. We have before us an example of a simulated contract. Article 1345 of the Civil Code provides
that the simulation of a contract may either be absolute or relative. In absolute simulation, there is a
colorable contract but without any substance, because the parties have no intention to be bound by
it. An absolutely simulated contract is void, and the parties may recover from each other what they
may have given under the "contract." On the other hand, if the parties state a false cause in the
8 

contract to conceal their real agreement, such a contract is relatively simulated. Here, the parties’
real agreement binds them.

In the present case, the parties intended to be bound by the Contract, even if it did not reflect the
actual purchase price of the property. That the parties intended the agreement to produce legal
effect is revealed by the letter of Esperanza Balite to respondent on 1996

Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and enforceable.
All the essential requisites prescribed by law for the validity and perfection of contracts are present.

The juridical nature of the Contract remained the same. What was concealed was merely the actual
price. Where the essential requisites are present and the simulation refers only to the content or
terms of the contract, the agreement is absolutely binding and enforceable between the parties and
12 

their successors in interest.

Cruz v. Bancom Finance Corp 147788

FACTS:
Plaintiffs herein, were the registered owners of a 339,335 square meter parcel of agricultural land
together with improvements located at Bulacan. Defendant Norma Sulit offered to purchase the land.
Plaintiffs’ asking price for the land was ₱700,000.00, but Norma only had ₱25,000.00 which Fr. Cruz
accepted as earnest money with the agreement that titles would be transferred to Norma upon
payment of the balance of ₱675,000.00. Norma failed to pay the balance and proposed [to] Fr. Cruz
to transfer the property to her but the latter refused, obviously because he had no reason to trust
Norma.  capitalizing on the close relationship of Candelaria Sanchez with the plaintiffs, Norma
succeeded in having the plaintiffs execute a document of sale of the land in favor of Candelaria who
would then obtain a bank loan in her name using the plaintiffs’ land as collateral. On the same day,
Candelaria executed another Deed of Absolute Sale over the land in favor of Norma. In both
documents, it appeared that the consideration for the sale of the land was only ₱150,000.00.
Pursuant to the sale, Norma was able to effect the transfer of the title to the land in her name.

Candelaria undertook to pay the plaintiffs the amount of ₱655,000.00 representing the balance of
the actual price of the land. In a Special Agreement Norma assumed Candelaria’s obligation,
stipulating to pay the plaintiffs the said amount within six months on pain of fine or penalty in case of
non-fulfillment.

Norma managed to obtain a loan from Bancom in the amount of ₱569,000.00 secured by a
mortgage over the land now titled in her name.

On account of Norma’s failure to pay the amount stipulated in the Special Agreement and her
subsequent disappearance from her usual address, plaintiffs were prompted to file the herein
complaint for the reconveyance of the land.

Norma defaulted in her payment to the Bank and her mortgage was foreclosed. At the subsequent
auction sale, Bancom was declared the highest bidder and was issued the corresponding certificate
of sale over the land.
ISSUE:

Whether or not the sale was valid?

RULING:

No. they executed with Sanchez, as well as the Deed of Sale executed between Sanchez and Sulit,
8 

was absolutely simulated; hence, null and void.

simulation takes place when the parties do not really want the contract they have executed to
produce the legal effects expressed by its wordings. Simulation or vices of declaration may be either
11 

absolute or relative. Article 1345 of the Civil Code distinguishes an absolute simulation from a
relative one while Article 1346 discusses their effects, as follows:

"Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the
parties do not intend to be bound at all; the latter when the parties conceal their true agreement.

"Art. 1346. An absolutely simulated contract is void. A relative simulation, when it does not prejudice
a third person and is not intended for any purpose contrary to law, morals, good customs, public
order or public policy binds the parties to their agreement."

Although the Deed of Sale between petitioners and Sanchez stipulated a consideration of
14 

₱150,000, there was actually no exchange of money between them.