Edilberto Cruz and Simpliciano Cruz vs. Bancom Finance Corp. (Union Bank of the Phils.) G.R. No. 147788, March 19, 2002
Subject: Obligations and Contracts
FACTS
Brothers Rev.
Fr. Edilberto Cruz and Simplicio Cruz, plaintiffs herein, were the registered
owners of a 33.9335-hectare parcel of agricultural land together with
improvements located in Barangay Pulang Yantoc, Angat, Bulacan. Sometime in May
1978, defendant Norma Sulit, after being introduced by Candelaria Sanchez to
Fr. Cruz, offered to purchase the land. Plaintiffs’ asking price for the land
was P700K, but Norma only had P25K which Fr. Cruz accepted as earnest money
with the agreement that titles would be transferred to Norma upon payment of
the balance of P675K. Norma failed to pay the balance and proposed [to] Fr.
Cruz to transfer the property to her but the latter refused, obviously because
he had no reason to trust Norma. But capitalizing on the close relationship of
Candelaria Sanchez with the plaintiffs, Norma succeeded in having the
plaintiffs execute a document of sale of the land in favor of Candelaria who
would then obtain a bank loan in her name using the plaintiffs’ land as
collateral. On the same day, Candelaria executed another Deed of Absolute Sale
over the land in favor of Norma. In both documents, it appeared that the
consideration for the sale of the land was only ₱150K. Pursuant to the sale,
Norma was able to effect the transfer of the title to the land in her name
under TCT No. T-248262.
On May 20,
1980, Bancom filed a motion for leave to intervene which was granted by the
trial court. Bancom claimed priority as mortgagee in good faith; and that its
contract of mortgage with Norma had been executed before the annotation of
plaintiffs’ interest in the title. Meanwhile in the middle of 1980, Norma
defaulted in her payment to the Bank and her mortgage was foreclosed. At the
subsequent auction sale, Bancom was declared the highest bidder and was issued
the corresponding certificate of sale over the land.
ISSUE
Whether or not
the two deeds of sale were absolute simulations.
RULING
Yes.
Under the law
(Art 1346, NCC), an absolutely simulated or fictitious contract is void. A
relative simulation, when it does not prejudice a third person and is not
intended for any purpose contrary to law, morals, good customs, public order,
or public policy binds the parties to their real agreement.
In this case,
although the Deed of Sale between petitioners and Sanchez stipulated a
consideration of P150K, there was actually no exchange of money between them.
It is also undisputed that petitioners did not receive any portion of the
proceeds of the loan. Clearly, the Deeds of Sale were executed merely to
facilitate the use of the property as collateral to secure a loan from a bank.
Being merely a subterfuge, these agreements could not have been the source of
any consideration for the supposed sales. The execution of the two documents on
the same day sustains the position of petitioners that the Contracts of Sale
were absolutely simulated, and that they received no consideration. The failure
of Sulit to take possession of the property purportedly sold to her was a clear
badge of simulation that rendered the whole transaction void and without force
and effect.
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