INTAC vs.

COURT OF APPEALS
684 SCRA 88 | October 11, 2012 | Mendoza, J. kam
Topic: When contract is simulated

SUMMARY: In 1977, owner Ireneo executed a deed of absolute sale in the name of Sps. Intac (wife is owner’s
niece) in order to lend them the subject property so they could use it as mortgage for a bank loan. After the owner
and his wife have passed, Sps. Intac are now asserting their ownership over the subject property. The Court held
that no valid sale of the subject property actually took place between the parties. There was simply no
consideration and no intent to sell it. Petition denied.

DOCTRINES:
As stated in our syllabus:
 Where there is lack of consideration due to a simulated price, the contract is null and void ab initio. (Art
1476)
 In absolute simulation, there is a colorable contract but it has no substance as the parties have no intention
to be bound by it; An absolutely simulated or fictitious contract is void, and the parties may recover from
each other what they may have given under the contract. (Art 1409 [2])
Other doctrines in the case:
 In a contract of sale, its perfection is consummated at the moment there is a meeting of the minds upon the
thing that is the object of the contract and upon the price. Consent is manifested by the meeting of the offer
and the acceptance of the thing and the cause, which are to constitute the contract.
 The primary consideration in determining the true nature of a contract is the intention of the parties. If
the words of a contract appear to contravene the evident intention of the parties, the latter shall prevail.
Such intention is determined not only from the express terms of their agreement, but also from the
contemporaneous and subsequent acts of the parties.

FACTS: PETITION for review on certiorari of a decision of CA

Petitioner HEIRS OF DR. MARIO S. INTAC and ANGELINA MENDOZA-INTAC
COURT OF APPEALS and SPOUSES MARCELO ROY, JR. and JOSEFINA MENDOZA-ROY and
Respondents
SPOUSES DOMINADOR LOZADA and MARTINA MENDOZA-LOZADA
Mario Intac died pending litigation (RTC) so he was substituted by his heirs.
 Ireneo Mendoza, husband of Salvacion Fermin, is the owner of the disputed property in QC. Both have
already passed away when this case was filed.
 Ireneo & Salvacion (stepmom) have two children – Josefina and Martina (respondents). Angelina
(petitioner) is the niece of Ireneo, whom he has taken care of since she was 3 y/o until she got married.
 October 25, 1977 – Ireneo, w/ the consent of his wife Salvacion, executed a deed of absolute sale in favor of
niece Angelina & her husband (Spouses Intac).
 Despite the sale, Ireneo & his family (respondents) continued staying in the premises & paying the realty
taxes.
 After Ireneo died intestate in 1982, his widow & respondents remained in the premises.
 After Salvacion died, respondents still maintained their residence there.
 Up to present:
a. Respondents remained in the premises
b. Are paying real estate taxes thereon
c. Are leasing out portions of the property
d. Are collecting the rentals
RTC – Feb 22, 1994 - Complaint for (1) cancellation of TCT, and (2) reconveyance of property filed by
respondents
 Respondents sought the cancellation of the Transfer Certificate of Title (TCT) issued in the name of Spouses
Intac, claiming that the sale was only simulated and therefore void. Spouses Intac claimed that it was a
valid sale for a consideration.
 Respondents’ contentions:
- Spouses Intac borrowed the title of the property for a loan from a financing institution when Ireneo
was still alive. Respondents objected but Ireneo assured them that Angelina would not take advantage
of the situation.
 - After Ireneo’s death in 1982, it was announced that Ireneo intended to divide the property among his
heirs and the Spouses Intac never raised any objected nor informed everyone else that the property
was already sold to them in 1977 (how sketch!!!).
- After Salvacion died in 1993, rumors spread that subject property was already in the name of Spouses
Intac. Upon verification by the respondents, they found out about the new TCT so they are now
contending that:
1. The new TCT is null and void because the deed of absolute sale was a fictitious or simulated
document.
2. Sps. Intac were guilty of fraud and bad faith when said document was executed.
3. Sps. Intac never informed the respondents that they were already the registered owners of the
property although they had never taken possession thereof.
4. Respondents have been in the possession of the property in the concept of an owner up to
present.
 Petitioners’ contentions:
1. It was a valid deed of absolute sale for a valuable consideration
2. The action to annul the deed of absolute sale had already prescribed (10 years prescription period; sale
was done in 1977 and complaint was filed in 1994).
3. That the stay of respondents in the premises was only by their mere tolerance because they were not
yet in need of the property (wuw ganda nila??? TOLERANCE DAW)
4. That respondents have knowledge of the sale that happened on Oct. 25, 1977.
 RTC Ruling (2002): Deed of absolute sale is an equitable mortgage. Cancel TCT in Sps. Intac’s name. Pay
respondents 30k for attorney’s fees. Sale is null and void for being a simulated one because the parties
had no intention of binding themselves at all.
- It is an equitable mortgage because:
1. Document did not express real intention of the contracting parties; Ireneo signed because he was in
urgent need of funds
2. The amount of 60k in 1977 was too inadequate to purchase a 240 sqm. lot in QC
3. Josefina & Martina continued to be in possession of the property up to present
4. Sps. Intac started paying taxes only in 1999.
- Sps. Intac are guilty of fraud because they effected registration even though the execution of the deed
was not really intended to transfer ownership of the subject property.
 CA Ruling – Marietto (Ireneo’s nephew) testified that Ireneo never intended to sell and deed was only
executed to help Sps. Intac borrow from a bank. This was confirmed by Angelina herself because they
mortgaged the property in July 1978 to finance the construction of a small hospital in Sta. Cruz, Laguna.
1. Sps. Intac never asserted ownership over the subject property – did not collect rents, or demanded
possession from respondents (nor informed respondents of their ownership!)
2. They waited for the death of Ireneo & Salvacion before informing the respondents of their ownership.
3. No proof of payment of the 60k claimed to have been paid by Sps. Intac. Marietto (credible witness
accdg to RTC) even testified that no such payment occurred.
= The deed of absolute sale was a simulated document and had no legal effect. Even assuming that there was
consent, the sale was still null & void because of lack of consideration. (Nawala yung equitable mortgage part sa CA
ruling.)

