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G.R. No.

156125 August 25, 2010

FRANCISCO MUOZ, JR., Petitioner,


vs.
ERLINDA RAMIREZ and ELISEO CARLOS, Respondents.

DECISION

BRION, J.:

We resolve the present petition for review on certiorari1 filed by petitioner Francisco Muoz, Jr. (petitioner) to
challenge the decision2 and the resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 57126.4 The CA
decision set aside the decision5 of the Regional Trial Court (RTC), Branch 166, Pasig City, in Civil Case No. 63665.
The CA resolution denied the petitioners subsequent motion for reconsideration.

FACTUAL BACKGROUND

The facts of the case, gathered from the records, are briefly summarized below.

Subject of the present case is a seventy-seven (77)-square meter residential house and lot located at 170 A.
Bonifacio Street, Mandaluyong City (subject property), covered by Transfer Certificate of Title (TCT) No. 7650 of the
Registry of Deeds of Mandaluyong City in the name of the petitioner.6

The residential lot in the subject property was previously covered by TCT No. 1427, in the name of Erlinda Ramirez,
married to Eliseo Carlos (respondents).7

On April 6, 1989, Eliseo, a Bureau of Internal Revenue employee, mortgaged TCT No. 1427, with Erlindas consent,
to the Government Service Insurance System (GSIS) to secure a P136,500.00 housing loan, payable within twenty
(20) years, through monthly salary deductions of P1,687.66.8 The respondents then constructed a thirty-six (36)-
square meter, two-story residential house on the lot.

On July 14, 1993, the title to the subject property was transferred to the petitioner by virtue of a Deed of Absolute
Sale, dated April 30, 1992, executed by Erlinda, for herself and as attorney-in-fact of Eliseo, for a stated
consideration of P602,000.00.9

On September 24, 1993, the respondents filed a complaint with the RTC for the nullification of the deed of absolute
sale, claiming that there was no sale but only a mortgage transaction, and the documents transferring the title to the
petitioners name were falsified.

The respondents alleged that in April 1992, the petitioner granted them a P600,000.00 loan, to be secured by a first
mortgage on TCT No. 1427; the petitioner gave Erlinda a P200,000.0010 advance to cancel the GSIS mortgage, and
made her sign a document purporting to be the mortgage contract; the petitioner promised to give the P402,000.00
balance when Erlinda surrenders TCT No. 1427 with the GSIS mortgage cancelled, and submits an affidavit signed
by Eliseo stating that he waives all his rights to the subject property; with the P200,000.00 advance, Erlinda paid
GSIS P176,445.2711 to cancel the GSIS mortgage on TCT No. 1427;12 in May 1992, Erlinda surrendered to the
petitioner the clean TCT No. 1427, but returned Eliseos affidavit, unsigned; since Eliseos affidavit was unsigned,
the petitioner refused to give the P402,000.00 balance and to cancel the mortgage, and demanded that Erlinda
return the P200,000.00 advance; since Erlinda could not return the P200,000.00 advance because it had been used
to pay the GSIS loan, the petitioner kept the title; and in 1993, they discovered that TCT No. 7650 had been issued
in the petitioners name, cancelling TCT No.1427 in their name.

The petitioner countered that there was a valid contract of sale. He alleged that the respondents sold the subject
property to him after he refused their offer to mortgage the subject property because they lacked paying capacity
and were unwilling to pay the incidental charges; the sale was with the implied promise to repurchase within one
year,13 during which period (from May 1, 1992 to April 30, 1993), the respondents would lease the subject property
for a monthly rental of P500.00;14 when the respondents failed to repurchase the subject property within the one-
year period despite notice, he caused the transfer of title in his name on July 14, 1993;15 when the respondents
failed to pay the monthly rentals despite demand, he filed an ejectment case16 against them with the Metropolitan
Trial Court (MeTC), Branch 60, Mandaluyong City, on September 8, 1993, or sixteen days before the filing of the
RTC case for annulment of the deed of absolute sale.

During the pendency of the RTC case, or on March 29, 1995, the MeTC decided the ejectment case. It ordered
Erlinda and her family to vacate the subject property, to surrender its possession to the petitioner, and to pay the
overdue rentals.17

In the RTC, the respondents presented the results of the scientific examination18 conducted by the National Bureau
of Investigation of Eliseos purported signatures in the Special Power of Attorney19 dated April 29, 1992 and the
Affidavit of waiver of rights dated April 29, 1992,20 showing that they were forgeries.
The petitioner, on the other hand, introduced evidence on the paraphernal nature of the subject property since it was
registered in Erlindas name; the residential lot was part of a large parcel of land owned by Pedro Ramirez and
Fructuosa Urcla, Erlindas parents; it was the subject of Civil Case No. 50141, a complaint for annulment of sale,
before the RTC, Branch 158, Pasig City, filed by the surviving heirs of Pedro against another heir, Amado Ramirez,
Erlindas brother; and, as a result of a compromise agreement, Amado agreed to transfer to the other compulsory
heirs of Pedro, including Erlinda, their rightful shares of the land.21

THE RTC RULING

In a Decision dated January 23, 1997, the RTC dismissed the complaint. It found that the subject property was
Erlindas exclusive paraphernal property that was inherited from her father. It also upheld the sale to the petitioner,
even without Eliseos consent as the deed of absolute sale bore the genuine signatures of Erlinda and the petitioner
as vendor and vendee, respectively. It concluded that the NBI finding that Eliseos signatures in the special power of
attorney and in the affidavit were forgeries was immaterial because Eliseos consent to the sale was not
necessary.22

The respondents elevated the case to the CA via an ordinary appeal under Rule 41 of the Revised Rules of Court.

THE CA RULING

The CA decided the appeal on June 25, 2002. Applying the second paragraph of Article 15823 of the Civil Code and
Calimlim-Canullas v. Hon. Fortun,24 the CA held that the subject property, originally Erlindas exclusive paraphernal
property, became conjugal property when it was used as collateral for a housing loan that was paid through conjugal
funds Eliseos monthly salary deductions; the subject property, therefore, cannot be validly sold or mortgaged
without Eliseos consent, pursuant to Article 12425 of the Family Code. Thus, the CA declared void the deed of
absolute sale, and set aside the RTC decision.

When the CA denied26 the subsequent motion for reconsideration,27 the petitioner filed the present petition for review
on certiorari under Rule 45 of the Revised Rules of Court.

THE PETITION

The petitioner argues that the CA misapplied the second paragraph of Article 158 of the Civil Code and Calimlim-
Canullas28 because the respondents admitted in the complaint that it was the petitioner who gave the money used to
cancel the GSIS mortgage on TCT No. 1427; Article 12029 of the Family Code is the applicable rule, and since the
value of the house is less than the value of the lot, then Erlinda retained ownership of the subject property. He also
argues that the contract between the parties was a sale, not a mortgage, because (a) Erlinda did not deny her
signature in the document;30 (b) Erlinda agreed to sign a contract of lease over the subject property;31 and, (c)
Erlinda executed a letter, dated April 30, 1992, confirming the conversion of the loan application to a deed of sale.32

THE CASE FOR THE RESPONDENTS

The respondents submit that it is unnecessary to compare the respective values of the house and of the lot to
determine ownership of the subject property; it was acquired during their marriage and, therefore, considered
conjugal property. They also submit that the transaction between the parties was not a sale, but an equitable
mortgage because (a) they remained in possession of the subject property even after the execution of the deed of
absolute sale, (b) they paid the 1993 real property taxes due on the subject property, and (c) they
received P200,000.00 only of the total stated price of P602,000.00.

THE ISSUE

The issues in the present case boil down to (1) whether the subject property is paraphernal or conjugal; and, (2)
whether the contract between the parties was a sale or an equitable mortgage.

OUR RULING

We deny the present Petition but for reasons other than those advanced by the CA.

This Court is not a trier of facts. However, if the inference, drawn by the CA, from the facts is manifestly mistaken,
as in the present case, we can review the evidence to allow us to arrive at the correct factual conclusions based on
the record.33

First Issue:

Paraphernal or Conjugal?
As a general rule, all property acquired during the marriage, whether the acquisition appears to have been made,
contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is
proved.34

In the present case, clear evidence that Erlinda inherited the residential lot from her father has sufficiently rebutted
this presumption of conjugal ownership.35 Pursuant to Articles 9236 and 10937 of the Family Code, properties acquired
by gratuitous title by either spouse, during the marriage, shall be excluded from the community property and be the
exclusive property of each spouse.38 The residential lot, therefore, is Erlindas exclusive paraphernal property.

The CA, however, held that the residential lot became conjugal when the house was built thereon through conjugal
funds, applying the second paragraph of Article 158 of the Civil Code and Calimlim-Canullas.39 Under the second
paragraph of Article 158 of the Civil Code, a land that originally belonged to one spouse becomes conjugal upon the
construction of improvements thereon at the expense of the partnership. We applied this provision in Calimlim-
Canullas,40 where we held that when the conjugal house is constructed on land belonging exclusively to the
husband, the land ipso facto becomes conjugal, but the husband is entitled to reimbursement of the value of the
land at the liquidation of the conjugal partnership.

The CA misapplied Article 158 of the


Civil Code and Calimlim-Canullas

We cannot subscribe to the CAs misplaced reliance on Article 158 of the Civil Code and Calimlim-Canullas.

As the respondents were married during the effectivity of the Civil Code, its provisions on conjugal partnership of
gains (Articles 142 to 189) should have governed their property relations. However, with the enactment of the Family
Code on August 3, 1989, the Civil Code provisions on conjugal partnership of gains, including Article 158, have
been superseded by those found in the Family Code (Articles 105 to 133). Article 105 of the Family Code states:

xxxx

The provisions of this Chapter [on the Conjugal Partnership of Gains] shall also apply to conjugal partnerships of
gains already established between spouses before the effectivity of this Code, without prejudice to vested rights
already acquired in accordance with the Civil Code or other laws, as provided in Article 256.

Thus, in determining the nature of the subject property, we refer to the provisions of the Family Code, and not the
Civil Code, except with respect to rights then already vested.

Article 120 of the Family Code, which supersedes Article 158 of the Civil Code, provides the solution in determining
the ownership of the improvements that are made on the separate property of the spouses, at the expense of the
partnership or through the acts or efforts of either or both spouses. Under this provision, when the cost of the
improvement and any resulting increase in value are more than the value of the property at the time of the
improvement, the entire property of one of the spouses shall belong to the conjugal partnership, subject to
reimbursement of the value of the property of the owner-spouse at the time of the improvement; otherwise, said
property shall be retained in ownership by the owner-spouse, likewise subject to reimbursement of the cost of the
improvement.41

In the present case, we find that Eliseo paid a portion only of the GSIS loan through monthly salary deductions.
From April 6, 198942 to April 30, 1992,43 Eliseo paid about P60,755.76,44 not the entire amount of the GSIS housing
loan plus interest, since the petitioner advanced the P176,445.2745 paid by Erlinda to cancel the mortgage in 1992.
Considering the P136,500.00 amount of the GSIS housing loan, it is fairly reasonable to assume that the value of
the residential lot is considerably more than the P60,755.76 amount paid by Eliseo through monthly salary
deductions.

Thus, the subject property remained the exclusive paraphernal property of Erlinda at the time she contracted with
the petitioner; the written consent of Eliseo to the transaction was not necessary. The NBI finding that Eliseos
signatures in the special power of attorney and affidavit were forgeries was immaterial.

Nonetheless, the RTC and the CA apparently failed to consider the real nature of the contract between the parties.

Second Issue:
Sale or Equitable Mortgage?

Jurisprudence has defined an equitable mortgage "as one which although lacking in some formality, or form or
words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real
property as security for a debt, there being no impossibility nor anything contrary to law in this intent."46

Article 1602 of the Civil Code enumerates the instances when a contract, regardless of its nomenclature, may be
presumed to be an equitable mortgage: (a) when the price of a sale with right to repurchase is unusually
inadequate; (b) when the vendor remains in possession as lessee or otherwise; (c) when upon or after the
expiration of the right to repurchase another instrument extending the period of redemption or granting a new period
is executed; (d) when the purchaser retains for himself a part of the purchase price; (e) when the vendor
binds himself to pay the taxes on the thing sold; and, (f) in any other case where it may be fairly inferred that
the real intention of the parties is that the transaction shall secure the payment of a debt or the performance
of any other obligation. These instances apply to a contract purporting to be an absolute sale.47

For the presumption of an equitable mortgage to arise under Article 1602 of the Civil Code, two (2) requisites must
concur: (a) that the parties entered into a contract denominated as a contract of sale; and, (b) that their intention
was to secure an existing debt by way of a mortgage. Any of the circumstances laid out in Article 1602 of the Civil
Code, not the concurrence nor an overwhelming number of the enumerated circumstances, is sufficient to support
the conclusion that a contract of sale is in fact an equitable mortgage.48

Contract is an equitable mortgage

In the present case, there are four (4) telling circumstances pointing to the existence of an equitable mortgage.

First, the respondents remained in possession as lessees of the subject property; the parties, in fact, executed a
one-year contract of lease, effective May 1, 1992 to April 30, 1993.49

Second, the petitioner retained part of the "purchase price," the petitioner gave a P200,000.00 advance to settle the
GSIS housing loan, but refused to give the P402,000.00 balance when Erlinda failed to submit Eliseos signed
affidavit of waiver of rights.

Third, respondents paid the real property taxes on July 8, 1993, despite the alleged sale on April 30,
1992;50payment of real property taxes is a usual burden attaching to ownership and when, as here, such payment is
coupled with continuous possession of the property, it constitutes evidence of great weight that the person under
whose name the realty taxes were declared has a valid and rightful claim over the land.51

Fourth, Erlinda secured the payment of the principal debt owed to the petitioner with the subject property. The
records show that the petitioner, in fact, sent Erlinda a Statement of Account showing that as of February 20, 1993,
she owed P384,660.00, and the daily interest, starting February 21, 1993, was P641.10.52 Thus, the parties clearly
intended an equitable mortgage and not a contract of sale.

That the petitioner advanced the sum of P200,000.00 to Erlinda is undisputed. This advance, in fact, prompted the
latter to transfer the subject property to the petitioner. Thus, before the respondents can recover the subject
property, they must first return the amount of P200,000.00 to the petitioner, plus legal interest of 12% per annum,
computed from April 30, 1992.

We cannot sustain the ballooned obligation of P384,660.00, claimed in the Statement of Account sent by the
petitioner,53 sans any evidence of how this amount was arrived at. Additionally, a daily interest of P641.10
or P19,233.00 per month for a P200,000.00 loan is patently unconscionable. While parties are free to stipulate on
the interest to be imposed on monetary obligations, we can step in to temper the interest rates if they are
unconscionable.54

In Lustan v. CA,55 where we established the reciprocal obligations of the parties under an equitable mortgage, we
ordered the reconveyance of the property to the rightful owner therein upon the payment of the loan within ninety
(90) days from the finality of the decision.56

WHEREFORE, in light of all the foregoing, we hereby DENY the present petition. The assailed decision and
resolution of the Court of Appeals in CA-G.R. CV No. 57126 are AFFIRMED with the following MODIFICATIONS:

1. The Deed of Absolute Sale dated April 30, 1992 is hereby declared an equitable mortgage; and

2. The petitioner is obligated to RECONVEY to the respondents the property covered by Transfer Certificate
of Title No. 7650 of the Register of Deeds of Mandaluyong City, UPON THE PAYMENT OF P200,000.00,
with 12% legal interest from April 30, 1992, by respondents within NINETY DAYS FROM THE FINALITY OF
THIS DECISION.

Costs against the petitioner.

SO ORDERED.

G.R. No. 178902 April 21, 2010

MANUEL O. FUENTES and LETICIA L. FUENTES, Petitioners,


vs.
CONRADO G. ROCA, ANNABELLE R. JOSON, ROSE MARIE R. CRISTOBAL and PILAR
MALCAMPO,Respondents.

DECISION

ABAD, J.:

This case is about a husbands sale of conjugal real property, employing a challenged affidavit of consent from an
estranged wife. The buyers claim valid consent, loss of right to declare nullity of sale, and prescription.

The Facts and the Case

Sabina Tarroza owned a titled 358-square meter lot in Canelar, Zamboanga City. On October 11, 1982 she sold it to
her son, Tarciano T. Roca (Tarciano) under a deed of absolute sale.1 But Tarciano did not for the meantime have
the registered title transferred to his name.

Six years later in 1988, Tarciano offered to sell the lot to petitioners Manuel and Leticia Fuentes (the Fuentes
spouses). They arranged to meet at the office of Atty. Romulo D. Plagata whom they asked to prepare the
documents of sale. They later signed an agreement to sell that Atty. Plagata prepared2 dated April 29, 1988, which
agreement expressly stated that it was to take effect in six months.

The agreement required the Fuentes spouses to pay Tarciano a down payment of P60,000.00 for the transfer of the
lots title to him. And, within six months, Tarciano was to clear the lot of structures and occupants and secure the
consent of his estranged wife, Rosario Gabriel Roca (Rosario), to the sale. Upon Tarcianos compliance with these
conditions, the Fuentes spouses were to take possession of the lot and pay him an additional P140,000.00
or P160,000.00, depending on whether or not he succeeded in demolishing the house standing on it. If Tarciano
was unable to comply with these conditions, the Fuentes spouses would become owners of the lot without any
further formality and payment.

The parties left their signed agreement with Atty. Plagata who then worked on the other requirements of the sale.
According to the lawyer, he went to see Rosario in one of his trips to Manila and had her sign an affidavit of
consent.3 As soon as Tarciano met the other conditions, Atty. Plagata notarized Rosarios affidavit in Zamboanga
City. On January 11, 1989 Tarciano executed a deed of absolute sale4 in favor of the Fuentes spouses. They then
paid him the additional P140,000.00 mentioned in their agreement. A new title was issued in the name of the
spouses5 who immediately constructed a building on the lot. On January 28, 1990 Tarciano passed away, followed
by his wife Rosario who died nine months afterwards.

Eight years later in 1997, the children of Tarciano and Rosario, namely, respondents Conrado G. Roca, Annabelle
R. Joson, and Rose Marie R. Cristobal, together with Tarcianos sister, Pilar R. Malcampo, represented by her son,
John Paul M. Trinidad (collectively, the Rocas), filed an action for annulment of sale and reconveyance of the land
against the Fuentes spouses before the Regional Trial Court (RTC) of Zamboanga City in Civil Case 4707. The
Rocas claimed that the sale to the spouses was void since Tarcianos wife, Rosario, did not give her consent to it.
Her signature on the affidavit of consent had been forged. They thus prayed that the property be reconveyed to
them upon reimbursement of the price that the Fuentes spouses paid Tarciano.6

The spouses denied the Rocas allegations. They presented Atty. Plagata who testified that he personally saw
Rosario sign the affidavit at her residence in Paco, Manila, on September 15, 1988. He admitted, however, that he
notarized the document in Zamboanga City four months later on January 11, 1989.7 All the same, the Fuentes
spouses pointed out that the claim of forgery was personal to Rosario and she alone could invoke it. Besides, the
four-year prescriptive period for nullifying the sale on ground of fraud had already lapsed.

Both the Rocas and the Fuentes spouses presented handwriting experts at the trial. Comparing Rosarios standard
signature on the affidavit with those on various documents she signed, the Rocas expert testified that the signatures
were not written by the same person. Making the same comparison, the spouses expert concluded that they were.8

On February 1, 2005 the RTC rendered judgment, dismissing the case. It ruled that the action had already
prescribed since the ground cited by the Rocas for annulling the sale, forgery or fraud, already prescribed under
Article 1391 of the Civil Code four years after its discovery. In this case, the Rocas may be deemed to have notice of
the fraud from the date the deed of sale was registered with the Registry of Deeds and the new title was issued.
Here, the Rocas filed their action in 1997, almost nine years after the title was issued to the Fuentes spouses on
January 18, 1989.9

Moreover, the Rocas failed to present clear and convincing evidence of the fraud. Mere variance in the signatures of
Rosario was not conclusive proof of forgery.10 The RTC ruled that, although the Rocas presented a handwriting
expert, the trial court could not be bound by his opinion since the opposing expert witness contradicted the same.
Atty. Plagatas testimony remained technically unrebutted.11
Finally, the RTC noted that Atty. Plagatas defective notarization of the affidavit of consent did not invalidate the
sale. The law does not require spousal consent to be on the deed of sale to be valid. Neither does the irregularity
vitiate Rosarios consent. She personally signed the affidavit in the presence of Atty. Plagata.12

On appeal, the Court of Appeals (CA) reversed the RTC decision. The CA found sufficient evidence of forgery and
did not give credence to Atty. Plagatas testimony that he saw Rosario sign the document in Quezon City. Its jurat
said differently. Also, upon comparing the questioned signature with the specimen signatures, the CA noted
significant variance between them. That Tarciano and Rosario had been living separately for 30 years since 1958
also reinforced the conclusion that her signature had been forged.

