Author: Randal
Umali v CA (1990) 7. Slobec obtained from Insurance Corporation of the
Petition: Appeal by certiorari
Petitioner: Buenaflor C. Umali, Mauricia M. Vda. De
Castillo, Victoria M. Castillo, Bertilla C. Rada, Marietta C.
Abanez, Leovina C. Jalbuena and Santiago Rivera
Respondent: CA, Bormaheco, Inc. and Philippine
Machinery Parts Manufacturing Co., Inc.
Ponencia: Regalado
DOCTRINE: (Simulation of Contracts)
FACTS:
Agreement of Counter-Guaranty with Chattel-Real
Estate Mortgage (Oct. 24, 1970)
Sales Agreement (Dec. 28, 1970)
Chattel Mortgage (Nov. 25, 1970)
Sales Agreement (Jan. 23, 1971)
Chattel Mortgage (Jan. 23, 1971)
Certificate of Sale executed by the Provincial Sherriff of
Quezon in favor of Insurance Corporation of the
Philippines (Sept. 28, 1973)
1. Santiago Rivera is the nephew of Mauricia Meer
Vda. De Castillo
2. Castillo family owns a parcel of land located in
Lucena City
3. The land was given as a security for a loan with
DBP, which they failed to pay the amortization,
foreclosure of the said property was about to be
initiated.
4. Castillo family entered into a Memorandum of
Agreement with Slobec Realty and Development,
Inc., represented by its President Santiago Rivera.
a. Down payment of P70,000, plus P400,000
after the property has been converted into a
subdivision.
5. Santiago Rivera entered into a Sales Agreement
over one unit of Caterpillar Tractor D-7 with
Bormaheco, Inc. to be used for the building of the
subdivision.
a. P50,000 down, P180,000 (18 monthly
installments)
6. Rivera executed in favor of Bormaheco a Chattel
Mortgage as security for the P180,000 balance.
Phil a surety bond which was turned into a
Agreement of Counter-Guaranty with Real Estate
Mortgage (executed by Rivera as president of
Slobec and Castillo family as mortgagers and ICP as
mortgagee)
8. For violation of the terms and conditions of the
Counter-Guaranty Agreement, the properties of the
Castillos were foreclosed by ICP as the highest
bidder.
a. A Certificate of Sale was issued by the
Provincial Sheriff of Lucena City.
9. ICP sold said lot to PM Parts.
a. PM Parts sent a letter addressed to Mauricia
Meer Castillo requesting her and her
children to vacate the subject property.
b. Castillo refused.
10. Buenaflor M. Castillo Umali (administratrix of late
Felipe Castillo) are contesting all the contracts listed.
11. They claim:
a. Sales Contract void since Rivera never
made any advance payment of P50,000 to
Bormaheco
b. Tractor was received by Rivera only on Jan.
23, 1971 and not in 1970 as stated in the
Chattel Mortgage
c. That when the Agreement of Counter-
Guaranty with Chattel/Real Estate Mortgage
was executed on October 24, 1970, to
secure the obligation of ICP under its surety
bond, the Sales Agreement and Chattel
Mortgage had not as yet been executed
ISSUES:
1. WoN the contracts are void
PROVISION:
RULING + RATIO:
1. No. findings of facts by the lower court are
binding.
- The lower courts found that there was no fraud
employed by the private respondents.
- The evidence on record reveals that petitioners had
every intention to be bound by their undertakings in
the various transactions.
- Rivera’s failure to pay the consideration agreed upon
clearly constitutes a breach of contract.
o Cannot be availed of by the guilty party
to justify and support an action for the
declaration of nullity of the contract.
2. “There is absolute simulation, which renders the
contract null and void, when the parties do not
Author: Randal
intend to be bound at all by the same. The basic
characteristic of this type of simulation of
contract is the fact that the apparent contract is
not really desired or intended to either produce
legal effects or in any way alter the juridical
situation of the parties.”

DISPOSITION: CA decision affirmed.