Facts:
Elvira Ong and Yu Bun Guan were married under Chinese rites on April 30, 1961. Their union produced three children. Ong alleged that she used her personal funds to purchase a parcel of land (the Rizal property) on March 20, 1968, which was then registered under her name. Additionally, they bought a house and lot in 1983 using conjugal funds, registered under their names. By 1992, following Yu’s request and promises, Ong executed a Deed of Sale in Yu’s favor over the Rizal property. Despite the promise of a payment of PHP200,000 for the sale, no payment was made; instead, Ong covered all related taxes from her personal funds.
Yu then managed to have a new title issued in his name by filing a ‘Petition for Replacement’ of the lost owner’s duplicate title, which Ong later discovered and contested by filing an Affidavit of Adverse Claim. Ong sought judicial relief by asking for the nullification of the sale and title in Yu’s name, compensatory damages, and attorney’s fees. Yu, on his part, contended that Ong was merely a dummy for the purchase since he was a Chinese national at the time of the acquisition, and hence, unable to own land in the Philippines.
Procedurally, the Regional Trial Court (RTC) in Makati decided in favor of Ong, declaring the sale void and her as the sole owner of the property. This decision was affirmed by the Court of Appeals (CA), which Yu then challenged before the Supreme Court (SC) through a Petition for Review under Rule 45.
Issues:
1. Whether the CA erred in not considering the property as co-owned despite funds coming from conjugal earnings.
2. Whether the CA erred in ruling the 1992 sale as fictitious, simulated, and inexistent.
3. Whether the pari delicto rule was improperly disregarded by the CA.
4. Whether the CA erred in annulling the title (TCT No. 181033) in favor of Yu without proof of actual fraud.
Court’s Decision:
The SC denied the petition and affirmed the CA’s decision. It ruled that:
1. The property was correctly adjudged as paraphernal of Ong, as there was sufficient evidence supporting the finding that she used her personal funds for the purchase.
2. The deed of sale was null and void due to lack of actual payment and intention of real transaction, rendering it a simulated act.
3. The in pari delicto rule does not apply to simulated or inexistent contracts, such as the one in question.
4. The cancellation of TCT No. 181033 was proper since the underlying sale deed was void and without legal effect.
Doctrine:
A simulated deed of sale has no legal effect, and the transfer certificate of title issued in consequence thereof should be cancelled. The pari delicto rule does not apply to simulated sales.
Class Notes:
– The principle of in pari delicto does not apply to inexistent and void contracts.
– Factual findings of the lower courts, especially when affirmed by the CA, are binding on the SC.
– A deed of sale stating consideration that was never paid is null and void for lack of cause or consideration.
Historical Background:
This case illustrates the Philippine judiciary’s stance on property transactions clouded by simulation to circumvent statutory prohibitions and the resolution of disputes arising from marital relationships involving property ownership and allegations of fraud. It underscores the court’s commitment to uphold the integrity of contractual transactions and protect rightful ownership established under personal funds, even amidst complex family and legal dynamics.
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