Since Tarciano and Rosario were married in 1950, the CA concluded that their property relations were governed by
the Civil Code under which an action for annulment of sale on the ground of lack of spousal consent may be brought
by the wife during the marriage within 10 years from the transaction. Consequently, the action that the Rocas, her
heirs, brought in 1997 fell within 10 years of the January 11, 1989 sale.

Considering, however, that the sale between the Fuentes spouses and Tarciano was merely voidable, the CA held
that its annulment entitled the spouses to reimbursement of what they paid him plus legal interest computed from
the filing of the complaint until actual payment. Since the Fuentes spouses were also builders in good faith, they
were entitled under Article 448 of the Civil Code to payment of the value of the improvements they introduced on the
lot. The CA did not award damages in favor of the Rocas and deleted the award of attorneys fees to the Fuentes
spouses.13

Unsatisfied with the CA decision, the Fuentes spouses came to this court by petition for review.14

The Issues Presented

The case presents the following issues:

1. Whether or not Rosarios signature on the document of consent to her husband Tarcianos sale of their
conjugal land to the Fuentes spouses was forged;

2. Whether or not the Rocas action for the declaration of nullity of that sale to the spouses already
prescribed; and

3. Whether or not only Rosario, the wife whose consent was not had, could bring the action to annul that
sale.

The Courts Rulings

First. The key issue in this case is whether or not Rosarios signature on the document of consent had been forged.
For, if the signature were genuine, the fact that she gave her consent to her husbands sale of the conjugal land
would render the other issues merely academic.

The CA found that Rosarios signature had been forged. The CA observed a marked difference between her
signature on the affidavit of consent15 and her specimen signatures.16 The CA gave no weight to Atty. Plagatas
testimony that he saw Rosario sign the document in Manila on September 15, 1988 since this clashed with his
declaration in the jurat that Rosario signed the affidavit in Zamboanga City on January 11, 1989.

The Court agrees with the CAs observation that Rosarios signature strokes on the affidavit appears heavy,
deliberate, and forced. Her specimen signatures, on the other hand, are consistently of a lighter stroke and more
fluid. The way the letters "R" and "s" were written is also remarkably different. The variance is obvious even to the
untrained eye.

Significantly, Rosarios specimen signatures were made at about the time that she signed the supposed affidavit of
consent. They were, therefore, reliable standards for comparison. The Fuentes spouses presented no evidence that
Rosario suffered from any illness or disease that accounted for the variance in her signature when she signed the
affidavit of consent. Notably, Rosario had been living separately from Tarciano for 30 years since 1958. And she
resided so far away in Manila. It would have been quite tempting for Tarciano to just forge her signature and avoid
the risk that she would not give her consent to the sale or demand a stiff price for it.

What is more, Atty. Plagata admittedly falsified the jurat of the affidavit of consent. That jurat declared that Rosario
swore to the document and signed it in Zamboanga City on January 11, 1989 when, as Atty. Plagata testified, she
supposedly signed it about four months earlier at her residence in Paco, Manila on September 15, 1988. While a
defective notarization will merely strip the document of its public character and reduce it to a private instrument, that
falsified jurat, taken together with the marks of forgery in the signature, dooms such document as proof of Rosarios
consent to the sale of the land. That the Fuentes spouses honestly relied on the notarized affidavit as proof of
Rosarios consent does not matter. The sale is still void without an authentic consent.
Second. Contrary to the ruling of the Court of Appeals, the law that applies to this case is the Family Code, not the
Civil Code. Although Tarciano and Rosario got married in 1950, Tarciano sold the conjugal property to the Fuentes
spouses on January 11, 1989, a few months after the Family Code took effect on August 3, 1988.

When Tarciano married Rosario, the Civil Code put in place the system of conjugal partnership of gains on their
property relations. While its Article 165 made Tarciano the sole administrator of the conjugal partnership, Article
16617 prohibited him from selling commonly owned real property without his wifes consent. Still, if he sold the same
without his wifes consent, the sale is not void but merely voidable. Article 173 gave Rosario the right to have the
sale annulled during the marriage within ten years from the date of the sale. Failing in that, she or her heirs may
demand, after dissolution of the marriage, only the value of the property that Tarciano fraudulently sold. Thus:

Art. 173. The wife may, during the marriage, and within ten years from the transaction questioned, ask the courts for
the annulment of any contract of the husband entered into without her consent, when such consent is required, or
any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership
property. Should the wife fail to exercise this right, she or her heirs, after the dissolution of the marriage, may
demand the value of property fraudulently alienated by the husband.

But, as already stated, the Family Code took effect on August 3, 1988. Its Chapter 4 on Conjugal Partnership of
Gains expressly superseded Title VI, Book I of the Civil Code on Property Relations Between Husband and
Wife.18Further, the Family Code provisions were also made to apply to already existing conjugal partnerships
without prejudice to vested rights.19 Thus:

Art. 105. x x x The provisions of this Chapter shall also apply to conjugal partnerships of gains already established
between spouses before the effectivity of this Code, without prejudice to vested rights already acquired in
accordance with the Civil Code or other laws, as provided in Article 256. (n)

Consequently, when Tarciano sold the conjugal lot to the Fuentes spouses on January 11, 1989, the law that
governed the disposal of that lot was already the Family Code.

In contrast to Article 173 of the Civil Code, Article 124 of the Family Code does not provide a period within which the
wife who gave no consent may assail her husbands sale of the real property. It simply provides that without the
other spouses written consent or a court order allowing the sale, the same would be void. Article 124 thus provides:

Art. 124. x x x In the event that one spouse is incapacitated or otherwise unable to participate in the administration
of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not
include the powers of disposition or encumbrance which must have the authority of the court or the written consent
of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. x x x

Under the provisions of the Civil Code governing contracts, a void or inexistent contract has no force and effect from
the very beginning. And this rule applies to contracts that are declared void by positive provision of law,20 as in the
case of a sale of conjugal property without the other spouses written consent. A void contract is equivalent to
nothing and is absolutely wanting in civil effects. It cannot be validated either by ratification or prescription.21

But, although a void contract has no legal effects even if no action is taken to set it aside, when any of its terms
have been performed, an action to declare its inexistence is necessary to allow restitution of what has been given
under it.22 This action, according to Article 1410 of the Civil Code does not prescribe. Thus:

Art. 1410. The action or defense for the declaration of the inexistence of a contract does not prescribe.

Here, the Rocas filed an action against the Fuentes spouses in 1997 for annulment of sale and reconveyance of the
real property that Tarciano sold without their mothers (his wifes) written consent. The passage of time did not erode
the right to bring such an action.

Besides, even assuming that it is the Civil Code that applies to the transaction as the CA held, Article 173 provides
that the wife may bring an action for annulment of sale on the ground of lack of spousal consent during the marriage
within 10 years from the transaction. Consequently, the action that the Rocas, her heirs, brought in 1997 fell within
10 years of the January 11, 1989 sale. It did not yet prescribe.

The Fuentes spouses of course argue that the RTC nullified the sale to them based on fraud and that, therefore, the
applicable prescriptive period should be that which applies to fraudulent transactions, namely, four years from its
discovery. Since notice of the sale may be deemed given to the Rocas when it was registered with the Registry of
Deeds in 1989, their right of action already prescribed in 1993.

But, if there had been a victim of fraud in this case, it would be the Fuentes spouses in that they appeared to have
agreed to buy the property upon an honest belief that Rosarios written consent to the sale was genuine. They had
four years then from the time they learned that her signature had been forged within which to file an action to annul
the sale and get back their money plus damages. They never exercised the right.
If, on the other hand, Rosario had agreed to sign the document of consent upon a false representation that the
property would go to their children, not to strangers, and it turned out that this was not the case, then she would
have four years from the time she discovered the fraud within which to file an action to declare the sale void. But
that is not the case here. Rosario was not a victim of fraud or misrepresentation. Her consent was simply not
obtained at all. She lost nothing since the sale without her written consent was void. Ultimately, the Rocas ground
for annulment is not forgery but the lack of written consent of their mother to the sale. The forgery is merely
evidence of lack of consent.

Third. The Fuentes spouses point out that it was to Rosario, whose consent was not obtained, that the law gave the
right to bring an action to declare void her husbands sale of conjugal land. But here, Rosario died in 1990, the year
after the sale. Does this mean that the right to have the sale declared void is forever lost?

The answer is no. As stated above, that sale was void from the beginning. Consequently, the land remained the
property of Tarciano and Rosario despite that sale. When the two died, they passed on the ownership of the
property to their heirs, namely, the Rocas.23 As lawful owners, the Rocas had the right, under Article 429 of the Civil
Code, to exclude any person from its enjoyment and disposal. 1avv phi1

In fairness to the Fuentes spouses, however, they should be entitled, among other things, to recover from
Tarcianos heirs, the Rocas, the P200,000.00 that they paid him, with legal interest until fully paid, chargeable
against his estate.

Further, the Fuentes spouses appear to have acted in good faith in entering the land and building improvements on
it. Atty. Plagata, whom the parties mutually entrusted with closing and documenting the transaction, represented that
he got Rosarios signature on the affidavit of consent. The Fuentes spouses had no reason to believe that the
lawyer had violated his commission and his oath. They had no way of knowing that Rosario did not come to
Zamboanga to give her consent. There is no evidence that they had a premonition that the requirement of consent
presented some difficulty. Indeed, they willingly made a 30 percent down payment on the selling price months
earlier on the assurance that it was forthcoming.

Further, the notarized document appears to have comforted the Fuentes spouses that everything was already in
order when Tarciano executed a deed of absolute sale in their favor on January 11, 1989. In fact, they paid the
balance due him. And, acting on the documents submitted to it, the Register of Deeds of Zamboanga City issued a
new title in the names of the Fuentes spouses. It was only after all these had passed that the spouses entered the
property and built on it. He is deemed a possessor in good faith, said Article 526 of the Civil Code, who is not aware
that there exists in his title or mode of acquisition any flaw which invalidates it.

As possessor in good faith, the Fuentes spouses were under no obligation to pay for their stay on the property prior
to its legal interruption by a final judgment against them.24 What is more, they are entitled under Article 448 to
indemnity for the improvements they introduced into the property with a right of retention until the reimbursement is
made. Thus:

Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right
to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546
and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of
the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof. (361a)

The Rocas shall of course have the option, pursuant to Article 546 of the Civil Code,25 of indemnifying the Fuentes
spouses for the costs of the improvements or paying the increase in value which the property may have acquired by
reason of such improvements.

WHEREFORE, the Court DENIES the petition and AFFIRMS WITH MODIFICATION the decision of the Court of
Appeals in CA-G.R. CV 00531 dated February 27, 2007 as follows:

1. The deed of sale dated January 11, 1989 that Tarciano T. Roca executed in favor of Manuel O. Fuentes,
married to Leticia L. Fuentes, as well as the Transfer Certificate of Title T-90,981 that the Register of Deeds
of Zamboanga City issued in the names of the latter spouses pursuant to that deed of sale are DECLARED
void;

2. The Register of Deeds of Zamboanga City is DIRECTED to reinstate Transfer Certificate of Title 3533 in
the name of Tarciano T. Roca, married to Rosario Gabriel;

3. Respondents Gonzalo G. Roca, Annabelle R. Joson, Rose Marie R. Cristobal, and Pilar Malcampo are
ORDERED to pay petitioner spouses Manuel and Leticia Fuentes the P200,000.00 that the latter paid
Tarciano T. Roca, with legal interest from January 11, 1989 until fully paid, chargeable against his estate;
4. Respondents Gonzalo G. Roca, Annabelle R. Joson, Rose Marie R. Cristobal, and Pilar Malcampo are
further ORDERED, at their option, to indemnify petitioner spouses Manuel and Leticia Fuentes with their
expenses for introducing useful improvements on the subject land or pay the increase in value which it may
have acquired by reason of those improvements, with the spouses entitled to the right of retention of the
land until the indemnity is made; and

5. The RTC of Zamboanga City from which this case originated is DIRECTED to receive evidence and
determine the amount of indemnity to which petitioner spouses Manuel and Leticia Fuentes are entitled.

SO ORDERED.

G.R. No. 187490 February 8, 2012

ANTONIA R. DELA PEA and ALVIN JOHN B. DELA PEA, Petitioners,


vs.
GEMMA REMILYN C. AVILA and FAR EAST BANK & TRUST CO., Respondents.

DECISION

PEREZ, J.:

Filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure, this petition for review on certiorari seeks the
reversal and setting aside of the Decision1 dated 31 March 2009 rendered by the then Second Division of the Court
of Appeals in CA-G.R. CV No. 90485,2 the dispositive portion of which states:

WHEREFORE, premises considered, the appeal is GRANTED and the assailed Decision, dated December 18,
2007, of the Regional Trial Court of Marikina City, Branch 272, is hereby REVERSED and SET ASIDE. The Deed of
Absolute Sale in favor of Gemma Avila dated November 4, 1997 and the subsequent sale on auction of the subject
property to FEBTC (now Bank of the Philippine Islands) on March 15, 1999 are upheld as valid and binding.

SO ORDERED.3

The Facts

The suit concerns a 277 square meter parcel of residential land, together with the improvements thereon, situated in
Marikina City and previously registered in the name of petitioner Antonia R. Dela Pea (Antonia), "married to
Antegono A. Dela Pea" (Antegono) under Transfer Certificate of Title (TCT) No. N-32315 of the Registry of Deeds
of Rizal.4 On 7 May 1996, Antonia obtained from A.C. Aguila & Sons, Co. (Aguila) a loan in the sum of P250,000.00
which, pursuant to the Promissory Note the former executed in favor of the latter, was payable on or before 7 July
1996, with interest pegged at 5% per month.5 On the very same day, Antonia also executed in favor of Aguila a
notarized Deed of Real Estate Mortgage over the property, for the purpose of securing the payment of said loan
obligation. The deed provided, in part, that "(t)his contract is for a period of Three (3) months from the date of this
instrument".6

On 4 November 1997, Antonia executed a notarized Deed of Absolute Sale over the property in favor of respondent
Gemma Remilyn C. Avila (Gemma), for the stated consideration of P600,000.00.7 Utilizing the document, Gemma
caused the cancellation of TCT No. N-32315 as well as the issuance of TCT No. 337834 of the Marikina City
Registry of Deeds, naming her as the owner of the subject realty.8 On 26 November 1997, Gemma also constituted
a real estate mortgage over said parcel in favor of respondent Far East Bank and Trust Company [now Bank of the
Philippine Islands] (FEBTC-BPI), to secure a loan facility with a credit limit of P1,200,000.00.9 As evidenced by the
Promissory Notes she executed from 12 December 1997 to 10 March 1998,10 Gemma obtained the following loans
from Visayas Avenue Branch of the FEBTC-BPI, in the aggregate sum of P1,200,000.00, to wit:

Promissory Note Date Amount Maturity


BDS#970779 12/02/97 P300,000.00 04/30/98
BDS#970790 12/15/97 P100,000.00 04/14/98
BDS#980800 01/16/98 P100,000.00 04/30/98
BDS#980805 02/06/98 P100,000.00 04/30/98
BDS#980817 02/27/98 P150,000.00 04/30/98
BDS#980821 03/10/98 P450,000.00 04/30/98
On 3 March 1998, in the meantime, Antonia filed with the Register of Deeds of Marikina an Affidavit of Adverse
Claim to the effect, among others, that she was the true and lawful owner of the property which had been titled in
the name of Gemma under TCT No. 32315; and, that the Deed of Absolute Sale Gemma utilized in procuring her
title was simulated.11 As a consequence, Antonias Affidavit of Adverse Claim was inscribed on TCT No. 337834 as
Entry No. 501099 on 10 March 1998.12 In view of Gemmas failure to pay the principal as well as the accumulated
interest and penalties on the loans she obtained, on the other hand, FEBTC-BPI caused the extrajudicial foreclosure
of the real estate mortgage constituted over the property. As the highest bidder at the public auction conducted in
the premises,13 FEBTC-BPI later consolidated its ownership over the realty and caused the same to be titled in its
name under TCT No. 415392 of the Marikina registry.14

On 18 May 1998, Antonia and her son, petitioner Alvin John B. Dela Pea (Alvin), filed against Gemma the
complaint for annulment of deed of sale docketed before Branch 272 of the Regional Trial Court (RTC) of Marikina
City as Civil Case No. 98-445-MK. Claiming that the subject realty was conjugal property, the Dela Peas alleged,
among other matters, that the 7 May 1996 Deed of Real Estate Mortgage Antonia executed in favor of Aguila was
not consented to by Antegono who had, by then, already died; that despite its intended 1998 maturity date, the due
date of the loan secured by the mortgage was shortened by Gemma who, taking advantage of her "proximate
relationship" with Aguila, altered the same to 1997; and, that the 4 November 1997 Deed of Absolute Sale in favor
of Gemma was executed by Antonia who was misled into believing that the transfer was necessary for the loan the
former promised to procure on her behalf from FEBTC-BPI. In addition to the annulment of said Deed of Absolute
Sale for being simulated and derogatory of Alvins successional rights, the Dela Peas sought the reconveyance of
the property as well as the grant of their claims for moral and exemplary damages, attorneys fees and the costs.15

Served with summons, Gemma specifically denied the material allegations of the foregoing complaint in her 1 July
1998 answer. Maintaining that the realty was the exclusive property of Antonia who misrepresented that her
husband was still alive, Gemma averred that the former failed to pay the P250,000.00 loan she obtained from Aguila
on its stipulated 7 July 1996 maturity; that approached to help prevent the extrajudicial foreclosure of the mortgage
constituted on the property, she agreed to settle the outstanding obligation to Aguila and to extend Antonia
a P50,000.00 loan, with interest pegged at 10% per month; that to pay back the foregoing accommodations, Antonia
agreed to the use of the property as collateral for a loan to be obtained by her from FEBTC-BPI, hence, the
execution of the impugned Deed of Absolute Sale; and, that conformably with the foregoing agreement, she
obtained loans in the total sum of P1,200,000.00 from FEBTC-BPI and applied the proceeds thereof to the sums
owed by Antonia. Together with the dismissal of the complaint, Gemma also prayed for the grant of her
counterclaims for moral and exemplary damages, attorneys fees, litigation expenses and the costs.16

On 25 September 1999, the Dela Peas filed a supplemental complaint, impleading FEBTC-BPI as additional
defendant. Calling attention to Antonias 3 March 1998 Affidavit of Adverse Claim and the Notice of Lis Pendens
they purportedly caused to be annotated on TCT No. 337834 on 10 December 1999, the Dela Peas alleged that
FEBTC-BPI was in bad faith when it purchased the property at public auction on 15 March 1999.17 In their 12
November 1999 answer, FEBTC-BPI, in turn, asserted that the property was already titled in Gemmas name when
she executed the 26 November 1997 real estate mortgage thereon, to secure the payment of the loans she obtained
in the sum of P1,200,000.00; and, that not being privy to Antonias transaction with Gemma and unaware of any
adverse claim on the property, it was a mortgagee in good faith, entitled to foreclose the mortgage upon Gemmas
failure to pay the loans she obtained. Seeking the dismissal of the complaint and the grant of its counterclaims for
damages against the Dela Peas, FEBTC-BPI alternatively interposed cross-claims against Gemma for the
payment of the subject loans, the accumulated interests and penalties thereon as well as such sums for which it
may be held liable in the premises.18

On 14 April 2000, the RTC issued the order terminating the pre-trial stage and declaring Gemma in default for failure
to attend the pre-trial settings and to engage the services of a new lawyer despite due notice and the withdrawal of
her counsel of record.19 In support of their complaint, Antonia20 and Alvin21 both took the witness stand and, by way
of corroborative evidence, presented the testimony of one Alessandro Almoden22 who claimed to have referred
Antonia to Gemma for the purpose of obtaining a loan. By way of defense evidence, on the other hand, FEBTC-BPI
adduced the oral evidence elicited from Eleanor Abellare, its Account Officer who handled Gemmas loans,23 and
Zenaida Torres, the National Bureau of Investigation (NBI) Document Examiner who, after analyzing Antonias
specimen signatures on the 7 May 1996 Deed of Real Estate Mortgage and 4 November 1997 Deed of Absolute
Sale,24 issued NBI Questioned Documents Report No. 482-802 to the effect, among others, that said signatures
were written by one and the same person.25

On 18 December 2007, the RTC went on to render a Decision finding that the subject property was conjugal in
nature and that the 4 November 1997 Deed of Absolute Sale Antonia executed in favor of Gemma was void as a
disposition without the liquidation required under Article 130 of the Family Code. Brushing aside FEBTC-BPIs claim
of good faith,26 the RTC disposed of the case in the following wise:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the plaintiffs and against the
defendants, as follows:

1). Declaring the Deed of Absolute dated November 04, 1997 in favor of defendant, [Gemma] as null and
void;
2). Ordering defendant [FEBTC-BPI] to execute a deed of reconveyance in favor of the [Dela Peas]
involving the subject property now covered by Transfer Certificate of Title No. 415392 in the name of
[FEBTC-BPI];

3). Ordering [Gemma] to pay the [Dela Peas] the following:

a). the amount of P200,000.00 as moral damages; and

b). the amount of P20,000.00 as and for attorneys fees; and

c). costs of the suit

On the cross-claim, [Gemma] is hereby ordered to pay [FEBTC-BPI] the amount of P2,029,317.17 as of November
10, 1999, with twelve (12%) percent interest per annum until fully paid.

