Formaran v. Ong
REITERATIONFacts
The Antecedents: Petitioner Dr. Lorna C. Formaran alleged that she owned a parcel of land donated to her on June 25, 1967. On August 12, 1967, she allegedly made it appear that she sold one-half of this land to respondent Dr. Glenda B. Ong, purportedly to enable Glenda to secure a bank loan. Petitioner claimed this sale was fictitious and without consideration, with an agreement that Glenda would return the land. However, Glenda filed an unlawful detainer case against petitioner. Petitioner filed the instant case for annulment of the Deed of Absolute Sale. Procedural History: The Municipal Circuit Trial Court decided the unlawful detainer case in favor of Glenda. The Regional Trial Court (RTC) ruled in favor of petitioner, declaring the Deed of Absolute Sale null and void for being simulated and without consideration, and ordering the cancellation of Glenda's tax declaration and payment of attorney's fees. The Court of Appeals (CA) reversed the RTC decision, dismissing petitioner's complaint and ordering her to vacate the land. The Petition: Petitioner filed a petition for certiorari under Rule 45, arguing that the CA decision was based on a misappreciation of facts.
Issue(s)
Whether the Deed of Absolute Sale is simulated and void for want of consideration. Whether the Court of Appeals erred in reversing the decision of the Regional Trial Court.
Ruling
The petition is GRANTED. The Decision of the Court of Appeals is REVERSED and SET ASIDE. The Decision of the Regional Trial Court is REINSTATED.
Ratio Decidendi
On whether the Deed of Absolute Sale is simulated and void for want of consideration: The Supreme Court held that the Deed of Absolute Sale is indeed simulated and void from the very beginning. Several facts and circumstances were considered as badges of bad faith that favored the petitioner's claim. These include the sale being totally devoid of consideration, executed less than two months after the land was donated to the petitioner by the parents of respondent Glenda Ong, the petitioner's mortgage of the land in 1978 for a substantial loan, the petitioner's continuous actual possession of the land since the alleged sale, the significant delay of twenty-four years in registering the alleged sale, the respondent Glenda Ong's failure to introduce any improvements on the land, and the fact that the petitioner's house stood on a portion of the subject land. The Court found these omissions militated against respondent Glenda's submission that the sale was legitimate and consideration was paid. The Court emphasized that while notarization creates a presumption of regularity, it does not validate an instrument never intended to have any binding legal effect. On whether the Court of Appeals erred in reversing the decision of the Regional Trial Court: The Supreme Court found that the Court of Appeals erred in reversing the RTC's decision because it was based on a misappreciation of facts. The RTC's findings, which were adopted by the Supreme Court, clearly showed that the sale was purely simulated. If the sale had been legitimate, respondent Glenda should have immediately taken possession, declared the land for taxation, registered the sale, paid realty taxes, and introduced improvements. Her failure to do any of these, coupled with the petitioner's continued possession and encumbrance of the property, strongly indicated the simulated nature of the sale. The Court reiterated that the presumption of regularity afforded by notarization cannot overcome the clear evidence of simulation.
Main Doctrine
A deed of absolute sale is considered simulated and void from the beginning if it is totally devoid of consideration, and the circumstances surrounding its execution and registration, such as significant delay in registration, lack of possession by the buyer, continued possession and encumbrance of the property by the seller, and failure to introduce improvements by the buyer, constitute badges of bad faith that tip the balance in favor of the seller's claim of simulation.