G.R. No. 120724-25 - Mate vs. Court of Appeals

On October 6, 1986, petitioner Fernando T. Mate was approached at his Tacloban City residence by Josefina R. Rey (hereafter “Josie”), a cousin of his wife, who sought assistance to avoid prosecution by private respondent Inocencio Tan for issuing rubber checks amounting to P4,432,067.00.
Josie proposed that Mate cede his three lots in Tacloban City to Tan in order to defuse the threat of criminal charges, assuring him that the document executed would be only simulatory since she would later redeem the properties with her own funds.

After initial reluctance, Mate agreed to execute a fictitious deed of sale with right of repurchase (pacto de retro) under the following conditions:

The sale price was to be P1,400,000.00 with an additional interest at 5% per month;
The repurchase had to be effected within six months or on or before April 4, 1987;
Although the document portrayed Mate as the vendor, the funds for redemption were to come from Josie;
The titles to the properties were to be delivered to Tan, with the understanding that the transaction would not be registered with the Register of Deeds.

To assure Mate of the redemption, Josie issued two postdated checks: one for P1,400,000.00 (purportedly for the selling price) and another for P420,000.00 (representing interest for six months).

Mate prepared and executed the deed of sale with right to repurchase, delivered it along with the property titles to Tan, who then refrained from registering the sale as agreed.
On January 14, 1987, Mate deposited the postdated checks—one at United Coconut Planters Bank for P1,400,000.00 and the other at METROBANK for P420,000.00. Both checks were dishonored due to being drawn against a closed account.
Upon learning that the checks were worthless, Mate attempted to contact Josie via telegram; her subsequent unavailability prompted him to travel to Manila, only to find her untraceable.
Mate then instituted criminal cases (Nos. 8310 and 8312) against Josie for violation of B.P. 22 and also filed a civil case (Civil Case No. 7396) for annulment of contract with damages against Josie and Tan.
The trial court consolidated matters by allowing Tan to file an action for consolidation of ownership of the properties and rendered a decision in favor of Tan, which was modified and affirmed upon appeal by the Court of Appeals.

Petitioner Fernando T. Mate assailed the Court of Appeals’ decision for upholding the deed and consolidating Tan’s ownership over the properties, arguing that the pacto de retro should be null and void for lack of valid consideration.
His argument centered on the proposition that no money changed hands since the checks meant to redeem the property were dishonored, thus voiding the essential consideration required for the contract.

Whether the deed of sale with right of repurchase (pacto de retro) executed on October 6, 1986, is null and void for lack of consideration, given that the checks (one for the purchase price and one purported as interest/attorney’s fee) were dishonored due to being issued against a closed account.

Whether the failure of the checks to clear justifies the annulment of the contract, or if the existence of a simulated consideration—even if ultimately not realized—sufficiently validates and binds the contractual obligation between the parties.

Whether petitioner’s actions, including the subsequent criminal complaint against Josie and his acceptance of the arrangement despite knowing the risks, diminish his claim that there was no valid consideration.