Case Summary (G.R. No. 173211)
Key Dates and Procedural Posture
Relevant acts: Ireneo purchased the property in 1954; a Deed of Absolute Sale dated October 25, 1977 purportedly transferred title to Spouses Intac; Ireneo died in 1982; respondents filed Complaint for Cancellation of TCT No. 242655 on February 22, 1994. RTC (Branch 220, Quezon City) rendered decision on April 30, 2002; Court of Appeals issued its decision on February 16, 2006 (modified RTC); the petition for review on certiorari to the Supreme Court was filed thereafter and denied.
Applicable Law and Constitutional Basis
Constitutional foundation: 1987 Philippine Constitution (decision date post‑1990).
Governing substantive law: Civil Code provisions on contracts and simulation — particularly Arts. 1318 (requisites of contract), 1345–1346 (simulation), and Art. 1471 (price simulated renders sale void). Relevant jurisprudence cited: Lequin v. Vizconde; Spouses Villaceran v. De Guzman; Gaudencio Valerio v. Vicenta Refresca; Lucia Carlos Alino v. Heirs of Angelica A. Lorenzo; and other authorities addressing simulation, elements of sale, possession, taxation evidence, and prescription.
Factual Background
Ireneo owned and occupied the subject lot with his family and had taken care of Angelina since childhood. In 1977, a Deed of Absolute Sale was executed by Ireneo (with Salvacion’s consent) conveying the lot to Mario and Angelina Intac. Despite the deed, Ireneo and his family (including the respondents) continued in possession, paid real estate taxes, and collected rentals. TCT No. 106530 was subsequently cancelled and TCT No. 242655 was issued in the names of Spouses Intac. Respondents only learned of the registration years later and sought cancellation and reconveyance, alleging the sale was simulated and void.
Claims and Defenses
Respondents’ claims: The 1977 deed was simulated (fictitious), lacking real consideration and true intention to transfer ownership; they remained in owner‑like possession; Spouses Intac acted in fraud and bad faith by registering the property without asserting ownership or informing heirs. Relief sought: cancellation of TCT No. 242655 and reconveyance.
Petitioners’ defense: The deed of sale was valid — elements of sale (consent, object, price) existed; consideration was paid (claimed P150,000 or P60,000 stated in contract) though documentary proof of payment was not produced; respondents knew or should have known and failed to act; prescription was argued as a bar.
RTC Ruling
The trial court declared the 1977 Deed of Absolute Sale null and void and construed it as an equitable mortgage. The RTC found indicia of simulation: lack of intention to sell (Ireneo signed out of urgency), manifestly inadequate price (P60,000 for a 240‑sqm Quezon City lot), uninterrupted possession by respondents after the alleged sale, and delayed payment of real property taxes by Spouses Intac (only in 1999). RTC ordered cancellation of TCT No. 242655 and reinstatement of title in the name of Ireneo, and awarded Php30,000 as attorney’s fees.
Court of Appeals Ruling
The Court of Appeals modified the RTC decision by declaring the deed of absolute sale NULL AND VOID (not recharacterizing it as an equitable mortgage) and ordered cancellation of TCT No. 242655 and reinstatement of Ireneo as registered owner. CA emphasized: (1) testimony that the deed was executed so Spouses Intac could mortgage the property to obtain a loan; (2) absence of acts of ownership by Spouses Intac (no collection of rents, no demand for possession, no disclosure to heirs until after deaths); (3) lack of proof of payment for the stated consideration; and (4) contemporaneous/subsequent conduct of parties indicating no intent to transfer ownership.
Issue Presented to the Supreme Court
Whether the Deed of Absolute Sale dated October 25, 1977 was an absolutely simulated (fictitious) contract lacking consideration and intent to transfer ownership, thereby void ab initio, and whether cancellation of the registered title and reconveyance were warranted; and whether prescription barred respondents’ action.
