Home

Law Firm

Law Library

Laws

Jurisprudence

Philippine Supreme Court

Jurisprudence

Philippine Supreme Court Jurisprudence > Year 2011 > September 2011 Decisions >
[G.R. No. 165748 : September 14, 2011] HEIRS OF POLICRONIO M. URETA, SR.,
NAMELY: CONRADO B. URETA, MACARIO B. URETA, GLORIA URETA-GONZALES, ROMEO
B. URETA, RITA URETA-SOLANO, NENA URETA-TONGCUA, VENANCIO B. URETA, LILIA
URETA-TAYCO, AND HEIRS OF POLICRONIO B. URETA, JR., NAMELY: MIGUEL T. URETA,
RAMON POLICRONIO T. URETA, EMMANUEL T. URETA, AND BERNADETTE T. URETA,
PETITIONERS, VS. HEIRS OF LIBERATO M. URETA, NAMELY: TERESA F. URETA, AMPARO
URETA-CASTILLO, IGNACIO F. URETA, SR., EMIRITO F. URETA, WILKIE F. URETA,
LIBERATO F. URETA, JR., RAY F. URETA, ZALDY F. URETA, AND MILA JEAN URETA
CIPRIANO; HEIRS OF PRUDENCIA URETA PARADERO, NAMELY: WILLIAM U. PARADERO,
WARLITO U. PARADERO, CARMENCITA P. PERLAS, CRISTINA P. CORDOVA, EDNA P.
GALLARDO, LETICIA P. REYES; NARCISO M. URETA; VICENTE M. URETA; HEIRS OF
FRANCISCO M. URETA, NAMELY: EDITA T. URETA-REYES AND LOLLIE T. URETA-
VILLARUEL; ROQUE M. URETA; ADELA URETA-GONZALES; HEIRS OF INOCENCIO M.
URETA, NAMELY: BENILDA V. URETA, ALFONSO V. URETA II, DICK RICARDO V. URETA,
AND ENRIQUE V. URETA; MERLINDA U. RIVERA; JORGE URETA; ANDRES URETA,
WENEFREDA U. TARAN; AND BENEDICT URETA, RESPONDENTS. [G.R. NO. 165930 ]
HEIRS OF LIBERATO M. URETA, NAMELY: TERESA F. URETA, AMPARO URETA-CASTILLO,
IGNACIO F. URETA, SR., EMIRITO F. URETA, WILKIE F. URETA, LIBERATO F. URETA, JR.,
RAY F. URETA, ZALDY F. URETA, AND MILA JEAN URETA CIPRIANO; HEIRS OF
PRUDENCIA URETA PARADERO, NAMELY: WILLIAM U. PARADERO, WARLITO U.
PARADERO, CARMENCITA P. PERLAS, CRISTINA P. CORDOVA, EDNA P. GALLARDO,
LETICIA P. REYES; NARCISO M. URETA; VICENTE M. URETA; HEIRS OF FRANCISCO M.
URETA, NAMELY: EDITA T. URETA-REYES AND LOLLIE T. URETA-VILLARUEL; ROQUE M.
URETA; ADELA URETA-GONZALES; HEIRS OF INOCENCIO M. URETA, NAMELY: BENILDA
V. URETA, ALFONSO V. URETA II, DICK RICARDO V. URETA, AND ENRIQUE V. URETA;
MERLINDA U. RIVERA; JORGE URETA; ANDRES URETA, WENEFREDA U. TARAN; AND
BENEDICT URETA, PETITIONERS, VS. HEIRS OF POLICRONIO M. URETA, SR., NAMELY:
CONRADO B. URETA, MACARIO B. URETA, GLORIA URETA-GONZALES, ROMEO B. URETA,
RITA URETA-SOLANO, NENA URETA-TONGCUA, VENANCIO B. URETA, LILIA URETA-
TAYCO, AND HEIRS OF POLICRONIO B. URETA, JR., NAMELY: MIGUEL T. URETA, RAMON
POLICRONIO T. URETA, EMMANUEL T. URETA, AND BERNADETTE T. URETA,
RESPONDENTS. :

THIRD DIVISION

[G.R. No. 165748 : September 14, 2011]

