Case Summary (G.R. No. 209284)
Procedural Posture
• March 17, 2005: Sps. Tanchuling and Cantela execute the Deed of Absolute Sale (subject deed).
• August 6, 2007: Petitioners file Complaint for Annulment of Deed of Sale and Delivery of Owner’s Duplicate TCTs (RTC Civil Case No. 10659).
• March 23, 2010: RTC declares the subject deed absolutely simulated and nullifies it.
• August 30, 2013: CA reverses RTC, upholding the sale’s validity.
• November 10, 2015: Supreme Court grants petition, reinstating the RTC decision.
Factual Background
Although the subject deed recites a P 400,000 consideration, Cantela never paid any amount. None of the parties ever took physical possession. Petitioners allege the deed was a public façade to deter illegal sales by a third party (John Mercado). An undated Deed of Absolute Sale—reconveying the same properties back to petitioners—was simultaneously executed.
Issue Presented
Whether the March 17, 2005 deed of sale is absolutely simulated and therefore null and void.
RTC Decision
The RTC found absolute simulation:
• Simultaneous undated deed evidenced no intent to transfer ownership.
• Cantela admitted signing the undated deed.
• No actual payment or possession occurred.
• Delay of over one year before attempting title transfer indicated lack of bona fide intent.
CA Decision
The Court of Appeals held the sale valid, reasoning:
• Petitioners acknowledged P 400,000 receipt in the deed.
• Cantela’s efforts to register and compute capital gains tax showed intent to exercise ownership.
• Notarized subject deed outweighed the non-notarized undated deed.
Doctrine on Simulation
Under Civil Code Article 1345, absolute simulation occurs when parties do not intend the contract to bind them. Article 1346 deems an absolutely simulated contract void. The Supreme Court in Heirs of Ureta v. Ureta held that a colorable contract lacking substance produces no legal effect.
Analysis on Lack of Consideration
Testimonies of Vicente Tanchuling and two disinterested witnesses unanimously confirmed no cash was delivered. Cantela offered no evidence to rebut these clear and convincing proofs, satisfying the rule that fraud or simulation must be affirmatively established by the party alleging it.
Analysis on Delay in Registration and Possession
Pursuant to Rufloe v. Burgos, a bona fide purchaser under the Torrens system promptly registers and takes possession. Cantela’s prolonged inaction, combined with failure to clear a property bond imped
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Facts
- On March 17, 2005, spouses Vicente Y. Tanchuling and Renee B. Tanchuling (Sps. Tanchuling) and Sotero C. Cantela executed a Deed of Absolute Sale covering Lots 5 and 6 of Block 1, Rawis, Legazpi City (192 sq. m. each), under TCT Nos. 41486 and 41487.
- The face of the deed recited a P400,000 consideration.
- Vicente delivered the owner’s copies of the TCTs to Cantela, though neither party took physical possession of the lots.
- Upon demand, Cantela refused to return the duplicate titles.
Complaint and Allegations
- On August 6, 2007, Sps. Tanchuling filed before the RTC a Complaint for Annulment of Deed of Sale and Delivery of Duplicate Copies of the TCTs with preliminary injunctive relief.
- They alleged absolute simulation on three grounds:
• No actual consideration was paid.
• The deed was executed merely to show public ownership and stop illegal sales by a third party (John Mercado).
• Cantela executed an undated Deed of Absolute Sale reconveying the properties back to them.
Cantela’s Answer and Counterclaim
- In his February 10, 2008 Answer with Counterclaim, Cantela maintained:
• He validly purchased the lots for P400,000.
• The undated reconveyance deed was surreptitiously inserted by Sps. Tanchuling.
• He attempted to secure a tax declaration but found the lots posted as a property bond and consulted the Bureau of Internal Revenue.
RTC Ruling
- On March 23, 2010, the RTC granted the complaint, declaring the March 17, 2