Heirs of the Late Spouses Aurelio v. Rodrigo N. Lim

Summary

The Supreme Court affirmed the validity of a deed of sale executed by a co-owner of real property, despite the stated consideration being lower than the actual agreed price. Esperanza Balite, a co-owner of a 17,551 square meter property, sold her undivided share to Rodrigo Lim for P1,000,000, though the deed stated P150,000 to reduce tax liability. The Court held this was a relatively simulated contract that remained valid and binding. Under Article 493 of the Civil Code, a co-owner may freely sell their undivided share without consent of other co-owners. The sale transferred only Esperanza's pro indiviso share of 9,751 square meters. The Court rejected arguments that the transaction constituted an equitable mortgage, finding clear intent to transfer ownership. The decision establishes important precedents on co-ownership rights, contract simulation, and the binding effect of sales with understated considerations for tax avoidance purposes.