Tanchuling v. Cantela
REITERATIONFacts
The Antecedents: Spouses Dr. Vicente Y. Tanchuling and Renee B. Tanchuling (Sps. Tanchuling) executed a Deed of Absolute Sale (subject deed) on March 17, 2005, selling two parcels of land to respondent Sotero C. Cantela (Cantela) for P400,000.00. The owner's copies of the Transfer Certificates of Title (TCTs) were delivered to Cantela, but neither party was in actual physical possession of the properties. Sps. Tanchuling alleged the deed was simulated, executed only to prevent illegal sales by a third party, and that Cantela simultaneously executed an undated deed reconveying the properties back to them. When Cantela refused to return the TCTs, Sps. Tanchuling filed a complaint for annulment of the deed and delivery of the TCTs. Procedural History: The Regional Trial Court (RTC) ruled in favor of Sps. Tanchuling, declaring the subject deed null and void for being absolutely simulated, citing the simultaneous execution of the undated deed, the lack of actual consideration, and Cantela's delay in registering the titles. The Court of Appeals (CA) reversed the RTC decision, finding that Cantela's acts to assert dominion negated simulation and that the subject deed, being notarized, should prevail over the undated deed. The Petition: Petitioners, Renee B. Tanchuling and the heirs of Vicente N. Y. Tanchuling, assailed the CA decision before the Supreme Court.
Issue(s)
Whether or not the Deed of Absolute Sale dated March 17, 2005, between Sps. Tanchuling and Cantela is simulated due to lack of consideration, failure to register and take possession, and the simultaneous execution of an undated deed reconveying the properties. Whether or not the Court of Appeals erred in reversing the Regional Trial Court's decision, considering the variance in factual findings regarding the simulation of the Deed of Absolute Sale.
Ruling
The petition is meritorious. The Supreme Court reversed and set aside the Decision of the Court of Appeals and reinstated the Decision of the Regional Trial Court, declaring the Deed of Absolute Sale dated March 17, 2005, null and void for being absolutely simulated.
Ratio Decidendi
On the issue of simulation: The Court held that the subject Deed of Absolute Sale was absolutely simulated. Simulation occurs when the parties do not intend the contract to produce the legal effects expressed by its terms. Article 1345 of the Civil Code distinguishes between absolute simulation, where parties do not intend to be bound at all, and relative simulation, where parties conceal their true agreement. Article 1346 states that an absolutely simulated contract is void. The main characteristic of absolute simulation is that the apparent contract is not desired or intended to produce legal effect or alter the juridical situation of the parties. In this case, the parties never intended to be bound by any sale agreement, and the subject deed was executed merely as a front to deter illegal sales by a third party. The Court reiterated the ruling in Cruz v. Bancom Finance Corporation that a contract of sale is void if it is without cause or consideration, or if the purchase price stated as paid was never actually paid. Although the subject deed stipulated a consideration of P400,000.00, the testimony of Vicente Tanchuling, corroborated by witnesses Ma. Belleza Navarro and Jesus Botero, clearly established that there was no actual cash consideration exchanged. Cantela failed to present any evidence to refute these assertions, thus supporting the finding of simulation. The Court found that Cantela's persistent failure to secure a title in his name indicated simulation, citing Rufloe v. Burgos. A true vendee would endeavor to register the sale to assert ownership and enjoy the benefits thereof. Furthermore, the failure of a purported buyer to take possession of the property is a clear badge of simulation, as held in Cruz v. Bancom Finance Corporation. Cantela's inaction, despite the alleged impediment of the properties being posted as a bond, negates the interest of a conscientious buyer. The Court emphasized that the undated deed, executed simultaneously with the subject deed and reconveying the properties back to Sps. Tanchuling, unmistakably evinced absolute simulation. Cantela's claim that he was tricked into signing the undated deed was unsubstantiated and self-serving. The fact that the undated deed was not notarized was rendered irrelevant by Cantela's admission of its execution, which, absent proof of fraud, must be presumed fair and regular. On the variance in factual findings: The Court noted that while the issue of simulation generally involves questions of fact, it can review such findings when, as in this case, the factual findings of the trial court and the appellate court are at variance. The Court found the RTC's findings more persuasive and consistent with the evidence presented, leading to the conclusion that the subject deed was absolutely simulated.
Main Doctrine
An absolutely simulated contract is void and produces no legal effect, as the parties thereto do not intend to be bound by any agreement. The absence of consideration and the failure to take possession of the property are badges of simulation.