De Joya vs. Madlangbayan

A Deed of Absolute Sale is absolutely simulated and void ab initio when, despite appearing valid on its face, the totality of evidence demonstrates that the parties never intended to be bound by the contract, as shown by a contemporaneous rejection of the offer dated subsequent to the deed, irregular notarization (failure to register in the notarial registry), and lack of proof of consideration, thereby negating the essential element of consent.

The case involves a dispute over two parcels of agricultural land located in Barrio Concordia, Alitagtag, Batangas, registered under Transfer Certificate of Title No. T-64767 in the names of petitioners Ana de Joya, Ciriaco de Joya, Lerma R. Castillo, Mario Castillo, Spouses Domingo and Leoncia Cordero, and Spouses Eufronio and Tarcila Cordero. The petitioners granted respondent Francisco P. Madlangbayan special and general powers of attorney to sell the properties for P17,000,000.00. When negotiations with potential buyers (respondents Dalida, et al.) reached an impasse over the purchase price, the petitioners revoked the authority, only to later discover a purported Deed of Absolute Sale dated April 8, 1996, conveying the properties for P10,000,000.00 to respondents Dalida, et al., who subsequently sold the properties to respondents Go, et al. in 2003.

• Petitioners are the registered owners of two parcels of agricultural land (Lot Nos. 5 and 6) with a total area of 171,792 square meters, located in Alitagtag, Batangas, covered by TCT No. T-64767.
• By virtue of a Special Power of Attorney dated January 23, 1992, and a General Power of Attorney dated February 5, 1996, petitioners granted respondent Francisco P. Madlangbayan authority to sell the subject properties.
• In April 1996, respondents Dalida, et al. made a counter-offer of P10,000,000.00 for the properties, which was below the petitioners' asking price of P17,000,000.00.
• In a letter dated April 10, 1996, respondent Madlangbayan, acting as agent, rejected the counter-offer, stating that the amount of P17,000,000.00 was "non-negotiable" and that petitioners were in great need of cash.
• A Deed of Absolute Sale purportedly dated April 8, 1996, was presented by respondents Dalida, et al., showing the sale of the properties for P10,000,000.00 to them, allegedly notarized by Atty. Henry Adasa.
• On May 3, 1996, petitioners executed a Revocation of Special Power of Attorney and General Power of Attorney, rescinding Madlangbayan's authority due to a disagreement over his claimed commission.
• On June 5, 1996, petitioners sent a letter demanding the return of the owner's duplicate certificate of title from Madlangbayan.
• On July 1, 1997, petitioners filed an Affidavit of Adverse Claim with the Registry of Deeds, and on July 14, 1997, filed a complaint for revocation of authority, annotating a Notice of Lis Pendens on the titles.
• Evidence revealed that the Deed of Absolute Sale dated April 8, 1996, does not appear in Notary Public Atty. Henry Adasa's Notarial Registry for 1996, and the supposed consideration (Certificate of Time Deposit No. 7290 for P10,000,000.00) was not included in the inventory of outstanding deposit liabilities of the Rural Bank of Bauan as of its closure date on May 9, 2003.
• On April 24, 2003, respondents Dalida, et al. sold the subject properties to respondents Go, et al. (Chollie Magnaye-Go, Renato Go, et al.) by virtue of a Deed of Absolute Sale, despite the pending litigation and Notice of Lis Pendens annotated on the titles.
• Respondents Go, et al. took possession of the properties and introduced improvements, but petitioners forcibly took possession on February 14, 2008.

• The Deed of Absolute Sale dated April 8, 1996, is absolutely simulated and void ab initio because there was no meeting of minds or consent between the parties, as evidenced by the letter dated April 10, 1996, rejecting the counter-offer.
• There was no valid consideration for the alleged sale, as the Certificate of Time Deposit No. 7290 dated April 10, 1996, was non-existent and not included in the bank's records, and no actual cash was paid to the petitioners.
• The failure of the notary public to register the Deed of Absolute Sale in the notarial registry casts doubt on its authenticity and indicates irregularity.
• Respondent Madlangbayan's authority was validly revoked on May 3, 1996, and he had no authority to sell the properties below the P17,000,000.00 floor price set by the petitioners without their consent.
• Respondents Dalida, et al. cannot be considered buyers in good faith because they were aware they were dealing with an agent and failed to ascertain the extent of his authority; they were also privy to the April 10, 1996 rejection letter.
• Respondents Go, et al. are likewise not buyers in good faith because they purchased the properties with notice of the Lis Pendens annotated on the titles and with knowledge of the pending litigation.