SO ORDERED.27

Aggrieved, FEBTC-BPI perfected the appeal which was docketed before the CA as CA-G.R. CV No. 90485. On 31
March 2009 the CAs Second Division rendered the herein assailed decision, reversing the RTCs appealed
decision, upon the following findings and conclusions: (a) the property was paraphernal in nature for failure of the
Dela Peas to prove that the same was acquired during Antonias marriage to Antegono; (b) having misled Gemma
into believing that the property was exclusively hers, Antonia is barred from seeking the annulment of the 4
November 1997 Deed of Absolute Sale; (c) Antonias claim that her signature was forged is belied by her admission
in the pleadings that she was misled by Gemma into executing said Deed of Absolute Sale and by NBI Questioned
Document Report No. 482-802; and, (d) FEBTC-BPI is a mortgagee in good faith and for value since Gemmas 26
November 1997 execution of the real estate mortgage in its favor predated Antonias 3 March 1998 Affidavit of
Adverse Claim and the 10 December 1999 annotation of a Notice of Lis Pendens on TCT No. 337834.28

The Issues

The Dela Peas seek the reversal of the assailed 31 March 2009 CA decision upon the affirmative of following
issues, to wit:

1) Whether or not the CA erred in reversing the RTC holding the house and lot covered by TCT No. N-32315
conjugal property of the spouses Antegono and Antonia Dela Pea;

2) Whether or not the CA erred in reversing the RTC declaring null and void the Deed of Absolute Sale
executed by Antonia to (Gemma); and

3) Whether or not the CA erred in reversing the RTC holding (FEBTC-BPI) a mortgagee/purchaser in bad
faith.29

The Courts Ruling

The petition is bereft of merit.

Pursuant to Article 160 of the Civil Code of the Philippines, all property of the marriage is presumed to belong to the
conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife. Although it is not
necessary to prove that the property was acquired with funds of the partnership,30 proof of acquisition during the
marriage is an essential condition for the operation of the presumption in favor of the conjugal partnership.31 In the
case of Francisco vs. Court of Appeals,32 this Court categorically ruled as follows:

Article 160 of the New Civil Code provides that "all property of the marriage is presumed to belong to the conjugal
partnership, unless it be proved that it pertains exclusively to the husband or to the wife." However, the party who
invokes this presumption must first prove that the property in controversy was acquired during the marriage. Proof of
acquisition during the coverture is a condition sine qua non for the operation of the presumption in favor of the
conjugal partnership. The party who asserts this presumption must first prove said time element. Needless to say,
the presumption refers only to the property acquired during the marriage and does not operate when there is no
showing as to when property alleged to be conjugal was acquired. Moreover, this presumption in favor of conjugality
is rebuttable, but only with strong, clear and convincing evidence; there must be a strict proof of exclusive ownership
of one of the spouses.33

As the parties invoking the presumption of conjugality under Article 160 of the Civil Code, the Dela Peas did not
even come close to proving that the subject property was acquired during the marriage between Antonia and
Antegono. Beyond Antonias bare and uncorroborated assertion that the property was purchased when she was
already married,34 the record is bereft of any evidence from which the actual date of acquisition of the realty can be
ascertained. When queried about the matter during his cross-examination, even Alvin admitted that his sole basis
for saying that the property was owned by his parents was Antonias unilateral pronouncement to the
effect.35Considering that the presumption of conjugality does not operate if there is no showing of when the property
alleged to be conjugal was acquired,36 we find that the CA cannot be faulted for ruling that the realty in litigation was
Antonias exclusive property.

Not having established the time of acquisition of the property, the Dela Peas insist that the registration thereof in
the name of "Antonia R. Dela Pea, of legal age, Filipino, married to Antegono A. Dela Pea" should have already
sufficiently established its conjugal nature. Confronted with the same issue in the case Ruiz vs. Court of
Appeals,37this Court ruled, however, that the phrase "married to" is merely descriptive of the civil status of the wife
and cannot be interpreted to mean that the husband is also a registered owner. Because it is likewise possible that
the property was acquired by the wife while she was still single and registered only after her marriage, neither would
registration thereof in said manner constitute proof that the same was acquired during the marriage and, for said
reason, to be presumed conjugal in nature. "Since there is no showing as to when the property in question was
acquired, the fact that the title is in the name of the wife alone is determinative of its nature as
paraphernal, i.e., belonging exclusively to said spouse."38

Viewed in light of the paraphernal nature of the property, the CA correctly ruled that the RTC reversibly erred in
nullifying Antonias 4 November 1997 sale thereof in favor of Gemma, for lack of the liquidation required under
Article 130 of the Family Code.39 That Antonia treated the realty as her own exclusive property may, in fact, be
readily gleaned from her utilization thereof as security for the payment of the P250,000.00 loan she borrowed from
Aguila.40 Despite Gemmas forfeiture of the right to present evidence on her behalf, her alleged alteration of the 7
May 1996 Deed of Real Estate Mortgage to shorten the maturity of the loan secured thereby was also properly
brushed aside by the CA. The double lie inherent in Antonias assertion that the same deed was altered by Gemma
to shorten the maturity of the loan to "1997 instead of 1998" is instantly evident from paragraph 1 of the document
which, consistent with 7 July 1996 maturity date provided in the Promissory Note she executed,41 specifically stated
that "(t)his contract is for a period of Three (3) months from the date of this instrument."42

Antonias evident lack of credibility also impels us to uphold the CAs rejection of her version of the circumstances
surrounding the execution of the 4 November 1997 Deed of Absolute Sale in favor of Gemma. In disavowing
authorship of the signature appearing on said deed,43 Antonia contradicted the allegation in the Dela Peas
complaint that she was misled by Gemma into signing the same document.44 The rule is well-settled that judicial
admissions like those made in the pleadings are binding and cannot be contradicted, absent any showing that the
same was made thru palpable mistake.45 Alongside that appearing on the Deed of Real Estate Mortgage she
admitted executing in favor of Aguila, Antonias signature on the Deed of Absolute Sale was, moreover, found to
have been written by one and the same person in Questioned Document Report No. 482-802 prepared by Zenaida
Torres, the NBI Document Examiner to whom said specimen signatures were submitted for
analysis.46Parenthetically, this conclusion is borne out by our comparison of the same signatures.

For all of Antonias denial of her receipt of any consideration for the sale of the property in favor of Gemma,47 the
evidence on record also lend credence to Gemmas version of the circumstances surrounding the execution of the
assailed 4 November 1997 Deed of Absolute Sale. Consistent with Gemmas claim that said deed was executed to
facilitate the loans she obtained from FEBTC-BPI which were agreed to be used as payment of the sums she
expended to settle the outstanding obligation to Aguila and the P50,000.00 she loaned Antonia,48 the latter admitted
during her direct examination that she did not pay the loan she obtained from Aguila.49 Presented as witness of the
Dela Peas, Alessandro Almoden also admitted that Gemma had extended a loan in the sum of P50,000.00 in favor
of Antonia. Notably, Alessandro Almodens claim that the title to the property had been delivered to Gemma as a
consequence of the transaction50 is at odds with Antonias claim that she presented said document to the Registry of
Deeds when she verified the status of the property prior to the filing of the complaint from which the instant suit
originated.51

With the material contradictions in the Dela Peas evidence, the CA cannot be faulted for upholding the validity of
the impugned 4 November 1997 Deed of Absolute Sale. Having been duly notarized, said deed is a public
document which carries the evidentiary weight conferred upon it with respect to its due execution.52 Regarded as
evidence of the facts therein expressed in a clear, unequivocal manner,53 public documents enjoy a presumption of
regularity which may only be rebutted by evidence so clear, strong and convincing as to exclude all controversy as
to falsity.54 The burden of proof to overcome said presumptions lies with the party contesting the notarial
document55 like the Dela Peas who, unfortunately, failed to discharge said onus. Absent clear and convincing
evidence to contradict the same, we find that the CA correctly pronounced the Deed of Absolute Sale was valid and
binding between Antonia and Gemma.

Since foreclosure of the mortgage is but the necessary consequence of non-payment of the mortgage
debt,56FEBTC-BPI was, likewise, acting well within its rights as mortgagee when it foreclosed the real estate
mortgage on the property upon Gemmas failure to pay the loans secured thereby. Executed on 26 November 1997,
the mortgage predated Antonias filing of an Affidavit of Adverse Claim with the Register of Deeds of Marikina on 3
March 1998 and the annotation of a Notice of Lis Pendens on TCT No. 337834 on 10 December 1999. "The
mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be,
to the fulfilment of the obligation for whose security it was constituted."57 When the principal obligation is not paid
when due, the mortgagee consequently has the right to foreclose the mortgage, sell the property, and apply the
proceeds of the sale to the satisfaction of the unpaid loan.58
Finally, the resolution of this case cannot be affected by the principles that banks like FEBTC-BPI are expected to
exercise more care and prudence than private individuals in that their dealings because their business is impressed
with public interest59 and their standard practice is to conduct an ocular inspection of the property offered to be
mortgaged and verify the genuineness of the title to determine the real owner or owners thereof, hence, the
inapplicability of the general rule that a mortgagee need not look beyond the title does not apply to them.60 The
validity of the Deed of Absolute Sale executed by Antonia in favor of Gemma having been upheld, FEBTC-BPIs
supposed failure to ascertain the ownership of the property has been rendered immaterial for the purpose of
determining the validity of the mortgage executed in its favor as well as the subsequent extrajudicial foreclosure
thereof.

WHEREFORE, premises considered, the petition is DENIED for lack of merit and the assailed CA Decision dated 31
March 2009 is, accordingly, AFFIRMED in toto.

SO ORDERED.

G.R. No. 182839 June 2, 2014

PHILIPPINE NATIONAL BANK, Petitioner,


vs.
JOSE GARCIA and CHILDREN NORA GARCIA, JOSE GARCIA, JR., BOBBY GARCIA and JIMMY GARCIA
and HEIRS OF ROGELIO GARCIA NAMELY: CELEDONIO GARCIA, DANILO GARCIA, ELSA GARCIA,
FERMIN GARCIA, HEHERSON GARCIA, GREGORIO GARCIA, IMELDA GARCIA and JANE
GARCIA,Respondents.

DECISION

BRION, J.:

We resolve this petition for review on certiorari1 assailing the decision2 dated September 26, 2007 and the
resolution3 dated May 6, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 71356.

These challenged CA rulings reversed and set aside the decision of the Regional Trial Court (RTC), Branch 23,
Roxas, Isabela, dismissing Civil Case No. Branch 23-500-96 for lack of cause of action.

The Factual Background

The facts of the case, gathered from the records, are briefly summarized below.

The subject of the present case is a parcel of residential land with all its improvements (subject property) located in
Barrio Olango, Mallig, Isabela. The land is covered by Transfer Certificate of Title (TCT) No. T-44422 under the
name of Jose Garcia Sr. (Jose Sr.) who acquired the subject property during his marriage with Ligaya Garcia.
Ligaya died on January 21, 1987.

The marriage of Jose Sr. and Ligaya produced the following children: Nora, Jose Jr., Bobby and Jimmy, all
surnamed Garcia, who are the respondents in the present case.

Sometime in 1989, the spouses Rogelio and Celedonia Garcia (Spouses Garcia) obtained a loan facility from the
petitioner, Philippine National Bank (petitioner bank), initially for P150,000.00. The loan was secured by a Real
Estate Mortgage over their property covered by TCT No. 177585. The spouses Garcia increased their loan
to P220,000.00 and eventually to P600,000.00. As security for the increased loan, they offered their property
covered by TCT No. 75324 and the subject property covered by TCT No. T-44422.

Jose Sr. agreed to accommodate the spouses Garcia by offering the subject property as additional collateral
security for the latters increased loan. For this purpose, Jose Sr. executed Special Powers of Attorney (SPAs) dated
April 14, 1992 and October 6, 1993, respectively, expressly authorizing the Spouses Garcia to apply for, borrow, or
secure any loan from the petitioner bank, and to convey and transfer the subject property by way of mortgage. Jose
Sr. also executed an Amendment of Real Estate Mortgage in favor of the petitioner bank. The SPAs and the
Amendment of Real Estate Mortgage are both inscribed on TCT No. T-44422. All of these transactions, however,
were without the knowledge and consent of Jose Sr.s children.

On maturity of the loan on April 20,1994, the spouses Garcia failed to pay their loan to the petitioner bank despite
repeated demands.

On January 12, 1996, the respondents filed before the RTC a Complaint for Nullity of the Amendment of Real Estate
Mortgage, Damages with Preliminary Injunction against the spouses Garcia and the petitioner bank. They claimed
that the Amendment of Real Estate Mortgage was null and void as to respondents Nora, Jose Jr., Bobby and Jimmy
as they were not parties to the contract.

The respondents alleged that the subject property was a conjugal property of Jose Sr. and his deceased spouse,
Ligaya, as they acquired the subject property during their marriage; that upon Ligayas death, Jose Sr., together with
his children Nora, Jose Jr., Bobby and Jimmy, by law, became owners pro indiviso of the subject property; that the
petitioner bank was at fault for not including Jose Sr. as payee to the check representing the loan despite its
knowledge that Jose Sr. was a signatory to the real estate mortgage; that the real estate mortgage executed by
Jose Sr. could not bind his children as they did not give their consent or approval to the encumbrance; and that the
real estate mortgage was also void as to Jose Sr. since he never benefitted from the loan.

In their answer, the Spouses Garcia alleged that Jose Sr. was indebted to them in the amount of P133,800.00. To
settle this indebtedness, Jose Sr. volunteered to give the subject property as additional security for their (the
Garcias) loan to the petitioner bank.

The petitioner bank, on the other hand, claimed that the mortgage was made in good faith and for value, and
maintained that the respondents complaint stated no cause of action against it. It alleged that the real estate
mortgage over the properties was duly registered and inscribed on their titles and was thus binding on the whole
world.

In the course of the proceedings, Nora, Jose Jr., Bobby and Jimmy executed an SPA dated May 31, 1996
authorizing Jose Sr. to act as their attorney-in-fact during the pretrial of the case.

The Ruling of the RTC

The RTC dismissed the complaint for lack of cause of action. The court held that the subject property was a
conjugal property since it was acquired by Jose Sr. during his marriage with his now deceased wife. As a conjugal
property, it is presumed that upon the death of his spouse, one-half of the property passed on to Jose Sr., while the
other half went to Jose and his children as co-owners and as forced heirs of his deceased spouse. Without the
consent of the children, the trial court ruled that the conjugal property could only be transferred or encumbered to
the extent of Jose Sr.s share in the conjugal partnership, plus his share as an heir in the other half pertaining to the
estate of his deceased spouse.

The RTC nevertheless declared that by virtue of the SPA executed by Nora, Jose Jr., Bobby and Jimmy in this suit,
they are already estopped from questioning the mortgage and from alleging lack of consent or knowledge in the
transaction. It held Jose Sr. liable as an accommodation party and upheld the petitioner banks right to collect the
debt.

The respondents disagreed with the RTC ruling and elevated the case to the CA via an ordinary appeal.

The Ruling of the CA

On September 26, 2007, the CA upheld the trial courts finding that the subject property was conjugal, but reversed
and set aside its ruling in so far as it declared valid and binding the Amendment of Real Estate Mortgage between
the petitioner bank, on one hand, and the spouses Garcia and Jose Sr., on the other hand, with respect to
respondents Nora, Jose Jr., Bobby and Jimmy. Relying on the Courts ruling in Nufable v. Nufable,4 the CA ruled
that the encumbrance Jose Sr. made over the entire conjugal property, without his childrens conformity, was null
and void because a mere part owner could not alienate the shares of the other co-owners.

The CA also declared that the conjugal property could only be liable to the extent of Jose Sr.s shares; Jose Sr.s
acts could not affect his childrens pro-indiviso shares in the subject property. It disagreed with the trial courts
estoppel theory and held that their execution of the SPA should not be construed as acquiescence to the mortgage
transaction. Lastly, it ruled that Jose Sr. could not escape liability from the mortgage since he voluntarily bound
himself as the Spouses Garcias accommodation mortgagor.

The petition

The petitioner bank disputes the CAs finding that the subject property was conjugal in nature. It argues that, as can
be gleaned from TCT No. T-44422, the subject property was registered in the name of Jose Sr. alone, who was
described in the title as "widower" and not "married." The petitioner bank posits that as a mortgagee in good faith, it
had the right to rely on the mortgagors certificate of title; in the absence of any indication that could arouse
suspicion, it had no obligation to undertake further investigation and verify whether the property was conjugal or was
acquired during marriage or thereafter.

Since the subject property belonged to Jose Sr., insofar as petitioner bank as mortgagee was concerned, Jose Sr.
had the right under Article 428 of the Civil Code to mortgage it without the consent of his children. Accordingly, the
mortgage in its entirety should be declared valid.

The Comment
The respondents state that the issues raised by petitioner bank are essentially factual; hence, they are beyond the
competence of this Court in a petition for review. They submit that in a certiorari petition under Rule 45 of the Rules
of Court, only questions of law may be entertained because the Court is not a trier of facts.

The Courts Ruling

We deny the petition for lack of merit.

The petition before us raises both questions of fact and of law. Whether petitioner bank is a mortgagee in good faith
and for value and whether the subject property was conjugal, are factual issues that this Court cannot look into as
our examination would entail going into factual matters and records of the case. In Rule 45 petitions, only questions
of law may be put into issue. Questions of fact cannot be entertained.5

Although there are exceptions to the rule that only questions of law may be raised in a petition for certiorari, the
petitioner bank failed to show that this case falls under any of the established exceptions. Too, since the CA partially
affirmed the findings of the trial court and absent any indication that these courts committed a serious error in its
findings, this Court is bound by these courts findings.6

Moreover, even if we were to review the factual issues raised by the petitioner bank, we still find no reason to depart
from the CAs ruling.

The Subject Property is Conjugal

a. All property acquired during marriage is presumed conjugal

Since Jose Sr. and Ligaya were married prior to the effectivity of the Family Code, their property relations were
governed by the conjugal partnership of gains as provided under Article 119 of the Civil Code. Under Article 160 of
the Civil Code, "all property of the marriage is presumed to belong to the conjugal partnership, unless it can be
proven that it pertains exclusively to the husband or to the wife."

In his testimony, Jose Sr. admitted that at the time he acquired the land through sale, he was already married. The
material portion of his testimony is as follows:

Q: Upon the death of your wife did you and your wife ever own a piece of land?

A: Yes, sir.

Q: Where is that land situated?

A: In Centro, District 2, Mallig[,] Isabela.

Q: Is that land titled in your names?

A:Yes, sir.

xxxx

Q: You and your wife acquired that piece of land?

A: Yes, sir.

xxxx

Q: May we know from you[,] Mr. Witness, how did you acquire this parcel of land presently embraced and covered
by TCT No. T-44422?

A: I purchased that piece of land from the Baniqued Family during my incumbency as Municipal Mayor, sir.

Q: What was your civil status at the time you purchased that piece of land?

A: I was already married, sir.(Emphasis ours, TSN, July 24, 1997, Jose Garcia Sr.)7

Because of the petitioner banks failure to rebut the allegation that the subject property was acquired during the
formers marriage to Ligaya, the legal presumption of the conjugal nature of the property, in line with Article 160 of
the Civil Code, applies to this property. Proof of the subject propertys acquisition during the subsistence of marriage
suffices to render the statutory presumption operative.8
b. Registration of the subject property in the name of one spouse does not destroy the presumption that the property
is conjugal

The petitioner bank claims that the CA failed to consider that the subject property was registered in the name of
Jose Sr. alone. Likewise, it raises the argument that Jose Sr.s change of status in the subject propertys title from
1a\^ /phi1

"married" to "widower" prior to the constitution of the real estate mortgage showed that the property was no longer
conjugal.

We do not consider this argument persuasive.

Registration of a property alone in the name of one spouse does not destroy its conjugal nature. What is material is
the time when the property was acquired.9 The registration of the property is not conclusive evidence of the
exclusive ownership of the husband or the wife. Although the property appears to be registered in the name of the
husband, it has the inherent character of conjugal property if it was acquired for valuable consideration during
marriage.10

It retains its conjugal nature.

In order to rebut the presumptive conjugal nature of the property, the petitioner must present strong, clear and
convincing evidence of exclusive ownership of one of the spouses.11 The burden of proving that the property belongs
exclusively to the wife or to the husband rests upon the party asserting it.

