Solid State Multi-products Corporation v. SPS ErlindaCatienza-Velasco Villaverde, et. al.

G.R. No. 175118

July 21, 2008
(Digested by LNR)

Facts:
In 1976, Julian Pearanda and ErlindaVillaverde’s uncle sold to SSMC a parcel of land located in
Bacoor, Cavite. But since the property was being claimed by a third party, the petitioner, Pearanda and
respondents undertook an Agreement with Mortgage to institute at his own expense for legal action and
damages if the property be proven to be owned by another person and respondents agreed to mortgage
their property (TCT No. T-82596) and pay 50% of the expense of the suit to secure Pearanda’s
compliance.
Petitioner files a civil action against the estate of Virata to remove the cloud on its title and was
found by the SC to be truly owned by the petitioner. But before the case was decided, the parties
executed a deed of absolute sale involving TCT No. T-82596 to petitioner in which the respondents
acknowledge the receipt, was also given the amount of P105k on account of the sale, and respondents
ordered the cancellation of the mortgage obligation in the agreement. 7 years after, respondents file a
complaint seeking the annulment of the deed of sale with petitioner on the ground of mistake, undue
influence, and fraud. They alleged that petitioner had induced them to sell their land on the misinformation
that the case filed against the Estate of Virata, which motivated them to sign the Agreement with
Mortgage and later the Deed of Absolute Sale, had already been dismissed. The RTC ruled in their favor,
saying that said property was merely a security to the process of quieting the title against the estate of
Virata, and nominal damages.
The CA affirmed with modification to return the amount paid by petitioner to the respondents with
6% interest until fully paid. However, petitioner avers that there was no mistake or fraud since the deed of
sale was separate from the agreement with mortgage and that the respondent undertook to pay 50% of
the cost of the suit, and that they are barred by prescription.

Issue:

Whether or not the agreement with mortgage and the deed of absolute sale are void

Ruling:
Yes. A contract has the following requisites: (1) consent of the contracting parties; (2) object
certain which is the subject matter of the contract; and (3) cause of the obligation which is established.
The cause or consideration is the contested requisite in this case. The parties executed the Agreement
with Mortgage and the Deed of Absolute Sale solely to confront the possibility that the property sold by
Pearanda to petitioner would be adjudged to another claimant. The final disposition of the quieting of title
case in favor of petitioner rendered the contracts without a cause, therefore void. On the other hand,
contract of sale is void and produces no effect whatsoever where the price, which appears thereon as
paid, has in fact never been paid by the purchaser to the vendor. It was clear in the case, that although
the respondents acknowledge the receipt of payment in the deed of sale, there was no evidence to show
that such amount was actually been paid to them.
Respondents were given the amount of P55,000.00 in October 1988, a few months before the
Deed of Absolute Sale was executed after they were told that the amount was a gift for the use of their
property. Later, when they obliged to sign the Deed of Absolute Sale, respondents were given
P50,000.00 for a total of P105k. The amount of P50,000.00, which is less than the stated consideration
for the sale of P96,000.00, was received by respondents only because they were then under the
impression that petitioner had lost the quieting of title case. The amounts received by respondents are not
the consideration for the sale but rather, as they understood it, amounts merely by petitioner out of the
latters good will. Further, the respondents were not prescribed from filing a case since Article 1410 of the
New Civil Code provides that the action or defense for the declaration of the inexistence of a contract
does not prescribe.