There can be no doubt that the contract of sale or Kasulatan lacked the essential element of consideration. It is a well-entrenched rule that where the 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 abinitio for lack of consideration. Moreover, Art. 1471 of the Civil Code, which provides that “if the price is simulated, the sale is void,” also applies to the instant case, since the price purportedly paid as indicated in the contract of sale was simulated for no payment was actually made.
Consideration and consent are essential elements in a contract of sale. Where a party’s consent to a contract of sale is vitiated or where there is lack of consideration due to a simulated price, the contract is null and void abinitio.
A contract, as defined in the Civil Code, is a meeting of minds, with respect to the other, to give something or to render some service. For a contract to be valid, it must have three essential elements: (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 requisites of consent are (1) it should be intelligent or with an exact notion of the matter to which it refers; (2) it should be free; and (3) it should be spontaneous. In De Jesus v. Intermediate Appellate Court, it was explained that intelligence in consent is vitiated by error, freedom by violence, intimidation or undue influence, and spontaneity by fraud.
Article (Art.) 1330 of the Civil Code provides that when consent is given through fraud, the contract is voidable.
Tolentino defines fraud as “every kind of deception whether in the form of insidious machinations, manipulations, concealments or misrepresentations, for the purpose of leading another party into error and thus execute a particular act.” Fraud has a “determining influence” on the consent of the prejudiced party, as he is misled by a false appearance of facts, thereby producing error on his part in deciding whether or not to agree to the offer.
One form of fraud is misrepresentation through insidious words or machinations. Under Art. 1338 of the Civil Code, there is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which without them he would not have agreed to. Insidious words or machinations constituting deceit are those that ensnare, entrap, trick, or mislead the other party who was induced to give consent which he or she would not otherwise have given.
Deceit is also present when one party, by means of concealing or omitting to state material facts, with intent to deceive, obtains consent of the other party without which, consent could not have been given. Art. 1339 of the Civil Code is explicit that failure to disclose facts when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud.
Facts:
In 1995, spouses Ramon and Virginia Lequin, residents bought the subject lot consisting of 10,115 sq. m. from one Carlito de Leon. The sale was negotiated by respondent Raymundo Vizconde.
In 1997, spouses Vizconde represented to spouses Lequin that they had also bought from Carlito de Leon a 1,012 sq. m. lot adjacent to the Lequins and built a house thereon.
As later confirmed by de Leon, however, the 1,012 sq. m. lot claimed by the Vizcondes is part of the 10,115 sq. m. lot Lequin bought from him.
With the consent of the Vizcondes, spouses Lequin then constructed their house on the 500-square meter half-portion of the lot claimed by respondents, as this was near the road.
Given this situation where the house of Lequins stood on a portion of the lot allegedly owned by Vizcondes, the former consulted a lawyer, who advised them that the 1,012 sq. m. lot be segregated from the subject lot whose title they own and to make it appear that they are selling to respondents 512 square meters thereof.
This sale was embodied in the February 12, 2000 Kasulatan where it was made to appear that the Vizcondes paid PhP 15,000 for the purchase of the 512-square meter portion of the subject lot.
In July 2000, petitioners tried to develop the dried up canal located between their 500-square meter lot and the public road. However, the respondents objected, claiming ownership of said dried up canal or sapang patay.
This prompted the Liquins to look into the ownership of the dried up canal and the lot claimed by the respondents Carlito de Leon told petitioners that what he had sold to respondents was the dried up canal or sapang patay and that the 1,012-square meter lot claimed by respondents really belongs to petitioners.
In 2001, petitioners filed a complaint praying for the Kasulatan to be declared as null and void ab initio.
The RTC found the Kasulatan allegedly conveying 512 square meters to respondents to be null and void due to: (1) the vitiated consent of petitioners in the execution of the simulated contract of sale; and (2) lack of consideration, since it was shown that while petitioners were ostensibly conveying to respondents 512 square meters of their property, yet the consideration of PhP 15,000 was not paid to them and, in fact,they were the ones who paid respondents PhP 50,000.
Upon appeal by the respondent-spouses, CA reversed the ruling.
Issue:
WON the Kasulatan was null and void.
But take note, on the issue of consent, the SC said that the Kasulatan was merely voidable. But on the issue of consideration, it was void. Final ruling - void.
Held: YES
Re: Lack of Consideration
The contract of sale or Kasulatan states that respondents paid petitioners PhP 15,000 for the 512-square meter portion. On its face, the above contract of sale appears to be supported by a valuable consideration. We, however, agree with the trial court’s finding that this is a simulated sale and unsupported by any consideration, for respondents never paid the PhP 15,000 purported purchase price.
The kasulatan did not express the true intent of the parties
Lack of consideration was proved by petitioners’ evidence aliunde showing that the Kasulatan did not express the true intent and agreement of the parties. As explained above, said sale contract was fraudulently entered into through the misrepresentations of respondents causing petitioners’ vitiated consent.
There can be no doubt that the contract of sale or Kasulatan lacked the essential element of consideration.
It is a well-entrenched rule that where the 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 ab initio for lack of consideration. Moreover, Art. 1471 of the Civil Code, which provides that “if the price is simulated, the sale is void,” also applies to the instant case, since the price purportedly paid as indicated in the contract of sale was simulated for no payment was actually made.
The contract is void ab intio
Consideration and consent are essential elements in a contract of sale. Where a party’s consent to a contract of sale is vitiated or where there is lack of consideration due to a simulated price, the contract is null and void ab initio.
The PhP 50,000 paid by petitioners to respondents as consideration for the transfer of the 500-square meter lot to petitioners must be restored to the latter.
Otherwise, an unjust enrichment situation ensues. The facts clearly show that the 500-square meter lot is legally owned by petitioners as shown by the testimony of de Leon; therefore, they have no legal obligation to pay PhP 50,000 therefor.
Considering that the 512 square-meter lot on which respondents’ house is located is clearly owned by petitioners, then the Court declares petitioners’ legal ownership over said 512 square-meter lot. The amount of PhP 50,000 should only earn interest at the legal rate of 6% per annum from the date of filing of complaint up to finality of judgment and not 12% since such payment is neither a loan nor a forbearance of credit. After finality of decision, the amount of PhP 50,000 shall earn interest of 12% per annum until fully paid.
There was vitiated consent on the part of Spouses Lequin.
There was fraud in the execution of the contract used on petitioners which affected their consent. Petitioners’ reliance and belief on the wrongful claim by respondents operated as a concealment of a material fact in their agreeing to and in readily executing the contract of sale, as advised and proposed by a notary public.
Believing that Carlito de Leon indeed sold a 1,012-square meter portion of the subject property to respondents, petitioners signed the contract of sale based on respondents’ representations. Had petitioners known, as they eventually would sometime in late 2000 or early 2001 when they made the necessary inquiry from Carlito de Leon, they would not have entered or signed the contract of sale, much less pay PhP 50,000 for a portion of the subject lot which they fully own. Thus, petitioners’ consent was vitiated by fraud or fraudulent machinations of Raymundo. In the eyes of the law, petitioners are the rightful and legal owners of the subject 512 square-meter lot anchored on their purchase thereof from de Leon. This right must be upheld and protected.
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