Saturday, July 30, 2011

Sale of property without consideration is void ab initio; imprescriptible

In a case, the Supreme Court upheld the findings of the trial court, affirmed by the Court of Appeals, that the Deed of Absolute Sale executed between respondent and petitioner was simulated and fictitious, and therefore, did not convey title over the subject property to petitioner. Apparently, respondent was convinced by petitioner to sign the said deed of sale because it was intended to be a mere proposal subject to the approval of the trial court wherein the proceedings for the settlement of the estate owning the property was still pending. The Supreme Court also agreed to the observation that the deed lacked consideration because respondent never received the stipulated purchase price for the subject property.

According to the Supreme Court, a sale that lacks consideration is void from the beginning and produces no legal effect. The right to declare it as such does not prescribe either:

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, Article 1471 of the Civil Code, provides that “if the price is simulated, the sale is void,” which 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.

Since it was well established that the Deed of Sale is simulated and, therefore void, petitioners’ claim that respondent's cause of action is one for annulment of contract, which already prescribed, is unavailing, because only voidable contracts may be annulled. On the other hand, respondent's defense for the declaration of the inexistence of the contract does not prescribe. (Please see Catindig vs. Vda de Meneses, GR No. 165851/Roxas Sr. vs. CA, GR No. 168875, 02 February 2011)

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