G.R. No. 133749 ; August 23, 2001
HERNANDO R. PEÑALOSA alias “HENRY PEÑALOSA,” petitioner, vs. SEVERINO C. SANTOS (deceased), Substituted by his heirs: OLIVER SANTOS and ADYLL M. SANTOS, and ADELA DURAN MENDEZ SANTOS, respondents.

FACTS

Respondents Severino C. Santos and Adela Mendez Santos are the registered owners of a house and lot in Quezon City. In 1988, they negotiated to sell the property to petitioner Hernando “Henry” Peñalosa. An initial deed of absolute sale for P1,800,000.00 was signed only by Peñalosa, not by Santos. Peñalosa later signed a document stating this first deed was executed to help Santos eject the tenant, Eleuterio Perez, and that he had not paid the consideration. The parties then executed a second notarized deed of absolute sale dated September 12, 1988, for P2,000,000.00, stating the price was fully paid. Santos claimed he signed this second deed only to facilitate Peñalosa’s bank loan and ejectment case, with the understanding that payment must be immediate, and that he only received P300,000.00 as earnest money. Peñalosa applied for a loan with Philam Life to pay the balance, but Santos refused to surrender the owner’s duplicate title, causing the loan to fail. Based on the deeds, Peñalosa successfully sued to eject Perez, and after winning, moved into the property in August 1989 and spent P700,000.00 on renovations. In 1992, Santos demanded Peñalosa vacate the property and later filed an action to quiet title, alleging the second deed was void due to lack of consideration (non-payment of P2,000,000.00), lack of consent from his wife Adela (the registered owner), and because it was simulated only for loan and ejectment purposes. The Regional Trial Court declared the second deed void and ordered Peñalosa to vacate and pay compensation. The Court of Appeals affirmed this decision.

ISSUE

The primary issue is whether the deed of absolute sale dated September 12, 1988, is valid and binding, or void and inexistent.

RULING

The Supreme Court DENIED the petition and AFFIRMED the decisions of the lower courts. The deed of absolute sale is void and inexistent. A contract of sale is void and produces no effect where the price, which is an essential element, has not been paid or delivered. The second deed stated the full price of P2,000,000.00 was paid, but it was established that Peñalosa only gave P300,000.00 as earnest money and failed to pay the balance. There was no concurrence of offer and acceptance upon a certain object and consideration. The deed was a mere simulated contract, executed not as a true sale but only to facilitate Peñalosa’s loan application and ejectment suit against the tenant. The court also noted that the property was registered in the name of Adela Mendez Santos, who did not sign the deed, thus the sale could not affect the conjugal property without her consent. Peñalosa was ordered to vacate the property and pay reasonable compensation for its use.