VALERIO vs. REFRESCA G.R No.

163687

FACTS:

● Narciso Valerio, married to Nieves Valerio, owned two adjacent agricultural lands with a total area of
6.5hectares.

● Lot 428 was a 4-hectare land. A portion consisting of 511 sq. m. is the subject of the petition● [1963]
Spouses Refresca started cultivating the 6.5hectare land as tenants.

● [1968] Narciso Valerio acquired ownership over the land.

● [1974] Valerios entered into a leasehold contract with tenant Alejandro whereby the latter was
allowed to continue tilling the 6.5 hectare land in exchange for fixed rentals.

● [1975] Narciso Valerio, with consent of his wife Nieves, executed a DEED OF SALE whereby he sold his
6.5hectare landholding to his heirs and conveyed 511 sq.m. of his landholding in favor of his tenant
Alejandro R.in recognition of his long service and cultivation of the subject land.

● [1982] The parties to the DEED OF SALE as co-owners, subdivided the 6.5 hectare land and executed a
DEED OF AGREEMENT OF SUBDIVISION.

● The 511 sq. m. of land was granted to tenant Alejandro R.

● Individual titles over the apportioned areas were subsequently issued to the vendees.

● Nieves Valerio [widow] entered into another LEASEHOLD AGREEMENT with the Refrescas over the6.5
hectare landholding for the period of 1984-1965 in exchange for the latter’s payment.

● Vicenta R. succeeded Alejandro R. in tilling the land when he died; thereafter, petitioners demanded
that the respondents vacate the land and they filed a complaint for the annulment of documents of
transfer and title of Alejandro.

Allegations:

[1] Cause or consideration for the transfer of the 511 sq.m. lot to the Refrescas was an agreement
between Narciso and Alejandro that conveyance of said portion would serve as disturbance
compensation in favor of the latter, i.e., the 511 sq. m. lot was granted to the Refrescas in exchange
for the surrender of their tenancy rights over the entire 6.5-hectare land;

[2] Alejandro allegedly obliged himself to return the 6.5-hectare land he was tilling as a tenant;

[3]Alejandro failed to fulfill his promise and instead continued to till the land until his death;

[4] Respondents succeeded in cultivating the entire land;

[5] The cause for the cession of the land was not complied with, the transfer of the 511 sq. m. lot to
Alejandro should be declared void as a contract without cause or consideration produced no effect.
● Respondents maintained that

[1] The 511 sq. m. lot was granted by Narciso to tenant Alejandro as a home lot due to the generosity of
theValerio spouses with whom they had always maintained good relations;

[2] The lot was given to them in recognition of their long years of cultivating the land; that in the 1975
Deed of Sale, Narciso apportioned his 6.5-hectare land among petitioners as his heirs and Alejandro
Refresca as his tenant;

[3] As co-owners, petitioners and Alejandro subdivided the land in order that separate titles may be
issued to them;

[4] Thereafter, respondent Vicenta succeeded her husband in tilling the 6.5-hectare land;

[5] As tenant, she paid lease rentals to petitioners who initially accepted them;

[6] Upon the death of petitioners’ mother, Nieves Valerio, petitioners demanded the Refrescas to return
the 511sq. m. land as the former intended to sell the entire land which shall then be converted to
commercial use.

[7] Invoked prescription and estoppel in their defense.

● At the pre-trial, the parties stipulated that the transfer of 511 sq. m. lot to Alejandro was without
monetary consideration.

Petitioners admitted that they did not pay monetary consideration for the transfer of the specific
portions of the land to them.

ISSUES:

Whether or not the 1975Deed of Sale between Narciso and Alejandro is absolutely simulated or
fictitious and produced no legal effect as there was no monetary consideration.

SC RULING:

NO. RELATIVELY SIMULATED

● 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 it has no substance as the parties have no
intention to be bound by it. The main characteristic of an absolute simulation is that the apparent
contract is not really desired or intended to produce legal effect or in any way alter the juridical situation
of the parties. As a result, an absolutely simulated or fictitious contract is void, and the parties may
recover from each other what they may have given under the contract. However, if the parties state a
false cause in the contract to conceal their real agreement, the contract is relatively simulated and the
parties are still bound by their real agreement. Hence, where the essential requisites of a contract are
present and the simulation refers only to the content or terms of the contract, the agreement is
absolutely binding and enforceable between the parties and their successors in interest.

In the case at bar, the records reveal that the clear intent of Narciso Valerio in executing the 1975 Deed
of Sale was to transfer ownership of the apportioned areas of his 6.5-hectare land to petitioners as his
heirs and to his tenant Alejandro. Although no monetary consideration was received by landowner
Narciso from any of the vendees, it cannot be said that the contract was not supported by a cause or
consideration or that Narciso never intended to transfer ownership thereof.

We find that the transfer of the lot to petitioners and Alejandro is supported by a cause or
consideration. If, as alleged by petitioners, the transfer was conditioned on the surrender of
respondents of their tenancy rights, said condition is the consideration for the contract. If no such
condition was imposed by Narciso prior to the execution of the deed of sale, the cause for the transfer
of the lot to Alejandro is clearly the liberality or generosity of landowner Narciso. In either case, we
agree with the ruling of the Court of Appeals that there was a cause or consideration for the transfer of
the land although the parties cannot agree on what it is.

Thus, we rule that the 1975 Deed of Sale between the parties is a relatively simulated contract as the
clear intent was to transfer ownership over the land. Hence, the contract binds the parties to their true
agreement, i.e., to cause the transfer of the specific apportioned areas to Alejandro and petitioners.
Petitioners failed to discharge the burden of proving their allegation that the 1975 Deed of Sale is a void
contract for being absolutely simulated.

The petition is dismissed.