Spouses Santiago v. Court of Appeals
REITERATIONFacts
The Antecedents: The underlying dispute concerns a parcel of land consisting of 927 square meters, registered under Transfer Certificate of Title No. T-115510 in the name of Paula Arcega. The petitioners, Spouses Regalado Santiago and Rosita Palabyab, and Josefina Arcega, claim to have purchased this land from Paula Arcega through a deed of absolute sale executed on July 18, 1971. The private respondent, Quirico Arcega, is the heir of Paula Arcega and alleges that the sale was fictitious and the consideration of P20,000.00 was never paid. He contends that the deed of sale was merely a simulated transaction to enable the petitioners to use the property as collateral for a loan from the Social Security System (SSS). Procedural History: Quirico Arcega filed a civil case on October 24, 1985, seeking to declare the deed of sale null and void. The Regional Trial Court (RTC) of Malolos, Bulacan, Branch 19, ruled in favor of Quirico Arcega, declaring the deed of sale and the subsequent Transfer Certificate of Title No. T-148989 issued in the petitioners' names as null and void, and ordering the reconveyance of the property. The petitioners appealed this decision to the Court of Appeals, which affirmed the RTC's judgment in its entirety. This petition for review under Rule 45 is an appeal from the decision of the Court of Appeals. The Petition: The petitioners, Spouses Regalado Santiago and Rosita Palabyab, and Josefina Arcega, are seeking review of the Court of Appeals' decision under Rule 45 of the Rules of Court. They argue that the lower courts erred in disregarding the notarized deed of sale and in admitting parol evidence that impugned the validity of the sale, particularly the testimony of the notary public who stated no money was involved. They also contend that the private respondent's action was barred by the statute of limitations and laches, as the complaint was filed more than fourteen years after the execution of the deed of sale. The petitioners maintain that the sale was genuine and that they paid the purchase price.
Issue(s)
Whether the deed of absolute sale executed by Paula Arcega in favor of the petitioners is a valid and genuine contract or a simulated one. Whether the private respondent's action to declare the deed of sale null and void is barred by the statute of limitations or laches. Whether the parol evidence rule bars the admission of evidence to prove the alleged simulation of the deed of sale.
Ruling
The petition is unmeritorious. The Supreme Court affirmed the decision of the Court of Appeals, upholding the RTC's declaration that the deed of absolute sale was null and void, and ordering the reconveyance of the property. The Court found that the sale was simulated and fictitious, executed solely to facilitate a loan with the Social Security System (SSS).
Ratio Decidendi
On the validity of the deed of absolute sale: The Court held that the deed of absolute sale was absolutely simulated and therefore void. Several circumstances indicated simulation: (1) The continued occupation of the master's bedroom by the vendor, Paula Arcega, until her death, while the vendees occupied smaller rooms, was contrary to the nature of ownership. A legitimate vendee would not allow the vendor to retain possession of the most favored part of the property. (2) The testimony of the notary public, Atty. Luis Cuvin, who stated that "NO MONEY WAS INVOLVED IN THE TRANSACTION," directly contradicted the purported consideration of P20,000.00. (3) The private respondent's complaint explicitly alleged that the sale was fictitious and intended to facilitate a loan from the SSS, requiring the property to be in the petitioners' names. (4) The Court cited Suntay v. Court of Appeals where a similar situation of continued possession by the vendor and lack of assertion of ownership rights by the vendee led to a finding of simulation. The Court emphasized that the intention of the parties is the primary consideration in determining the true nature of a contract, and here, the evidence showed no intention to convey ownership for a price. The issuance of a new title in the petitioners' names did not validate the simulated sale, as the Torrens system does not create or vest title but merely confirms and records existing ones, and cannot be used as a shield for fraud. On the statute of limitations and laches: The Court ruled that the action to declare the inexistence of a contract does not prescribe, citing Article 1410 of the New Civil Code. Therefore, the private respondent's action was not barred by the statute of limitations. Regarding laches, the Court held that applying it would be impractical, unjust, and inequitable, as it would result in vesting ownership in favor of petitioners through a simulated deed. The Court reiterated that laches is an equitable doctrine that should not be used to defeat justice or perpetrate fraud, and that courts will not be strictly bound by it when manifest wrong or injustice would result. The circumstances of the case, particularly the simulated nature of the sale, warranted the equitable intervention of the court to prevent injustice. On the admissibility of parol evidence: The Court found that the parol evidence rule did not bar the admission of evidence to prove the alleged simulation of the deed of sale. The private respondent's complaint put in issue the validity of the deeds of sale, specifically alleging that they were fictitious and failed to express the true intent and agreement of the parties. This falls under exception (b) and (c) of Section 9, Rule 130 of the Rules of Court, which allows evidence to explain or add to the terms of a written agreement when its validity or the true intent of the parties is questioned. Furthermore, the Court noted that the petitioners failed to object to the introduction of parol evidence during the trial, thereby waiving their right to invoke the parol evidence rule. The Court cannot disregard competent evidence admitted without objection.
Main Doctrine
A deed of sale is considered absolutely simulated and void if the parties never intended to be bound by the terms of the sale, particularly the transfer of ownership for a valuable consideration. The continued possession by the vendor and the absence of any assertion of ownership rights by the vendee are strong indicators of simulation. The parol evidence rule is not a bar to proving the true nature of a contract when its validity or the true intent of the parties is put in issue, especially when the validity of the agreement is questioned.