balite vs Lim

HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE; Namely, ANTONIO T. BALITE, FLOR T. BALITE-ZAMAR, VISITACION T. BALITE-DIFUNTORUM, PEDRO T. BALITE, PABLO T. BALITE, GASPAR T. BALITE, CRISTETA T. BALITE and AURELIO T. BALITE JR.  vs. RODRIGO N. LIM

G.R. No. 152168             December 10, 2004

Facts:

          The spouses Aurelio and Esperanza Balite were the owners of a parcel of land. When the spuoses died intestate, and their children, the petitioners, inherited the subject property and became co-owners thereof, with Esperanza inheriting an undivided share of 9,751 square meters. Esperanza became ill and in need of money for her hospital expenses. She, through her daughter, Cristeta, offered to sell to Rodrigo Lim, her undivided share for the price of P1M. Esperanza and Rodrigo agreed that, under the "Deed of Absolute Sale", to be executed by Esperanza over the property, it will be made to appear that the purchase price of the property would beP150K, although the actual price was P1,000,000.00. Esperanza executed a "Deed of Absolute Sale" in favor of Lim over a portion of the property, with an area of 10,000 square meters, for the price of P150K.  They also executed a "Joint Affidavit" under which they declared that the real price of the property was P1,000,000.00, payable to Esperanza, by installments.

The other children learned of the sale, and, they wrote a letter to the Register of Deeds, saying that they were not informed of the sale nor did they give their consent thereto.

Issue:

          Whether or not there is undervaluation of consideration or the contract is valid

Ruling:

          The Supreme Court held that Article 1345 of the Civil Code provides that the simulation of a contract may either be absolute or relative. In absolute simulation, there is a colorable contract but without any substance, because the parties have no intention to be bound by it. An absolutely simulated contract is void, and the parties may recover from each other what they may have given under the "contract." On the other hand, if the parties state a false cause in the contract to conceal their real agreement, such a contract is relatively simulated. Here, the parties’ real agreement binds them.

In the present case, the parties intended to be bound by the Contract, even if it did not reflect the actual purchase price of the property. That the parties intended the agreement to produce legal effect is revealed by the letter of Esperanza Balite to respondent dated October 23, 199610 and petitioners’ admission that there was a partial payment of P320,000 made on the basis of the Deed of Absolute Sale. There was an intention to transfer the ownership of over 10,000 square meters of the property. Clear from the letter is the fact that the objections of her children prompted Esperanza to unilaterally withdraw from the transaction.