In the present case, aside from its allegation that the subject property is no longer conjugal and its assertion that it is
a mortgagee in good faith, the petitioner bank offered no evidence, convincing to this Court, that the subject property
exclusively belonged to Jose Sr. As stated earlier, the petitioner bank failed to overcome the legal presumption that
the disputed property was conjugal. Thus, the conclusion of both lower courts that the subject property was
1w phi 1

conjugal property holds. Factual findings of the CA affirming those of the trial court are binding on this Court unless
there is a clear showing that such findings are tainted with arbitrariness, capriciousness or palpable error.12

The conjugal partnership was converted into an implied ordinary co-ownership upon the death of Ligaya

Upon the death of Ligaya on January 21, 1987, the conjugal partnership was automatically dissolved and terminated
pursuant to Article 175(1) of the Civil Code,13 and the successional rights of her heirs vest, as provided under Article
777 of the Civil Code, which states that"[t]he rights to the succession are transmitted from the moment of the death
of the decedent."

Consequently, the conjugal partnership was converted into an implied ordinary co-ownership between the surviving
spouse, on the one hand, and the heirs of the deceased, on the other.14 This resulting ordinary co-ownership among
the heirs is governed by Article 493 of the Civil Code which reads:

Art. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and
he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when
personal rights are involved. But the effect of the alienation of the mortgage, with respect to the co-owners shall be
limited to the portion which may be allotted to him in the division upon the termination of the co-ownership."
(Emphasis supplied)

Under this provision, each co-owner has the full ownership of his part or share in the co-ownership and may,
therefore, alienate, assign or mortgage it except when personal rights are involved. Should a co-owner alienate or
mortgage the co-owned property itself, the alienation or mortgage shall remain valid but only to the extent of the
portion which may be allotted to him in the division upon the termination of the co-ownership.15 In Carvajal v. Court of
Appeals,16 the Court said:

While under Article 493 of the New Civil Code, each co-owner shall have the full ownership of his part and of the
fruits and benefits pertaining thereto and he may alienate, assign or mortgage it, and even substitute another person
in its enjoyment, the effect of the alienation or the mortgage with respect to the co-owners, shall be limited, by
mandate of the same article, to the portion which may be allotted to him in the division upon the termination of the
co-ownership. He has no right to sell or alienate a concrete, specific, or determinate part of the thing in common to
the exclusion of the other co-owners because his right over the thing is represented by an abstract or Ideal portion
without any physical adjudication.3 An individual co- owner cannot adjudicate to himself or claim title to any definite
portion of the land or thing owned in common until its actual partition by agreement or judicial decree. Prior to that
time all that the co-owner has is an Ideal or abstract quota or proportionate share in the entire thing owned in
common by all the co-owners.4 What a co owner may dispose of is only his undivided aliquot share, which shall be
limited to the portion that may be allotted to him upon partition. [emphasis supplied].

In the present case, Jose Sr. constituted the mortgage over the entire subject property after the death of Ligaya, but
before the liquidation of the conjugal partnership. While under Article 493 of the Civil Code, even if he had the right
to freely mortgage or even sell his undivided interest in the disputed property, he could not dispose of or mortgage
the entire property without his childrens consent. As correctly emphasized by the trial court, Jose Sr.s right in the
subject property is limited only to his share in the conjugal partnership as well as his share as an heir on the other
half of the estate which is his deceased spouses share. Accordingly, the mortgage contract is void insofar as it
extends to the undivided shares of his children (Nora, Jose Jr., Bobby and Jimmy) because they did not give their
consent to the transaction.17

Accordingly, the Amendment of Real Estate Mortgage constituted by Jose Sr. over the entire property without his
co-owners' consent is not necessarily void in its entirety. The right of the petitioner bank as mortgagee is limited
though only to the portion which may be allotted to Jose Sr. in the event of a division and liquidation of the subject
property.

WHEREFORE, in view of the foregoing, we hereby AFFIRM the Decision dated September 26, 2007of the Court of
Appeals in CA-G.R. CV No. 71356. Costs against petitioner Philippine National Bank.

SO ORDERED.

G.R. No. 170166 April 6, 2011

JOE A. ROS and ESTRELLA AGUETE, Petitioners,


vs.
PHILIPPINE NATIONAL BANK - LAOAG BRANCH, Respondent.

DECISION

CARPIO, J.:

The Case

G.R. No. 170166 is a petition for review1 assailing the Decision2 promulgated on 17 October 2005 by the Court of
Appeals (appellate court) in CA-G.R. CV No. 76845. The appellate court granted the appeal filed by the Philippine
National Bank Laoag Branch (PNB). The appellate court reversed the 29 June 2001 Decision of Branch 15 of the
Regional Trial Court of Laoag City (trial court) in Civil Case No. 7803.

The trial court declared the Deed of Real Estate Mortgage executed by spouses Jose A. Ros3 (Ros) and Estrella
Aguete (Aguete) (collectively, petitioners), as well as the subsequent foreclosure proceedings, void. Aside from
payment of attorneys fees, the trial court also ordered PNB to vacate the subject property to give way to petitioners
possession.

The Facts

The appellate court narrated the facts as follows:

On January 13, 1983, spouses Jose A. Ros and Estrella Aguete filed a complaint for the annulment of the Real
Estate Mortgage and all legal proceedings taken thereunder against PNB, Laoag Branch before the Court of First
Instance, Ilocos Norte docketed as Civil Case No. 7803.

The complaint was later amended and was raffled to the Regional Trial Court, Branch 15, Laoag City.

The averments in the complaint disclosed that plaintiff-appellee Joe A. Ros obtained a loan of P115,000.00 from
PNB Laoag Branch on October 14, 1974 and as security for the loan, plaintiff-appellee Ros executed a real estate
mortgage involving a parcel of land Lot No. 9161 of the Cadastral Survey of Laoag, with all the improvements
thereon described under Transfer Certificate of Title No. T-9646.

Upon maturity, the loan remained outstanding. As a result, PNB instituted extrajudicial foreclosure proceedings on
the mortgaged property. After the extrajudicial sale thereof, a Certificate of Sale was issued in favor of PNB, Laoag
as the highest bidder. After the lapse of one (1) year without the property being redeemed, the property was
consolidated and registered in the name of PNB, Laoag Branch on August 10, 1978.

Claiming that she (plaintiff-appellee Estrella Aguete) has no knowledge of the loan obtained by her husband nor she
consented to the mortgage instituted on the conjugal property a complaint was filed to annul the proceedings
pertaining to the mortgage, sale and consolidation of the property interposing the defense that her signatures
affixed on the documents were forged and that the loan did not redound to the benefit of the family. 1avv phi 1

In its answer, PNB prays for the dismissal of the complaint for lack of cause of action, and insists that it was
plaintiffs-appellees own acts [of]

omission/connivance that bar them from recovering the subject property on the ground of estoppel, laches,
abandonment and prescription.4]
The Trial Courts Ruling

On 29 June 2001, the trial court rendered its Decision5 in favor of petitioners. The trial court declared that Aguete did
not sign the loan documents, did not appear before the Notary Public to acknowledge the execution of the loan
documents, did not receive the loan proceeds from PNB, and was not aware of the loan until PNB notified her in 14
August 1978 that she and her family should vacate the mortgaged property because of the expiration of the
redemption period. Under the Civil Code, the effective law at the time of the transaction, Ros could not encumber
any real property of the conjugal partnership without Aguetes consent. Aguete may, during their marriage and within
ten years from the transaction questioned, ask the courts for the annulment of the contract her husband entered into
without her consent, especially in the present case where her consent is required. The trial court, however, ruled
that its decision is without prejudice to the right of action of PNB to recover the amount of the loan and its interests
from Ros.

The dispositive portion reads:

WHEREFORE, premises considered, judgment is hereby rendered:

1. DECLARING the Deed of Real Estate Mortgage (Exhibit "C") and the subsequent foreclosure
proceedings conducted thereon NULL and VOID;

2. ORDERING the Register of Deeds of the City of Laoag to cancel TCT No. T-15276 in the name of
defendant PNB and revert the same in the name of plaintiffs spouses Joe Ros and Estrella Aguete;

3. ORDERING defendant to vacate and turnover the possession of the premises of the property in suit to the
plaintiffs; and

4. ORDERING defendant to pay plaintiffs attorneys fee and litigation expenses in the sum of TEN
THOUSAND (P10,000.00) PESOS.

No pronouncement as to costs.

SO ORDERED.6]

PNB filed its Notice of Appeal7 of the trial courts decision on 13 September 2001 and paid the corresponding fees.
Petitioners filed on the same date a motion for execution pending appeal,8 which PNB opposed.9 In their comment to
the opposition10 filed on 10 October 2001, petitioners stated that at the hearing of the motion on 3 October 2001,
PNBs lay representative had no objection to the execution of judgment pending appeal. Petitioners claimed that the
house on the subject lot is dilapidated, a danger to life and limb, and should be demolished. Petitioners added that
they obliged themselves to make the house habitable at a cost of not less P50,000.00. The repair cost would accrue
to PNBs benefit should the appellate court reverse the trial court. PNB continued to oppose petitioners motion.11

In an Order12 dated 8 May 2002, the trial court found petitioners motion for execution pending appeal improper
because petitioners have made it clear that they were willing to wait for the appellate courts decision. However, as a
court of justice and equity, the trial court allowed petitioners to occupy the subject property with the condition that
petitioners would voluntarily vacate the premises and waive recovery of improvements introduced should PNB
prevail on appeal.

The Appellate Courts Ruling

On 17 October 2005, the appellate court rendered its Decision13 and granted PNBs appeal. The appellate court
reversed the trial courts decision, and dismissed petitioners complaint.

The appellate court stated that the trial court concluded forgery without adequate proof; thus it was improper for the
trial court to rely solely on Aguetes testimony that her signatures on the loan documents were forged. The appellate
court declared that Aguete affixed her signatures on the documents knowingly and with her full consent.

Assuming arguendo that Aguete did not give her consent to Ros loan, the appellate court ruled that the conjugal
partnership is still liable because the loan proceeds redounded to the benefit of the family. The records of the case
reveal that the loan was used for the expansion of the familys business. Therefore, the debt obtained is chargeable
against the conjugal partnership.

Petitioners filed the present petition for review before this Court on 9 December 2005.

The Issues

Petitioners assigned the following errors:


I. The Honorable Court of Appeals erred in not giving weight to the findings and conclusions of the trial court, and in
reversing and setting aside such findings and conclusions without stating specific contrary evidence;

II. The Honorable Court of Appeals erred in declaring the real estate mortgage valid;

III. The Honorable Court of Appeals erred in declaring, without basis, that the loan contracted by husband Joe A.
Ros with respondent Philippine National Bank Laoag redounded to the benefit of his family, aside from the fact
that such had not been raised by respondent in its appeal.14]

The Courts Ruling

The petition has no merit. We affirm the ruling of the appellate court.

The Civil Code was the applicable law at the time of the mortgage. The subject property is thus considered part of
the conjugal partnership of gains. The pertinent articles of the Civil Code provide:

Art. 153. The following are conjugal partnership property:

(1) That which is acquired by onerous title during the marriage at the expense of the common fund, whether
the acquisition be for the partnership, or for only one of the spouses;

(2) That which is obtained by the industry, or work or as salary of the spouses, or of either of them;

(3) The fruits, rents or interest received or due during the marriage, coming from the common property or
from the exclusive property of each spouse.

Art. 160. All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it
pertains exclusively to the husband or to the wife.

Art. 161. The conjugal partnership shall be liable for:

(1) All debts and obligations contracted by the husband for the benefit of the conjugal partnership, and those
contracted by the wife, also for the same purpose, in the cases where she may legally bind the partnership;

(2) Arrears or income due, during the marriage, from obligations which constitute a charge upon property of
either spouse or of the partnership;

(3) Minor repairs or for mere preservation made during the marriage upon the separate property of either the
husband or the wife; major repairs shall not be charged to the partnership;

(4) Major or minor repairs upon the conjugal partnership property;

(5) The maintenance of the family and the education of the children of both husband and wife, and of
legitimate children of one of the spouses;

(6) Expenses to permit the spouses to complete a professional, vocational or other course.

Art. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is
confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership
without the wifes consent. If she refuses unreasonably to give her consent, the court may compel her to grant the
same.

Art. 173. The wife may, during the marriage, and within ten years from the transaction questioned, ask the courts for
the annulment of any contract of the husband entered into without her consent, when such consent is required, or
any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership
property. Should the wife fail to exercise this right, she or her heirs after the dissolution of the marriage may demand
the value of the property fraudulently alienated by the husband.

There is no doubt that the subject property was acquired during Ros and Aguetes marriage. Ros and Aguete were
married on 16 January 1954, while the subject property was acquired in 1968.15 There is also no doubt that Ros
encumbered the subject property when he mortgaged it for P115,000.00 on 23 October 1974.16 PNB Laoag does
not doubt that Aguete, as evidenced by her signature, consented to Ros mortgage to PNB of the subject property.
On the other hand, Aguete denies ever having consented to the loan and also denies affixing her signature to the
mortgage and loan documents.

The husband cannot alienate or encumber any conjugal real property without the consent, express or implied, of the
wife. Should the husband do so, then the contract is voidable.17 Article 173 of the Civil Code allows Aguete to
question Ros encumbrance of the subject property. However, the same article does not guarantee that the courts
will declare the annulment of the contract. Annulment will be declared only upon a finding that the wife did not give
her consent. In the present case, we follow the conclusion of the appellate court and rule that Aguete gave her
consent to Ros encumbrance of the subject property.

The documents disavowed by Aguete are acknowledged before a notary public, hence they are public documents.
Every instrument duly acknowledged and certified as provided by law may be presented in evidence without further
proof, the certificate of acknowledgment being prima facie evidence of the execution of the instrument or document
involved.18 The execution of a document that has been ratified before a notary public cannot be disproved by the
mere denial of the alleged signer.19 PNB was correct when it stated that petitioners omission to present other
positive evidence to substantiate their claim of forgery was fatal to petitioners cause.20 Petitioners did not present
any corroborating witness, such as a handwriting expert, who could authoritatively declare that Aguetes signatures
were really forged.

A notarized document carries the evidentiary weight conferred upon it with respect to its due execution, and it has in
its favor the presumption of regularity which may only be rebutted by evidence so clear, strong and convincing as to
exclude all controversy as to the falsity of the certificate. Absent such, the presumption must be upheld. The burden
of proof to overcome the presumption of due execution of a notarial document lies on the one contesting the same.
Furthermore, an allegation of forgery must be proved by clear and convincing evidence, and whoever alleges it has
the burden of proving the same.21]

Ros himself cannot bring action against PNB, for no one can come before the courts with unclean hands. In their
1avv phi 1

memorandum before the trial court, petitioners themselves admitted that Ros forged Aguetes signatures.

Joe A. Ros in legal effect admitted in the complaint that the signatures of his wife in the questioned documents are
forged, incriminating himself to criminal prosecution. If he were alive today, he would be prosecuted for forgery. This
strengthens the testimony of his wife that her signatures on the questioned documents are not hers.

In filing the complaint, it must have been a remorse of conscience for having wronged his family; in forging the
signature of his wife on the questioned documents; in squandering the P115,000.00 loan from the bank for himself,
resulting in the foreclosure of the conjugal property; eviction of his family therefrom; and, exposure to public
contempt, embarassment and ridicule.22]

The application for loan shows that the loan would be used exclusively "for additional working [capital] of buy & sell
of garlic & virginia tobacco."23 In her testimony, Aguete confirmed that Ros engaged in such business, but claimed to
be unaware whether it prospered. Aguete was also aware of loans contracted by Ros, but did not know where he
"wasted the money."24 Debts contracted by the husband for and in the exercise of the industry or profession by
which he contributes to the support of the family cannot be deemed to be his exclusive and private debts.25

If the husband himself is the principal obligor in the contract, i.e., he directly received the money and services to be
used in or for his own business or his own profession, that contract falls within the term "x x x x obligations for the
benefit of the conjugal partnership." Here, no actual benefit may be proved. It is enough that the benefit to the family
is apparent at the signing of the contract. From the very nature of the contract of loan or services, the family stands
to benefit from the loan facility or services to be rendered to the business or profession of the husband. It is
immaterial, if in the end, his business or profession fails or does not succeed. Simply stated, where the husband
contracts obligations on behalf of the family business, the law presumes, and rightly so, that such obligation will
redound to the benefit of the conjugal partnership.26]

For this reason, we rule that Ros loan from PNB redounded to the benefit of the conjugal partnership. Hence, the
debt is chargeable to the conjugal partnership.

WHEREFORE, we DENY the petition. The Decision of the Court of Appeals in CA-G.R. CV No. 76845 promulgated
on 17 October 2005 is AFFIRMED. Costs against petitioners.

SO ORDERED.

G.R. No. 164201 December 10, 2012

EFREN PANA, Petitioner,


vs.
HEIRS OF JOSE JUANITE, SR. and JOSE JUANITE, JR., Respondents.

DECISION

ABAD, J.:
This case is about the propriety of levy and execution on conjugal properties where one of the spouses has been
found guilty of a crime and ordered to pay civil indemnities to the victims' heirs.

The Facts and the Case

The prosecution accused petitioner Efren Pana (Efren), his wife Melecia, and others of murder before the. Regional
Trial Court (RTC) of Surigao City in Criminal Cases 4232 and 4233.1

On July 9, 1997 the RTC rendered a consolidated decision2 acquitting Efren of the charge for insufficiency of
evidence but finding Melecia and another person guilty as charged and sentenced them to the penalty of death. The
RTC ordered those found guilty to pay each of the heirs of the victims, jointly and severally, P50,000.00 as civil
indemnity, P50,000.00 each as moral damages, and P150,000.00 actual damages.

On appeal to this Court, it affirmed on May 24, 2001 the conviction of both accused but modified the penalty
to reclusion perpetua. With respect to the monetary awards, the Court also affirmed the award of civil indemnity and
moral damages but deleted the award for actual damages for lack of evidentiary basis. In its place, however, the
Court made an award of P15,000.00 each by way of temperate damages. In addition, the Court awarded
P50,000.00 exemplary damages per victim to be paid solidarily by them.3 The decision became final and executory
on October 1, 2001.4

Upon motion for execution by the heirs of the deceased, on March 12, 2002 the RTC ordered the issuance of the
writ,5 resulting in the levy of real properties registered in the names of Efren and Melecia.6 Subsequently, a notice of
levy7 and a notice of sale on execution8 were issued.

On April 3, 2002, petitioner Efren and his wife Melecia filed a motion to quash the writ of execution, claiming that the
levied properties were conjugal assets, not paraphernal assets of Melecia.9 On September 16, 2002 the RTC denied
the motion.10 The spouses moved for reconsideration but the RTC denied the same on March 6, 2003.11

Claiming that the RTC gravely abused its discretion in issuing the challenged orders, Efren filed a petition
for certiorari before the Court of Appeals (CA). On January 29, 2004 the CA dismissed the petition for failure to
sufficiently show that the RTC gravely abused its discretion in issuing its assailed orders.12 It also denied Efrens
motion for reconsideration,13 prompting him to file the present petition for review on certiorari.

The Issue Presented

The sole issue presented in this case is whether or not the CA erred in holding that the conjugal properties of
spouses Efren and Melecia can be levied and executed upon for the satisfaction of Melecias civil liability in the
murder case.

Ruling of the Court

To determine whether the obligation of the wife arising from her criminal liability is chargeable against the properties
of the marriage, the Court has first to identify the spouses property relations.

Efren claims that his marriage with Melecia falls under the regime of conjugal partnership of gains, given that they
were married prior to the enactment of the Family Code and that they did not execute any prenuptial
agreement.14Although the heirs of the deceased victims do not dispute that it was the Civil Code, not the Family
Code, which governed the marriage, they insist that it was the system of absolute community of property that
applied to Efren and Melecia. The reasoning goes:

Admittedly, the spouses were married before the effectivity of the Family Code. But that fact does not prevent the
application of [A]rt. 94, last paragraph, of the Family Code because their property regime is precisely governed by
the law on absolute community. This finds support in Art. 256 of the Family Code which states:

"This code shall have retroactive effect in so far as it does not prejudice or impair vested or acquired rights in
accordance with the Civil Code or other laws."

None of the spouses is dead. Therefore, no vested rights have been acquired by each over the properties of the
community. Hence, the liabilities imposed on the accused-spouse may properly be charged against the community
as heretofore discussed.15

The RTC applied the same reasoning as above.16 Efren and Melecias property relation was admittedly conjugal
under the Civil Code but, since the transitory provision of the Family Code gave its provisions retroactive effect if no
vested or acquired rights are impaired, that property relation between the couple was changed when the Family
Code took effect in 1988. The latter code now prescribes in Article 75 absolute community of property for all
marriages unless the parties entered into a prenuptial agreement. As it happens, Efren and Melecia had no
prenuptial agreement. The CA agreed with this position.17
Both the RTC and the CA are in error on this point. While it is true that the personal stakes of each spouse in their
conjugal assets are inchoate or unclear prior to the liquidation of the conjugal partnership of gains and, therefore,
none of them can be said to have acquired vested rights in specific assets, it is evident that Article 256 of the Family
Code does not intend to reach back and automatically convert into absolute community of property relation all
conjugal partnerships of gains that existed before 1988 excepting only those with prenuptial agreements.

