G.R. No. 45965 - Gonzalez vs. Trinidad

Parties and the character of the controversy
Amparo Gonzalez and Alfredo Trinidad (petitioners) filed an appeal by certiorari from a decision of the Court of Appeals that reversed a decision of the Court of First Instance of Manila.
Primitivo Trinidad and Maria Ynaraes (respondents) were the plaintiffs in the Court of First Instance case and the respondents in the appeal.

Proceedings before the Court of First Instance of Manila
In civil case No. 47960, the Court of First Instance of Manila declared the deed of sale of an urban property null and void.
The Court of First Instance rendered judgment under articles 1305 and 1306 of the Civil Code, dismissing the plaintiffs’ action and also dismissing the defendants’ counterclaim.

Proceedings before the Court of Appeals
The plaintiffs appealed to the Court of Appeals.
The Court of Appeals reversed the decision of the Court of First Instance and ruled as stated at the beginning of the decision: it declared the deed of sale null and void and ordered the cancellation of the transfer certificate of title by the registrar of deeds of said city.

The deed of sale and the surrounding circumstances
On November 11, 1931, the then plaintiffs executed in favor of the now petitioners a deed of sale of an urban property in the City of Manila for P 10,000.
The property was mortgaged to the Bureau of Lands for P 6,500, and the purchasers assumed the encumbrance.
The sale was simulated.
The supposed vendors allegedly did not receive the alleged price.
The idea behind the simulated sale was to save the property, which was fictitiously sold, from attachment by Dr. Ramon Papa.
Dr. Papa had obtained the attachment due to a credit represented by a note for P 4,000 executed and signed by Primitivo Trinidad, which Lorenzo Perez had endorsed to Dr. Papa.
Dr. Papa died.
The credit represented by the note was then adjudicated to Carmen Papa.
Primitivo Trinidad later entered into a subsequent agreement with Carmen Papa, under which he would pay the note as soon as he had the money.
Because of these events, the litigation and attachment feared by Primitivo Trinidad were averted.

in holding that articles 1305 and 1306 of the Civil Code were not applicable; and
in reversing instead of affirming the trial court’s decision.

an illegal consideration or subject matter; and
illegality either because the facts constitute an offense or misdemeanor or because the consideration is rendered illegal.

Petitioners asserted that the contract of sale, being onerous, has for its cause or consideration the price of P 10,000 under article 1274 of the Civil Code.
Petitioners asserted that both the consideration (P 10,000) and the subject matter (the property) were lawful and not penalized by law.
Petitioners also maintained that because the contract was fictitious and simulated and the supposed vendors did not receive the stipulated price, the contract was null and void per se or nonexistent under article 1261 of the Civil Code.
Petitioners relied on the distinction drawn by the Court of Appeals:

the object of the contracting parties or the vendors’ motives should not be confused with the consideration, and
although the vendors’ motives might be illegal, the motives do not determine the consideration when the consideration is lacking.

The legal discussion used by petitioners (consideration versus motive)
Petitioners invoked Manresa, Commentaries on the Civil Code, volume 8, pages 618 and 619, emphasizing the distinction between:

consideration as the “why” or essential reason that moves the parties, and
motives as particular reasons of a contracting party that do not affect the other party and do not preclude a different consideration.

Applicability of articles 1305 and 1306 of the Civil Code
Whether the Court of Appeals erred in holding that articles 1305 and 1306 were not applicable to the simulated deed of sale.

Legal consequences of simulation and absence of receipt of the price
Whether, despite the lawfulness of the price amount and the property as objects of a sale, the fictitious and simulated nature of the transaction and the alleged non-receipt of the stipulated price rendered the contract void per se or nonexistent under article 1261 of the Civil Code.
Whether the vendors’ illegal motives in entering into the simulated sale could be equated with the consideration such that the contract would fall under articles 1305 and 1306.

Correctness of the appellate disposition
Whether the Court of Appeals erred in reversing the trial court’s decision instead of affirming it.
Whether the Court of Appeals’ order for cancellation of the transfer certificate of title was proper in light of the alleged legal errors assigned...(Subscriber-Only)