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August 19, 2014

Heirs of Intac vs. CA

  • Ireneo Mendoza, married to Salvacion Fermin, was the owner of the subject property located in Quezon city which he purchased in 1954. (TCT No. 242655)
  • Ireneo had two children: respondents Josefina and Martina (respondents), Salvacion being their stepmother. 
  • When he was still alive, Ireneo, also took care of his niece, Angelina, since she was three years old until she got married. 
  • On October 25, 1977, Ireneo, with the consent of Salvacion, executed a deed of absolute sale of the property in favor of Angelina and her husband, Mario (Spouses Intac). 
  • Despite the sale, Ireneo and his family, including the respondents, continued staying in the premises and paying the realty taxes. After Ireneo died intestate in 1982, his widow and the respondents remained in the premises. After Salvacion died, respondents still maintained their residence there. Up to the present, they are in the premises, paying the real estate taxes thereon, leasing out portions of the property, and collecting the rentals.
  • The controversy arose when respondents sought the cancellation of TCT No. 242655, claiming that the sale was only simulated and, therefore, void.
  • The heirs of Ireneo, the respondents in this case, alleged that: 1. When Ireneo was still alive, Spouses Intac borrowed the title of the property (TCT No. 106530) from him to be used as collateral for a loan from a financing institution; 2. they objected because the title would be placed in the names of said spouses and it would then appear that the couple owned the property; that Ireneo, however, tried to appease them, telling them not to worry because Angelina would not take advantage of the situation considering that he took care of her for a very long time; that during his lifetime, he informed them that the subject property would be equally divided among them after his death; and 3. that respondents were the ones paying the real estate taxes over said property.
  • Spouses Intac countered, among others, that the subject property had been transferred to them based on a valid deed of absolute sale and for a valuable consideration; that the action to annul the deed of absolute sale had already prescribed; that the stay of respondents in the subject premises was only by tolerance during Ireneo’s lifetime because they were not yet in need of it at that time; and that despite respondents’ knowledge about the sale that took place on October 25, 1977, respondents still filed an action against them.
  • RTC ruled in favor of the respondents saying that the sale to the spouses Intac was null and void. The CA also ruled that there was no consideration in the sale to the spouses Intac and that the contract was one for equitable mortgage.

WON the Deed of Absolute Sale was a simulated contract or a valid agreement. 
WON the Deed of Absolute Sale, dated October 25, 1977, involving the subject real property in Pagasa, Quezon City, was a simulated contract or a valid agreement.


The deed of sale executed by Ireneo and Salvacion was absolutely simulated for lack of consideration and cause and, therefore, void. 

Articles 1345 and 1346 of the Civil Code provide:
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 or fictitious 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 real agreement.

Relatively simulated agreement vs. Absolute simulation 
If the parties state a false cause in the contract to conceal their real agreement, the contract is only relatively simulated and the parties are still bound by their real agreement. Hence, where the essential requisites of a contract 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 their successors in interest

In absolute simulation, there is a colorable contract but it has no substance as the parties have no intention to be bound by it. "The main characteristic of an absolute simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of the parties." "As a result, an absolutely simulated or fictitious contract is void, and the parties may recover from each other what they may have given under the contract."

No valid sale took place between Ireneo and Spouses Intac
In the case at bench, the Court is one with the courts below that no valid sale of the subject property actually took place between the alleged vendors, Ireneo and Salvacion; and the alleged vendees, Spouses Intac. There was simply no consideration and no intent to sell it.

Evidences to prove that there was no absolute deed of sale between the parties
Critical is the testimony of Marietto, a witness to the execution of the subject absolute deed of sale. He testified that Ireneo personally told him that he was going to execute a document of sale because Spouses Intac needed to borrow the title to the property and use it as collateral for their loan application. Ireneo and Salvacion never intended to sell or permanently transfer the full ownership of the subject property to Spouses Intac. Marietto was characterized by the RTC as a credible witness.

Aside from their plain denial, the heirs of Intac failed to present any concrete evidence to disprove Marietto’s testimony. They claimed that they actually paid P150,000.00 for the subject property. They, however, failed to adduce proof, even by circumstantial evidence, that they did, in fact, pay it. Even for the consideration of P60,000.00 as stated in the contract, petitioners could not show any tangible evidence of any payment therefor. Their failure to prove their payment only strengthened Marietto’s story that there was no payment made because Ireneo had no intention to sell the subject property.

Angelina’s story, except on the consideration, was consistent with that of Marietto. Angelina testified that she and her husband mortgaged the subject property sometime in July 1978 to finance the construction of a small hospital in Sta. Cruz, Laguna. Angelina claimed that Ireneo offered the property as he was in deep financial need.

The contract of sale was only for the purpose of lending the title of the property to Spouses Intac to enable them to secure a loan. 
Their arrangement was only temporary and could not give rise to a valid sale. Where there is no consideration, the sale is null and void ab initio. The case of Lequin vs. VIzconde was cited in this case.

The fact that Ireneo was still in physical possession of the subject property after the sale is a strong evidence to prove that there was no valid sale between the parties.
More importantly, Ireneo and his family continued to be in physical possession of the subject property after the sale in 1977 and up to the present. They even went as far as leasing the same and collecting rentals. If Spouses Intac really purchased the subject property and claimed to be its true owners, why did they not assert their ownership immediately after the alleged sale took place? Why did they have to assert their ownership of it only after the death of Ireneo and Salvacion? One of the most striking badges of absolute simulation is the complete absence of any attempt on the part of a vendee to assert his right of dominion over the property.

As heretofore shown, the contemporaneous and subsequent acts of both parties in this case, point to the fact that the intention of Ireneo was just to lend the title to the Spouses Intac to enable them to borrow money and put up a hospital in Sta. Cruz, Laguna. Clearly, the subject contract was absolutely simulated and, therefore, void.

The Spouses Intac never became the owners of the property despite its registration in their names.
It is also of no moment that TCT No. 106530 covering the subject property was cancelled and a new TCT (TCT No. 242655)21 was issued in their names. After all, registration does not vest title. As a logical consequence, petitioners did not become the owners of the subject property even after a TCT had been issued in their names.



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