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HELD: Article 1409 (2) of the new Civil Code relied upon by the respondent court
provides that contracts "which are absolutely simulated or fictitious" are inexistent
and void from the beginning. The basic characteristic of simulation is the fact that
the apparent contract is not really desired or intended to produce legal effects or
in any way alter the juridical situation of the parties.
The respondents' action may not be considered as one to declare the
inexistence of a contract for lack of consideration. It is total absence of cause or
consideration that renders a contract absolutely void and inexistent. In the case
at bar consideration was not absent. The sum of P1.00 appears in the document
as one of the considerations for the assignment of inheritance. In addition and
this of great legal import the document recites that the decedent Mateo
Carantes had, during his lifetime, expressed to the signatories to the contract that
the property subject-matter thereof rightly and exclusively belonged to the
petitioner Maximino Carantes. This acknowledgment by the signatories definitely
constitutes valuable consideration for the contract.
The present action being one to annul a contract on the ground of fraud,
its prescriptive period is four years from the time of the discovery of the fraud. In
connection with the payment of real estate taxes, it is to be noted that the
respondent court also found that all the receipts were issued in the name of the
petitioner. The circumstances mentioned above do not make out a case of a
continuing and subsisting trust.
The action for nullity of a contract shall also be extinguished when the
thing which is the object thereof should be lost by fraud or fault of the
person having the right to bring the action.
If the cause of the action should be the incapacity of any of the contracting
parties, the loss of the thing shall be no obstacle for the action to prevail,
unless it has occurred by fraud or fault on the part of the plaintiff after
having acquired capacity.