Absolutely simulated sale is a void contract

Dear PAO,

Carlo borrowed from my father a Torrens Title covering a riceland in Isabela province. My father verbally
agreed in lending the Torrens Title to him since Carlo is his nephew, and he trusted him that much. A part
of their agreement is the execution of a Deed of Sale, so that the title will be canceled and be transferred
in the name of Carlo. After the transfer, Carlo obtained a loan from a bank and mortgaged the property.
In 2010, he paid his loan with the bank but he refused to reconvey the property to us. He now claims full
ownership over the property because it was already titled in his name. Can we recover the property from
Carlo?

Aries

Dear Aries,

There is no contract of sale between your father and Carlo. Under Article 1458 of the New Civil Code of
the Philippines, it is stated, By the contract of sale, one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price
certain in money or its equivalent. The requisites of a contract are found under Article 1319 of the
same code, which are as follows:(1) Consent of the contracting parties; (2) Object certain which is the
subject matter of the contract; and (3) Cause of the obligation which is established. The contract
entered by your father and his nephew, Carlo, is not valid because it lacks consideration and cause.
Moreover, the same is not a contract of sale because the parties do not intend any transfer of
ownership over the land.

The contract of sale is absolutely simulated. Under Article 1345 of the New Civil Code of the Philippines,
simulation of 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. Correlative
thereto, Article 1346 of the same law also provides that 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.

In a similar case decided by the Supreme Court entitled Heirs of Dr. Mario S. Intac and Angelina
Mendoza-Intac vs. CA [Court of Appeals] and Spouses Roy, et al. (G.R. No. 173211, October 11, 2012),
Associate Justice Jose Mendoza stated:

In absolute simulation, there is a colorable contract but it has no substance as the parties have no
intention to be bound by it. The main characteristic of an absolute simulation is that the apparent
contract is not really desired or intended to produce legal effect or in any way alter the juridical
situation of the parties. As a result, an absolutely simulated or fictitious contract is void, and the
parties may recover from each other what they may have given under the contract.
In the case at bench, the court is one with the courts below that no valid sale of the subject property
actually took place between the alleged vendors, Ireneo and Salvacion; and the alleged vendees,
Spouses Intac. There was simply no consideration and no intent to sell it.

Applying this decision in your case, the contract of sale between your father and Carlo is void, because
this is a simulated sale. Your father did not really intend an absolute transfer of ownership of the
property to Carlo. Your father may recover the property by filing a civil action for the nullification of the
deed of sale and certificate of title in the name of Carlo, alleging and proving that he merely lent the
Torrens Title of the riceland and has no absolute intention to transfer it to the latter.