GR 220517; (June, 2018) (Digest)
G.R. No. 220517 . June 20, 2018.
LOLITA ESPIRITU SANTO MENDOZA AND SPS. ALEXANDER AND ELIZABETH GUTIERREZ, PETITIONERS, VS. SPS. RAMON, SR. AND NATIVIDAD PALUGOD, RESPONDENTS.
FACTS
Petitioner Lolita Mendoza and Jasminia Palugod were close friends who jointly purchased a lot in 1991 and constructed a house thereon in 1996. Jasminia was diagnosed with breast cancer. In 2004, Jasminia executed a Deed of Absolute Sale over the property in favor of Lolita. Subsequently, Lolita mortgaged the property to petitioners Spouses Alexander and Elizabeth Gutierrez to secure a loan. Jasminia passed away later that year.
Respondents, the parents and compulsory heirs of Jasminia, filed a complaint for the declaration of nullity of the Deed of Sale and the subsequent Real Estate Mortgage. They alleged that the sale was simulated, as Lolita had no independent livelihood and was dependent on Jasminia, and that Jasminia, on her deathbed, had stated the property should go to her brother. The Regional Trial Court (RTC) ruled in favor of the respondents, declaring both the deed of sale and the mortgage null and void.
ISSUE
Whether the Deed of Absolute Sale executed by Jasminia Palugod in favor of Lolita Mendoza is valid.
RULING
The Supreme Court denied the petition and affirmed the lower courts’ rulings, declaring the Deed of Absolute Sale null and void for being an absolutely simulated or fictitious contract. The legal logic rests on the essential requisites of a contract under Article 1318 of the Civil Code: consent, object certain, and cause or consideration. The Court found that the purported sale lacked a true cause. The respondents successfully established by preponderance of evidence that no actual monetary consideration passed from Lolita to Jasminia for the property. Lolita’s own judicial admission that she did not pay any money for the transfer was a crucial factor. A contract without a cause produces no legal effect. Consequently, the simulated sale transferred no valid title to Lolita. Since she was not the owner, the Real Estate Mortgage she constituted in favor of the Spouses Gutierrez was also void, as a mortgage requires the mortgagor to be the absolute owner of the property. The Court upheld the respondents’ legal standing as compulsory heirs to challenge the void contract affecting their inheritance. The reinstatement of the original title in Jasminia’s name and the declaration of the respondents as owners by succession were proper.