G.R. No.

165748 September 14, 2011

HEIRS OF URETA, petitioners,
vs.
HEIRS OF URETA, respondents.
G.R. NO. 165930
HEIRS OF URETA, petitioners,
vs.
HEIRS OF URETA, respondents.

FACTS:

Alfonso was financially well-off and owned numbers of properties during his
lifetime. In order to reduce the inheritance taxes, Alfonso sought to make it
appear that he had sold some of his lands to his children.

Alfonso executed four Deeds of Sale covering several parcels of land in favor
of Policronio, Liberato, Prudencia, and his common-law wife, Valeriana Dela
Cruz. The Deed of Sale in favor of Policronio, covered six parcels of land,
which are the properties in dispute in this case.

Alfonso died and Liberato acted as the administrator of his father’s estate. He
was later succeeded by his sister Prudencia, and then by her daughter,
Carmencita Perlas. Subsequently, Policronio later on also died.

Alfonso’s heirs executed a Deed of Extra-Judicial Partition, which included all

the lands that were covered by the four deeds of sale. Conrado, Policronio’s
eldest son, representing the Heirs of Policronio, signed the Deed of Extra-
Judicial Partition in behalf of his co-heirs.

The Heirs of Policronio found tax declarations in his name covering the six
parcels of land. Not long after, they learned about the Deed of Extra-Judicial
Partition involving Alfonso’s estate.

Believing that the six parcels of land belonged to their late father, the Heirs of
Policronio sought to amicably settle the matter with the Heirs of Alfonso, but it
failed.

The Heirs of Policronio filed a Complaint for Declaration of Ownership,

among others, against the Heirs of Alfonso but it was dismissed because the
lower court found that the Heirs of Alfonso clearly established that the Deed
of Sale was null and void and that there was no money involved in the sale. The
Deed of Extra-Judicial Partition, on the other hand, was declared valid.

The CA affirmed the finding of the RTC that the Deed of Sale was void.
However, it annulled the Deed of Extra-Judicial Partition due to the incapacity
of Conrado to give his consent to the contract. It held that it was necessary that
he be clothed with the proper authority.
ISSUES:

1. Whether or not the Deed of Absolute Sale is valid.

No, the Deed of Sale is not valid. The Deed of Sale was not the result of a fair
and regular private transaction because it was absolutely simulated. The Court
finds no clear reason to deviate from the finding of the CA that the Deed of
Sale is null and void. The Civil Code provides:

Art. 1345. Simulation of a contract may be absolute or relative. The

former takes place when the parties do not intend to be bound at all; the
latter, when the parties conceal their true agreement.

Art. 1346. An absolutely simulated or fictitious contract is void. A

relative simulation, when it does not prejudice a third person and is not
intended for any purpose contrary to law, morals, good customs, public
order or public policy binds the parties to their real agreement.

In absolute simulation, there is a colorable contract but it has no substance as

the parties have no intention to be bound by it. Lacking in an absolutely
simulated contract is consent, which is essential to a valid contract. In this case,
Alfonso simulated a transfer to Policronio purely for taxation purposes,
without intending to transfer ownership over the subject lands.

Furthermore, there was absence of an attempt in any manner on the part of

Policronio to assert rights of ownership over the subject properties.
Policronio’s failure to take exclusive possession of the subject properties or to
collect rentals is contrary to the principle of ownership.

It is further telling that Policronio never disclosed the existence of the Deed of
Sale to his children. This, coupled with Policronio’s failure to exercise any
rights pertaining to an owner of the subject lands, leads to the conclusion that
he was aware that the transfer was only made for taxation purposes and never
intended to bind the parties thereto.

It is clear that the parties did not intend to be bound at all, and as such, the
Deed of Sale produced no legal effects and did not alter the juridical situation
of the parties.

Since the Deed of Sale is void, the subject properties were properly included in
the Deed of Extra-Judicial Partition of the estate of Alfonso.

2. Whether or not the Deed of Extra-Judicial Partition is valid.

Yes, the Deed of Extra-Judicial Partition is valid. The CA erred in annulling the
Deed of Extra-Judicial Partition based on Article 1390 (1) of the Civil Code,
holding that a special power of attorney was lacking as required under Article
1878 (5) and (15) of the Civil Code. The Court finds that Article 1878 (5) and
(15) is inapplicable to the case at bench.
Partition is not a transfer of property from one to the other, but rather, it is a
confirmation of title or right of property that an heir is renouncing in favor of
another heir who accepts and receives the inheritance. The Deed of Extra-
Judicial Partition cannot, therefore, be considered as an act of strict dominion.
Hence, a special power of attorney is not necessary.

Neither is Article 1390 (1) applicable as it contemplates the incapacity of a

party to give consent to a contract. What is involved in the case at bench
though is not Conrado’s incapacity to give consent to the contract, but rather
his lack of authority to do so.

Although Conrado’s co-heirs claimed that they did not authorize Conrado to
sign, several circumstances militate against their contention. The Court
concludes that the allegation of Conrado’s vitiated consent and lack of
authority to sign in behalf of his co-heirs was a mere afterthought on the part
of the Heirs of Policronio as it appears that the Heirs of Policronio were not
only aware of the existence of the Deed of Extra-Judicial Partition prior to June
30, 1995 but had, in fact, given Conrado authority to sign in their behalf. They
are now estopped from questioning its legality, and the Deed of Extra-Judicial
Partition is valid, binding, and enforceable against them.

Furthermore, assuming there was actual preterition, it did not render the Deed
of Extra-Judicial Partition voidable.

Preterition under Article 854 of the Civil Code is as follows:

Art. 854. The preterition or omission of one, some, or all of the

compulsory heirs in the direct line, whether living at the time of the
execution of the will or born after the death of the testator, shall annul
the institution of heir; but the devises and legacies shall be valid insofar
as they are not inofficious.

If the omitted compulsory heirs should die before the testator, the
institution shall be effectual, without prejudice to the right of
representation.

Preterition has been defined as the total omission of a compulsory heir from
the inheritance. Preterition is thus a concept of testamentary succession and
requires a will. In the case at bench, there is no will involved. Therefore,
preterition cannot apply.