Yu Bun Guan v.

Ong
GR # 144735 | October 18, 2001
Petitioner: Yu Bun Guan
Respondent: Elvira Ong
(Article 1409, 1411 of the Civil Code, Contracts)

DOCTRINE
A simulated deed of sale has no legal effect, and the transfer certificate of title issued in
consequence thereof should be cancelled. Pari delicto does not apply to simulated sales.
FACTS
1. Petitioner and respondent are husband and wife. They lived together until Yu abandoned
Ong and her children because of his 'incurable promiscuity, volcanic temper and other
vicious vices'.
2. Ong purchased a parcel of land referred to as the Rizal property out of her personal funds
and subsequently registered it in her name.
3. Also during their marriage, she purchased out of their conjugal funds a house and lot. –
4. Before their separation, Ong reluctantly agreed to Yu’s “importunings” (means overly
persistent) that she execute a deed of sale of the Rizal property in his favor, but on the
promise that he would construct a commercial building for the benefit of the children.
5. He suggested that the J.P. Rizal property should be in his name alone so that she would not
be involved in any obligation.
a. The consideration for the 'simulated sale' was that, after its execution in which he
would represent himself as single, a Deed of Absolute Sale would be executed in
favor of the 3 children
b. Yu obliged that he would pay the Allied Bank, Inc. the loan he obtained.
6. Yu did not pay the consideration to Ong. Ong paid for the taxes and assessments out of her
personal funds. When the new title was issued in Yu’s name, Ong did not deliver the owner’s
copy of the title to him to insure that the commitment was honored.
7. Yu refused to perform his promise and later filed a petitioner for replacement of an owner’s
duplicate title. He falsely made it appear that the owner’s copy of the title was lost or
misplaced. The Court granted the petition.
8. Upon discovery of the fraudulent steps taken by Yu, Ong filed an affidavit of adverse claim
asking the court to declare the sale of the Rizal property null and void.
9. RTC declared the sale void.
a. It found that the Rizal property was paraphernal (wife ‘s only) because the (1) title
was issued in her name (2) Yu admitted that it was in her name (3) petitioner was
estopped from claiming otherwise (4) she paid real property taxes.
b. In pari delicto rule in Art 1411/1412 was not applicable because it would apply only
to existing contracts with an illegal cause or object, not to simulated or fictitious
contracts or to those that were inexistent due to lack of an essential requisite such
as cause or consideration.
c. Deed of Absolute Sale was simulated and executed during the marriage of the
parties.
10. CA upheld the decision of the RTC.
 11. Yu argues that there was a valid sale and that the consideration consisted of his promise to
construct a commercial building for the benefit of their children and to pay the loan from
Allied Bank.

ISSUE/S
W/N the sale of the Rizal property was void and inexistent – YES.
W/N the in pari delicto rule applies – NO.

PROVISIONS
Art 1409.
Art1411.
Art 1412.

RULING & RATIO

1. Yes. The sale was fictitious, simulated, and inexistent. It is void and without effect.
 No portion of the P200,000 consideration stated in the deed was ever paid.
 Neither of the parties had any intention of paying the amount.
 The deed was executed merely to facilitate the transfer of the property to the agreement to
enable Yu to construct a commercial building.
 Being merely a subterfuge, or instrument of deceit, the agreement cannot be taken as the
consideration of the sale.
2. No. The in pari delicto does not apply to inexistent and void contracts. It applies to cases where
the nullity arises from the illegality of the consideration or the purpose of the contract.
 When two persons are equally at fault, the law does not relieve them.
 The exception to this general rule is when the principle is invoked with respect to inexistent
contracts

DISPOSITION
WHEREFORE, the Petition is hereby DENIED and the assailed. Decision AFFIRMED. Costs against
petitioner.

NOTES
 Paraphernal – property owned by a married woman.