HEIRS OF POLICRONIO M. URETA, SR., NAMELY: CONRADO B. URETA, MACARIO

B. URETA, GLORIA URETA-GONZALES, ROMEO B. URETA, RITA URETA-SOLANO,
NENA URETA-TONGCUA, VENANCIO B. URETA, LILIA URETA-TAYCO, AND HEIRS
OF POLICRONIO B. URETA, JR., NAMELY: MIGUEL T. URETA, RAMON
POLICRONIO T. URETA, EMMANUEL T. URETA, AND BERNADETTE T. URETA,
PETITIONERS, VS. HEIRS OF LIBERATO M. URETA, NAMELY: TERESA F. URETA,
AMPARO URETA-CASTILLO, IGNACIO F. URETA, SR., EMIRITO F. URETA, WILKIE
F. URETA, LIBERATO F. URETA, JR., RAY F. URETA, ZALDY F. URETA, AND MILA
JEAN URETA CIPRIANO; HEIRS OF PRUDENCIA URETA PARADERO, NAMELY:
WILLIAM U. PARADERO, WARLITO U. PARADERO, CARMENCITA P. PERLAS,
CRISTINA P. CORDOVA, EDNA P. GALLARDO, LETICIA P. REYES; NARCISO M.
URETA; VICENTE M. URETA; HEIRS OF FRANCISCO M. URETA, NAMELY: EDITA T.
URETA-REYES AND LOLLIE T. URETA-VILLARUEL; ROQUE M. URETA; ADELA
URETA-GONZALES; HEIRS OF INOCENCIO M. URETA, NAMELY: BENILDA V.
URETA, ALFONSO V. URETA II, DICK RICARDO V. URETA, AND ENRIQUE V.
URETA; MERLINDA U. RIVERA; JORGE URETA; ANDRES URETA, WENEFREDA U.
 TARAN; AND BENEDICT URETA, RESPONDENTS.

[G.R. NO. 165930 ]

HEIRS OF LIBERATO M. URETA, NAMELY: TERESA F. URETA, AMPARO URETA-

CASTILLO, IGNACIO F. URETA, SR., EMIRITO F. URETA, WILKIE F. URETA,
LIBERATO F. URETA, JR., RAY F. URETA, ZALDY F. URETA, AND MILA JEAN
URETA CIPRIANO; HEIRS OF PRUDENCIA URETA PARADERO, NAMELY: WILLIAM
U. PARADERO, WARLITO U. PARADERO, CARMENCITA P. PERLAS, CRISTINA P.
CORDOVA, EDNA P. GALLARDO, LETICIA P. REYES; NARCISO M. URETA;
VICENTE M. URETA; HEIRS OF FRANCISCO M. URETA, NAMELY: EDITA T. URETA-
REYES AND LOLLIE T. URETA-VILLARUEL; ROQUE M. URETA; ADELA URETA-
GONZALES; HEIRS OF INOCENCIO M. URETA, NAMELY: BENILDA V. URETA,
ALFONSO V. URETA II, DICK RICARDO V. URETA, AND ENRIQUE V. URETA;
MERLINDA U. RIVERA; JORGE URETA; ANDRES URETA, WENEFREDA U. TARAN;
AND BENEDICT URETA, PETITIONERS, VS. HEIRS OF POLICRONIO M. URETA,
SR., NAMELY: CONRADO B. URETA, MACARIO B. URETA, GLORIA URETA-
GONZALES, ROMEO B. URETA, RITA URETA-SOLANO, NENA URETA-TONGCUA,
VENANCIO B. URETA, LILIA URETA-TAYCO, AND HEIRS OF POLICRONIO B.
URETA, JR., NAMELY: MIGUEL T. URETA, RAMON POLICRONIO T. URETA,
EMMANUEL T. URETA, AND BERNADETTE T. URETA, RESPONDENTS.

DECISION

MENDOZA, J.:

These consolidated petitions for review on certiorari under Rule 45 of the 1997 Revised

Rules of Civil Procedure assail the April 20, 2004 Decision[1] of the Court of Appeals

(CA), and its October 14, 2004 Resolution[2] in C.A.-G.R. CV No. 71399, which affirmed

with modification the April 26, 2001 Decision[3] of the Regional Trial Court, Branch 9,
Kalibo, Aklan (RTC) in Civil Case No. 5026.

The Facts

In his lifetime, Alfonso Ureta (Alfonso) begot 14 children, namely, Policronio, Liberato,
Narciso, Prudencia, Vicente, Francisco, Inocensio, Roque, Adela, Wenefreda, Merlinda,
Benedicto, Jorge, and Andres. The children of Policronio (Heirs of Policronio), are
opposed to the rest of Alfonso's children and their descendants (Heirs of Alfonso).

Alfonso was financially well-off during his lifetime. He owned several fishpens, a
fishpond, a sari-sari store, a passenger jeep, and was engaged in the buying and selling
of copra. Policronio, the eldest, was the only child of Alfonso who failed to finish
schooling and instead worked on his father's lands.

Sometime in October 1969, Alfonso and four of his children, namely, Policronio, Liberato,
Prudencia, and Francisco, met at the house of Liberato. Francisco, who was then a
municipal judge, suggested that in order to reduce the inheritance taxes, their father
should make it appear that he had sold some of his lands to his children. Accordingly,
Alfonso executed four (4) Deeds of Sale covering several parcels of land in favor of

Policronio,[4] Liberato,[5] Prudencia,[6] and his common-law wife, Valeriana Dela Cruz.[7]
The Deed of Sale executed on October 25, 1969, in favor of Policronio, covered six
parcels of land, which are the properties in dispute in this case.

Since the sales were only made for taxation purposes and no monetary consideration
was given, Alfonso continued to own, possess and enjoy the lands and their produce.

