TONGOY vs. CA (G.R. No. L-45645, June 28, 1983) Facts

TONGOY vs. CA (G.R. No.
L-45645, June 28, 1983)
FACTS:
The subjects of this case are two (2) parcels of land namely: Hacienda Pulo – originally
registered in the names of Francisco, Jose, Ana, Teresa and Jovita Tongoy; and the Cuaycong
property – originally registered in the name of Basilisa Cuaycong.
Of the original registered co-owners of Hacienda Pulo, Jose, Ana and Teresa died single. The
other two registered co-owners, Francisco and Jovita, were survived by children. Francisco had
six children: Patricio and Luis by the first marriage; Amado, Ricardo, Cresenciano and Norberto
by the second wife. On the other hand, Jovita Tongoy de Sonora had four children: Mercedes,
Juan, Jesus and Trinidad T. Sonora.
By the time this case was commenced, Patricio and Luis Tongoy have themselves died. It is
claimed that Patricio left three acknowledged natural children named Fernando, Estrella and
Salvacion, all surnamed Tongoy. On the other hand, Luis left behind a son, Francisco A. Tongoy,
and a surviving spouse, Ma. Rosario Araneta Vda. de Tongoy. (HEREIN PETITIONERS)
Hacienda Pulo was mortgaged by its registered co-owners to the Philippine National Bank (PNB)
as security for a loan payable in ten years. The mortgagors however were unable to keep up
with the yearly amortizations, as a result of which the PNB instituted judicial foreclosure
proceedings over the said property.
On 1933, Patricio and Luis executed a Declaration of Inheritance wherein they declared
themselves as the only heirs of the late Francisco Tongoy and thereby entitled to the latter's
share in Hacienda Pulo.
The other surviving heirs of Francisco Tongoy and Jovita Sonora executed an "Escritura de
Venta" which by its terms transferred for consideration their rights and interests over Hacienda
Pulo in favor of Luis Tongoy. On the basis of the foregoing document, Hacienda Pulo was placed
in the name of Luis Tongoy, married to Maria Rosario Araneta. In the following year, the title of
the adjacent Cuaycong property also came under the name of Luis Tongoy, married to Maria
Rosario Araneta, by virtue of an "Escritura de Venta" executed in his favor by the owner Basilisa
Cuaycong purportedly for P4,000.00.
Luis Tongoy executed a real estate mortgage over the Cuaycong property and Hacienda Pulo in
favor of PNB to secure a loan. After two decades, he was able to pay off all his obligations with
the PNB including the mortgage obligations on the Cuaycong property and Hacienda Pulo.
On 1966, Luis Tongoy died leaving as heirs his wife Ma. Rosario and his son Francisco. Just
before his death, Luis received a letter from Jesus T. Sonora demanding the return of the shares
in the properties to the co-owners.
Not long after the death of Luis, a complaint was filed against Francisco and Ma. Rosario by the
heirs of Jovita Sonora and other siblings of Luis Tongoy and/or their predecessors (HEREIN
RESPONDENTS) alleging that they transferred their interests on the two lots in question to Luis
Tongoy by means of simulated sales, pursuant to a trust arrangement whereby the latter would
return such interests after the mortgage obligations thereon had been settled.
Francisco and Ma. Rosario denied the plaintiffs' causes of action and maintained that the sale to
Luis of the two lots in question was genuine and for a valuable consideration, and that no trust
agreement of whatever nature existed between him and the plaintiffs. As affirmative defense,
they raised prescription against plaintiffs.
The trial court dismissed the complaint holding that the plaintiffs’ action for reconveyance is
barred by prescription. On appeal, CA ruled in favor of the Sonoras and ordered the
reconveyance of the properties to all the heirs based on their original shares.
ISSUE: WON the rights of herein respondents over subject properties, which were the subjects
of simulated or fictitious transactions, have already prescribed
RULING:
NO. The negative answer to the aforesaid query is found in Articles 1409 and 1410 of the New
Civil Code. Said provisions state thus:
Art. 1409. The following contracts are inexistent and void from the beginning:
xxx xxx xxx
2) Those which are absolutely simulated or fictitious;
xxx xxx xxx
These contracts cannot be ratified. Neither can the right to set up the defense of
illegality be waived.
Art. 1410. The action or defense for the declaration of the inexistence of a
contract does not prescribe.
The characteristic of simulation is the fact that the apparent contract is not really desired nor
intended to produce legal effects nor in any way alter the juridical situation of the parties. 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.
A void or inexistent contract is one which has no force and effect from the very beginning, as if
it had never been entered into, and which cannot be validated either by time or by ratification.
A void contract produces no effect whatsoever either against or in favor of anyone; hence, it
does not create, modify or extinguish the juridical relation to which it refers.
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.
The nullity of these contracts is definite and cannot be cured by ratification. The nullity is
permanent, even if the cause thereof has ceased to exist, or even when the parties have
complied with the contract spontaneously.
Evidently, therefore, the deeds of transfer executed in favor of Luis Tongoy were from the very
beginning absolutely simulated or fictitious, since the same were made merely for the purpose
of restructuring the mortgage over the subject properties and thus preventing the foreclosure
by the PNB.
Considering the law and jurisprudence on simulated or fictitious contracts as aforestated, the
within action for reconveyance instituted by herein respondents which is anchored on the said
simulated deeds of transfer cannot and should not be barred by prescription. No amount of
time could accord validity or efficacy to such fictitious transactions, the defect of which is
permanent.
There is no implied trust that was generated by the simulated transfers; because being fictitious
or simulated, the transfers were null and void ab initio-from the very beginning and thus vested
no rights whatsoever in favor of Luis Tongoy or his heirs. That which is inexistent cannot give
life to anything at all.
THE JUDGMENT APPEALED FROM IS AFFIRMED IN TOTO.

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TONGOY vs. CA (G.R. No.

L-45645, June 28, 1983)

xxx xxx xxx

2) Those which are absolutely simulated or fictitious;

xxx xxx xxx

2) They are not susceptible of ratification.

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

THE JUDGMENT APPEALED FROM IS AFFIRMED IN TOTO.

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