Legal Standards on Contracts and Simulation Applied
The Court reiterated that a valid contract of sale requires consent (meeting of minds), an object certain, and a cause (consideration). Simulation is either absolute (no intent to be bound at all; void) or relative (parties conceal true agreement; real agreement may bind them). Where the price is simulated (Art. 1471), the sale is void. Determination of true intent relies on both express terms and contemporaneous/subsequent conduct of the parties. Possession, payment of taxes, attempts to assert dominion, and documentary or circumstantial proof of payment are important indicia of genuine ownership and a bona fide sale.
Supreme Court’s Analysis — Credibility and Evidence
The Court accepted the trial court’s credibility assessment of Marietto, a witness who testified that Ireneo expressly stated the title was being lent so Spouses Intac could secure a loan, and that Ireneo never intended a permanent sale. Petitioners failed to produce concrete or circumstantial evidence of payment (no receipts, no bank transactions, no proof that Ireneo received loan proceeds). Angelina’s testimony that she mortgaged the property to finance a hospital corroborated the purpose of obtaining a loan but did not establish that consideration was paid to Ireneo or that the latter intended to sell. The lack of any exercise of owner’s dominion by Spouses Intac, continued exclusive possession and rent collection by respondents, and the belated tax payments by petitioners were held as strong indicia of simulation.
Possession, Tax Payments, and Effect of Registration
The Court emphasized that continued actual possession in the concept of owner by respondents, combined with acts consistent with ownership (paying taxes, leasing, collecting rentals), supported respondents’ claim and permitted them to seek reconveyance despite the existence of a certificate of title in petitioners’ names. The Court reiterated the principle that registration does not itself vest title where registration was procur
Case Syllabus (G.R. No. 173211)
Procedural Posture
- Petition for Review on Certiorari under Rule 45 filed with the Supreme Court, assailing the February 16, 2006 Decision of the Court of Appeals in CA G.R. CV No. 75982, which itself modified the April 30, 2002 Decision of the Regional Trial Court, Branch 220, Quezon City, in Civil Case No. Q-94-19452 (action for cancellation of transfer certificate of title and reconveyance).
- The case reached the Supreme Court as G.R. No. 173211; the Supreme Court rendered its decision on October 11, 2012 (published 697 Phil. 373; 109 OG No. 36, 6047, September 9, 2013).
- The petitioners are the heirs of Mario Intac and Angelina Intac; respondents include the Court of Appeals and certain named spouses (as stated in the caption).
Subject Property and Titles
- The disputed property is located at No. 36, Road 8, Bagong Pag-asa, Quezon City, presently covered by Transfer Certificate of Title (TCT) No. 242655 issued by the Registry of Deeds of Quezon City.
- The lot was originally covered by TCT No. 106530, which Ireneo Mendoza purchased in 1954.
- TCT No. 106530 was cancelled and TCT No. 242655 was later issued in the names of Spouses Intac; petitioners sought cancellation of TCT No. 242655 and reconveyance.
Relevant Parties and Relationships
- Ireneo Mendoza (decedent) — original purchaser of the subject property in 1954; married to Salvacion Fermin.
- Salvacion Fermin — spouse of Ireneo, later deceased.
- Josefina and Martina Mendoza — children of Ireneo; respondents in the RTC action; residents of the property and paying realty taxes.
- Angelina (full name Angelina Mendoza-Intac in caption) and Mario Intac (Spouses Intac) — alleged vendees in the 1977 Deed of Absolute Sale; Mario died May 20, 1995; Angelina and their children were substituted as parties (petitioners in this case).
- Marietto Mendoza — nephew of Ireneo; testified as a witness regarding the nature of the 1977 transaction.
- Aurelio Mendoza — brother of Ireneo; present at a post-death family conference recounted by respondents.
Factual Background
- Ireneo purchased the subject property in 1954 and took care of his niece Angelina from age three until her marriage.
- On October 25, 1977, Ireneo, with the consent of Salvacion, executed a Deed of Absolute Sale in favor of Angelina and Mario Intac.
