TONGOY v.

CA

FACTS:
Hacienda Pulo were owned by five co-owners who had succeeded it from their late
father, three of whom died without issues, Jose, Ana, and Teresa while the other two,
Francisco (have six children from two wives) and Jovita (have four children) have
their own.
The hacienda was mortgaged by the registered co-owners above mentioned to Phil.
Nat’l Bank (PNB) for a loan payable in ten years. In 1935 after having been in default
of the loan, the Hacienda was judicially declared by the Supreme Court for
foreclosure in favor of the PNB. Consequently, the co-owners had agreed in a
meeting that to avoid actual seceding from them the hacienda by PNB at their
disadvantage, made a simulated transfer of their rights as co-owners to the newly
lawyer Luis Tongoy (legitimate son of Francisco, one of the co-owners), of which
was favored by PNB. Thereafter, Luis Tongoy in twenty years was able to pay off all
the obligations with PNB. In 1958, PNB officially released the hacienda from the
mortgage. In February 1966, Luis died leaving as his heirs, his son Francisco and his
wife. However, in a month before Luis’ death, Jesus Tongoy Sonora (son of Jovita)
demanded from him the return of the shares to all co-owners. Therefore, not long
after Luis’ death the heirs of Jovita (the Sonoras) and Luis’ brothers and illegitimate
siblings filed complaints against his son Francisco, as administrator of the estate of
Luis, and his wife pertaining to the interests of the shares and its interests in
Hacienda Pulo.

GENERAL ISSUE:
Whether or not the simulated act of assignment or transfer of rights be considered
as binding between the parties.

CONTROLLING ISSUE:
Whether or not the simulated act of assignment or transfer of rights of co-
ownership made by the co-owners in favor of Luis Tongoy, can be considered as
binding between the parties.

RULING: NO
The deeds of transfer executed in favor of Luis Tongoy, were from the beginning is
absolutely simulated or fictitious, since the same were made merely for purpose of
restructuring mortgage over the subject properties and thus preventing foreclosure
by the PNB.
The law and jurisprudence on simulated or fictitious contracts for reconveyance
instituted by respondents is anchored on the said simulated deeds of transfer
cannot and should not be barred by prescription. No amount of time could accord
validity or efficacy to such fictitious transactions, the defect of which is permanent.
There is no implied trust that was generated by the simulated transfers because
being fictitious or simulated, the transfers were null and void ab initio from the very
beginning and thus vested no rights whatsoever in favor of Luis Tongoy or his heirs.
That which is inexistent cannot give life to anything at all.
DISPOSITON:
Wherefore, the judgment appealed from is hereby affirmed in toto.