When Alfonso died on October 11, 1972, Liberato acted as the administrator of his
father's estate. He was later succeeded by his sister Prudencia, and then by her
daughter, Carmencita Perlas. Except for a portion of parcel 5, the rest of the parcels
transferred to Policronio were tenanted by the Fernandez Family. These tenants never
turned over the produce of the lands to Policronio or any of his heirs, but to Alfonso and,
later, to the administrators of his estate.

Policronio died on November 22, 1974. Except for the said portion of parcel 5, neither
Policronio nor his heirs ever took possession of the subject lands.

On April 19, 1989, Alfonso's heirs executed a Deed of Extra-Judicial Partition, [8] which
included all the lands that were covered by the four (4) deeds of sale that were
previously executed by Alfonso for taxation purposes. Conrado, Policronio's eldest son,
representing the Heirs of Policronio, signed the Deed of Extra-Judicial Partition in behalf
of his co-heirs.

After their father's death, the Heirs of Policronio found tax declarations in his name
covering the six parcels of land. On June 15, 1995, they obtained a copy of the Deed of
Sale executed on October 25, 1969 by Alfonso in favor of Policronio.

Not long after, on July 30, 1995, the Heirs of Policronio allegedly learned about the Deed
of Extra-Judicial Partition involving Alfonso's estate when it was published in the July 19,
1995 issue of the Aklan Reporter.

Believing that the six parcels of land belonged to their late father, and as such, excluded
from the Deed of Extra-Judicial Partition, the Heirs of Policronio sought to amicably settle
the matter with the Heirs of Alfonso. Earnest efforts proving futile, the Heirs of Policronio
filed a Complaint for Declaration of Ownership, Recovery of Possession, Annulment of

Documents, Partition, and Damages[9] against the Heirs of Alfonso before the RTC on
November 17, 1995 where the following issues were submitted: (1) whether or not the
Deed of Sale was valid; (2) whether or not the Deed of Extra-Judicial Partition was valid;
and (3) who between the parties was entitled to damages.

The Ruling of the RTC

On April 26, 2001, the RTC dismissed the Complaint of the Heirs of Policronio and ruled
in favor of the Heirs of Alfonso in a decision, the dispositive portion of which reads:

WHEREFORE, the Court finds that the preponderance of evidence tilts in favor
of the defendants, hence the instant case is hereby DISMISSED.

The counterclaims are likewise DISMISSED.

With costs against plaintiffs.

SO ORDERED.

The RTC found that the Heirs of Alfonso clearly established that the Deed of Sale was
null and void. It held that the Heirs of Policronio failed to rebut the evidence of the Heirs
of Alfonso, which proved that the Deed of Sale in the possession of the former was one
of the four (4) Deeds of Sale executed by Alfonso in favor of his 3 children and second
wife for taxation purposes; that although tax declarations were issued in the name of
Policronio, he or his heirs never took possession of the subject lands except a portion of
parcel 5; and that all the produce were turned over by the tenants to Alfonso and the
administrators of his estate and never to Policronio or his heirs.

The RTC further found that there was no money involved in the sale. Even granting that
there was, as claimed by the Heirs of Policronio, ?2,000.00 for six parcels of land, the
amount was grossly inadequate. It was also noted that the aggregate area of the subject
lands was more than double the average share adjudicated to each of the other children
in the Deed of Extra-Judicial Partition; that the siblings of Policronio were the ones who
shared in the produce of the land; and that the Heirs of Policronio only paid real estate
taxes in 1996 and 1997. The RTC opined that Policronio must have been aware that the
transfer was merely for taxation purposes because he did not subsequently take
possession of the properties even after the death of his father.

The Deed of Extra-Judicial Partition, on the other hand, was declared valid by the RTC
as all the heirs of Alfonso were represented and received equal shares and all the
requirements of a valid extra-judicial partition were met. The RTC considered Conrado's
claim that he did not understand the full significance of his signature when he signed in
behalf of his co-heirs, as a gratutitous assertion. The RTC was of the view that when he
admitted to have signed all the pages and personally appeared before the notary public,
he was presumed to have understood their contents.

Lastly, neither party was entitled to damages. The Heirs of Alfonso failed to present
testimony to serve as factual basis for moral damages, no document was presented to
prove actual damages, and the Heirs of Policronio were found to have filed the case in
good faith.

The Ruling of the CA

Aggrieved, the Heirs of Policronio appealed before the CA, which rendered a decision on
April 20, 2004, the dispositive portion of which reads as follows:

WHEREFORE, the appeal is PARTIALLY GRANTED. The appealed Decision,

dated 26 April 2001, rendered by Hon. Judge Dean R. Telan of the Regional
Trial Court of Kalibo, Aklan, Branch 9, is hereby AFFIRMED with
MODIFICATION:

1.) The Deed of Sale in favor of Policronio Ureta, Sr., dated 25 October 1969,
covering six (6) parcels of land is hereby declared VOID for being
ABSOLUTELY SIMULATED;

2.) The Deed of Extra-Judicial Partition, dated 19 April 1989, is ANNULLED;

3.) The claim for actual and exemplary damages are DISMISSED for lack of
factual and legal basis.