The Family Code itself provides in Article 76 that marriage settlements cannot be modified except prior to marriage.

Art. 76. In order that any modification in the marriage settlements may be valid, it must be made before the
celebration of the marriage, subject to the provisions of Articles 66, 67, 128, 135 and 136.

Clearly, therefore, the conjugal partnership of gains that governed the marriage between Efren and Melecia who
were married prior to 1988 cannot be modified except before the celebration of that marriage.

Post-marriage modification of such settlements can take place only where: (a) the absolute community or conjugal
partnership was dissolved and liquidated upon a decree of legal separation;18 (b) the spouses who were legally
separated reconciled and agreed to revive their former property regime;19 (c) judicial separation of property had
been had on the ground that a spouse abandons the other without just cause or fails to comply with his obligations
to the family;20 (d) there was judicial separation of property under Article 135; (e) the spouses jointly filed a petition
for the voluntary dissolution of their absolute community or conjugal partnership of gains.21 None of these
circumstances exists in the case of Efren and Melecia.

What is more, under the conjugal partnership of gains established by Article 142 of the Civil Code, the husband and
the wife place only the fruits of their separate property and incomes from their work or industry in the common fund.
Thus:

Art. 142. By means of the conjugal partnership of gains the husband and wife place in a common fund the fruits of
their separate property and the income from their work or industry, and divide equally, upon the dissolution of the
marriage or of the partnership, the net gains or benefits obtained indiscriminately by either spouse during the
marriage.

This means that they continue under such property regime to enjoy rights of ownership over their separate
properties. Consequently, to automatically change the marriage settlements of couples who got married under the
Civil Code into absolute community of property in 1988 when the Family Code took effect would be to impair their
acquired or vested rights to such separate properties.

The RTC cannot take advantage of the spouses loose admission that absolute community of property governed
their property relation since the record shows that they had been insistent that their property regime is one of
conjugal partnership of gains.22 No evidence of a prenuptial agreement between them has been presented.

What is clear is that Efren and Melecia were married when the Civil Code was still the operative law on marriages.
The presumption, absent any evidence to the contrary, is that they were married under the regime of the conjugal
partnership of gains. Article 119 of the Civil Code thus provides:

Art. 119. The future spouses may in the marriage settlements agree upon absolute or relative community of
property, or upon complete separation of property, or upon any other regime. In the absence of marriage
settlements, or when the same are void, the system of relative community or conjugal partnership of gains as
established in this Code, shall govern the property relations between husband and wife.

Of course, the Family Code contains terms governing conjugal partnership of gains that supersede the terms of the
conjugal partnership of gains under the Civil Code. Article 105 of the Family Code states:

"x x x x

The provisions of this Chapter [on the Conjugal Partnership of Gains] shall also apply to conjugal partnerships of
gains already established between spouses before the effectivity of this Code, without prejudice to vested rights
already acquired in accordance with the Civil Code or other laws, as provided in Article 256."23

Consequently, the Court must refer to the Family Code provisions in deciding whether or not the conjugal properties
of Efren and Melecia may be held to answer for the civil liabilities imposed on Melecia in the murder case. Its Article
122 provides:

Art. 122. The payment of personal debts contracted by the husband or the wife before or during the marriage shall
not be charged to the conjugal properties partnership except insofar as they redounded to the benefit of the family.

Neither shall the fines and pecuniary indemnities imposed upon them be charged to the partnership.
However, the payment of personal debts contracted by either spouse before the marriage, that of fines and
indemnities imposed upon them, as well as the support of illegitimate children of either spouse, may be enforced
against the partnership assets after the responsibilities enumerated in the preceding Article have been covered, if
the spouse who is bound should have no exclusive property or if it should be insufficient; but at the time of the
liquidation of the partnership, such spouse shall be charged for what has been paid for the purpose above-
mentioned.

Since Efren does not dispute the RTCs finding that Melecia has no exclusive property of her own,24 the above
applies. The civil indemnity that the decision in the murder case imposed on her may be enforced against their
conjugal assets after the responsibilities enumerated in Article 121 of the Family Code have been covered.25 Those
responsibilities are as follows:

Art. 121. The conjugal partnership shall be liable for:

(1) The support of the spouse, their common children, and the legitimate children of either spouse; however,
the support of illegitimate children shall be governed by the provisions of this Code on Support;

(2) All debts and obligations contracted during the marriage by the designated administrator-spouse for the
benefit of the conjugal partnership of gains, or by both spouses or by one of them with the consent of the
other;

(3) Debts and obligations contracted by either spouse without the consent of the other to the extent that the
family may have benefited;

(4) All taxes, liens, charges, and expenses, including major or minor repairs upon the conjugal partnership
property;

(5) All taxes and expenses for mere preservation made during the marriage upon the separate property of
either spouse;

(6) Expenses to enable either spouse to commence or complete a professional, vocational, or other activity
for self-improvement;

(7) Antenuptial debts of either spouse insofar as they have redounded to the benefit of the family;

(8) The value of what is donated or promised by both spouses in favor of their common legitimate children
for the exclusive purpose of commencing or completing a professional or vocational course or other activity
for self-improvement; and

(9) Expenses of litigation between the spouses unless the suit is found to be groundless.

If the conjugal partnership is insufficient to cover the foregoing liabilities, the spouses shall be solidarily liable for the
unpaid balance with their separate properties. 1wphi1

Contrary to Efrens contention, Article 121 above allows payment of the criminal indemnities imposed on his wife,
Melecia, out of the partnership assets even before these are liquidated. Indeed, it states that such indemnities "may
be enforced against the partnership assets after the responsibilities enumerated in the preceding article have been
covered."[26] No prior liquidation of those assets is required. This is not altogether unfair since Article 122 states
that "at the time of liquidation of the partnership, such [offending] spouse shall be charged for what has been paid
for the purposes above-mentioned."

WHEREFORE, the Court AFFIRMS with MODIFICATION the Resolutions of the Court of Appeals in CA-G.R. SP
77198 dated January 29, 2004 and May 14, 2004. The Regional Trial Court of Surigao City, Branch 30, shall first
ascertain that, in enforcing the writ of execution on the conjugal properties of spouses Efren and Melecia Pana for
the satisfaction of the indemnities imposed by final judgment on the latter accused in Criminal Cases 4232 and
4233, the responsibilities enumerated in Article 121 of the Family Code have been covered.

SO ORDERED.

G.R. No. 195670 December 3, 2012

WILLEM BEUMER, Petitioner,


vs.
AVELINA AMORES, Respondent.

DECISION
PERLAS-BERNABE, J.:

Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of CoLlli assailing the October 8,
2009 Decision2 and January 24, 2011 Resolution3 of the court of Appeals (CA) in CA-G.R. CV No. 01940, which
affirmed the February 28, 2007 Decision4 of the Regional Trial Court (RTC) of Negros Oriental, Branch 34 in Civil
Case No. I 2884. The foregoing rulings dissolved the conjugal partnership of gains of Willem Beumer (petitioner)
and Avelina Amores (respondent) and distributed the properties forming part of the said property regime.

The Factual Antecedents

Petitioner, a Dutch National, and respondent, a Filipina, married in March 29, 1980. After several years, the RTC of
Negros Oriental, Branch 32, declared the nullity of their marriage in the Decision5 dated November 10, 2000 on the
basis of the formers psychological incapacity as contemplated in Article 36 of the Family Code.

Consequently, petitioner filed a Petition for Dissolution of Conjugal Partnership6 dated December 14, 2000 praying
for the distribution of the following described properties claimed to have been acquired during the subsistence of
their marriage, to wit:

By Purchase:

a. Lot 1, Block 3 of the consolidated survey of Lots 2144 & 2147 of the Dumaguete Cadastre, covered by
Transfer Certificate of Title (TCT) No. 22846, containing an area of 252 square meters (sq.m.), including a
residential house constructed thereon.

b. Lot 2142 of the Dumaguete Cadastre, covered by TCT No. 21974, containing an area of 806 sq.m.,
including a residential house constructed thereon.

c. Lot 5845 of the Dumaguete Cadastre, covered by TCT No. 21306, containing an area of 756 sq.m.

d. Lot 4, Block 4 of the consolidated survey of Lots 2144 & 2147 of the Dumaguete Cadastre, covered by
TCT No. 21307, containing an area of 45 sq.m.

By way of inheritance:

e. 1/7 of Lot 2055-A of the Dumaguete Cadastre, covered by TCT No. 23567, containing an area of 2,635
sq.m. (the area that appertains to the conjugal partnership is 376.45 sq.m.).

f. 1/15 of Lot 2055-I of the Dumaguete Cadastre, covered by TCT No. 23575, containing an area of 360
sq.m. (the area that appertains to the conjugal partnership is 24 sq.m.).7

In defense,8 respondent averred that, with the exception of their two (2) residential houses on Lots 1 and 2142, she
and petitioner did not acquire any conjugal properties during their marriage, the truth being that she used her own
personal money to purchase Lots 1, 2142, 5845 and 4 out of her personal funds and Lots 2055-A and 2055-I by way
of inheritance.9 She submitted a joint affidavit executed by her and petitioner attesting to the fact that she purchased
Lot 2142 and the improvements thereon using her own money.10 Accordingly, respondent sought the dismissal of
the petition for dissolution as well as payment for attorneys fees and litigation expenses.11

During trial, petitioner testified that while Lots 1, 2142, 5845 and 4 were registered in the name of respondent, these
properties were acquired with the money he received from the Dutch government as his disability benefit12 since
respondent did not have sufficient income to pay for their acquisition. He also claimed that the joint affidavit they
submitted before the Register of Deeds of Dumaguete City was contrary to Article 89 of the Family Code, hence,
invalid.13

For her part, respondent maintained that the money used for the purchase of the lots came exclusively from her
personal funds, in particular, her earnings from selling jewelry as well as products from Avon, Triumph and
Tupperware.14 She further asserted that after she filed for annulment of their marriage in 1996, petitioner transferred
to their second house and brought along with him certain personal properties, consisting of drills, a welding
machine, grinders, clamps, etc. She alleged that these tools and equipment have a total cost of P500,000.00.15

The RTC Ruling

On February 28, 2007, the RTC of Negros Oriental, Branch 34 rendered its Decision, dissolving the parties conjugal
partnership, awarding all the parcels of land to respondent as her paraphernal properties; the tools and equipment in
favor of petitioner as his exclusive properties; the two (2) houses standing on Lots 1 and 2142 as co-owned by the
parties, the dispositive of which reads:

WHEREFORE, judgment is hereby rendered granting the dissolution of the conjugal partnership of gains between
petitioner Willem Beumer and respondent Avelina Amores considering the fact that their marriage was previously
annulled by Branch 32 of this Court. The parcels of land covered by Transfer Certificate of Titles Nos. 22846, 21974,
21306, 21307, 23567 and 23575 are hereby declared paraphernal properties of respondent Avelina Amores due to
the fact that while these real properties were acquired by onerous title during their marital union, Willem Beumer,
being a foreigner, is not allowed by law to acquire any private land in the Philippines, except through inheritance.

The personal properties, i.e., tools and equipment mentioned in the complaint which were brought out by Willem
from the conjugal dwelling are hereby declared to be exclusively owned by the petitioner.

The two houses standing on the lots covered by Transfer Certificate of Title Nos. 21974 and 22846 are hereby
declared to be co-owned by the petitioner and the respondent since these were acquired during their marital union
and since there is no prohibition on foreigners from owning buildings and residential units. Petitioner and respondent
are, thereby, directed to subject this court for approval their project of partition on the two houses aforementioned.

The Court finds no sufficient justification to award the counterclaim of respondent for attorneys fees considering the
well settled doctrine that there should be no premium on the right to litigate. The prayer for moral damages are
likewise denied for lack of merit.

No pronouncement as to costs.

SO ORDERED.16

It ruled that, regardless of the source of funds for the acquisition of Lots 1, 2142, 5845 and 4, petitioner could not
have acquired any right whatsoever over these properties as petitioner still attempted to acquire them
notwithstanding his knowledge of the constitutional prohibition against foreign ownership of private lands.17 This was
made evident by the sworn statements petitioner executed purporting to show that the subject parcels of land were
purchased from the exclusive funds of his wife, the herein respondent.18 Petitioners plea for reimbursement for the
amount he had paid to purchase the foregoing properties on the basis of equity was likewise denied for not having
come to court with clean hands.

The CA Ruling

Petitioner elevated the matter to the CA, contesting only the RTCs award of Lots 1, 2142, 5845 and 4 in favor of
respondent. He insisted that the money used to purchase the foregoing properties came from his own capital funds
and that they were registered in the name of his former wife only because of the constitutional prohibition against
foreign ownership. Thus, he prayed for reimbursement of one-half (1/2) of the value of what he had paid in the
purchase of the said properties, waiving the other half in favor of his estranged ex-wife.19

On October 8, 2009, the CA promulgated a Decision20 affirming in toto the judgment rendered by the RTC of Negros
Oriental, Branch 34. The CA stressed the fact that petitioner was "well-aware of the constitutional prohibition for
aliens to acquire lands in the Philippines."21 Hence, he cannot invoke equity to support his claim for reimbursement.

Consequently, petitioner filed the instant Petition for Review on Certiorari assailing the CA Decision due to the
following error:

UNDER THE FACTS ESTABLISHED, THE COURT ERRED IN NOT SUSTAINING THE PETITIONERS ATTEMPT
AT SUBSEQUENTLY ASSERTING OR CLAIMING A RIGHT OF HALF OR WHOLE OF THE PURCHASE PRICE
USED IN THE PURCHASE OF THE REAL PROPERTIES SUBJECT OF THIS CASE.22 (Emphasis supplied)

The Ruling of the Court

The petition lacks merit.

The issue to be resolved is not of first impression. In In Re: Petition For Separation of Property-Elena Buenaventura
Muller v. Helmut Muller23 the Court had already denied a claim for reimbursement of the value of purchased parcels
of Philippine land instituted by a foreigner Helmut Muller, against his former Filipina spouse, Elena Buenaventura
Muller. It held that Helmut Muller cannot seek reimbursement on the ground of equity where it is clear that he
willingly and knowingly bought the property despite the prohibition against foreign ownership of Philippine
land24enshrined under Section 7, Article XII of the 1987 Philippine Constitution which reads:

Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to
individuals, corporations, or associations qualified to acquire or hold lands of the public domain.

Undeniably, petitioner openly admitted that he "is well aware of the above-cited constitutional prohibition"25 and even
asseverated that, because of such prohibition, he and respondent registered the subject properties in the latters
name.26 Clearly, petitioners actuations showed his palpable intent to skirt the constitutional prohibition. On the basis
of such admission, the Court finds no reason why it should not apply the Muller ruling and accordingly, deny
petitioners claim for reimbursement.
As also explained in Muller, the time-honored principle is that he who seeks equity must do equity, and he who
comes into equity must come with clean hands. Conversely stated, he who has done inequity shall not be accorded
equity. Thus, a litigant may be denied relief by a court of equity on the ground that his conduct has been inequitable,
unfair and dishonest, or fraudulent, or deceitful.27

In this case, petitioners statements regarding the real source of the funds used to purchase the subject parcels of
land dilute the veracity of his claims: While admitting to have previously executed a joint affidavit that respondents
personal funds were used to purchase Lot 1,28 he likewise claimed that his personal disability funds were used to
acquire the same. Evidently, these inconsistencies show his untruthfulness. Thus, as petitioner has come before the
Court with unclean hands, he is now precluded from seeking any equitable refuge.

In any event, the Court cannot, even on the grounds of equity, grant reimbursement to petitioner given that he
acquired no right whatsoever over the subject properties by virtue of its unconstitutional purchase. It is well-
established that equity as a rule will follow the law and will not permit that to be done indirectly which, because of
public policy, cannot be done directly.29 Surely, a contract that violates the Constitution and the law is null and void,
vests no rights, creates no obligations and produces no legal effect at all.30 Corollary thereto, under Article 1412 of
the Civil Code,31 petitioner cannot have the subject properties deeded to him or allow him to recover the money he
had spent for the purchase thereof. The law will not aid either party to an illegal contract or agreement; it leaves the
parties where it finds them.32 Indeed, one cannot salvage any rights from an unconstitutional transaction knowingly
entered into.

Neither can the Court grant petitioners claim for reimbursement on the basis of unjust enrichment.33 As held in
Frenzel v. Catito, a case also involving a foreigner seeking monetary reimbursement for money spent on purchase
of Philippine land, the provision on unjust enrichment does not apply if the action is proscribed by the Constitution,
to wit:

Futile, too, is petitioner's reliance on Article 22 of the New Civil Code which reads:

Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall return the same to him. 1wphi1

The provision is expressed in the maxim: "MEMO CUM ALTERIUS DETER DETREMENTO PROTEST" (No person
should unjustly enrich himself at the expense of another). An action for recovery of what has been paid without just
cause has been designated as an accion in rem verso. This provision does not apply if, as in this case, the action is
proscribed by the Constitution or by the application of the pari delicto doctrine. It may be unfair and unjust to bar the
petitioner from filing an accion in rem verso over the subject properties, or from recovering the money he paid for the
said properties, but, as Lord Mansfield stated in the early case of Holman v. Johnson: "The objection that a contract
is immoral or illegal as between the plaintiff and the defendant, sounds at all times very ill in the mouth of the
defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of
policy, which the defendant has the advantage of, contrary to the real justice, as between him and the
plaintiff."34(Citations omitted)

Nor would the denial of his claim amount to an injustice based on his foreign citizenship.35 Precisely, it is the
Constitution itself which demarcates the rights of citizens and non-citizens in owning Philippine land. To be sure, the
constitutional ban against foreigners applies only to ownership of Philippine land and not to the improvements built
thereon, such as the two (2) houses standing on Lots 1 and 2142 which were properly declared to be co-owned by
the parties subject to partition. Needless to state, the purpose of the prohibition is to conserve the national
patrimony36 and it is this policy which the Court is duty-bound to protect.

WHEREFORE, the petition is DENIED. Accordingly, the assailed October 8, 2009 Decision and January 24, 2011
Resolution of the Court of Appeals in CA-G.R. CV No. 01940 are AFFIRMED.

SO ORDERED.

G.R. No. 202370 September 23, 2013

JUAN SEVILLA SALAS, JR., Petitioner,


vs.
EDEN VILLENA AGUILA, Respondent.

DECISION

CARPIO, J.:

The Case
This petition for review on certiorari1 assails the 16 March 2012 Decision2 and the 28 June 2012 Resolution3 of the
Court of Appeals (CA) in CA-G.R. CV No. 95322. The CA affirmed the 26 September 2008 Order4 of the Regional
Trial Court of Nasugbu, Batangas, Branch 14 (RTC), in Civil Case No. 787.

The Facts

On 7 September 1985, petitioner Juan Sevilla Salas, Jr. (Salas) and respondent Eden Villena Aguila (Aguila) were
married. On 7 June 1986, Aguila gave birth to their daughter, Joan Jiselle. Five months later, Salas left their
conjugal dwelling. Since then, he no longer communicated with Aguila or their daughter.

On 7 October 2003, Aguila filed a Petition for Declaration of Nullity of Marriage (petition) citing psychological
incapacity under Article 36 of the Family Code. The petition states that they "have no conjugal properties
whatsoever."5 In the Return of Summons dated 13 October 2003, the sheriff narrated that Salas instructed his
mother Luisa Salas to receive the copy of summons and the petition.6

On 7 May 2007, the RTC rendered a Decision7 declaring the nullity of the marriage of Salas and Aguila (RTC
Decision). The RTC Decision further provides for the "dissolution of their conjugal partnership of gains, if any."8

On 10 September 2007, Aguila filed a Manifestation and Motion9 stating that she discovered: (a) two 200-square-
meter parcels of land with improvements located in San Bartolome, Quezon City, covered by Transfer Certificate of
Title (TCT) No. N-259299-A and TCT No. N-255497; and (b) a 108-square-meter parcel of land with improvement
located in Tondo, Manila, covered by TCT No. 243373 (collectively, "Discovered Properties"). The registered owner
of the Discovered Properties is "Juan S.Salas, married to Rubina C. Salas." The manifestation was set for hearing
on 21 September 2007. However, Salas notice of hearing was returned unserved with the remark, "RTS Refused
To Receive."

On 19 September 2007, Salas filed a Manifestation with Entry of Appearance10 requesting for an Entry of Judgment
of the RTC Decision since no motion for reconsideration or appeal was filed and no conjugal property was involved.

