Balita, Lyca Agnes

150263

RAFAEL G. SUNTAY, substituted by his heirs, namely: ROSARIO, RAFAEL, JR.,

APOLINARIO, RAYMUND, MARIA VICTORIA, MARIA ROSARIO and MARIA LOURDES,
all surnamed SUNTAY, petitioners,
vs.
THE HON. COURT OF APPEALS and FEDERICO C. SUNTAY, respondents.
G.R. No. 114950 December 19, 1995
Simulation of Contracts

FACTS:
Federico Suntay was the registered owner of a 5,118sqm parcel of land in Bulacan. The land has
improvements such as a rice mill and warehouse. He applied as a miller-contractor of the then National
Rice and Corn Corporation (NARIC), informing the latter that he had a daily rice mill output of 400 cavans
of palay and warehouse storage capacity of 150,000 cavans of palay. His application was disapproved. For
purposes of circumvention, he asked his nephew and lawyer Rafael Suntay make the application for him.
In 1962, Rafael prepared an absolute deed of sale conveying to himself the parcel of land with all its
structures for the P20,000, and had it notarized. The TCT was issued in the name of Rafael but Federico
remained in possession of the property as owner, and Rafael never made any attempt to take possession.
Less than 3 months after conveyance, a countersale was prepared and signed by Rafael who caused its
delivery to Frederico because Frederico needed it to obtain a collateralized loan. Thus, the same land with
all its structures was sold back to Federico for also P20,000. This second deed appears notarized on its face
(Document no. 56), but an examination shows that on the notarial register, Document no. 56 is not a deed
of sale but a real estate mortgage on a parcel of land to secure a loan. Nowhere on the notarial register can
it be found any entry pertaining to the second deed of sale.
In 1970, Federico filed a complaint for reconveyance and damages against Rafael. He alleged that the
first deed of sale was made with the understanding that at any time, the title can be restored to Federico’s
name, and Rafael would take whatever steps were necessary to do so. He alleged that Rafael never paid any
consideration for the first deed of sale, which was absolutely simulated. Rafael argues that the property was
absolutely sold for a consideration of P20,000.
After a 13 year trial, the trial court ruled that the deed of sale is genuine and not stimulated. The second
deed of sale was not notarized and has no consideration. On appeal, the CA affirmed the RTC decision, but
reversed itself after a motion for reconsideration. Physical possessions enjoyment, and use of property
remained with Federico for years, and Rafael never assumed the benefits of ownership. It found that the
deed of sale was simulated.

Hence, this petition.

ISSUE:
W/n the deed of sale is simulated.

RULING:
 YES. The deed of sale is absolutely simulated and fictitious and hence null and void, as they parties
did not intend to be legally bound. Thus, the second deed of sale is also inefffective.
There are 2 presumptions which, if shown, infer prima facie validity of the transaction: (1) that there
was sufficient consideration for the contract, and (2) that it was the result of a fair and regular private
transaction. However, these presumptions must yield to the evidence adduced, and in this case the evidence
show signs of simulation of the Deed of Sale.
First, the history and relationship of trust, interdependence, and intimacy between Rafael and Federico
is an unmistakable token of simulation. Federico, as uncle, naively lent his title to his nephew because of
his trust. When their relationship turned sour, Rafael probably knew where to hit Federico as he knew most
of Federico’s business and personal dealings as counsel.
Also, Rafael's insistence that the sale to him was a Dacion en Pago in satisfaction of Federico’s unpaid
attorney’s fees is questionable. It was never claimed until 1976. Rafael also admitted he did not inform
Federico of the Dacion. Also, no accounting was undertaken to arrive at the amount of the alleged unpaid
atty’s fees. This is a grave symptom of simulation.
The most prominent sign of simulation is the complete absence of an attempt by Rafael to assert his
rights of ownership over the land. He never even collected rentals for Federico’s use and occupation. All
he had was a title in his name. This failure is a clear sign of fraud.
Also, the notarization of the Deed does not justify that the sale is a true conveyance to which the parties
are bound. Conduct, to be given jural effects must be jural in subject, ie must concern jural relations (not
of friendship or family). A father who promises a box for his son is not bound in contract, though the same
promise to his neighbor may be binding. In this case, the evidence proves that the sale of the land was not
intended to have any legal effect. It is not the function of the notary public to make binding an instrument
which was never intended to have any binding legal effect upon parties. The intention of the parties is
always the primary consideration in determining the true nature of a contract.
Rafael also never declared his ownership of the land in his annual SALN, so he apparently never
considered it as one of his assets.

DISPOSITIVE:
WHEREFORE, the Amended Decision promulgated by the Court of Appeals on December 15, 1993 in
CA-G.R CV No. 08179 is hereby AFFIRMED IN TOTO.