Yu Bun Guan v. Elvira Ong
REITERATIONFacts
The Antecedents: Respondent Elvira Ong alleged that she and petitioner Yu Bun Guan were married in 1961 and lived together until petitioner abandoned her and their children in 1992 due to alleged promiscuity and vices. Respondent claimed she purchased a parcel of land (Rizal property) in 1968 with her personal funds, and a house and lot in 1983 with conjugal funds. Before their separation in 1992, respondent allegedly agreed to execute a Deed of Sale of the Rizal property in favor of petitioner, who promised to construct a commercial building for their children and pay a loan. The consideration for this 'simulated sale' was P200,000.00, which was not paid. Respondent paid the capital gains tax and other assessments. A new title (TCT No. 181033) was issued in petitioner's name, but respondent retained the owner's copy. Due to petitioner's refusal to fulfill his promise and his insistence on obtaining the owner's copy, coupled with threats and violence, respondent filed an Affidavit of Adverse Claim. Petitioner, on the other hand, claimed he purchased the Rizal property in 1968 using his own funds, with respondent acting as his dummy because he was then a Chinese national. He alleged that when he became a Filipino citizen in 1972, a Deed of Sale was executed to reflect true ownership. He also filed a petition for replacement of the owner's duplicate title in 1993, claiming it was lost, which was granted. Respondent discovered this 'fraudulent step' and filed an Affidavit of Adverse Claim. Petitioner argued respondent was in pari delicto. Procedural History: The Regional Trial Court (RTC) declared the Deed of Sale dated July 24, 1992, VOID, declared respondent Elvira Ong the OWNER of the property covered by TCT No. 217614, ordered the cancellation of TCT No. 181033 and issuance of a new title in respondent's name, and awarded damages and attorney's fees to respondent. The Court of Appeals (CA) affirmed the RTC Decision, finding the JP Rizal property to be respondent's paraphernal property, debunking petitioner's dummy claim, and holding that the pari delicto rule was inapplicable as the contract was simulated. The CA also affirmed the award of damages. The Petition: Petitioner sought review of the CA Decision and Resolution, raising issues regarding co-ownership, the validity of the 1992 sale, the application of the pari delicto rule, and the annulment of his title.
Issue(s)
Whether the JP Rizal property should be deemed co-owned, considering the source of funds used for its purchase. Whether the Deed of Sale dated July 24, 1992, was fictitious, simulated, and inexistent. Whether the in pari delicto rule should apply to the sale of the subject property in favor of the petitioner. Whether the annulment of the title in petitioner's name was proper in the absence of actual fraud.
Ruling
The Petition is denied. The assailed Decision of the Court of Appeals is affirmed. Costs are against the petitioner.
Ratio Decidendi
On the Nature of the Property: The Court affirmed the findings of the RTC and CA that the JP Rizal property was paraphernal property of the respondent. The Court reiterated the rule that factual findings of the trial court, especially when affirmed by the Court of Appeals, are binding and conclusive on the Supreme Court. Petitioner's testimony regarding the source of funds was inconsistent and unreliable, while respondent's capacity to purchase was sufficiently established. The claim that respondent was a dummy due to petitioner's alienage at the time of purchase was debunked by the fact that the title was issued to respondent prior to the alleged advice to use her as a dummy. On the Fictitious, Simulated and Inexistent Sale: The Court agreed with the lower courts that the Deed of Sale dated July 24, 1992, was simulated and therefore void. Citing Rongavilla v. Court of Appeals, the Court held that a deed of sale where the stated consideration was not paid is null and void for lack of cause or consideration. In this case, the P200,000.00 consideration was never paid, and neither party intended to pay it. The Deed was merely a subterfuge to facilitate the transfer of property based on an agreement that was not the consideration for the sale itself. On the Inapplicability of the in Pari Delicto Principle: The Court reiterated that the principle of in pari delicto applies only to contracts with an illegal cause or purpose, not to inexistent or void contracts. Since the Deed of Sale was found to be simulated and inexistent due to lack of consideration, the pari delicto rule, which denies recovery to equally at-fault parties, does not apply. The exception to the general rule is when the principle is invoked with respect to inexistent contracts, as in this case. On the Cancellation of TCT: Based on the finding that the Deed of Absolute Sale was simulated, void, and without effect, the Court affirmed the CA's order for the cancellation of TCT No. 181033. The Court reasoned that there was no legal basis for the issuance of the certificate of title in petitioner's name, as the underlying deed of sale was null and void from the beginning.
Main Doctrine
A simulated deed of sale has no legal effect, and the transfer certificate of title issued in consequence thereof should be cancelled. The principle of pari delicto does not apply to simulated or inexistent contracts.