- Despite the execution of the deed, Ireneo and his family, including respondents Josefina and Martina, continued to occupy the premises and pay real estate taxes.
- Ireneo died intestate in 1982; Salvacion later died; respondents continued in actual possession, leased portions of the property and collected rentals up to the time of litigation.
- Spouses Intac mortgaged the property in July 1978 (according to Angelina’s testimony) to finance the construction of a small hospital in Sta. Cruz, Laguna.
- TCT No. 106530 was canceled and TCT No. 242655 was issued in the names of Spouses Intac; respondents later sought cancellation and reconveyance.
Complaint, Reliefs Sought, and Procedural Events
- On February 22, 1994, respondents (Josefina and Martina) filed a Complaint for Cancellation of TCT No. 242655 and reconveyance against Spouses Intac before the RTC.
- The complaint alleged simulation of the 1977 sale, fraud and bad faith by Spouses Intac, absence of true consideration, and continued possession by respondents in the concept of owner.
- Mario Intac died May 20, 1995; substituted by his heirs (Angelina and their children), who became petitioners in subsequent proceedings.
Parties’ Allegations and Defenses (Averments)
- Respondents’ averments:
- Spouses Intac borrowed TCT No. 106530 from Ireneo to use as collateral for a loan; respondents objected because title transfer would give appearance that Spouses Intac owned the property.
- Ireneo reassured them that Angelina would not take advantage, and had promised the property would be divided among heirs after his death.
- After Ireneo’s death, a family conference occurred where Aurelio expressed that the property was to be divided among heirs; Spouses Intac did not disclose any ownership then.
- In 1993, after Salvacion’s death, respondents discovered TCT No. 106530 had been cancelled and TCT No. 242655 issued to Spouses Intac; they claimed the deed of sale was simulated, no consideration passed, and Spouses Intac acted in fraud and bad faith.
- Respondents remained in possession, paid taxes, leased portions and collected rentals.
- Spouses Intac’s defenses (Answer):
- The transaction was a valid deed of absolute sale for a valuable consideration.
- The action to annul the deed had prescribed.
- Respondents’ occupancy was by tolerance during Ireneo’s lifetime.
- Respondents had knowledge of the 1977 sale and nevertheless filed suit years later.
RTC Decision (April 30, 2002)
- The Regional Trial Court ruled in favor of respondents, declaring the Deed of Absolute Sale dated October 25, 1977 as an equitable mortgage.
- RTC ordered cancellation of TCT No. 242655 and issuance of a new TCT in the name of Ireneo Mendoza.
- RTC ordered defendants to pay plaintiffs Thirty Thousand Pesos (Php30,000.00) as attorney’s fees; other claims for damages denied.
- RTC’s rationale included findings that:
- The deed did not reflect a true intention to transfer ownership and was simulated; the parties did not intend to be bound.
- The P60,000.00 amount in 1977 was grossly inadequate for a 240-square meter lot in Quezon City.
- Respondents remained in possession from 1954 through filing in 1994.
- Spouses Intac only began paying real estate taxes in 1999.
- Spouses Intac were guilty of fraud for registering the property despite the lack of intention to transfer ownership.
Court of Appeals Ruling (February 16, 2006)
- The CA modified the RTC in part but ultimately affirmed the matter’s disposition by declaring the deed of absolute sale null and void.
- The CA held:
- The deed was executed to enable Spouses Intac to facilitate processing of a mortgage and obtain a loan; the transfer of title was to enable borrowing, not to effect a true sale.
- Marietto’s testimony supported that Ireneo never intended to sell; Angelina’s testimony that they mortgaged the property in July 1978 to finance a hospital corroborated the loan-purpose narrative.
- The conduct of Spouses Intac—failure to assert ownership, collect rents, inform respondents, or demand possession—belied an intent to own the property.
- Spouses Intac admitted lack of proof of payment for the purported purchase price; lack of proof corroborated absence of consideration.
- Even if consent existed, lack of consideration rendered the sale void.
- CA decretal