On 21 September 2007, the hearing for Aguilas manifestation ensued, with Aguila, her counsel and the state
prosecutor present. During the hearing, Aguila testified that on 17 April 2007 someone informed her of the existence
of the Discovered Properties. Thereafter, she verified the information and secured copies of TCTs of the Discovered
Properties. When asked to clarify, Aguila testified that Rubina C. Salas (Rubina) is Salas common-law wife.11

On 8 February 2008, Salas filed an Opposition to the Manifestation12 alleging that there is no conjugal property to be
partitioned based on Aguilas petition. According to Salas, Aguilas statement was a judicial admission and was not
made through palpable mistake. Salas claimed that Aguila waived her right to the Discovered Properties. Salas
likewise enumerated properties he allegedly waived in favor of Aguila, to wit:(1) parcels of land with improvements
located in Sugar Landing Subdivision, Alangilan, Batangas City; No. 176 Brias Street, Nasugbu, Batangas; P.
Samaniego Street, Silangan, Nasugbu, Batangas; and Batangas City, financed by Filinvest; (2) cash amounting
to P200,000.00; and (3) motor vehicles, specifically Honda City and Toyota Tamaraw FX(collectively, "Waived
Properties"). Thus, Salas contended that the conjugal properties were deemed partitioned.

The Ruling of the Regional Trial Court

In its 26 September 2008 Order, the RTC ruled in favor of Aguila. The dispositive portion of the Order reads:

WHEREFORE, foregoing premises being considered, the petitioner and the respondent are hereby directed to
partition between themselves by proper instruments of conveyance, the following properties, without prejudice to the
legitime of their legitimate child, Joan Jisselle Aguila Salas:

(1) A parcel of land registered in the name of Juan S. Salas married to Rubina C. Salas located in San
Bartolome, Quezon City and covered by TCT No. N-259299-A marked as Exhibit "A" and its improvements;

(2) A parcel of land registered in the name of Juan S.Salas married to Rubina C. Salas located in San
Bartolome, Quezon City and covered by TCT No. N-255497 marked as Exhibit "B" and its improvements;

(3) A parcel of land registered in the name of Juan S.Salas married to Rubina Cortez Salas located in Tondo
and covered by TCT No. 243373-Ind. marked as Exhibit "D" and its improvements.

Thereafter, the Court shall confirm the partition so agreed upon bythe parties, and such partition, together with the
Order of the Court confirming the same, shall be recorded in the Registry of Deeds of the place in which the
property is situated.

SO ORDERED.13

The RTC held that pursuant to the Rules,14 even upon entry of judgment granting the annulment of marriage, the
court can proceed with the liquidation, partition and distribution of the conjugal partnership of gains if it has not been
judicially adjudicated upon, as in this case. The RTC found that the Discovered Properties are among the conjugal
properties to be partitioned and distributed between Salas and Aguila. However, the RTC held that Salas failed to
prove the existence of the Waived Properties.

On 11 November 2008, Rubina filed a Complaint-in-Intervention, claiming that: (1) she is Rubina Cortez, a widow
and unmarried to Salas; (2) the Discovered Properties are her paraphernal properties; (3) Salas did not contribute
money to purchase the Discovered Properties as he had no permanent job in Japan; (4) the RTC did not acquire
jurisdiction over her as she was not a party in the case; and (5) she authorized her brother to purchase the
Discovered Properties but because he was not well-versed with legal documentation, he registered the properties in
the name of "Juan S. Salas, married to Rubina C. Salas."

In its 16 December 2009 Order, the RTC denied the Motion for Reconsideration filed by Salas. The RTC found that
Salas failed to prove his allegation that Aguila transferred the Waived Properties to third persons. The RTC
emphasized that it cannot go beyond the TCTs, which state that Salas is the registered owner of the Discovered
Properties. The RTC further held that Salas and Rubina were at fault for failing to correct the TCTs, if they were not
married as they claimed.

Hence, Salas filed an appeal with the CA.

The Ruling of the Court of Appeals

On 16 March 2012, the CA affirmed the order of the RTC.15 The CA ruled that Aguilas statement in her petition is
not a judicial admission. The CA pointed out that the petition was filed on 7 October 2003, but Aguila found the
Discovered Properties only on 17 April 2007 or before the promulgation of the RTC decision. Thus, the CA
concluded that Aguila was palpably mistaken in her petition and it would be unfair to punish her over a matter that
she had no knowledge of at the time she made the admission. The CA also ruled that Salas was not deprived of the
opportunity to refute Aguilas allegations in her manifestation, even though he was not present in its hearing. The CA
likewise held that Rubina cannot collaterally attack a certificate of title.

In a Resolution dated 28 June 2012,16 the CA denied the Motion for Reconsideration17 filed by Salas. Hence, this
petition.

The Issues

Salas seeks a reversal and raises the following issues for resolution:

1. The Court of Appeals erred in affirming the trial courts decision ordering the partition of the parcels of
land covered by TCT Nos. N-259299-A and N-255497 in Quezon City and as well as the property in Manila
covered by TCT No. 243373 between petitioner and respondent.

2. The Court of Appeals erred in affirming the trial courts decision in not allowing Rubina C. Cortez to
intervene in this case18

The Ruling of the Court

The petition lacks merit.

Since the original manifestation was an action for partition, this Court cannot order a division of the property, unless
it first makes a determination as to the existence of a co-ownership.19 Thus, the settlement of the issue of ownership
is the first stage in this action.20

Basic is the rule that the party making an allegation in a civil case has the burden of proving it by a preponderance
of evidence.21 Salas alleged that contrary to Aguilas petition stating that they had no conjugal property, they actually
acquired the Waived Properties during their marriage. However, the RTC found, and the CA affirmed, that Salas
failed to prove the existence and acquisition of the Waived Properties during their marriage:

A perusal of the record shows that the documents submitted by [Salas] as the properties allegedly registered in the
name of [Aguila] are merely photocopies and not certified true copies, hence, this Court cannot admit the same as
part of the records of this case. These are the following:

(1) TCT No. T-65876 a parcel of land located at Poblacion, Nasugbu, Batangas, registered in the name of
Eden A. Salas, married to Juan Salas Jr. which is cancelled by TCT No. T-105443 in the name of Joan
Jiselle A. Salas, single;

(2) TCT No. T-68066 a parcel of land situated in the Barrio of Landing, Nasugbu, Batangas, registered in
the name of Eden A. Salas, married to Juan S. Salas Jr.
Moreover, [Aguila] submitted original copy of Certification issued by Ms. Erlinda A. Dasal, Municipal Assessor of
Nasugbu, Batangas, certifying that [Aguila] has no real property (land and improvement) listed in the Assessment
Roll for taxation purposes, as of September 17, 2008.

Such evidence, in the absence of proof to the contrary, has the presumption of regularity. x x x.

Suffice it to say that such real properties are existing and registered in the name of [Aguila], certified true copies
thereof should have been the ones submitted to this Court. Moreover, there is also a presumption that properties
registered in the Registry of Deeds are also declared in the Assessment Roll for taxation purposes.22

On the other hand, Aguila proved that the Discovered Properties were acquired by Salas during their marriage. Both 1wphi1

the RTC and the CA agreed that the Discovered Properties registered in Salas name were acquired during his
marriage with Aguila. The TCTs of the Discovered Properties were entered on 2 July 1999 and 29 September 2003,
or during the validity of Salas and Aguilas marriage. In Villanueva v. Court of Appeals,23 we held that the question of
whether the properties were acquired during the marriage is a factual issue. Factual findings of the RTC, particularly
if affirmed by the CA, are binding on us, except under compelling circumstances not present in this case.24

On Salas allegation that he was not accorded due process for failing to attend the hearing of Aguilas manifestation,
we find the allegation untenable. The essence of due process is opportunity to be heard. We hold that Salas was
given such opportunity when he filed his opposition to the manifestation, submitted evidence and filed his appeal.

On both Salas and Rubinas contention that Rubina owns the Discovered Properties, we likewise find the contention
unmeritorious. The TCTs state that "Juan S. Salas, married to Rubina C. Salas" is the registered owner of the
Discovered Properties. A Torrens title is generally a conclusive evidence of the ownership of the land referred to,
because there is a strong presumption that it is valid and regularly issued.25 The phrase "married to" is merely
descriptive of the civil status of the registered owner.26 Furthermore, Salas did not initially dispute the ownership of
the Discovered Properties in his opposition to the manifestation. It was only when Rubina intervened that Salas
supported Rubinas statement that she owns the Discovered Properties.

Considering that Rubina failed to prove her title or her legal interest in the Discovered Properties, she has no right to
intervene in this case. The Rules of Court provide that only "a person who has a legal interest in the matter in
litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely
affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with
leave of court, be allowed to intervene in the action."27

In Dio v. Dio,28 we held that Article 147 of the Family Code applies to the union of parties who are legally
capacitated and not barred by any impediment to contract marriage, but whose marriage is nonetheless declared
void under Article 36 of the Family Code, as in this case. Article147 of the Family Code provides:

ART. 147. When a man and a woman who are capacitated to marry each other, live exclusively with each other as
husband and wife without the benefit of marriage or under a void marriage, their wages and salaries shall be owned
by them in equal shares and the property acquired by both of them through their work or industry shall be governed
by the rules on co-ownership.

In the absence of proof to the contrary, properties acquired while they lived together shall be presumed to have
been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares. For purposes of
this Article, a party who did not participate in the acquisition by the other party of any property shall be deemed to
have contributed jointly in the acquisition thereof if the formers efforts consisted in the care and maintenance of the
family and of the household.

Neither party can encumber or dispose by acts inter vivos of his or her share in the property acquired during
cohabitation and owned in common, without the consent of the other, until after the termination of their cohabitation.

When only one of the parties to a void marriage is in good faith, the share of the party in bad faith in the co-
ownership shall be forfeited in favor of their common children. In case of default of or waiver by any or all of the
common children or their descendants, each vacant share shall belong to the respective surviving descendants. In
the absence of descendants, such share shall belong to the innocent party. In all cases, the forfeiture shall take
place upon termination of the cohabitation. (Emphasis supplied)

Under this property regime, property acquired during the marriage is prima facie presumed to have been obtained
through the couples joint efforts and governed by the rules on co-ownership.29 In the present case, Salas did not
rebut this presumption. In a similar case where the ground for nullity of marriage was also psychological incapacity,
we held that the properties acquired during the union of the parties, as found by both the RTC and the CA, would be
governed by co-ownership.30 Accordingly, the partition of the Discovered Properties as ordered by the RTC and the
CA should be sustained, but on the basis of co-ownership and not on the regime of conjugal partnership of gains.

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated16 March 2012 and the Resolution dated 28
June 2012 of the Court of Appeals in CA-G.R. CV No. 95322.
SO ORDERED.

G.R. No. 202932 October 23, 2013

EDILBERTO U. VENTURA JR., Petitioner,


vs.
SPOUSES PAULINO and EVANGELINE ABUDA, Respondents.

DECISION

CARPIO, J.:

The Case

This petition for review on certiorari seeks to annul the Decision1 dated 9 March 2012 of the Court of Appeals (CA)
in CA-G.R. CV No. 92330 and the Resolution2 dated 3 August 2012 denying the motion for reconsideration. The
Decision and Resolution dismissed the Appeal dated 23 October 2009 and affirmed with modification the
Decision3dated 24 November 2008 of the Regional Trial Court of Manila, Branch 32 (RTC-Manila).

The Facts

The RTC-Manila and the CA found the facts to be as follows:

Socorro Torres (Socorro) and Esteban Abletes (Esteban) were married on 9 June 1980. Although Socorro and
Esteban never had common children, both of them had children from prior marriages: Esteban had a daughter
named Evangeline Abuda (Evangeline), and Socorro had a son, who was the father of Edilberto U. Ventura, Jr.
(Edilberto), the petitioner in this case.

Evidence shows that Socorro had a prior subsisting marriage to Crispin Roxas (Crispin) when she married Esteban.
Socorro married Crispin on 18 April 1952. This marriage was not annulled, and Crispin was alive at the time of
Socorros marriage to Esteban.

Estebans prior marriage, on the other hand, was dissolved by virtue of his wifes death in 1960. According to
Edilberto, sometime in 1968, Esteban purchased a portion of a lot situated at 2492 State Alley, Bonifacio Street,
Vitas, Tondo, Manila (Vitas property). The remaining portion was thereafter purchased by Evangeline on her fathers
behalf sometime in 1970.4 The Vitas property was covered by Transfer Certificate of Title No. 141782, dated 11
December 1980, issued to "Esteban Abletes, of legal age, Filipino, married to Socorro Torres."5

Edilberto also claimed that starting 1978, Evangeline and Esteban operated small business establishments located
at 903 and 905 Delpan Street, Tondo, Manila (Delpan property).6

On 6 September 1997, Esteban sold the Vitas and Delpan properties to Evangeline and her husband, Paulino
Abuda (Paulino).7 According to Edilberto:

when Esteban was diagnosed with colon cancer sometime in 1993, he decided to sell the Delpan and Vitas
properties to Evangeline. Evangeline continued paying the amortizations on the two (2) properties situated in Delpan
Street. The amortizations, together with the amount of Two Hundred Thousand Pesos (Php 200,000.00), which
Esteban requested as advance payment, were considered part of the purchase price of the Delpan properties.
Evangeline likewise gave her father Fifty Thousand Pesos (Php 50,000.00) for the purchase of the Vitas properties
and she shouldered his medical expenses.8

Esteban passed away on 11 September 1997, while Socorro passed away on 31 July 1999.

Sometime in 2000, Leonora Urquila (Leonora), the mother of Edilberto, discovered the sale. Thus, Edilberto,
represented by Leonora, filed a Petition for Annulment of Deeds of Sale before the RTC-Manila. Edilberto alleged
that the sale of the properties was fraudulent because Estebans signature on the deeds of sale was forged.
Respondents, on the other hand, argued that because of Socorros prior marriage to Crispin, her subsequent
marriage to Esteban was null and void. Thus, neither Socorro nor her heirs can claim any right or interest over the
properties purchased by Esteban and respondents.9

The Ruling of the RTC-Manila

The RTC-Manila dismissed the petition for lack of merit.

The RTC-Manila ruled that the marriage between Socorro and Esteban was void from the beginning.10 Article 83 of
the Civil Code, which was the governing law at the time Esteban and Socorro were married, provides:
Art. 83. Any marriage subsequently contracted by any person during the lifetime of the first spouse of such person
shall be illegal and void from its performance unless:

1. The first marriage was annulled or dissolved; or

2. The first spouse had been absent for seven consecutive years at the time of the second marriage without
the spouse present having news of the absentee being alive, or if the absentee, though he has been absent
for less than seven years, is generally considered as dead and believed to be so by the spouse present at
the time of contracting such subsequent marriage, or if the absentee is presumed dead according to articles
390 and 391. The marriage so contracted shall be valid in any of the three cases until declared null and void.

During trial, Edilberto offered the testimony of Socorros daughter-in-law Conchita Ventura (Conchita). In her first
affidavit, Conchita claimed that Crispin, who was a seaman, had been missing and unheard from for 35 years.
However, Conchita recanted her earlier testimony and executed an Affidavit of Retraction.11

The RTC-Manila ruled that the lack of a judicial decree of nullity does not affect the status of the union. It applied our
ruling in Nial v. Badayog:12

Jurisprudence under the Civil Code states that no judicial decree is necessary in order to establish the nullity of a
marriage. x x x

Under ordinary circumstances, the effect of a void marriage, so far as concerns the conferring of legal rights upon
the parties, is as though no marriage had ever taken place. And therefore, being good for no legal purpose, its
invalidity can be maintained in any proceeding in which [the] fact of marriage may be material, either direct or
collateral, in any civil court between any parties at any time, whether before or after the death of either or both the
husband and the wife, and upon mere proof of the facts rendering such marriage void, it will be disregarded or
treated as non-existent by the courts.13

According to the RTC-Manila, the Vitas and Delpan properties are not conjugal, and are governed by Articles 144
and 485 of the Civil Code, to wit:

Art. 144. When a man and a woman live together as husband and wife, but they are not married, or their marriage is
void from the beginning, the property acquired by either or both of them through their work or industry or their wages
and salaries shall be governed by the rules on co-ownership.

Art. 485. The share of the co-owners, in the benefits as well as in the charges, shall be proportional to their
respective interests. Any stipulation in a contract to the contrary shall be void.

The portions belonging to the co-owners in the co-ownership shall be presumed equal, unless the contrary is
proved.

The RTC-Manila then determined the respective shares of Socorro and Esteban in the properties. It found that:

with respect to the property located at 2492 State Alley, Bonifacio St. Vitas, Tondo, Manila covered by TCT No.
141782, formerly Marcos Road, Magsaysay Village, Tondo, Manila, [Evangeline] declared that part of it was first
acquired by her father Esteban Abletes sometime in 1968 when he purchased the right of Ampiano Caballegan.
Then, in 1970, she x x x bought the right to one-half of the remaining property occupied by Ampiano Caballegan.
However, during the survey of the National Housing Authority, she allowed the whole lot to be registered in her
fathers name. As proof thereof, she presented Exhibits "8" to "11" x x x. These documents prove that that she has
been an occupant of the said property in Vitas, Tondo even before her father and Socorro Torres got married in
June, 1980.14

Anent the parcels of land and improvements thereon 903 and 905 Del Pan Street, Tondo, Manila, x x x Evangeline
professed that in 1978, before her father met Socorro Torres and before the construction of the BLISS Project
thereat, her father [already had] a bodega of canvas (lona) and a sewing machine to sew the canvas being sold at
903 Del Pan Street, Tondo Manila. In 1978, she was also operating Vangies Canvas Store at 905 Del Pan Street,
Tondo, Manila, which was evidenced by Certificate of Registration of Business Name issued in her favor on 09
November 1998 x x x. When the BLISS project was constructed in 1980, the property became known as Units D-9
and D-10. At first, her father [paid] for the amortizations for these two (2) parcels of land but when he got sick with
colon cancer in 1993, he asked respondents to continue paying for the amortizations x x x. [Evangeline] paid a total
of P195,259.52 for Unit D-9 as shown by the 37 pieces of receipts x x x and the aggregate amount of P188,596.09
for Unit D-10, as evidenced by 36 receipts x x x.15

The RTC-Manila concluded that Socorro did not contribute any funds for the acquisition of the properties. Hence,
she cannot be considered a co-owner, and her heirs cannot claim any rights over the Vitas and Delpan properties.16

Aggrieved, Edilberto filed an appeal before the CA.

The Ruling of the CA


In its Decision17 dated 9 March 2012, the CA sustained the decision of the RTC-Manila. The dispositive portion of
the CA Decision reads:

WHEREFORE, the Appeal is hereby DENIED and the challenged Decision of the court a quo STANDS.

SO ORDERED.18

The CA ruled, however, that the RTC-Manila should have applied Article 148 of the Family Code, and not Articles
144 and 485 of the Civil Code. Article 148 of the Family Code states that in unions between a man and a woman
who are incapacitated to marry each other:

x x x only the properties acquired by both of the parties through their actual joint contribution of money, property, or
industry shall be owned by them in common in proportion to their respective contributions. In the absence of proof to
the contrary, their contributions and corresponding shares are presumed to be equal. The same rule and
presumption shall apply to joint deposits of money and evidences of credit.

If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute
community or conjugal partnership existing in such valid marriage. If the party who acted in bad faith is not validly
married to another, his or her share shall be forfeited in the manner provided in the last paragraph of the preceding
Article.

The foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith.

The CA applied our ruling in Saguid v. Court of Appeals,19 and held that the foregoing provision applies "even if the
cohabitation or the acquisition of the property occurred before the effectivity of the Family Code."20 The CA found
that Edilberto failed to prove that Socorro contributed to the purchase of the Vitas and Delpan properties. Edilberto
was unable to provide any documentation evidencing Socorros alleged contribution.21

On 2 April 2012, Edilberto filed a Motion for Reconsideration,22 which was denied by the CA in its Resolution dated 3
August 2012.23

Hence, this petition.

The Ruling of this Court

We deny the petition.

Edilberto admitted that in unions between a man and a woman who are incapacitated to marry each other, the
ownership over the properties acquired during the subsistence of that relationship shall be based on the actual
contribution of the parties. He even quoted our ruling in Borromeo v. Descallar24 in his petition:

It is necessary for each of the partners to prove his or her actual contribution to the acquisition of property in order to
be able to lay claim to any portion of it. Presumptions of co-ownership and equal contribution do not apply.25

This is a reiteration of Article 148 of the Family Code, which the CA applied in the assailed decision:

Art 148. In cases of cohabitation [wherein the parties are incapacitated to marry each other], only the properties
acquired by both of the parties through their actual joint contribution of money, property, or industry shall be owned
by them in common in proportion to their respective contributions. In the absence of proof to the contrary, their
contributions and corresponding shares are presumed to be equal. The same rule and presumption shall apply to
joint deposits of money and evidences of credit.

If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute
community or conjugal partnership existing in such valid marriage. If the party who acted in bad faith is not validly
married to another, his or her share shall be forfeited in the manner provided in the last paragraph of the preceding
Article.

The foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith.

Applying the foregoing provision, the Vitas and Delpan properties can be considered common property if: (1) these
were acquired during the cohabitation of Esteban and Socorro; and (2) there is evidence that the properties were
acquired through the parties actual joint contribution of money, property, or industry.