The case is hereby REMANDED to the court of origin for the proper partition
of ALFONSO URETA'S Estate in accordance with Rule 69 of the 1997 Rules of
Civil Procedure. No costs at this instance.

SO ORDERED.

The CA affirmed the finding of the RTC that the Deed of Sale was void. It found the Deed
of Sale to be absolutely simulated as the parties did not intend to be legally bound by it.
As such, it produced no legal effects and did not alter the juridical situation of the
parties. The CA also noted that Alfonso continued to exercise all the rights of an owner
even after the execution of the Deed of Sale, as it was undisputed that he remained in
possession of the subject parcels of land and enjoyed their produce until his death.

Policronio, on the other hand, never exercised any rights pertaining to an owner over the
subject lands from the time they were sold to him up until his death. He never took or
attempted to take possession of the land even after his father's death, never demanded
delivery of the produce from the tenants, and never paid realty taxes on the properties.
It was also noted that Policronio never disclosed the existence of the Deed of Sale to his
children, as they were, in fact, surprised to discover its existence. The CA, thus,
concluded that Policronio must have been aware that the transfer was only made for
taxation purposes.

The testimony of Amparo Castillo, as to the circumstances surrounding the actual

arrangement and agreement between the parties prior to the execution of the four (4)
Deeds of Sale, was found by the CA to be unrebutted. The RTC's assessment of the
credibility of her testimony was accorded respect, and the intention of the parties was
given the primary consideration in determining the true nature of the contract.

Contrary to the finding of the RTC though, the CA annulled the Deed of Extra-Judicial
Partition due to the incapacity of one of the parties to give his consent to the contract.
It held that before Conrado could validly bind his co-heirs to the Deed of Extra-Judicial
Partition, it was necessary that he be clothed with the proper authority. The CA ruled
that a special power of attorney was required under Article 1878 (5) and (15) of the Civil
Code. Without a special power of attorney, it was held that Conrado lacked the legal
capactiy to give the consent of his co-heirs, thus, rendering the Deed of Extra-Judicial
Partition voidable under Article 1390 (1) of the Civil Code.

As a consequence, the CA ordered the remand of the case to the RTC for the proper
partition of the estate, with the option that the parties may still voluntarily effect the
partition by executing another agreement or by adopting the assailed Deed of Partition
with the RTC's approval in either case. Otherwise, the RTC may proceed with the
compulsory partition of the estate in accordance with the Rules.

With regard to the claim for damages, the CA agreed with the RTC and dismissed the
claim for actual and compensatory damages for lack of factual and legal basis.

Both parties filed their respective Motions for Reconsideration, which were denied by the
CA for lack of merit in a Resolution dated October 14, 2004.

In their Motion for Reconsideration, the Heirs of Policronio argued that the RTC violated
the best evidence rule in giving credence to the testimony of Amparo Castillo with regard
to the simulation of the Deed of Sale, and that prescription had set in precluding any
question on the validity of the contract.
The CA held that the oral testimony was admissible under Rule 130, Section 9 (b) and
(c), which provides that evidence aliunde may be allowed to explain the terms of the
written agreement if the same failed to express the true intent and agreement of the
parties thereto, or when the validity of the written agreement was put in issue.
Furthermore, the CA found that the Heirs of Policronio waived their right to object to
evidence aliunde having failed to do so during trial and for raising such only for the first
time on appeal. With regard to prescription, the CA ruled that the action or defense for
the declaration of the inexistence of a contract did not prescribe under Article 1410 of
the Civil Code.

On the other hand, the Heirs of Alfonso argued that the Deed of Extra-Judicial Partition
should not have been annulled, and instead the preterited heirs should be given their
share. The CA reiterated that Conrado's lack of capacity to give his co-heirs' consent to
the extra-judicial settlement rendered the same voidable.

Hence, the present Petitions for Review on Certiorari.

The Issues

The issues presented for resolution by the Heirs of Policronio in G.R. No. 165748 are as
follows:

I.

Whether the Court of Appeals is correct in ruling that the Deed of

Absolute Sale of 25 October 1969 is void for being absolutely
fictitious and in relation therewith, may parol evidence be entertained
to thwart its binding effect after the parties have both died?

Assuming that indeed the said document is simulated, whether or not

the parties thereto including their successors in interest are estopped
to question its validity, they being bound by Articles 1412 and 1421
of the Civil Code?

II.

Whether prescription applies to bar any question respecting the

validity of the Deed of Absolute Sale dated 25 October 1969? Whether
prescription applies to bar any collateral attack on the validity of the
 deed of absolute sale executed 21 years earlier?

III.

Whether the Court of Appeals correctly ruled in nullifying the Deed of

Extrajudicial Partition because Conrado Ureta signed the same
without the written authority from his siblings in contravention of
Article 1878 in relation to Article 1390 of the Civil Code and in
relation therewith, whether the defense of ratification and/or
preterition raised for the first time on appeal may be entertained?

