Simulated Contract

Article 1412 is not applicable to fictitious or simulated contracts, because they refer to contracts with an illegal cause or subject-matter. This article presupposes the existence of a cause, it cannot refer to fictitious or simulated contracts which are in reality non-existent. As it has been determined that the Deed of Sale is a simulated contract, the provision cannot apply to it.

Granting that the Deed of Sale was not simulated, the provision would still not apply. Since the subject properties were included as properties of Alfonso in the Deed of Extra-Judicial Partition, they are covered by corresponding inheritance and estate taxes. Therefore, tax evasion, if at all present, would not arise, and Article 1412 would again be inapplicable (Hiers of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al. Vs. Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al./Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al. Vs. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al., G.R. No. 165748/G.R. No. 165930. September 14, 2011).