Edilberto argues that the certificate of title covering the Vitas property shows that the parcel of land is co-owned by
Esteban and Socorro because: (1) the Transfer Certificate of Title was issued on 11 December 1980, or several
months after the parties were married; and (2) title to the land was issued to "Esteban Abletes, of legal age, married
to Socorro Torres."26
We disagree. The title itself shows that the Vitas property is owned by Esteban alone. The phrase "married to
1wphi1

Socorro Torres" is merely descriptive of his civil status, and does not show that Socorro co-owned the
property.27The evidence on record also shows that Esteban acquired ownership over the Vitas property prior to his
marriage to Socorro, even if the certificate of title was issued after the celebration of the marriage. Registration
under the Torrens title system merely confirms, and does not vest title. This was admitted by Edilberto on page 9 of
his petition wherein he quotes an excerpt of our ruling in Borromeo:

Registration is not a mode of acquiring ownership. It is only a means of confirming the fact of its existence with
notice to the world at large. Certificates of title are not a source of right. The mere possession of a title does not
make one the true owner of the property. Thus, the mere fact that respondent has the titles of the disputed
properties in her name does not necessarily, conclusively and absolutely make her the owner. The rule on
indefeasibility of title likewise does not apply to respondent. A certificate of title implies that the title is quiet, and that
it is perfect, absolute and indefeasible. However, there are well-defined exceptions to this rule, as when the
transferee is not a holder in good faith and did not acquire the subject properties for a valuable consideration.

Edilberto claims that Esteban s actual contribution to the purchase of the Delpan property was not sufficiently
proven since Evangeline shouldered some of the amortizations.28 Thus, the law presumes that Esteban and Socorro
jointly contributed to the acquisition of the Del pan property.

We cannot sustain Edilberto s claim. Both the RTC-Manila and the CA found that the Delpan property was acquired
prior to the marriage of Esteban and Socorro.29 Furthermore, even if payment of the purchase price of the Delpan
property was made by Evangeline, such payment was made on behalf of her father. Article 1238 of the Civil Code
provides:

Art. 1238. Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a
donation, which requires the debtor s consent. But the payment is in any case valid as to the creditor who has
accepted it.

Thus, it is clear that Evangeline paid on behalf of her father, and the parties intended that the Delpan property would
be owned by and registered under the name of Esteban.

During trial, the Abuda spouses presented receipts evidencing payments of the amortizations for the Delpan
property. On the other hand, Edilberto failed to show any evidence showing Socorro s alleged monetary
1wphi1

contributions. As correctly pointed out by the CA:

settled is the rule that in civil cases x x x the burden of proof rests upon the party who, as determined by the
pleadings or the nature of the case, asserts the affirmative of an issue. x x x. Here it is Appellant who is duty bound
to prove the allegations in the complaint which undoubtedly, he miserably failed to do so.30

WHEREFORE, the petition is DENIED. The Decision dated 9 March 2012 of the Court of Appeals in CA-G.R. CV
No. 92330 is AFFIRMED.

SO ORDERED.

G.R. No. 165803 September 1, 2010

SPOUSES REX AND CONCEPCION AGGABAO, Petitioners,


vs.
DIONISIO Z. PARULAN, JR. and MA. ELENA PARULAN, Respondents.

DECISION

BERSAMIN, J.:

On July 26, 2000, the Regional Trial Court (RTC), Branch 136, in Makati City annulled the deed of absolute sale
executed in favor of the petitioners covering two parcels of registered land the respondents owned for want of the
written consent of respondent husband Dionisio Parulan, Jr. On July 2, 2004, in C.A.-G.R. CV No. 69044,1 the Court
of Appeals (CA) affirmed the RTC decision.

Hence, the petitioners appeal by petition for review on certiorari, seeking to reverse the decision of the CA. They
present as the main issue whether the sale of conjugal property made by respondent wife by presenting a special
power of attorney to sell (SPA) purportedly executed by respondent husband in her favor was validly made to the
vendees, who allegedly acted in good faith and paid the full purchase price, despite the showing by the husband
that his signature on the SPA had been forged and that the SPA had been executed during his absence from the
country.
We resolve the main issue against the vendees and sustain the CAs finding that the vendees were not buyers in
good faith, because they did not exercise the necessary prudence to inquire into the wifes authority to sell. We hold
that the sale of conjugal property without the consent of the husband was not merely voidable but void; hence, it
could not be ratified.

Antecedents

Involved in this action are two parcels of land and their improvements (property) located at No. 49 Miguel Cuaderno
Street, Executive Village, BF Homes, Paraaque City and registered under Transfer Certificate of Title (TCT) No.
633762 and TCT No. 633773 in the name of respondents Spouses Maria Elena A. Parulan (Ma. Elena) and Dionisio
Z. Parulan, Jr. (Dionisio), who have been estranged from one another.

In January 1991, real estate broker Marta K. Atanacio (Atanacio) offered the property to the petitioners, who initially
did not show interest due to the rundown condition of the improvements. But Atanacios persistence prevailed upon
them, so that on February 2, 1991, they and Atanacio met with Ma. Elena at the site of the property. During their
meeting, Ma. Elena showed to them the following documents, namely: (a) the owners original copy of TCT No.
63376; (b) a certified true copy of TCT No. 63377; (c) three tax declarations; and (d) a copy of the special power of
attorney (SPA) dated January 7, 1991 executed by Dionisio authorizing Ma. Elena to sell the property.4 Before the
meeting ended, they paid P20,000.00 as earnest money, for which Ma. Elena executed a handwritten Receipt of
Earnest Money, whereby the parties stipulated that: (a) they would pay an additional payment of P130,000.00 on
February 4, 1991; (b) they would pay the balance of the bank loan of the respondents amounting to P650,000.00 on
or before February 15, 1991; and (c) they would make the final payment of P700,000.00 once Ma. Elena turned over
the property on March 31, 1991.5

On February 4, 1991, the petitioners went to the Office of the Register of Deeds and the Assessors Office of
Paraaque City to verify the TCTs shown by Ma. Elena in the company of Atanacio and her husband (also a
licensed broker).6 There, they discovered that the lot under TCT No. 63376 had been encumbered to Banco Filipino
in 1983 or 1984, but that the encumbrance had already been cancelled due to the full payment of the
obligation.7They noticed that the Banco Filipino loan had been effected through an SPA executed by Dionisio in
favor of Ma. Elena.8 They found on TCT No. 63377 the annotation of an existing mortgage in favor of the Los Baos
Rural Bank, also effected through an SPA executed by Dionisio in favor of Ma. Elena, coupled with a copy of a court
order authorizing Ma. Elena to mortgage the lot to secure a loan of P500,000.00.9

The petitioners and Atanacio next inquired about the mortgage and the court order annotated on TCT No. 63377 at
the Los Baos Rural Bank. There, they met with Atty. Noel Zarate, the banks legal counsel, who related that the
bank had asked for the court order because the lot involved was conjugal property.10

Following their verification, the petitioners delivered P130,000.00 as additional down payment on February 4, 1991;
and P650,000.00 to the Los Baos Rural Bank on February 12, 1991, which then released the owners duplicate
copy of TCT No. 63377 to them.11

On March 18, 1991, the petitioners delivered the final amount of P700,000.00 to Ma. Elena, who executed a deed of
absolute sale in their favor. However, Ma. Elena did not turn over the owners duplicate copy of TCT No. 63376,
claiming that said copy was in the possession of a relative who was then in Hongkong.12 She assured them that the
owners duplicate copy of TCT No. 63376 would be turned over after a week.

On March 19, 1991, TCT No. 63377 was cancelled and a new one was issued in the name of the petitioners.

Ma. Elena did not turn over the duplicate owners copy of TCT No. 63376 as promised. In due time, the petitioners
learned that the duplicate owners copy of TCT No. 63376 had been all along in the custody of Atty. Jeremy Z.
Parulan, who appeared to hold an SPA executed by his brother Dionisio authorizing him to sell both lots.13

At Atanacios instance, the petitioners met on March 25, 1991 with Atty. Parulan at the Manila Peninsula.14 For that
meeting, they were accompanied by one Atty. Olandesca.15 They recalled that Atty. Parulan "smugly
demanded P800,000.00" in exchange for the duplicate owners copy of TCT No. 63376, because Atty. Parulan
represented the current value of the property to be P1.5 million. As a counter-offer, however, they
tendered P250,000.00, which Atty. Parulan declined,16 giving them only until April 5, 1991 to decide.

Hearing nothing more from the petitioners, Atty. Parulan decided to call them on April 5, 1991, but they informed him
that they had already fully paid to Ma. Elena.17

Thus, on April 15, 1991, Dionisio, through Atty. Parulan, commenced an action (Civil Case No. 91-
1005 entitledDionisio Z. Parulan, Jr., represented by Jeremy Z. Parulan, as attorney in fact, v. Ma. Elena Parulan,
Sps. Rex and Coney Aggabao), praying for the declaration of the nullity of the deed of absolute sale executed by
Ma. Elena, and the cancellation of the title issued to the petitioners by virtue thereof.

In turn, the petitioners filed on July 12, 1991 their own action for specific performance with damages against the
respondents.
Both cases were consolidated for trial and judgment in the RTC.18

Ruling of the RTC

After trial, the RTC rendered judgment, as follows:

WHEREFORE, and in consideration of the foregoing, judgment is hereby rendered in favor of plaintiff Dionisio A.
Parulan, Jr. and against defendants Ma. Elena Parulan and the Sps. Rex and Concepcion Aggabao, without
prejudice to any action that may be filed by the Sps. Aggabao against co-defendant Ma. Elena Parulan for the
amounts they paid her for the purchase of the subject lots, as follows:

1. The Deed of Absolute Sale dated March 18, 1991 covering the sale of the lot located at No. 49 M.
Cuaderno St., Executive Village, BF Homes, Paraaque, Metro Manila, and covered by TCT Nos. 63376
and 63377 is declared null and void.

2. Defendant Mrs. Elena Parulan is directed to pay litigation expenses amounting to P50,000.00 and the
costs of the suit.

SO ORDERED.19

The RTC declared that the SPA in the hands of Ma. Elena was a forgery, based on its finding that Dionisio had been
out of the country at the time of the execution of the SPA;20 that NBI Sr. Document Examiner Rhoda B. Flores had
certified that the signature appearing on the SPA purporting to be that of Dionisio and the set of standard sample
signatures of Dionisio had not been written by one and the same person;21 and that Record Officer III Eliseo O.
Terenco and Clerk of Court Jesus P. Maningas of the Manila RTC had issued a certification to the effect that Atty.
Alfred Datingaling, the Notary Public who had notarized the SPA, had not been included in the list of Notaries Public
in Manila for the year 1990-1991.22

The RTC rejected the petitioners defense of being buyers in good faith because of their failure to exercise ordinary
prudence, including demanding from Ma. Elena a court order authorizing her to sell the properties similar to the
order that the Los Baos Rural Bank had required before accepting the mortgage of the property.23 It observed that
they had appeared to be in a hurry to consummate the transaction despite Atanacios advice that they first consult a
lawyer before buying the property; that with ordinary prudence, they should first have obtained the owners duplicate
copies of the TCTs before paying the full amount of the consideration; and that the sale was void pursuant to Article
124 of the Family Code.24

Ruling of the CA

As stated, the CA affirmed the RTC, opining that Article 124 of the Family Code applied because Dionisio had not
consented to the sale of the conjugal property by Ma. Elena; and that the RTC correctly found the SPA to be a
forgery.

The CA denied the petitioners motion for reconsideration.25

Issues

The petitioners now make two arguments: (1) they were buyers in good faith; and (2) the CA erred in affirming the
RTCs finding that the sale between Mrs. Elena and the petitioners had been a nullity under Article 124 of the Family
Code.

The petitioners impute error to the CA for not applying the "ordinary prudent mans standard" in determining their
status as buyers in good faith. They contend that the more appropriate law to apply was Article 173 of the Civil
Code, not Article 124 of the Family Code; and that even if the SPA held by Ma. Elena was a forgery, the ruling
in Veloso v. Court of Appeals26 warranted a judgment in their favor.

Restated, the issues for consideration and resolution are as follows:

1) Which between Article 173 of the Civil Code and Article 124 of the Family Code should apply to the sale
of the conjugal property executed without the consent of Dionisio?

2) Might the petitioners be considered in good faith at the time of their purchase of the property?

3) Might the ruling in Veloso v. Court of Appeals be applied in favor of the petitioners despite the finding of
forgery of the SPA?

Ruling

The petition has no merit. We sustain the CA.


1.

Article 124, Family Code, applies to sale of conjugal


properties made after the effectivity of the Family Code

The petitioners submit that Article 173 of the Civil Code, not Article 124 of the Family Code, governed the property
relations of the respondents because they had been married prior to the effectivity of the Family Code; and that the
second paragraph of Article 124 of the Family Code should not apply because the other spouse held the
administration over the conjugal property. They argue that notwithstanding his absence from the country Dionisio
still held the administration of the conjugal property by virtue of his execution of the SPA in favor of his brother; and
that even assuming that Article 124 of the Family Code properly applied, Dionisio ratified the sale through Atty.
Parulans counter-offer during the March 25, 1991 meeting.

We do not subscribe to the petitioners submissions.

To start with, Article 25427 the Family Code has expressly repealed several titles under the Civil Code, among them
the entire Title VI in which the provisions on the property relations between husband and wife, Article 173 included,
are found.

Secondly, the sale was made on March 18, 1991, or after August 3, 1988, the effectivity of the Family Code. The
proper law to apply is, therefore, Article 124 of the Family Code, for it is settled that any alienation or encumbrance
of conjugal property made during the effectivity of the Family Code is governed by Article 124 of the Family Code.28

Article 124 of the Family Code provides:

Article 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses
jointly. In case of disagreement, the husbands decision shall prevail, subject to recourse to the court by the wife for
proper remedy, which must be availed of within five years from the date of the contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the
conjugal properties, the other spouse may assume sole powers of administration. These powers do not
include disposition or encumbrance without authority of the court or the written consent of the other
spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the
transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and
may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court
before the offer is withdrawn by either or both offerors.

Thirdly, according to Article 25629 of the Family Code, the provisions of the Family Code may apply retroactively
provided no vested rights are impaired. In Tumlos v. Fernandez,30 the Court rejected the petitioners argument that
the Family Code did not apply because the acquisition of the contested property had occurred prior to the effectivity
of the Family Code, and pointed out that Article 256 provided that the Family Code could apply retroactively if the
application would not prejudice vested or acquired rights existing before the effectivity of the Family Code. Herein,
however, the petitioners did not show any vested right in the property acquired prior to August 3, 1988 that
exempted their situation from the retroactive application of the Family Code.

Fourthly, the petitioners failed to substantiate their contention that Dionisio, while holding the administration over the
property, had delegated to his brother, Atty. Parulan, the administration of the property, considering that they did not
present in court the SPA granting to Atty. Parulan the authority for the administration.

Nonetheless, we stress that the power of administration does not include acts of disposition or encumbrance, which
are acts of strict ownership. As such, an authority to dispose cannot proceed from an authority to administer, and
vice versa, for the two powers may only be exercised by an agent by following the provisions on agency of the Civil
Code (from Article 1876 to Article 1878). Specifically, the apparent authority of Atty. Parulan, being a special
agency, was limited to the sale of the property in question, and did not include or extend to the power to administer
the property.31

Lastly, the petitioners insistence that Atty. Parulans making of a counter-offer during the March 25, 1991 meeting
ratified the sale merits no consideration. Under Article 124 of the Family Code, the transaction executed sans the
written consent of Dionisio or the proper court order was void; hence, ratification did not occur, for a void contract
could not be ratified.32

On the other hand, we agree with Dionisio that the void sale was a continuing offer from the petitioners and Ma.
Elena that Dionisio had the option of accepting or rejecting before the offer was withdrawn by either or both Ma.
Elena and the petitioners. The last sentence of the second paragraph of Article 124 of the Family Code makes this
clear, stating that in the absence of the other spouses consent, the transaction should be construed as a continuing
offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon
the acceptance by the other spouse or upon authorization by the court before the offer is withdrawn by either or both
offerors.
2.

Due diligence required in verifying not only vendors title,


but also agents authority to sell the property

A purchaser in good faith is one who buys the property of another, without notice that some other person has a right
to, or interest in, such property, and pays the full and fair price for it at the time of such purchase or before he has
notice of the claim or interest of some other persons in the property. He buys the property with the belief that the
person from whom he receives the thing was the owner and could convey title to the property. He cannot close his
eyes to facts that should put a reasonable man on his guard and still claim he acted in good faith.33 The status of a
buyer in good faith is never presumed but must be proven by the person invoking it.34

Here, the petitioners disagree with the CA for not applying the "ordinary prudent mans standard" in determining
their status as buyers in good faith. They insist that they exercised due diligence by verifying the status of the TCTs,
as well as by inquiring about the details surrounding the mortgage extended by the Los Baos Rural Bank. They
lament the holding of the CA that they should have been put on their guard when they learned that the Los Baos
Rural Bank had first required a court order before granting the loan to the respondents secured by their mortgage of
the property.

The petitioners miss the whole point.

Article 124 of the Family Code categorically requires the consent of both spouses before the conjugal property may
be disposed of by sale, mortgage, or other modes of disposition. In Bautista v. Silva,35 the Court erected a standard
to determine the good faith of the buyers dealing with

a seller who had title to and possession of the land but whose capacity to sell was restricted, in that the consent of
the other spouse was required before the conveyance, declaring that in order to prove good faith in such a situation,
the buyers must show that they inquired not only into the title of the seller but also into the sellers capacity to
sell.36Thus, the buyers of conjugal property must observe two kinds of requisite diligence, namely: (a) the diligence
in verifying the validity of the title covering the property; and (b) the diligence in inquiring into the authority of the
transacting spouse to sell conjugal property in behalf of the other spouse.

It is true that a buyer of registered land needs only to show that he has relied on the face of the certificate of title to
the property, for he is not required to explore beyond what the certificate indicates on its face.37 In this respect, the
petitioners sufficiently proved that they had checked on the authenticity of TCT No. 63376 and TCT No. 63377 with
the Office of the Register of Deeds in Pasay City as the custodian of the land records; and that they had also gone
to the Los Baos Rural Bank to inquire about the mortgage annotated on TCT No. 63377. Thereby, the petitioners
observed the requisite diligence in examining the validity of the TCTs concerned.

Yet, it ought to be plain enough to the petitioners that the issue was whether or not they had diligently inquired into
the authority of Ma. Elena to convey the property, not whether or not the TCT had been valid and authentic, as to
which there was no doubt. Thus, we cannot side with them.

Firstly, the petitioners knew fully well that the law demanded the written consent of Dionisio to the sale, but yet they
did not present evidence to show that they had made inquiries into the circumstances behind the execution of the
SPA purportedly executed by Dionisio in favor of Ma. Elena. Had they made the appropriate inquiries, and not
simply accepted the SPA for what it represented on its face, they would have uncovered soon enough that the
respondents had been estranged from each other and were under de facto separation, and that they probably held
conflicting interests that would negate the existence of an agency between them. To lift this doubt, they must, of
necessity, further inquire into the SPA of Ma. Elena. The omission to inquire indicated their not being buyers in good
faith, for, as fittingly observed in Domingo v. Reed:381avvphi1

What was required of them by the appellate court, which we affirm, was merely to investigate as any prudent
vendee should the authority of Lolita to sell the property and to bind the partnership. They had knowledge of facts
that should have led them to inquire and to investigate, in order to acquaint themselves with possible defects in her
title. The law requires them to act with the diligence of a prudent person; in this case, their only prudent course of
action was to investigate whether respondent had indeed given his consent to the sale and authorized his wife to
sell the property.39

Indeed, an unquestioning reliance by the petitioners on Ma. Elenas SPA without first taking precautions to verify its
authenticity was not a prudent buyers move.40 They should have done everything within their means and power to
ascertain whether the SPA had been genuine and authentic. If they did not investigate on the relations of the
respondents vis--vis each other, they could have done other things towards the same end, like attempting to locate
the notary public who had notarized the SPA, or checked with the RTC in Manila to confirm the authority of Notary
Public Atty. Datingaling. It turned out that Atty. Datingaling was not authorized to act as a Notary Public for Manila
during the period 1990-1991, which was a fact that they could easily discover with a modicum of zeal.

Secondly, the final payment of P700,000.00 even without the owners duplicate copy of the TCT No. 63376 being
handed to them by Ma. Elena indicated a revealing lack of precaution on the part of the petitioners. It is true that she
promised to produce and deliver the owners copy within a week because her relative having custody of it had gone
to Hongkong, but their passivity in such an essential matter was puzzling light of their earlier alacrity in immediately
and diligently validating the TCTs to the extent of inquiring at the Los Baos Rural Bank about the annotated
mortgage. Yet, they could have rightly withheld the final payment of the balance. That they did not do so reflected
their lack of due care in dealing with Ma. Elena.

Lastly, another reason rendered the petitioners good faith incredible. They did not take immediate action against
Ma. Elena upon discovering that the owners original copy of TCT No. 63376 was in the possession of Atty. Parulan,
contrary to Elenas representation. Human experience would have impelled them to exert every effort to proceed
against Ma. Elena, including demanding the return of the substantial amounts paid to her. But they seemed not to
mind her inability to produce the TCT, and, instead, they contented themselves with meeting with Atty. Parulan to
negotiate for the possible turnover of the TCT to them.

