Short answer. A contract signed purely for show is absolutely simulated, and Article 1346 of the Civil Code declares it void. It produces no effect at all, so neither party can enforce it. If the parties instead hid a real agreement behind a false one, the hidden agreement binds them, provided it harms nobody and breaks no law.
What the law says
An absolutely simulated or fictitious contract is void.
Civil Code, Article 1346 — Effect of Simulation. Read the full provision →
A contract that is pure pretence is void
Absolute simulation means the parties never intended to be bound at all. The deed or agreement exists only to be shown to somebody else, usually a creditor, a tax assessor, or a family member. Because there was no real consent and no real cause, the law treats the paper as producing nothing. A void contract is not merely a weak one: it cannot be ratified, it does not become good with the passing of years, and any party, heir or genuinely interested person may ask a court to declare it a nullity. The seller who signed a sham deed of sale therefore never stopped owning the property, and the supposed buyer never began to.
Relative simulation: the real agreement survives
Relative simulation is different. There the parties did intend a genuine transaction, but dressed it up as something else — a sale that was really a donation, or a deed of absolute sale that was really a loan secured by the land. In that situation the false document is set aside and the parties are held to what they actually agreed, but only on two conditions: the concealed agreement must prejudice no third person, and it must not be aimed at any purpose contrary to law, morals, good customs, public order or public policy. A hidden agreement designed to defeat a creditor, a compulsory heir or the government fails both tests and binds nobody.
What you still have to prove, and what it costs
Calling a contract simulated is easy; proving it is the hard part. A notarised deed carries a presumption of regularity, so the person attacking it must show that no price was ever paid, that possession never changed hands, that the supposed buyer had no means to buy, or that everyone kept behaving as though nothing had been sold. Courts read conduct after signing as closely as the document itself.
Note also who the rule protects. A buyer in good faith who relied on a clean title may keep the property, leaving the original owner to chase the person who tricked them, and a sham transfer meant to hide assets can expose the parties to separate civil and tax consequences.
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 Chingkoe and Rosita Chingkoe vs. Faustino Chingkoe and Gloria Chingkoe, G.R. No. 244076, March 16, 2022 — read the decision on LawPhil →
- ATCI Overseas Corporation and Amalia G. Ikdal vs. Asset Pool A (SPV-AMC), Inc, G.R. No. 250523, June 28, 2021 — read the decision on LawPhil →
- Robert and Nenita De Leon vs. Gilbert and Analyn Dela Llana, G.R. No. 212277, February 11, 2015 — read the decision on LawPhil →
- Heirs of Dr. Mario S. Intac and Angelina Mendoza-Intac vs. Court of Appeals and Spouses Marcelo Roy, Jr. and Josefina Mendoza-Roy, et al, G.R. No. 173211, October 11, 2012 — read the decision on LawPhil →