ABSOLUTELY SIMULATED SALE IS A VOID CONTRACT

SEPT. 25, 2017

Dear PAO,

Carlo borrowed from my father a Torrens Title covering a

riceland in Isabela province. My father verbally agreed in lending
the Torrens Title to him since Carlo is his nephew, and he trusted
him that much. A part of their agreement is the execution of a
Deed of Sale, so that the title will be canceled and be transferred
in the name of Carlo. After the transfer, Carlo obtained a loan
from a bank and mortgaged the property. In 2010, he paid his
loan with the bank but he refused to reconvey the property to us.
He now claims full ownership over the property because it was
already titled in his name. Can we recover the property from
Carlo?

Dear Aries,

There is no contract of sale between your father and Carlo.

Under Article 1458 of the New Civil Code of the Philippines, it is
stated, “By the contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefore a price certain
in money or its equivalent.” The requisites of a contract are found
under Article 1319 of the same code, which are as follows:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the
contract;
(3) Cause of the obligation which is established.”

The contract entered by your father and his nephew, Carlo,

is not valid because it lacks consideration and cause. Moreover,
the same is not a contract of sale because the parties do not
intend any transfer of ownership over the land.

The contract of sale is absolutely simulated. Under Article

1345 of the New Civil Code of the Philippines, “simulation of
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.” Correlative
thereto, Article 1346 of the same law also provides that “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.”

In a similar case decided by the Supreme Court entitled

Heirs of Dr. Mario S. Intac and Angelina Mendoza-Intac vs. CA
[Court of Appeals] and Spouses Roy, et al. (G.R. No. 173211,
October 11, 2012), Associate Justice Jose Mendoza stated:

“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.”

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.”

Applying this decision in your case, the contract of sale

between your father and Carlo is void, because this is a simulated
sale. Your father did not really intend an absolute transfer of
ownership of the property to Carlo. Your father may recover the
property by filing a civil action for the nullification of the deed of
sale and certificate of title in the name of Carlo, alleging and
proving that he merely lent the Torrens Title of the riceland and
has no absolute intention to transfer it to the latter.

Again, we find it necessary to mention that this opinion is

solely based on the facts you have narrated and our appreciation
of the same. The opinion may vary when the facts are changed or
elaborated.
We hope that we were able to enlighten you on the matter.