G.R. No. 133148 - Blanco vs. Quasha

Case Summary (G.R. No. 133148)

Factual Background

Mary Ruth C. Elizalde owned a house and a 2,500-square-meter lot at 515 Buendia Extension, Forbes Park, Makati, originally covered by Transfer Certificate of Title No. 106110. On May 22, 1975, acting by attorney-in-fact Don Manuel Elizalde, she executed a Deed of Sale in favor of Parex Realty Corporation for P625,000.00, payable in twenty-five equal annual installments of P25,000.00 from May 22, 1975 to May 22, 1999. Simultaneously, Parex executed a Contract of Lease leasing the same land back to Elizalde for twenty-five years at P2,083.34 per month, with rental payments credited against the yearly installments. The original title was cancelled and a new title, TCT No. S-6798, issued in Parex’s name on May 27, 1975. Elizalde later confirmed and ratified the transaction on October 17, 1975, and she continued to pay subdivision dues and, pursuant to the lease, real estate taxes during her lifetime.

Origins of the Dispute and Pleadings

Following Elizalde’s death on March 1, 1990, heirs sought to recover the property. J.R. Blanco, as special administrator, demanded reconveyance or assignment of Parex’s shares by letter dated June 13, 1990; defendants did not comply. Petitioner filed a complaint for reconveyance on July 10, 1990 in Civil Case No. 90-1851 before the Regional Trial Court of Makati, alleging that the May 22, 1975 sale and the attendant lease-back were absolutely simulated and fictitious and therefore void, and that the transaction had been contrived to circumvent the effect of this Court’s ruling in Republic v. Quasha and subsequent statutory measures affecting alien and foreign-controlled ownership.

Petitioner’s Principal Claims

Petitioner asserted that the sale was a sham effected on advice of counsel to evade the consequences of the Parity Amendment and related jurisprudence, relying on the timing of Parex’s incorporation on May 10, 1974 and the issuance of executive measures such as Presidential Decree No. 471 and an executive moratorium described in the record. Petitioner maintained that Elizalde received no payment; that the sale was fictitious because the annual installment equaled precisely the credited annual rental; and that the parties’ true intent was to leave legal title with Parex while Elizalde retained possession and enjoyment, thereby justifying reconveyance to her estate.

Respondents’ Principal Defenses

Respondents denied simulation and any impropriety. They relied on the executed and recorded instruments, the issuance of TCT No. S-6798 in Parex’s name, Parex’s payment of the agreed installments through the reciprocal rental-credit arrangement, and Elizalde’s post facto confirmation of the sale. Respondents also resisted allegations of undue influence or improper contacts with the appellate judges and denied any compromise agreement alleged by petitioner.

Trial Court Disposition

The Regional Trial Court of Makati rendered judgment on December 20, 1994 declaring the sale to Parex Realty Corporation fictitious and simulated, recognizing the estate of Mary Ruth Elizalde as the true owner of the land then covered by TCT No. S-6798, ordering reconveyance of title to the estate, and awarding attorney’s fees of P500,000.00 with costs.

Court of Appeals Decision

On appeal, the Court of Appeals, through a decision penned by Justice Ramon A. Barcelona and concurred in by Justices Minerva Gonzaga-Reyes and Demetrio G. Demetria, set aside the trial court judgment and dismissed the complaint on February 18, 1998. The appellate court made detailed factual findings: delivery of the property occurred upon execution and issuance of the new TCT; Parex obligated itself to pay P625,000.00 in installments and in fact made payments through the rental-credit arrangement under the lease; Elizalde confirmed and ratified the sale; and Elizalde’s payment of taxes and subdivision dues was stipulated as lessee’s obligation and did not negate the transfer. The Court of Appeals concluded that the deed of sale met the requisites of Article 1458 of the Civil Code, that the parties intended to be bound thereby, and that TCT No. S-6798 had acquired indefeasibility.

Issues Presented to the Supreme Court

The petition to the Supreme Court raised principally whether the sale-lease-back was simulated and thus void, and whether the Court should set aside the Court of Appeals’ factual findings and conclusions. Petitioner also pressed allegations of influence peddling affecting the appellate disposition.

