44. Clemente v. CA et. al.

GR No. 175483, October 14, 2015

PRINCIPLE: ABSOLUTELY SIMULATED CONTRACT, EFFECT

Facts:

Adela owns three adjoining parcels of land in Scout Ojeda Street, Diliman, Quezon City – subdivided as lot 32, 34,
and 35-b respectively. During her lifetime, she allowed her children and grandchildren, the use and possession of
said properties. Adela simulated a transfer of Lot 32 and 34 to her two grandsons namely Carlos Jr., and Dennis. As
a consequence, TCTs were issued accordingly while lot 35-b remained with Adela.

Prior to Adela and Valentina Clemente’s departure to USA, Adela requested her grandsons to execute a deed of
reconveyance. Subsequently, Adela executed a deed of absolute sale in favor of Clemente over lots 32 and 34 for
the price of 240,000. On the same day, a Special Power of Attorney was executed by Adela in favor of Clemente.
Adela and Clemente then went to USA.

When Clemente returned to the Philippines, she opted to register the sale and sought to eject the children of Adela
who were staying at the property. Only then did the children of Adela became aware of the conveyance of property. In
return, they filed a complaint for reconveyance of properties against Clemente which was later amended to include lot
35-b where it was discovered during the trial that the same property was subjected to another deed of absolute sale
for the price of 60,000. The amended complaint sought to nullify the transactions between Adela and Clemente on
the allegations that the contract was void and inexistent for being simulated and that there is no considerations on the
sale.

Issue: Whether the contract of sale over lots 32, 34, and 35-b between Adela and Clemente is valid.

Ruling: There is no valid contract unless the following requisites concur: (1) consent of the contracting parties; (2)
object certain which is the subject matter of the contract; and (3) Cause of the obligation which is established. The
absence of one renders the contract void. Here, there is no valid contract due to the absence of consent between the
contracting parties as the contract of sale was a mere simulation.

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 short, in absolute simulation there appears to be a valid contract but there is actually none because
the element of consent is lacking. This is so because the parties do not actually intend to be bound by the terms of
the contract.

In determining the true nature of a contract, the primary test 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.

The Court affirmed the findings of the Trial Court and the CA on the findings that the contract was mere simulation
taking into consideration the totality of evidence and circumstances presented before the court. While there is a
contract of sale, there is no transfer of ownership as clearly seen in the case. The use and possession of the
properties were still enjoyed by the children and grandchildren of Adela. It is illogical that a contract of sale be
executed and a Special Power of Attorney be executed on the buyer in the parties. That in a letter made by Adela, it
was said that Clemente has “no say” when it comes to the properties and such falls under the sole discretion of
Adela. That Clemente merely follows the instructions of Adela when a letter was sent where it was said that “the
houses be under your name” pertaining to the children of Adela. With these circumstances at hand, it was ruled that
there is indeed no contract of sale as there is no consent on both parties and that it was mere simulated and not to be
bound by said contract.

Additionally, the Court ruled that there is no consideration on the contract of sale. As provided by law, if the price is
simulated, the same is void. The records reveal that the duplicate originals of the contract of sale bear a different
entry with regards to the price. Lastly, the court ruled that there is no implied trust in favor of the children and
grandchildren of Adela as there is no vested right in favor of Clemente. The court ordered the reconveyance of the
properties to the estate of Adela.