Short answer. If the price in a deed of sale is simulated, meaning fake or not truly intended as the real price, the sale itself is void. The transaction may still be shown to have actually been a donation, or some other kind of act or contract altogether.
What the law says
If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract.
Civil Code, Article 1471 — Simulated Price. Read the full provision →
A simulated price voids the sale as a sale
Price is one of the essential elements of a contract of sale. When the price stated in the deed is simulated, not a genuine price the parties actually intended to be paid, the sale is void. This is different from a sale where the price is merely too low or was never fully paid; a simulated price means the figure in the document was never real to begin with, so there is no true sale to speak of.
The document is not automatically worthless, though
A void sale is not necessarily the end of the story. The law allows the underlying act to be shown for what it actually was, which could turn out to be a donation, or some other act or contract the parties genuinely meant to carry out under the guise of a sale. What the transaction really was depends on the facts and intentions behind it, not on the label written on the deed.
Why people simulate a price at all
A deed of sale with a fake price often shows up where a property was actually meant to be given away, or transferred for reasons other than a genuine purchase, but the parties wrote it up as a sale for convenience, cost, or other motives. That does not make it a valid sale simply because it is labeled one and notarized. The label on the document does not control; what the parties truly agreed to and intended does.
What this means if you are affected
If you signed, relied on, or are contesting a deed of sale where the price looks fabricated or was never actually paid or intended to be paid, the starting point is recognizing that the sale, as a sale, may not hold up. What relief or recharacterization is available depends heavily on what the true underlying arrangement was, so the specific facts, why the price was written that way and what the parties actually meant to happen, matter more than the deed's wording.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Felix Ting Ho, Jr., et al. vs. Vicente Teng Gui, G.R. No. 130115, July 16, 2008 — read the decision on LawPhil →
- Spouses Teodorico M. Viocente and Dominga L. Viocente vs. Spouses Danilo L. Viovicente, G.R. No. 219074, July 28, 2020 — read the decision on LawPhil →
- Myrna C. Pasco vs. Isabel Cuenca, Romeo M. Ytang, Jr., and Esther C. Ytang, G.R. No. 214319, November 4, 2020 — read the decision on LawPhil →
- Lolita Espiritu Santo Mendoza and Sps. Alexander and Elizabeth Gutierrez vs. Sps. Ramon, Sr. and Natividad Palugod, G.R. No. 220517, June 20, 2018 — read the decision on LawPhil →