The issues presented for resolution by the Heirs of Alfonso in G.R. No. 165930 are as
follows:

I.

Whether or not grave error was committed by the Trial Court and
Court of Appeals in declaring the Deed of Sale of subject properties as
absolutely simulated and null and void thru parol evidence based on
their factual findings as to its fictitious nature, and there being
waiver of any objection based on violation of the parol evidence rule.

II.

Whether or not the Court of Appeals was correct in holding that

Conrado Ureta's lack of capacity to give his co-heirs' consent to the
Extra-Judicial Partition rendered the same voidable.

III.

Granting arguendo that Conrado Ureta was not authorized to

represent his co-heirs and there was no ratification, whether or not
the Court of Appeals was correct in ordering the remand of the case
to the Regional Trial Court for partition of the estate of Alfonso Ureta.

IV.

Since the sale in favor of Policronio Ureta Sr. was null and void ab
initio, the properties covered therein formed part of the estate of the
late Alfonso Ureta and was correctly included in the Deed of
Extrajudicial Partition even if no prior action for nullification of the
 sale was filed by the heirs of Liberato Ureta.

V.

Whether or not the heirs of Policronio Ureta Sr. can claim that
estoppel based on Article 1412 of the Civil Code as well as the issue
of prescription can still be raised on appeal.

These various contentions revolve around two major issues, to wit: (1) whether the
Deed of Sale is valid, and (2) whether the Deed of Extra-Judicial Partition is valid. Thus,
the assigned errors shall be discussed jointly and in seriatim.

The Ruling of the Court

Validity of the Deed of Sale

Two veritable legal presumptions bear on the validity of the Deed of Sale: (1) that there
was sufficient consideration for the contract; and (2) that it was the result of a fair and
regular private transaction. If shown to hold, these presumptions infer prima facie the

transaction's validity, except that it must yield to the evidence adduced.[10]

As will be discussed below, the evidence overcomes these two presumptions.

Absolute Simulation

First, the Deed of Sale was not the result of a fair and regular private transaction
because it was absolutely simulated.

The Heirs of Policronio argued that the land had been validly sold to Policronio as the
Deed of Sale contained all the essential elements of a valid contract of sale, by virtue of
which, the subject properties were transferred in his name as evidenced by the tax
declaration. There being no invalidation prior to the execution of the Deed of Extra-
Judicial Partition, the probity and integrity of the Deed of Sale should remain
undiminished and accorded respect as it was a duly notarized public instrument.

The Heirs of Policronio posited that his loyal services to his father and his being the
eldest among Alfonso's children, might have prompted the old man to sell the subject
lands to him at a very low price as an advance inheritance. They explained that
Policronio's failure to take possession of the subject lands and to claim their produce
manifests a Filipino family practice wherein a child would take possession and enjoy the
fruits of the land sold by a parent only after the latter's death. Policronio simply treated
the lands the same way his father Alfonso treated them - where his children enjoyed
usufructuary rights over the properties, as opposed to appropriating them exclusively to
himself. They contended that Policronio's failure to take actual possession of the lands
did not prove that he was not the owner as he was merely exercising his right to dispose
of them. They argue that it was an error on the part of the CA to conclude that
ownership by Policronio was not established by his failure to possess the properties sold.
Instead, emphasis should be made on the fact that the tax declarations, being indicia of
possession, were in Policronio's name.

They further argued that the Heirs of Alfonso failed to appreciate that the Deed of Sale
was clear enough to convey the subject parcels of land. Citing jurisprudence, they
contend that there is a presumption that an instrument sets out the true agreement of

the parties thereto and that it was executed for valuable consideration,[11] and where
there is no doubt as to the intention of the parties to a contract, the literal meaning of

the stipulation shall control.[12] Nowhere in the Deed of Sale is it indicated that the
transfer was only for taxation purposes. On the contrary, the document clearly indicates
that the lands were sold. Therefore, they averred that the literal meaning of the
stipulation should control.

The Court disagrees.

The Court finds no cogent reason to deviate from the finding of the CA that the Deed of
Sale is null and void for being absolutely simulated. The Civil Code provides:

Art. 1345. Simulation of a 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.

Art. 1346. 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.

Valerio v. Refresca[13] is instructive on the matter of simulation of contracts:

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.However, if the parties state a false cause in the contract
to conceal their real agreement, the contract is relatively simulated and the
parties are still bound by their real agreement.Hence, where the essential
requisites of a contract are present and the simulation refers only to the
content or terms of the contract, the agreement is absolutely binding and
enforceable between the parties and their successors in interest.

Lacking, therefore, in an absolutely simulated contract is consent which is essential to a

valid and enforceable contract.[14] Thus, where a person, in order to place his property
beyond the reach of his creditors, simulates a transfer of it to another, he does not really
intend to divest himself of his title and control of the property; hence, the deed of

transfer is but a sham.[15] Similarly, in this case, Alfonso simulated a transfer to

Policronio purely for taxation purposes, without intending to transfer ownership over the
subject lands.

