G.R. No. 243874 . October 06, 2021
EVANGELINE C. DESCALLAR, PATRICIA MARIE C. DESCALLAR, AND ALESSANDRA MONICA C. DESCALLAR, PETITIONERS, VS. HEIRS OF BELEN A. FERIA GUEVARA, HEIRS OF AUGUSTUS CAESAR A. FERIA, VICTORY A. FERIA, SALUD FERIA-MALLARE, VALERIE VICTORIA ISACKS, ERNESTO FERIA PASTOR, JR., AND ANJANETTE CHRISTINA VULTAGGIO, RESPONDENTS.

FACTS

Belen A. Feria Guevara and Augustus Caesar A. Feria, siblings of the late Cristeta A. Feria, filed a Complaint for Accion Reivindicatoria and/or Reconveyance and Damages against Spouses Joel and Evangeline Descallar over a lot in Mandaluyong City covered by TCT No. 10854. They alleged that Cristeta executed a simulated Deed of Absolute Sale in favor of her nephew, Joel, in 1995, with the promise that the property would be returned upon demand or transferred to her heirs. No actual consideration was paid. Cristeta remained the beneficial owner, paying taxes and leasing the property. When she demanded its return, Joel refused. Cristeta died in 2003 before filing a case. Belen and Augustus annotated their Affidavits of Adverse Claim on the title. The Spouses Descallar repeatedly failed to file their Answer despite extensions, leading the RTC to declare them in default. The CA, in a related certiorari case, directed the inclusion of other indispensable parties and gave the Spouses Descallar a non-extendible period to answer the Amended Complaint. They again failed to file an Answer, leading to another order of default. The RTC proceeded with ex-parte reception of evidence, where Belen and witnesses testified to the simulated sale and Cristeta’s continued ownership. The RTC ruled in favor of the plaintiffs, declaring the sale void and ordering reconveyance. The CA modified the RTC decision, declaring the sale merely voidable due to undue influence and ordering the defendants to pay the fair market value of the property instead of reconveyance.

ISSUE

Whether the Court of Appeals erred in modifying the Regional Trial Court’s decision by declaring the deed of sale merely voidable (instead of void ab initio as a simulated sale) and ordering the payment of the property’s fair market value (instead of ordering its reconveyance).

RULING

The Supreme Court granted the petition, reversed the CA decision, and reinstated the RTC decision with modification. The Court held that the contract of sale was void ab initio for being absolutely simulated or fictitious. A contract is simulated when the parties do not intend to be bound by it, and it produces no legal effect. The evidence clearly established that the parties did not intend to transfer ownership, no price was paid, and Cristeta retained all beneficial rights over the property. The defense of prescription does not apply to void contracts. The action for reconveyance based on a void contract is imprescriptible. The defendants, having been validly declared in default, are deemed to have admitted the material allegations of the complaint. The Court ordered the reconveyance of the property to the heirs of Cristeta. However, the award of attorney’s fees was deleted for lack of factual and legal basis.