G.R. No. 209284 - Tanchuling vs. Cantela

Case Summary (G.R. No. 209284)

Factual Background

On March 17, 2005 the parties executed a notarized Deed of Absolute Sale covering two parcels of land, Lots 5 and 6 of Block 1, Rawis, Legazpi City, covered by Transfer Certificate of Title Nos. 41486 and 41487, respectively, and reciting a consideration of P400,000.00. After execution, the owner’s copies of the TCTs were delivered to Cantela although none of the parties took actual physical possession of the properties. The petitioners later discovered that portions of the same properties were being illegally sold by a third party, and they sought recovery of the TCTs when Cantela refused to return them on demand. The petitioners claimed that the March 2005 deed was absolutely simulated and accompanied by a contemporaneous undated Deed of Absolute Sale conveying the properties back to the vendors.

Trial Court Proceedings

The petitioners filed a Complaint for Annulment of Deed of Sale and Delivery of the Owner’s Duplicate Copy of the TCTs with preliminary prohibitory and mandatory injunctive relief before the RTC on August 6, 2007. The RTC held trial and received testimony indicating that no cash consideration passed at the time of signing and that an undated reconveyance deed was executed simultaneously. The trial court found identical witnesses, signatures, community tax certificate details, and letter-composition in both deeds, and noted Cantela’s admission that his signature appeared on the undated deed. The RTC concluded that the parties never intended to be bound by the sale and declared the subject deed absolutely simulated and void.

Court of Appeals Ruling

On appeal, the Court of Appeals reversed the RTC. The CA emphasized the parties’ contemporaneous and subsequent acts, particularly Cantela’s attempts to assert dominion over the properties, as negating absolute simulation. The CA treated the recited consideration of P400,000.00 as proof of payment because the subject deed acknowledged receipt of the amount, and it favored the notarized subject deed over the undated, unnotarized document.

Issues Presented

The dispositive issue before the Supreme Court was whether the subject Deed of Absolute Sale was simulated and therefore null and void, raising subsidiary questions on the sufficiency of evidence of consideration, the probative value of the undated reconveyance deed, the significance of delay in registration and lack of possession by the purported vendee, and the proper resolution of conflicting factual findings between the trial court and the appellate court under a Rule 45 petition.

Parties’ Contentions

The petitioners maintained that the subject deed was absolutely simulated because no consideration was ever paid, the sale was executed merely to show a public instrument to deter illegal sales by a third party, and an undated reconveyance deed executed simultaneously demonstrated the absence of intent to transfer ownership. The respondent contended that the sale was valid, that he paid P400,000.00, that the undated deed was surreptitiously inserted by the petitioners into the papers he signed, and that administrative obstacles such as a property bond explained delay in registration.

The Court’s Ruling

The Supreme Court granted the petition and reinstated the RTC decision, holding that the subject deed was absolutely simulated and therefore void. The Court accepted the RTC’s factual findings over the CA’s contrary conclusion because Rule 45 allows review when the factual findings of the trial court and the appellate court are at variance. The Court found clear and convincing evidence that no consideration passed, reliance on corroborative testimony of witnesses present at the execution, the simultaneous existence of an undated reconveyance, Cantela’s failure to pursue timely registration and to take possession, and the absence of credible proof of fraud in the petitioners’ conduct.

Legal Basis and Reasoning

The Court applied the distinction between absolute and relative simulation under Art. 1345 and Art. 1346 of the Civil Code and reiterated that an absolutely simulated contract is void. Citing Heirs of Policronio M. Ureta, Sr. v. Heirs of Liberato M. Ureta, the Court explained that absolute simulation exists when the apparent contract is not intended to produce legal effects or alter the juridical situation of the parties. The Court relied on contemporaneous witnes

Case Syllabus (G.R. No. 209284)

Parties and Procedural Posture

Petitioners were Renee B. Tanchuling and the heirs of Vicente N. Y. Tanchuling, namely Rebecca Tanchuling-Tan, Rita Tanchuling-Mapa, Rosemarie Tanchuling-Salinas, and Vincent Raymond B. Tanchuling.
Respondent was Sotero C. Cantela.
The Regional Trial Court, Branch 5, Legazpi City rendered a Decision dated March 23, 2010 nullifying the Deed of Absolute Sale as absolutely simulated.
The Court of Appeals rendered a Decision dated August 30, 2013 reversing the RTC and upholding the validity of the deed.
The petitioners filed a petition for review on certiorari under Rule 45 of the Rules of Court before the Supreme Court.
The Supreme Court, through an opinion penned by Perlas-Bernabe, J., granted the petition and reinstated the RTC Decision.

Key Factual Allegations

The parties executed a Deed of Absolute Sale dated March 17, 2005 covering two parcels, Lots 5 and 6 of Block 1 in Rawis, Legazpi City, covered by TCT No. 41486 and TCT No. 41487.
The face of the deed recited a consideration of P400,000.00 for the purchase of the properties.
Vicente delivered the owner’s copies of the TCTs to Cantela after execution despite the parties not being in actual physical possession of the properties.
Petitioners alleged that the deed was executed as a front to show ownership and to deter a group led by John Mercado from illegally selling portions of the properties.
Petitioners alleged the existence of a simultaneous undated Deed of Absolute Sale whereby Cantela reconveyed the properties back to the Tanchulings.

Claims and Defenses

Petitioners claimed that the subject deed was absolutely simulated because no actual consideration passed and the deed was only a colorable instrument to show ownership.
Respondent claimed that he validly purchased the properties for P400,000.00 and that the undated deed was surreptitiously inserted by petitioners.
Respondent further asserted that attempts to register the titles revealed the properties were posted as a property bond and that he sought computation of capital gains tax.

Trial Court Findings

The RTC found the subject deed to be absolutely simulated and declared it void.
The RTC relied on the simultaneous execution of the undated deed which contained identical witnesses, signatures, community tax certificate details, and letter-composition.
The RTC noted that Cantela admitted that his signature appeared on the undated deed.
The RTC observed an unexplained delay of one year, seven months, and thirteen days before Cantela attempted to transfer the titles to his name.
The RTC found that the parties knew the sale could not be consummated because petitioners were not in physical possession of the properties.

Appellate Court Findings

The CA reversed the RTC and held that contemporaneous and subsequent acts of the parties, especially acts by Cantela asserting dominion, negated absolute simulation.
The CA concluded that consideration existed because petitioners acknowledged receipt of P400,000.00 in the deed.
The CA held that the notarized subject deed prevailed over the undated non-notarized deed.

Issue Presented