Pasco vs. Cuenca

An absolutely simulated contract — one executed without consideration and without intent to be bound — is void ab initio under Articles 1345 and 1471 of the Civil Code, and cannot serve as a basis for ownership or valid title transfer, notwithstanding its notarized form.

Myrna C. Pasco and the Spouses Baguispas — Antonio Baguispas and Isabel Cuenca-Baguispas — were parties to an alleged transaction involving Lot No. 38-B (336 sq.m.), a parcel of land in Dipolog City originally registered under TCT No. T-12461 in the spouses' names. Antonio died on March 3, 1987, leaving Isabel as his sole surviving compulsory heir. Isabel subsequently executed an affidavit of self-adjudication on June 8, 1988 and, years later, sold the same property to spouses Romeo M. Ytang, Jr. and Esther C. Ytang by a Deed of Absolute Sale dated May 8, 1998. The competing claims over Lot No. 38-B thus pit petitioner's alleged 1986 purchase against the Ytangs' 1998 acquisition from the surviving spouse.

On September 9, 1999, Myrna C. Pasco filed a complaint in Branch 6, Regional Trial Court, Dipolog City, docketed as Civil Case No. 5437, against Isabel Cuenca and spouses Romeo M. Ytang, Jr. and Esther C. Ytang. The subject of the dispute was Lot No. 38-B, a 336-square-meter parcel of land originally registered under TCT No. T-12461 in the names of Spouses Antonio Baguispas and Isabel Cuenca-Baguispas.

Petitioner alleged that in June 1986, the Spouses Baguispas agreed to sell Lot No. 38-B to her for ₱50,000.00 and executed a notarized Deed of Sale dated July 1, 1986 in her favor. Antonio died on March 3, 1987, leaving Isabel as his sole surviving compulsory heir. Isabel thereafter executed an affidavit of self-adjudication on June 8, 1988 and, years later, sold the property to the Spouses Ytang by a Deed of Absolute Sale dated May 8, 1998. Following that sale, TCT No. T-62536 was issued in the Ytangs' names. Petitioner prayed for annulment of TCT No. T-62536, annulment of the 1998 deed, and recovery of ownership and damages.

Respondents answered that the 1986 sale was simulated and unsupported by consideration. According to respondents, the deed was executed only to enable petitioner to use the title as collateral for a Social Security System (SSS) loan, and the Spouses Baguispas never intended to sell Lot No. 38-B to petitioner. Isabel testified that the deed was signed solely for that purpose and that no ₱50,000.00 was ever received.

The RTC, in its decision dated May 31, 2010, found for petitioner: it declared TCT No. T-62536 and the May 8, 1998 Deed of Absolute Sale null and void, declared petitioner the lawful owner of Lot No. 38-B, and directed the Register of Deeds to reinstate TCT No. T-12461 and annotate the 1986 Deed of Sale if petitioner registered it. Respondents' motion for reconsideration was denied, prompting their appeal to the Court of Appeals.

The CA, in a decision dated August 27, 2014 in CA-G.R. CV No. 02386-MIN, reversed the RTC. It held the July 1, 1986 Deed of Sale void ab initio for lack of consideration and as an absolutely simulated sale under Articles 1345 and 1471 of the Civil Code, relying on Isabel's testimony that the deed was signed only to enable petitioner to obtain an SSS loan and that no payment was ever made. The CA's ruling thus validated the subsequent sale to the Spouses Ytang. Petitioner filed a Rule 45 petition for review with the Supreme Court. During the proceedings, the Court required proof of authority for Atty. Senen O. Angeles, petitioner's counsel, to sign the verification and certification of non-forum shopping. Counsel then disclosed that petitioner had died on August 19, 2011 and submitted a Letter of Authority dated September 20, 2014 from petitioner's alleged heirs, represented by Emma P. Saile, authorizing him to file the petition.

• Ownership via 1986 Deed of Sale: Petitioner maintained that the notarized Deed of Sale dated July 1, 1986 validly transferred ownership of Lot No. 38-B to her for ₱50,000.00, entitling her to the property over the subsequent 1998 sale to the Ytangs.
• Authority of Counsel: Petitioner's counsel asserted authority to file and verify the Rule 45 petition on behalf of the deceased petitioner through a Letter of Authority dated September 20, 2014 executed by petitioner's alleged heirs, represented by Emma P. Saile.

• Simulated Sale: Respondents countered that the 1986 Deed of Sale was absolutely simulated and void for lack of consideration, having been executed solely to enable petitioner to use the title as collateral for an SSS loan, with the Spouses Baguispas never intending to transfer ownership.
• Validity of 1998 Sale: Respondents argued that because the 1986 deed was void, Isabel Cuenca remained the lawful owner and validly sold the property to the Spouses Ytang on May 8, 1998.

• Authority of Counsel: Whether Atty. Senen O. Angeles had authority to file and verify the Rule 45 petition on behalf of petitioner after her death.
• Validity of the 1986 Deed of Sale: Whether the Court of Appeals erred in ruling that the July 1, 1986 Deed of Sale is null and void for lack of consideration and for being an absolutely simulated sale.

• Article 1345, Civil Code — Provides that simulation is absolute when the parties do not intend to be bound at all, rendering the contract void ab initio. The CA applied this provision to the 1986 Deed of Sale, finding that the Spouses Baguispas never intended to transfer ownership to petitioner.
• Article 1471, Civil Code — Addresses the effect of lack of consideration on a contract of sale. The CA relied on this provision in holding the 1986 deed void for absence of consideration, as no ₱50,000.00 was ever paid.