ISSUE (HELD): WON the Deed of Absolute Sale between Sps. Ireneo & Salvacion (vendors) and Sps. Intac (vendees)
was a simulated contract or a valid agreement? (SIMULATED CONTRACT)

RATIO DECIDENDI:
Petitioners primarily argue that all elements (consent, subject matter, & consideration) of a valid contract
of sale were present. That Ireneo & Salvacion never brought any action to invalidate the sale during their lifetime.
That the signatures of Ireneo & Salvacion meant that they knowingly and willfully entered into the agreement and
were prepared for the consequences of their act (THE NERVE).
Additional positions of respondents include the unequal footing of the parties (Angelina was a doctor and
Ireneo & Salvacion were less educated people). That no action was brought because Ireneo & Salvacion trusted
Angelina. Also, petitioners could not present a witness to rebut Marietto’s testimony which was straightforward &
truthful.
SC: The Court differentiated between an absolute and relative simulation (Arts. 13451 & 13462). The SC agrees with
the lower courts that there was no valid sale because there was simply no consideration and no intent to sell it.

The testimony of Marietto was critical because he was a witness to the execution of the deed. He confirmed
that the deed was only borrowed by Sps. Intac so it can be used as collateral for their bank loan. Ireneo & Salvacion
never intended to sell the property or permanently transfer the full ownership to Sps. Intac.

Petitioners failed to disprove Marietto’s testimony (aside from plain denial). They claim that they paid
150k but even circumstantial evidence as to payment could not be presented. 60k is the amount stated in the
contract, no proof of payment of such amount either. Angelina claimed that Ireneo sold because he was in deep
need of money but if that was the case, shouldn’t Ireneo used the property himself to get a loan instead of lending
the title to the Intacs? The Intacs claim to have taken care of Ireneo when he was terminally ill but such acts (hello
kinupkop ni Ireneo si Angelina!), while they are deemed services of value, cannot be considered as consideration
for the subject property for lack of quantification and the Filipino culture of taking care of their elders.

Thus, the Court agrees with the courts below that the questioned contract of sale was only for the purpose
of lending the title of the property to Spouses Intac to enable them to secure a loan. Their arrangement was only
temporary and could not give rise to a valid sale. Where there is no consideration, the sale is null and void ab initio.
 Lequin vs. Vizconde - It is a well- entrenched rule that where the deed of sale states that the purchase price
has been paid but in fact has never been paid, the deed of sale is null and void ab initio for lack of
consideration. Where there is lack of consideration due to a simulated price, the contract is null and
void ab initio.

Ireneo & his family continued to be in possession of the property even after the sale in 1977 up to present. One
of the most striking badges of absolute simulation is the complete absence of any attempt on the part of a vendee to
assert his right of dominion over the property.

The primary consideration in determining the true nature of a contract is the intention of the parties. If the
words of a contract appear to contravene the evident intention of the parties, the latter shall prevail. Such intention
is determined not only from the express terms of their agreement, but also from the contemporaneous and
subsequent acts of the parties. The intention of Ireneo was just to lend the title to the Spouses Intac to enable them
to borrow money and put up a hospital in Sta. Cruz, Laguna. Clearly, the subject contract was absolutely simulated
and, therefore, void.

As to registration in the name of Sps. Intac: The Spouses Intac never became the owners of the property despite
its registration in their names. After all, registration does not vest title. It cannot be used to protect a usurper from
the true owner, nor can it be used as a shield for the commission of fraud, or to permit one to enrich oneself at the
expense of others. Hence, reconveyance of the subject property is warranted.

As to prescription: The action has not prescribed yet as the respondents are still in actual possession of the
subject property. It is a well-settled doctrine that “if the person claiming to be the owner of the property is in actual
possession thereof, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not
prescribe.”

DISPOSITIVE: DENIED.

1
Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the
parties conceal their true agreement.
2 Art. 1346. 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.