Theprimary consideration in determining the true nature of a contract is the intention of

the parties.If the words of a contract appear to contravene the evident intention of the
parties, the latter shall prevail. Such intention is determined not only from the express
terms of their agreement, but also from the contemporaneous and subsequent acts of

the parties.[16] The true intention of the parties in this case was sufficiently proven by
the Heirs of Alfonso.

The Heirs of Alfonso established by a preponderance of evidence[17] that the Deed of

Sale was one of the four (4) absolutely simulated Deeds of Sale which involved no actual
monetary consideration, executed by Alfonso in favor of his children, Policronio, Liberato,
and Prudencia, and his second wife, Valeriana, for taxation purposes.

Amparo Castillo, the daughter of Liberato, testified, to wit:

Q: Now sometime in the year 1969 can you recall if your grandfather and
his children [met] in your house?

A: Yes sir, that was sometime in October 1969 when they [met] in our
house, my grandfather, my late uncle Policronio Ureta, my late uncle Liberato
Ureta, my uncle Francisco Ureta, and then my auntie Prudencia Ureta they
talk[ed] about, that idea came from my uncle Francisco Ureta to [sell] some
parcels of land to his children to lessen the inheritance tax whatever
happened to my grandfather, actually no money involved in this sale.
 Q: Now you said there was that agreement, verbal agreement. [W]here
were you when this Alfonso Ureta and his children gather[ed] in your house?

A: I was near them in fact I heard everything they were talking [about]

xxx

Q: Were there documents of sale executed by Alfonso Ureta in furtherance

of their verbal agreement?

A: Yes sir.

Q: To whom in particular did your grandfather Alfonso Ureta execute this

deed of sale without money consideration according to you?

A: To my uncle Policronio Ureta and to Prudencia Ureta Panadero.

Q: And who else?

A: To Valeriana dela Cruz.

Q: How about your father?

A: He has.[18]

The other Deeds of Sale executed by Alfonso in favor of his children Prudencia and
Liberato, and second wife Valeriana, all bearing the same date of execution, were duly
presented in evidence by the Heirs of Alfonso, and were uncontested by the Heirs of
Policronio. The lands which were the subject of these Deeds of Sale were in fact included
in the Deed of Extra-Judicial Partition executed by all the heirs of Alfonso, where it was
expressly stipulated:

That the above-named Amparo U. Castillo, Prudencia U. Paradero, Conrado B.

Ureta and Merlinda U. Rivera do hereby recognize and acknowledge as a fact
that the properties presently declared in their respective names or in the
names of their respective parents and are included in the foregoing
instrument are actually the properties of the deceased Alfonso Ureta and
were transferred only for the purpose of effective administration and
development and convenience in the payment of taxes and, therefore, all
instruments conveying or affecting the transfer of said properties are null and

void from the beginning.[19]

As found by the CA, Alfonso continued to exercise all the rights of an owner even after
the execution of the Deeds of Sale. It was undisputed that Alfonso remained in
possession of the subject lands and enjoyed their produce until his death. No credence
can be given to the contention of the Heirs of Policrionio that their father did not take
possession of the subject lands or enjoyed the fruits thereof in deference to a Filipino
family practice. Had this been true, Policronio should have taken possession of the
subject lands after his father died. On the contrary, it was admitted that neither
Policronio nor his heirs ever took possession of the subject lands from the time they
were sold to him, and even after the death of both Alfonso and Policronio.

It was also admitted by the Heirs of Policronio that the tenants of the subject lands
never turned over the produce of the properties to Policronio or his heirs but only to
Alfonso and the administrators of his estate. Neither was there a demand for their
delivery to Policronio or his heirs. Neither did Policronio ever pay real estate taxes on the
properties, the only payment on record being those made by his heirs in 1996 and 1997
ten years after his death. In sum, Policronio never exercised any rights pertaining to an
owner over the subject lands.

The most protuberant index of simulation of contract is the complete absence of an

attempt in any manner on the part of the ostensible buyer to assert rights of ownership
over the subject properties. Policronio's failure to take exclusive possession of the
subject properties or, in the alternative, to collect rentals, is contrary to the principle of
ownership. Such failure is a clear badge of simulation that renders the whole transaction

void. [20]
It is further telling that Policronio never disclosed the existence of the Deed of Sale to his
children. This, coupled with Policronio's failure to exercise any rights pertaining to an
owner of the subject lands, leads to the conclusion that he was aware that the transfer
was only made for taxation purposes and never intended to bind the parties thereto.