Supreme Court’s Approach to the Nature of the Issue

The Supreme Court treated the question of simulation as essentially a factual inquiry into the parties’ true intent and agreement. Citing doctrinal authority that absolute simulation is void while relative simulation yields to the parties’ true agreement when not prejudicial or contrary to law, the Court observed that determination of such intent required resolution of evidentiary facts. The Court reiterated that it is not a trier of facts and that, under Rule 45, only errors of law are reviewable on certiorari, while factual findings of the Court of Appeals supported by substantial evidence are final and binding.

Review of the Appellate Factual Findings

The Court examined and found the Court of Appeals’ factual findings to be supported by the record. The Supreme Court emphasized the documentary and circumstantial indicia identified by the appellate court: the cancellation of the original title and issuance of TCT No. S-6798 in Parex’s name, the stipulation and actual performance of staggered payments through the lease-credit mechanism, Elizalde’s subsequent ratification of the sale, and the lease provision assigning payment of taxes and subdivision dues to the lessee. The Court held that these facts sustained the conclusion that the parties intended the deed of sale to produce legal effects.

Consideration, Simulation and Motive

Addressing the claim that no

Case Syllabus (G.R. No. 133148)

Parties and Procedural Posture

Petitioner J.R. Blanco acted as special administrator of the intestate estate of Mary Ruth C. Elizalde and filed an action for reconveyance on July 10, 1990 in the Regional Trial Court of Makati, Branch 147, Civil Case No. 90-1851.
Respondents were William H. Quasha, Cirilo F. Asperilla, Jr., Sylvia E. Marcos, Delfin A. Manuel, Jr., Cirilo E. Doronila, and Parex Realty Corporation, the vendee named in the challenged deed of sale.
The trial court, on December 20, 1994, declared the deed of sale fictitious, reconveyed the property to the estate, and awarded attorney’s fees of P500,000.00.
The Court of Appeals, in a decision penned by Justice Ramon A. Barcelona on February 18, 1998, set aside the trial court judgment and dismissed the complaint for reconveyance.
The petitioner filed a petition for review on certiorari under Rule 45, Rules of Court, which the Supreme Court dismissed on November 17, 1999, affirming the Court of Appeals in toto.

Key Factual Allegations

Mary Ruth C. Elizalde was an American national and registered owner of a house and lot on a 2,500 square-meter parcel at 515 Buendia Extension, Forbes Park, Makati, originally covered by TCT No. 106110.
On May 22, 1975, Elizalde, through attorney-in-fact Don Manuel Elizalde, executed a Deed of Sale conveying the land (but excluding the house) to Parex Realty Corporation for PHP 625,000.00 payable in twenty-five annual installments of PHP 25,000.00.
Simultaneously, Parex executed a Contract of Lease leasing the same land back to Elizalde for twenty-five years at PHP 2,083.34 per month, with rental payments credited against the annual purchase installments.
TCT No. 106110 was cancelled and TCT No. S-6798 was issued in the name of Parex on May 27, 1975, and Elizalde executed a Confirmation and Ratification of the sale on October 17, 1975.
Elizalde continued to pay subdivision dues, garbage fees, and agreed to pay real estate taxes during the lease term and she died on March 1, 1990.

Contracts and Title Transactions

The deed of sale and lease-back were contemporaneous documents executed on May 22, 1975 and were recorded in the Registry of Deeds by cancellation of the prior title and issuance of TCT No. S-6798 in Parex’s name.
The lease contained an express provision that real estate taxes and assessment fees during the lease term were for the lessee’s account.
The sale provided for a price certain and a payment schedule which the Court of Appeals found to have been actually paid by crediting rentals against installments.

Issues Presented

Whether the sale-lease-back transaction between Mary Ruth Elizalde and Parex Realty Corporation was a simulated or fictitious contract and therefore void.
Whether the factual findings sustaining the validity of the deed of sale were reviewable under Rule 45, Rules of Court.
Whether allegations of improper influence peddling affecting the appeal required judicial inquiry or relief.

Parties’ Contentions

Petitioner alleged that the sale was absolutely simulated and fictitious, that no consideration was received, and that the transaction was engineered by counsel to evade this Court’s ruling in Republic v. Quasha, 46 SCRA 160 (1972) and the Pari