G.R. No. 261491 – CANDELARIO S. DELA CRUZ, LUBITA D. LANTAPON, DIEGO S. DELA CRUZ, MAURICIA D. EPE, RODRIGO S. DELA CRUZ, and ARISTON S. DELA CRUZ, petitioners, vs. ALEJANDRO DUMASIG and ROSALINDA D. EPE, respondents.
LAZARO-JAVIER, J.
Rule Synopsis
In absolute simulation, there is a colorable contract but it has no substance as the parties have no intent to be bound by it. The apparent contract is not desired or intended to produce legal effects or alter the parties’ juridical situation. An absolutely simulated or fictitious contract is void, and the parties may recover from each other what they may have given under the contract. In determining whether a contract is absolutely simulated, the totality of the prior, contemporaneous, and subsequent acts of the parties must be considered.
Facts
During their lifetime Spouses Eniego and Silvestra Dela Cruz (Sps. Dela Cruz) owned 35,153 sqm of agricultural land through an emancipation patent covered by TCT No. EP-250 (subject lot). In 1987, Sps. Dela Cruz mortgaged the subject lot with the Cooperative Rural Bank (CRB). They failed to pay the corresponding loan causing CRB to foreclose the real estate mortgage. At her parents’ request, Rosalinda paid the loan.** Sps. Dela Cruz, in turn, promised that the subject lot would be her share in the inheritance. The three then executed a Deed of Sale with Assumption of Mortgage. Rosalinda possessed the subject lot for one cropping season only in the same year, which she then returned to her parents. Sps. Dela Cruz possessed the property until their respective deaths in 2007 and 2009.
In 2004, Sps. Dela Cruz remortgaged the subject lot to Erlito Llanes (Llanes).
In 2011, Rosalinda mortgaged the subject lot to respondent Alejandro Dumasig (Dumasig). They executed an Agreement of Loan with Real Estate Mortgage. The proceeds were used to pay off the mortgage debts in favor of Llanes and Paulino Saladaga (Saladaga).
**It appears that Rosalinda obtained a loan from Saladaga with the subject lot as collateral to pay off the mortgage debt with CRB.
In 2011, the petitioners, who are the other children of Sps. Dela Cruz, discovered that Dumasig began occupying and cultivating the land without their knowledge, much less consent. As heirs, they then demanded that Dumasig return the physical possession and ownership of the subject lot but he refused. Thus, they filed a complaint for accion reivindicatoria before the Regional Trial Court (RTC).
The RTC granted the complaint, declared the petitioners as co-owners, and ordered the partition of the subject lot. It also ordered Dumasig to vacate and surrender possession of the portion of the land mortgaged to him.
The Court of Appeals (CA) reversed and set aside RTC’s decision. It also denied the petitioners’ Motion for Reconsideration.
Hence, the instant Petition for Review before the Supreme Court.
Issues
Based on the facts and evidence on record, are Rosalinda and Dumasig the rightful owners and possessors of the subject lot?
Ruling and Discussion
No. Based on the facts and evidence on record, Rosalinda and Dumasig are not the rightful owners and possessors of the subject lot.
The sale between Sps. Dela Cruz and Rosalinda was absolutely fictitious.
In absolute simulation, there is a colorable contract but it has no substance as the parties have no intent to be bound by it. The main characteristic of an absolute simulation is that the apparent contract is not desired or intended to produce legal effects or alter the parties’ juridical situation. As a result, an absolutely simulated or fictitious contract is void, and the parties may recover from each other what they may have given under the contract. In determining whether a contract is absolutely simulated, the totality of the prior, contemporaneous, and subsequent acts of the parties must be considered.
Here, the following circumstances indicate that Sps. Dela Cruz never intended to sell the subject lot to Rosalinda:
(a) the money that Rosalinda used to pay the loan were proceeds of the loan from Saladaga, which she acquired by using the subject lot as collateral;**
(b) Sps. Dela Cruz continued to possess the subject lot and exercised rights of ownership over the same even after the sale in 2003 until their respective deaths;
(c) Sps. Dela Cruz re-mortgaged the subject lot to Llanes in 2004;
(d) Rosalinda possessed the land for one cropping only and returned the same to Sps. Dela Cruz immediately after;
(e) While still alive, Sps. Dela Cruz executed an Amended Waiver of Rights and Interest involving the subject lot in favor of Diego to form part of his share in the inheritance; and
(f) it was only after Sps. Dela Cruz’s death that Rosalinda took over the land and mortgaged the same to Dumasig.
Rosalinda’s failure to exercise any act of dominion over the property after the sale belies any intention to be bound by the Deed of Sale between her and Sps. Dela Cruz.
The sale is void for violating the provisions of Presidential Decree (PD) 27.
PD 27 prohibits the transfer of title to land acquired under it, except by hereditary succession or to the government. Hence, sales or transfers of lands in favor of persons other than the Government by other legal means or to the farmer’s successor by hereditary succession are null and void. However, such a sale is valid when the conveyance was made in favor of the actual tenant-tiller thereon.
Here, while Rosalinda is an heir of Sps. Dela Cruz, the transfer of the subject lot to her was made not via hereditary succession but sale. Further, it is undisputed that at the time of the sale, Rosalinda was not the actual tenant-tiller of the subject lot but Sps. Dela Cruz.
The sale between Sps. Dela Cruz and Rosalinda is void. The Agreement of Loan with Real Estate Mortgage between Rosalinda and Dumasig is also void since Rosalinda was not the absolute owner of the land she mortgaged to Dumasig. Thus, petitioners and Rosalinda, as the children of Sps. Dela Cruz, are the co-owners of the subject lot under Article 1087 of the Civil Code.
dispositive
Petition granted. Decision and Resolution of the CA reversed. Decision of the RTC is reinstated.