G.R. No. 154339 ; October 15, 2007
ROMUALDO ANSELMO for himself and in representation of his deceased wife, EMERLINDA MERCADO-ANSELMO, Petitioner, vs. SPOUSES WILLIAM HERNANDEZ & ROSEMARIE HERNANDEZ, Respondents.

FACTS

Petitioner Romualdo Anselmo and his wife, along with another couple, were the registered owners of a lot in Quezon City containing their residence and garments factory. Respondents, the spouses Hernandez, claimed to have purchased this property from the owners for ₱2.5 million, as evidenced by a notarized Deed of Absolute Sale dated April 24, 1991, resulting in the issuance of a new title in their name. The agreement allegedly included a temporary right for the Anselmos to remain on the property until April 30, 1991. When the Anselmos failed to vacate, the Hernandezes filed a Complaint for Specific Performance to obtain physical possession.
In their defense, the Anselmos contended the deed was void, alleging the transaction was actually a loan of ₱2.5 million secured by the property, making the sale simulated. They asserted the documents were procured through fraud, claiming respondent William Hernandez induced them to sign a deed of sale instead of a mortgage document under the pretext that he needed it to secure funds from friends. They admitted receiving ₱300,000 and that Hernandez paid some of their existing debts.

ISSUE

Whether the Deed of Absolute Sale is void for being a simulated contract or voidable due to alleged fraud.

RULING

The Supreme Court upheld the validity of the Deed of Absolute Sale and ordered the petitioners to deliver possession to the respondents, but deleted the award of damages. The Court ruled that the contract was not void for want of consideration. Petitioner Emerlinda Anselmo’s own testimony acknowledged that respondent William Hernandez paid substantial amounts in cash and by settling her obligations, totaling approximately ₱2.25 million, which constitutes sufficient consideration. The minor discrepancy from the stated ₱2.5 million price was deemed inconsequential.
On the claim of a simulated sale or equitable mortgage, the Court found the petitioners failed to prove their allegation by clear and convincing evidence. The legal presumption of regularity in private transactions and the due execution of the notarized deed stood. Crucially, the Court held that even assuming the petitioners were induced to sign a deed of sale under a fraudulent pretext, such a contract is not simulated but merely voidable due to fraud under Article 1338 of the Civil Code. A voidable contract remains valid until annulled in a direct action for that purpose, subject to a four-year prescriptive period. The petitioners’ attempt to assail the deed’s validity merely as a defense in the specific performance case, without filing a direct action for annulment, was insufficient to invalidate it. Consequently, the sale was upheld, and the respondents were entitled to possession as registered owners.