As the above factual circumstances remain unrebutted by the Heirs of Policronio, the
factual findings of the RTC, which were affirmed by the CA, remain binding and

conclusive upon this Court.[21]

It is clear that the parties did not intend to be bound at all, and as such, the Deed of
Sale produced no legal effects and did not alter the juridical situation of the parties. The
Deed of Sale is, therefore, void for being absolutely simulated pursuant to Article 1409
(2) of the Civil Code which provides:

Art. 1409. The following contracts are inexistent and void from the beginning:

xxx

(2) Those which are absolutely simulated or fictitious;

xxx

For guidance, the following are the most fundamental characteristics of void or inexistent
contracts:

1) As a general rule, they produce no legal effects whatsoever in accordance

with the principle "quod nullum est nullum producit effectum."

2)They are not susceptible of ratification.

3) The right to set up the defense of inexistence or absolute nullity cannot be

waived or renounced.

4)The action or defense for the declaration of their inexistence or absolute

nullity is imprescriptible.

5) The inexistence or absolute nullity of a contract cannot be invoked by a

person whose interests are not directly affected.[22]

Since the Deed of Sale is void, the subject properties were properly included in the Deed
of Extra-Judicial Partition of the estate of Alfonso.

Absence and Inadequacy of Consideration

The second presumption is rebutted by the lack of consideration for the Deed of Sale.

In their Answer,[23] the Heirs of Alfonso initially argued that the Deed of Sale was void
for lack of consideration, and even granting that there was consideration, such was
inadequate. The Heirs of Policronio counter that the defenses of absence or inadequacy
of consideration are not grounds to render a contract void.

The Heirs of Policronio contended that under Article 1470 of the Civil Code, gross
inadequacy of the price does not affect a contract of sale, except as it may indicate a
defect in the consent, or that the parties really intended a donation or some other act or
contract. Citing jurisprudence, they argued that inadequacy of monetary consideration
does not render a conveyance inexistent as liberality may be sufficient cause for a valid
contract, whereas fraud or bad faith may render it either rescissible or voidable,

although valid until annulled.[24] Thus, they argued that if the contract suffers from
inadequate consideration, it remains valid until annulled, and the remedy of rescission
calls for judicial intervention, which remedy the Heirs of Alfonso failed to take.

It is further argued that even granting that the sale of the subject lands for a
consideration of ?2,000.00 was inadequate, absent any evidence of the fair market value
of the land at the time of its sale, it cannot be concluded that the price at which it was

sold was inadequate.[25] As there is nothing in the records to show that the Heirs of
Alfonso supplied the true value of the land in 1969, the amount of ?2,000.00 must thus
stand as its saleable value.

On this issue, the Court finds for the Heirs of Alfonso.

For lack of consideration, the Deed of Sale is once again found to be void. It states that
Policronio paid, and Alfonso received, the P2,000.00 purchase price on the date of the
signing of the contract:

That I, ALFONSO F. URETA, x x x for and in consideration of the sum of TWO

THOUSAND (P2,000.00) PESOS, Philippine Currency, to me in hand paid by
POLICRONIO M. URETA, x x x, do hereby CEDE, TRANSFER, and CONVEY, by

way of absolute sale, x x x six (6) parcels of land x x x.[26] [Emphasis ours]
Although, on its face, the Deed of Sale appears to be supported by valuable

consideration, the RTC found that there was no money involved in the sale.[27] This
finding was affirmed by the CA in ruling that the sale is void for being absolutely
simulated. Considering that there is no cogent reason to deviate from such factual
findings, they are binding on this Court.

It is well-settled in a long line of cases that where a deed of sale states that the
purchase price has been paid but in fact has never been paid, the deed of sale is null and

void for lack of consideration.[28] Thus, although the contract states that the purchase
price of ?2,000.00 was paid by Policronio to Alfonso for the subject properties, it has
been proven that such was never in fact paid as there was no money involved. It must,
therefore, follow that the Deed of Sale is void for lack of consideration.

Given that the Deed of Sale is void, it is unnecessary to discuss the issue on the
inadequacy of consideration.

Parol Evidence and Hearsay

The Heirs of Policronio aver that the rules on parol evidence and hearsay were violated
by the CA in ruling that the Deed of Sale was void.

They argued that based on the parol evidence rule, the Heirs of Alfonso and, specifically,
Amparo Castillo, were not in a position to prove the terms outside of the contract
because they were not parties nor successors-in-interest in the Deed of Sale in question.
Thus, it is argued that the testimony of Amparo Castillo violates the parol evidence rule.

Stemming from the presumption that the Heirs of Alfonso were not parties to the
contract, it is also argued that the parol evidence rule may not be properly invoked by
either party in the litigation against the other, where at least one of the parties to the
suit is not a party or a privy of a party to the written instrument in question and does
not base a claim on the instrument or assert a right originating in the instrument or the

relation established thereby.[29]

Their arguments are untenable.

The objection against the admission of any evidence must be made at the proper time,
as soon as the grounds therefor become reasonably apparent, and if not so made, it will
be understood to have been waived. In the case of testimonial evidence, the objection
must be made when the objectionable question is asked or after the answer is given if

the objectionable features become apparent only by reason of such answer.[30] In this
case, the Heirs of Policronio failed to timely object to the testimony of Amparo Castillo
and they are, thus, deemed to have waived the benefit of the parol evidence rule.

