In the Philippines, property disputes among relatives often arise from "acts of generosity" or "strategic transfers" that later become sources of regret. Whether you gave a piece of land to a favorite niece or "sold" a house to a sibling to avoid taxes, the law provides specific, albeit narrow, pathways to undo these transactions.
Here is a comprehensive guide on revoking a Deed of Donation versus canceling a Simulated Property Transfer.
1. Revoking a Deed of Donation
A donation is an act of liberality where a person (donor) disposes gratuitously of a thing or right in favor of another (donee). Once accepted, a donation is generally irrevocable. However, under the Civil Code of the Philippines, there are four primary grounds for revocation:
A. Reduction due to "Birth, Appearance, or Adoption" (BAR)
If a donor had no children at the time of the donation but subsequently has a child (legitimate, legitimated, or illegitimate) or discovers a child they thought was dead is actually alive, the donation may be reduced or revoked to ensure the donor has enough to provide for their "compulsory heirs."
B. Non-Compliance with Conditions
If the Deed of Donation was "onerous" (meaning it came with specific conditions, like “build a chapel on this land”), and the relative fails to comply with those conditions, the donor can file a court action to revoke the donation.
- Prescription: Usually 4 years from the non-compliance.
C. Ingratitude
This is the most common ground cited in family disputes. You can revoke a donation if the relative:
- Commits an offense against the person, honor, or property of the donor, their spouse, or children.
- Imputes to the donor any criminal offense or act involving moral turpitude, even if they can prove it (unless the crime was committed against the relative themselves).
- Unduly refuses the donor support when the relative is legally or morally bound to give it.
D. Inofficiousness
A person cannot give away more than they can give by will. If a donation impairs the legitime (the mandatory inheritance) of the donor’s compulsory heirs, it is considered "inofficious" and can be reduced or canceled after the donor's death.
2. Canceling a Simulated Property Transfer
A "simulated" transfer occurs when the parties create a contract (usually a Deed of Absolute Sale) that does not reflect their true intent. This is often done to bypass the high donor’s tax rates or to hide assets.
Absolute vs. Relative Simulation
- Absolute Simulation: The parties do not intend to be bound at all (e.g., a "fake sale" where no money changes hands and the "seller" keeps the property). Status: Void from the beginning.
- Relative Simulation: The parties hide their true agreement (e.g., they sign a "Sale" but it was actually a "Donation"). Status: The "Sale" is void, but the "Donation" may be valid if it meets the legal requirements for a donation.
How to Cancel It
To "cancel" a simulated transfer, you must file a Petition for Annulment of Sale or Cancellation of Title in court. You must prove:
- Lack of Consideration: No price was ever paid.
- Lack of Intent: Evidence (texts, letters, or testimonies) showing the parties never intended to transfer ownership.
- Continued Possession: If the "seller" stayed in the house and continued paying the real property taxes, it is a strong indicator of a simulated sale.
3. Comparison of Legal Remedies
| Feature | Deed of Donation | Simulated Sale (Deed of Sale) |
|---|---|---|
| Nature of Act | Gratuitous (Free) | Onerous (For a price) |
| Main Ground | Ingratitude or Breach of Condition | Lack of actual payment/intent |
| Prescription | 1 to 4 years (depending on ground) | None (Void contracts don't prescribe) |
| Difficulty | High (Law favors the donee) | Moderate (Requires proof of "non-payment") |
4. Crucial Hurdles to Consider
The "Clean Hands" Doctrine
If you simulated a sale specifically to evade taxes or defraud the government, a court might refuse to help you under the "In Pari Delicto" rule (both parties are at fault). The law generally leaves parties where they are if they both acted with illegal intent.
Protection of Third Parties
If your relative has already sold the property to an Innocent Purchaser for Value (someone who didn't know about the family drama and paid a fair price), you can no longer recover the property. Your only recourse would be to sue your relative for damages.
Formal Requirements
For a donation of real property to be valid, it must be in a public instrument (notarized). The acceptance by the relative must also be in writing, either in the same deed or a separate notarized document. If these formalities weren't met, the donation is void from the start, making it easier to "cancel."
Summary Checklist for Revocation:
- Determine if the document is a Donation or a Sale.
- If Donation: Identify the specific ground (e.g., Ingratitude).
- If Sale: Gather proof that no money was ever exchanged.
- Check if the property has been sold to a third party.
- Consult a lawyer to file a Notice of Lis Pendens to prevent the relative from selling the property while the case is ongoing.
Would you like me to draft a sample Demand Letter for the return of a property based on a breached condition?