• The Deed of Absolute Sale dated April 8, 1996, is valid as all elements of a contract of sale are present: consent, object, and consideration.
• The law presumes the existence of sufficient consideration in every contract, and the burden is upon the petitioners to prove otherwise; they failed to show that CTD No. 7290 does not exist.
• The sale was consummated on April 8, 1996, prior to the revocation of the power of attorney on May 3, 1996, making the revocation ineffective as to the already executed sale.
• The lack of actual receipt of consideration by the petitioners does not render the contract inexistent but merely constitutes a breach of contract actionable for specific performance.
• Respondents Dalida, et al. are buyers in good faith who relied on the special power of attorney and the notarized Deed of Absolute Sale.
• Respondents Go, et al. are buyers in good faith for value, and the Notice of Lis Pendens merely subjects the transfer to the outcome of litigation but does not invalidate the transfer itself.

• Procedural: Whether the Supreme Court may review factual findings in a petition for review under Rule 45 of the Rules of Court when the findings of fact of the Regional Trial Court and the Court of Appeals are conflicting.
• Substantive Issues:
  • Whether the Deed of Absolute Sale dated April 8, 1996, is absolutely simulated and void ab initio for lack of consent and consideration.
  • Whether respondents Dalida, et al. and Go, et al. qualify as buyers in good faith.
  • Whether the subsequent sale from respondents Dalida, et al. to respondents Go, et al. is valid.

• Procedural: The Supreme Court may review factual findings in a petition for review under Rule 45 when the findings of fact of the RTC and the CA are conflicting, as in this case where the RTC found the sale simulated while the CA found it valid. This falls under the established exception to the general rule that only questions of law may be raised in a Rule 45 petition.
• Substantive:
  • The Deed of Absolute Sale dated April 8, 1996, is absolutely simulated and void ab initio. The letter dated April 10, 1996, rejecting the counter-offer, which was not controverted or explained by respondents, proves that no meeting of minds occurred as of April 8, 1996. The failure of the notary to register the deed in the notarial registry and the non-existence of CTD No. 7290 in bank records further support the finding of simulation and lack of consideration.
  • Respondents Dalida, et al. are not buyers in good faith because they were dealing with an agent and were bound to ascertain the extent of his authority; they were privy to the rejection letter showing no agreement on price existed.
  • Respondents Go, et al. are not buyers in good faith because they purchased the properties with actual notice of the Lis Pendens annotated on the titles since July 14, 1997, and with knowledge of the lease agreement between petitioners and a third party.
  • The subsequent sale from Dalida, et al. to Go, et al. is void because a simulated sale conveys no title; the seller cannot transfer what she does not own (nemo dat quod non habet).
  • The Decision of the Court of Appeals dated September 26, 2016, and its Resolution dated December 28, 2016, are reversed and set aside; the Judgment of the Regional Trial Court dated December 10, 2014, is reinstated.