Granting that the Heirs of Policronio timely objected to the testimony of Amparo Castillo,
their argument would still fail.

Section 9 of Rule 130 of the Rules of Court provides:

Section 9. Evidence of written agreements. -- When the terms of an

agreement have been reduced to writing, it is considered as containing all the
terms agreed upon and there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of
the written agreement.

However, a party may present evidence to modify, explain or add to the terms
of written agreement if he puts in issue in his pleading:

(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;

(b) The failure of the written agreement to express the true intent and
agreement of the parties thereto;

(c) The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or their successors
in interest after the execution of the written agreement.

The term "agreement" includes wills.

 [Emphasis ours]

Paragraphs (b) and (c) are applicable in the case at bench.

The failure of the Deed of Sale to express the true intent and agreement of the parties

was clearly put in issue in the Answer[31] of the Heirs of Alfonso to the Complaint. It
was alleged that the Deed of Sale was only made to lessen the payment of estate and
inheritance taxes and not meant to transfer ownership. The exception in paragraph (b) is
allowed to enable the court to ascertain the true intent of the parties, and once the

intent is clear, it shall prevail over what the document appears to be on its face.[32] As
the true intent of the parties was duly proven in the present case, it now prevails over
what appears on the Deed of Sale.

The validity of the Deed of Sale was also put in issue in the Answer, and was precisely

one of the issues submitted to the RTC for resolution.[33] The operation of the parol
evidence rule requires the existence of a valid written agreement. It is, thus, not
applicable in a proceeding where the validity of such agreement is the fact in dispute,

such as when a contract may be void for lack of consideration.[34] Considering that the
Deed of Sale has been shown to be void for being absolutely simulated and for lack of
consideration, the Heirs of Alfonso are not precluded from presenting evidence to modify,
explain or add to the terms of the written agreement.

The Heirs of Policronio must be in a state of confusion in arguing that the Heirs of
Alfonso may not question the Deed of Sale for not being parties or successors-in-interest
therein on the basis that the parol evidence rule may not be properly invoked in a
proceeding or litigation where at least one of the parties to the suit is not a party or a
privy of a party to the written instrument in question and does not base a claim on the
instrument or assert a right originating in the instrument or the relation established
thereby. If their argument was to be accepted, then the Heirs of Policronio would
themselves be precluded from invoking the parol evidence rule to exclude the evidence
of the Heirs of Alfonso.

Indeed, the applicability of the parol evidence rule requires that the case be between

parties and their successors-in-interest.[35] In this case, both the Heirs of Alfonso and
the Heirs of Policronio are successors-in-interest of the parties to the Deed of Sale as
they claim rights under Alfonso and Policronio, respectively. The parol evidence rule
excluding evidence aliunde, however, still cannot apply because the present case falls
under two exceptions to the rule, as discussed above.
With respect to hearsay, the Heirs of Policronio contended that the rule on hearsay was
violated when the testimony of Amparo Castillo was given weight in proving that the
subject lands were only sold for taxation purposes as she was a person alien to the
contract. Even granting that they did not object to her testimony during trial, they
argued that it should not have been appreciated by the CA because it had no probative

value whatsoever.[36]

The Court disagrees.

It has indeed been held that hearsay evidence whether objected to or not cannot be

given credence for having no probative value.[37] This principle, however, has been
relaxed in cases where, in addition to the failure to object to the admissibility of the
subject evidence, there were other pieces of evidence presented or there were other
circumstances prevailing to support the fact in issue. In Top-Weld Manufacturing, Inc. v.

ECED S.A.,[38] this Court held:

Hearsay evidence alone may be insufficient to establish a fact in an injunction

suit (Parker v. Furlong, 62 P. 490) but, when no objection is made thereto, it
is, like any other evidence, to be considered and given the importance it
deserves. (Smith v. Delaware & Atlantic Telegraph & Telephone Co., 51 A
464). Although we should warn of the undesirability of issuing judgments
solely on the basis of the affidavits submitted, where as here, said affidavits
are overwhelming, uncontroverted by competent evidence and not inherently
improbable, we are constrained to uphold the allegations of the respondents
regarding the multifarious violations of the contracts made by the petitioner.

In the case at bench, there were other prevailing circumstances which corroborate the
testimony of Amparo Castillo. First, the other Deeds of Sale which were executed in
favor of Liberato, Prudencia, and Valeriana on the same day as that of Policronio's were
all presented in evidence. Second, all the properties subject therein were included in the
Deed of Extra-Judicial Partition of the estate of Alfonso. Third, Policronio, during his
lifetime, never exercised acts of ownership over the subject properties (as he never
demanded or took possession of them, never demanded or received the produce thereof,
and never paid real estate taxes thereon). Fourth, Policronio never informed his children
of the sale.

As the Heirs of Policronio failed to controvert the evidence presented, and to timely
object to the testimony of Amparo Castillo, both the RTC and the CA correctly accorded
probative weight to her testimony.