• Absolute Simulation (Article 1345, Civil Code) — A contract where the parties do not intend to be bound by the agreement, making it void ab initio despite appearing valid on its face. The Court applied this doctrine by finding the April 8, 1996 Deed simulated because the April 10, 1996 rejection letter demonstrated no meeting of minds, and there was no actual payment of consideration.
• Meeting of the Minds (Consent) under Article 1319, Civil Code — Essential element of contract requiring unity of offer and acceptance on the object and cause. The Court found this absent because the agent's rejection of the counter-offer on April 10, 1996 (two days after the supposed April 8, 1996 sale) proved no agreement existed at the time of the alleged execution.
• Revocation of Agency (Articles 1919 and 1920, Civil Code) — Agency is extinguished by revocation by the principal, which may be done at will and takes effect upon communication to the agent. The Court noted the revocation dated May 3, 1996, was valid, though the earlier simulated sale was already void.
• Presumption of Consideration — While the law presumes sufficient consideration in every contract, this is merely prima facie and may be rebutted by proof to the contrary. The Court found the presumption overcome by evidence that CTD No. 7290 did not exist in bank records and the consideration was never paid.
• Good Faith of Buyers — A buyer dealing with an agent must ascertain the nature and extent of the agent's authority. The Court held respondents Dalida, et al. were not in good faith because they knew of the rejection letter and dealt with an agent, while respondents Go, et al. had notice of lis pendens.
• Nemo Dat Quod Non Habet — One cannot transfer what one does not own. The Court applied this principle to void the subsequent sale from Dalida, et al. to Go, et al., as the former acquired no rights from the simulated sale.

• "In absolute simulation, there appears to be a contract but it has no substance as the parties have no intention to be bound by it."
• "The primary consideration in determining the true nature of a contract is the intention of the parties. Such that when a conflict exists between the express terms of an agreement and the evident intention of the parties, the latter prevails."
• "Registration of the notarized document in the notarial registry is basic requirement in the notarial process. Without registration, a document or instrument while signed by the Notary Public cannot be treated as duly notarized."
• "A contract of agency is personal, representative, and derivative in nature. The authority of the agent to act emanates from the powers granted to him by his principal."
• "To produce an agreement, the offer must be certain and the acceptance timely and absolute."

• Medina v. Mayor Asistio, Jr., 269 Phil. 225 (1990) — Cited for the exception allowing the Supreme Court to review factual findings when the RTC and CA have conflicting findings.
• Heirs of Policronio M. Ureta, Sr., et al. v. Heirs of Liberato M. Ureta, et al., 673 Phil. 188 (2011) — Cited for the rule that legal presumptions of fair transaction and sufficient consideration are merely prima facie and may be rebutted.
• Riosa v. Tabaco La Suerte Corporation, 720 Phil. 586 (2013) — Cited for the principle that a signed document purporting to be a contract does not preclude a finding of invalidity when evidence shows no meeting of minds, and for the rule on irregular notarization reducing evidentiary value.
• Clemente v. Court of Appeals, et al., 771 Phil. 113 (2015) — Cited for the definition of absolute simulation and the rule that parties may recover what they have given under a simulated contract.
• Heirs of Spouses Intac v. Court of Appeals, et al., 697 Phil. 373 (2012) — Cited for the principle that intention of parties prevails over express terms and for distinguishing absolute from relative simulation.
• Bernardo v. Atty. Ramos, 433 Phil. 8 (2002) — Cited for the requirement of registration in the notarial registry and the effect of non-registration on the document's status as a public document.
• Manila Memorial Park Cemetery, Inc. v. Linsangan, 485 Phil. 764 (2004) — Cited for the duty of buyers dealing with an agent to ascertain the extent of the agent's authority.
• Tolentino, et al. v. Sps. Latagan, 761 Phil. 108 (2015) — Cited for the principle that a simulated sale and all transactions subsequent thereto are void and convey no title.

• Article 1318, Civil Code — Defines the three essential requisites of contracts: consent, object certain, and cause of the obligation.
• Article 1319, Civil Code — Defines consent as manifested by the meeting of the offer and the acceptance upon the thing and the cause.
• Article 1345, Civil Code — Defines absolute simulation as a contract where the parties do not intend to be bound, making it void.
• Article 1346, Civil Code — Defines relative simulation where the parties conceal their true agreement, which may still bind them if no prejudice to third persons.
• Article 1919, Civil Code — Provides that agency is extinguished by its revocation.
• Article 1920, Civil Code — Provides that the principal may revoke the agency at will, and the revocation may be express or implied.
• Rule 45, Rules of Court — Governs petitions for review on certiorari to the Supreme Court, limiting review to questions of law except in recognized exceptions.