3.

Veloso v. Court of Appeals cannot help petitioners

The petitioners contend that the forgery of the SPA notwithstanding, the CA could still have decided in their favor
conformably with Veloso v. Court of Appeals,41 a case where the petitioner husband claimed that his signature and
that of the notary public who had notarized the SPA the petitioner supposedly executed to authorize his wife to sell
the property had been forged. In denying relief, the Court upheld the right of the vendee as an innocent purchaser
for value.

Veloso is inapplicable, however, because the contested property therein was exclusively owned by the petitioner
and did not belong to the conjugal regime. Veloso being upon conjugal property, Article 124 of the Family Code did
not apply.

In contrast, the property involved herein pertained to the conjugal regime, and, consequently, the lack of the written
consent of the husband rendered the sale void pursuant to Article 124 of the Family Code. Moreover, evenassuming
that the property involved in Veloso was conjugal, its sale was made on November 2, 1987, or prior to the effectivity
of the Family Code; hence, the sale was still properly covered by Article 173 of the Civil Code, which provides that a
sale effected without the consent of one of the spouses is only voidable, not void. However, the sale herein was
made already during the effectivity of the Family Code, rendering the application of Article 124 of the Family Code
clear and indubitable.

The fault of the petitioner in Veloso was that he did not adduce sufficient evidence to prove that his signature and
that of the notary public on the SPA had been forged. The Court pointed out that his mere allegation that the
signatures had been forged could not be sustained without clear and convincing proof to substantiate the allegation.
Herein, however, both the RTC and the CA found from the testimonies and evidence presented by Dionisio that his
signature had been definitely forged, as borne out by the entries in his passport showing that he was out of the
country at the time of the execution of the questioned SPA; and that the alleged notary public, Atty. Datingaling, had
no authority to act as a Notary Public for Manila during the period of 1990-1991.

WHEREFORE, we deny the petition for review on certiorari, and affirm the decision dated July 2, 2004 rendered by
the Court of Appeals in C.A.-G.R. CV No. 69044 entitled "Dionisio Z. Parulan, Jr. vs. Ma. Elena Parulan and Sps.
Rex and Concepcion Aggabao" and "Sps. Rex and Concepcion Aggabao vs. Dionisio Z. Parulan, Jr. and Ma. Elena
Parulan."

Costs of suit to be paid by the petitioners.

SO ORDERED.

G.R. No. 183984 April 13, 2011

ARTURO SARTE FLORES, Petitioner,


vs.
SPOUSES ENRICO L. LINDO, JR. and EDNA C. LINDO, Respondents.

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review1 assailing the 30 May 2008 Decision2 and the 4 August 2008 Resolution3 of
the Court of Appeals in CA-G.R. SP No. 94003.
The Antecedent Facts

The facts, as gleaned from the Court of Appeals Decision, are as follows:

On 31 October 1995, Edna Lindo (Edna) obtained a loan from Arturo Flores (petitioner) amounting to P400,000
payable on 1 December 1995 with 3% compounded monthly interest and 3% surcharge in case of late payment. To
secure the loan, Edna executed a Deed of Real Estate Mortgage4 (the Deed) covering a property in the name of
Edna and her husband Enrico (Enrico) Lindo, Jr. (collectively, respondents). Edna also signed a Promissory
Note5and the Deed for herself and for Enrico as his attorney-in-fact.

Edna issued three checks as partial payments for the loan. All checks were dishonored for insufficiency of funds,
prompting petitioner to file a Complaint for Foreclosure of Mortgage with Damages against respondents. The case
was raffled to the Regional Trial Court of Manila, Branch 33 (RTC, Branch 33) and docketed as Civil Case No. 00-
97942.

In its 30 September 2003 Decision,6 the RTC, Branch 33 ruled that petitioner was not entitled to judicial foreclosure
of the mortgage. The RTC, Branch 33 found that the Deed was executed by Edna without the consent and authority
of Enrico. The RTC, Branch 33 noted that the Deed was executed on 31 October 1995 while the Special Power of
Attorney (SPA) executed by Enrico was only dated 4 November 1995.

The RTC, Branch 33 further ruled that petitioner was not precluded from recovering the loan from Edna as he could
file a personal action against her. However, the RTC, Branch 33 ruled that it had no jurisdiction over the personal
action which should be filed in the place where the plaintiff or the defendant resides in accordance with Section 2,
Rule 4 of the Revised Rules on Civil Procedure.

Petitioner filed a motion for reconsideration. In its Order7 dated 8 January 2004, the RTC, Branch 33 denied the
motion for lack of merit.

On 8 September 2004, petitioner filed a Complaint for Sum of Money with Damages against respondents. It was
raffled to Branch 42 (RTC, Branch 42) of the Regional Trial Court of Manila, and docketed as Civil Case No. 04-
110858.

Respondents filed their Answer with Affirmative Defenses and Counterclaims where they admitted the loan but
stated that it only amounted to P340,000. Respondents further alleged that Enrico was not a party to the loan
because it was contracted by Edna without Enricos signature. Respondents prayed for the dismissal of the case on
the grounds of improper venue, res judicata and forum-shopping, invoking the Decision of the RTC, Branch 33. On 7
March 2005, respondents also filed a Motion to Dismiss on the grounds of res judicata and lack of cause of action.

The Decision of the Trial Court

On 22 July 2005, the RTC, Branch 42 issued an Order8 denying the motion to dismiss. The RTC, Branch 42 ruled
that res judicata will not apply to rights, claims or demands which, although growing out of the same subject matter,
constitute separate or distinct causes of action and were not put in issue in the former action. Respondents filed a
motion for reconsideration. In its Order9 dated 8 February 2006, the RTC, Branch 42 denied respondents motion.
The RTC, Branch 42 ruled that the RTC, Branch 33 expressly stated that its decision did not mean that petitioner
could no longer recover the loan petitioner extended to Edna.

Respondents filed a Petition for Certiorari and Mandamus with Prayer for a Writ of Preliminary Injunction and/or
Temporary Restraining Order before the Court of Appeals.

The Decision of the Court of Appeals

In its 30 May 2008 Decision, the Court of Appeals set aside the 22 July 2005 and 8 February 2006 Orders of the
RTC, Branch 42 for having been issued with grave abuse of discretion.

The Court of Appeals ruled that while the general rule is that a motion to dismiss is interlocutory and not appealable,
the rule admits of exceptions. The Court of Appeals ruled that the RTC, Branch 42 acted with grave abuse of
discretion in denying respondents motion to dismiss.

The Court of Appeals ruled that under Section 3, Rule 2 of the 1997 Rules of Civil Procedure, a party may not
institute more than one suit for a single cause of action. If two or more suits are instituted on the basis of the same
cause of action, the filing of one on a judgment upon the merits in any one is available ground for the dismissal of
the others. The Court of Appeals ruled that on a nonpayment of a note secured by a mortgage, the creditor has a
single cause of action against the debtor, that is recovery of the credit with execution of the suit. Thus, the creditor
may institute two alternative remedies: either a personal action for the collection of debt or a real action to foreclose
the mortgage, but not both. The Court of Appeals ruled that petitioner had only one cause of action against Edna for
her failure to pay her obligation and he could not split the single cause of action by filing separately a foreclosure
proceeding and a collection case. By filing a petition for foreclosure of the real estate mortgage, the Court of
Appeals held that petitioner had already waived his personal action to recover the amount covered by the
promissory note.

Petitioner filed a motion for reconsideration. In its 4 August 2008 Resolution, the Court of Appeals denied the
motion.

Hence, the petition before this Court.

The Issue

The sole issue in this case is whether the Court of Appeals committed a reversible error in dismissing the complaint
for collection of sum of money on the ground of multiplicity of suits.

The Ruling of this Court

The petition has merit.

The rule is that a mortgage-creditor has a single cause of action against a mortgagor-debtor, that is, to recover the
debt.10 The mortgage-creditor has the option of either filing a personal action for collection of sum of money or
instituting a real action to foreclose on the mortgage security.11 An election of the first bars recourse to the second,
otherwise there would be multiplicity of suits in which the debtor would be tossed from one venue to another
depending on the location of the mortgaged properties and the residence of the parties.12

The two remedies are alternative and each remedy is complete by itself.13 If the mortgagee opts to foreclose the real
estate mortgage, he waives the action for the collection of the debt, and vice versa.14 The Court explained:

x x x in the absence of express statutory provisions, a mortgage creditor may institute against the mortgage debtor
either a personal action for debt or a real action to foreclose the mortgage. In other words, he may pursue either of
the two remedies, but not both. By such election, his cause of action can by no means be impaired, for each of the
two remedies is complete in itself. Thus, an election to bring a personal action will leave open to him all the
properties of the debtor for attachment and execution, even including the mortgaged property itself. And, if he
waives such personal action and pursues his remedy against the mortgaged property, an unsatisfied judgment
thereon would still give him the right to sue for deficiency judgment, in which case, all the properties of the
defendant, other than the mortgaged property, are again open to him for the satisfaction of the deficiency. In either
case, his remedy is complete, his cause of action undiminished, and any advantages attendant to the pursuit of one
or the other remedy are purely accidental and are all under his right of election. On the other hand, a rule that would
authorize the plaintiff to bring a personal action against the debtor and simultaneously or successively another
action against the mortgaged property, would result not only in multiplicity of suits so offensive to justice (Soriano v.
Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio v. San Agustin, 25 Phil. 404), but also in subjecting
the defendant to the vexation of being sued in the place of his residence or of the residence of the plaintiff, and then
again in the place where the property lies.15

The Court has ruled that if a creditor is allowed to file his separate complaints simultaneously or successively, one to
recover his credit and another to foreclose his mortgage, he will, in effect, be authorized plural redress for a single
breach of contract at so much costs to the court and with so much vexation and oppressiveness to the debtor.16

In this case, however, there are circumstances that the Court takes into consideration.

Petitioner filed an action for foreclosure of mortgage. The RTC, Branch 33 ruled that petitioner was not entitled to
judicial foreclosure because the Deed of Real Estate Mortgage was executed without Enricos consent. The RTC,
Branch 33 stated:

All these circumstances certainly conspired against the plaintiff who has the burden of proving his cause of action.
On the other hand, said circumstances tend to support the claim of defendant Edna Lindo that her husband did not
consent to the mortgage of their conjugal property and that the loan application was her personal decision.

Accordingly, since the Deed of Real Estate Mortgage was executed by defendant Edna Lindo lacks the consent or
authority of her husband Enrico Lindo, the Deed of Real Estate Mortgage is void pursuant to Article 96 of the Family
Code.

This does not mean, however, that the plaintiff cannot recover the P400,000 loan plus interest which he extended to
defendant Edna Lindo. He can institute a personal action against the defendant for the amount due which should be
filed in the place where the plaintiff resides, or where the defendant or any of the principal defendants resides at the
election of the plaintiff in accordance with Section 2, Rule 4 of the Revised Rules on Civil Procedure. This Court has
no jurisdiction to try such personal action.17

Edna did not deny before the RTC, Branch 33 that she obtained the loan. She claimed, however, that her husband
did not give his consent and that he was not aware of the transaction.18 Hence, the RTC, Branch 33 held that
petitioner could still recover the amount due from Edna through a personal action over which it had no jurisdiction.
Edna also filed an action for declaratory relief before the RTC, Branch 93 of San Pedro Laguna (RTC, Branch 93),
which ruled:

At issue in this case is the validity of the promissory note and the Real Estate Mortgage executed by Edna Lindo
without the consent of her husband.

The real estate mortgage executed by petition Edna Lindo over their conjugal property is undoubtedly an act of strict
dominion and must be consented to by her husband to be effective. In the instant case, the real estate mortgage,
absent the authority or consent of the husband, is necessarily void. Indeed, the real estate mortgage is this case
was executed on October 31, 1995 and the subsequent special power of attorney dated November 4, 1995 cannot
be made to retroact to October 31, 1995 to validate the mortgage previously made by petitioner.

The liability of Edna Lindo on the principal contract of the loan however subsists notwithstanding the illegality of the
mortgage. Indeed, where a mortgage is not valid, the principal obligation which it guarantees is not thereby rendered
null and void. That obligation matures and becomes demandable in accordance with the stipulation pertaining to it.
Under the foregoing circumstances, what is lost is merely the right to foreclose the mortgage as a special remedy for
satisfying or settling the indebtedness which is the principal obligation. In case of nullity, the mortgage deed remains
as evidence or proof of a personal obligation of the debtor and the amount due to the creditor may be enforced in an
ordinary action.

In view of the foregoing, judgment is hereby rendered declaring the deed of real estate mortgage as void in the
absence of the authority or consent of petitioners spouse therein. The liability of petitioner on the principal contract
of loan however subsists notwithstanding the illegality of the real estate mortgage.19

The RTC, Branch 93 also ruled that Ednas liability is not affected by the illegality of the real estate mortgage.

Both the RTC, Branch 33 and the RTC, Branch 93 misapplied the rules.

Article 124 of the Family Code provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly.
In case of disagreement, the husbands decision shall prevail, subject to recourse to the court by the wife for proper
remedy, which must be availed of within five years from the date of contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal
properties, the other spouse may assume sole powers of administration. These powers do not include disposition or
encumbrance without authority of the court or the written consent of the other spouse. In the absence of such
authority or consent the disposition or encumbrance shall be void. However, the transaction shall be construed
as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a
binding contract upon the acceptance by the other spouse or authorization by the court before the offer is
withdrawn by either or both offerors. (Emphasis supplied)

Article 124 of the Family Code of which applies to conjugal partnership property, is a reproduction of Article 96 of the
Family Code which applies to community property.

Both Article 96 and Article 127 of the Family Code provide that the powers do not include disposition or
encumbrance without the written consent of the other spouse. Any disposition or encumbrance without the written
consent shall be void. However, both provisions also state that "the transaction shall be construed as a continuing
offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract
upon the acceptance by the other spouse x x x before the offer is withdrawn by either or both offerors."

In this case, the Promissory Note and the Deed of Real Estate Mortgage were executed on 31 October 1995. The
Special Power of Attorney was executed on 4 November 1995. The execution of the SPA is the acceptance by
the other spouse that perfected the continuing offer as a binding contract between the parties, making the
Deed of Real Estate Mortgage a valid contract.

However, as the Court of Appeals noted, petitioner allowed the decisions of the RTC, Branch 33 and the RTC,
Branch 93 to become final and executory without asking the courts for an alternative relief. The Court of Appeals
stated that petitioner merely relied on the declarations of these courts that he could file a separate personal action
and thus failed to observe the rules and settled jurisprudence on multiplicity of suits, closing petitioners avenue for
recovery of the loan.

Nevertheless, petitioner still has a remedy under the law.

In Chieng v. Santos,20 this Court ruled that a mortgage-creditor may institute against the mortgage-debtor either a
personal action for debt or a real action to foreclose the mortgage. The Court ruled that the remedies are alternative
and not cumulative and held that the filing of a criminal action for violation of Batas Pambansa Blg. 22 was in effect
a collection suit or a suit for the recovery of the mortgage-debt.21 In that case, however, this Court pro hac vice,
ruled that respondents could still be held liable for the balance of the loan, applying the principle that no person may
unjustly enrich himself at the expense of another.22

The principle of unjust enrichment is provided under Article 22 of the Civil Code which provides:

Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall return the same to him.

There is unjust enrichment "when a person unjustly retains a benefit to the loss of another, or when a person retains
money or property of another against the fundamental principles of justice, equity and good conscience."23 The
principle of unjust enrichment requires two conditions: (1) that a person is benefited without a valid basis or
justification, and (2) that such benefit is derived at the expense of another.24
1avvphi 1

The main objective of the principle against unjust enrichment is to prevent one from enriching himself at the expense
of another without just cause or consideration.25 The principle is applicable in this case considering that Edna
admitted obtaining a loan from petitioners, and the same has not been fully paid without just cause. The Deed was
declared void erroneously at the instance of Edna, first when she raised it as a defense before the RTC, Branch 33
and second, when she filed an action for declaratory relief before the RTC, Branch 93. Petitioner could not be
expected to ask the RTC, Branch 33 for an alternative remedy, as what the Court of Appeals ruled that he should
have done, because the RTC, Branch 33 already stated that it had no jurisdiction over any personal action that
petitioner might have against Edna.

Considering the circumstances of this case, the principle against unjust enrichment, being a substantive law, should
prevail over the procedural rule on multiplicity of suits. The Court of Appeals, in the assailed decision, found that
Edna admitted the loan, except that she claimed it only amounted to P340,000. Edna should not be allowed to
unjustly enrich herself because of the erroneous decisions of the two trial courts when she questioned the validity of
the Deed. Moreover, Edna still has an opportunity to submit her defenses before the RTC, Branch 42 on her claim
as to the amount of her indebtedness.

WHEREFORE, the 30 May 2008 Decision and the 4 August 2008 Resolution of the Court of Appeals in CA-G.R. SP
No. 94003 are SET ASIDE. The Regional Trial Court of Manila, Branch 42 is directed to proceed with the trial of
Civil Case No. 04-110858.

SO ORDERED.

G.R. No 176556 July 4, 2012

BRIGIDO B. QUIAO, Petitioner,


vs.
RITA C. QUIAO, KITCHIE C. QUIAO, LOTIS C. QUIAO, PETCHIE C. QUIAO, represented by their mother RITA
QUIAO, Respondents.

DECISION

REYES, J.:

The family is the basic and the most important institution of society. It is in the family where children are born and
molded either to become useful citizens of the country or troublemakers in the community. Thus, we are saddened
when parents have to separate and fight over properties, without regard to the message they send to their children.
Notwithstanding this, we must not shirk from our obligation to rule on this case involving legal separation escalating
to questions on dissolution and partition of properties.

The Case

This case comes before us via Petition for Review on Certiorari1 under Rule 45 of the Rules of Court. The petitioner
seeks that we vacate and set aside the Order2 dated January 8, 2007 of the Regional Trial Court (RTC), Branch 1,
Butuan City. In lieu of the said order, we are asked to issue a Resolution defining the net profits subject of the
forfeiture as a result of the decree of legal separation in accordance with the provision of Article 102(4) of the Family
Code, or alternatively, in accordance with the provisions of Article 176 of the Civil Code.

Antecedent Facts

On October 26, 2000, herein respondent Rita C. Quiao (Rita) filed a complaint for legal separation against herein
petitioner Brigido B. Quiao (Brigido).3 Subsequently, the RTC rendered a Decision4 dated October 10, 2005, the
dispositive portion of which provides:
WHEREFORE, viewed from the foregoing considerations, judgment is hereby rendered declaring the legal
separation of plaintiff Rita C. Quiao and defendant-respondent Brigido B. Quiao pursuant to Article 55.

As such, the herein parties shall be entitled to live separately from each other, but the marriage bond shall not be
severed.

Except for Letecia C. Quiao who is of legal age, the three minor children, namely, Kitchie, Lotis and Petchie, all
surnamed Quiao shall remain under the custody of the plaintiff who is the innocent spouse.

Further, except for the personal and real properties already foreclosed by the RCBC, all the remaining properties,
namely:

1. coffee mill in Balongagan, Las Nieves, Agusan del Norte;

2. coffee mill in Durian, Las Nieves, Agusan del Norte;

3. corn mill in Casiklan, Las Nieves, Agusan del Norte;

4. coffee mill in Esperanza, Agusan del Sur;

5. a parcel of land with an area of 1,200 square meters located in Tungao, Butuan City;

6. a parcel of agricultural land with an area of 5 hectares located in Manila de Bugabos, Butuan City;

7. a parcel of land with an area of 84 square meters located in Tungao, Butuan City;

8. Bashier Bon Factory located in Tungao, Butuan City;

shall be divided equally between herein [respondents] and [petitioner] subject to the respective legitimes of the
children and the payment of the unpaid conjugal liabilities of [P]45,740.00.

[Petitioners] share, however, of the net profits earned by the conjugal partnership is forfeited in favor of the common
children.

He is further ordered to reimburse [respondents] the sum of [P]19,000.00 as attorney's fees and litigation expenses
of [P]5,000.00[.]

SO ORDERED.5

Neither party filed a motion for reconsideration and appeal within the period provided for under Section 17(a) and (b)
of the Rule on Legal Separation.6

On December 12, 2005, the respondents filed a motion for execution7 which the trial court granted in its Order dated
December 16, 2005, the dispositive portion of which reads:

"Wherefore, finding the motion to be well taken, the same is hereby granted. Let a writ of execution be issued for the
immediate enforcement of the Judgment.

SO ORDERED."8

Subsequently, on February 10, 2006, the RTC issued a Writ of Execution9 which reads as follows:

NOW THEREFORE, that of the goods and chattels of the [petitioner] BRIGIDO B. QUIAO you cause to be made the
sums stated in the afore-quoted DECISION [sic], together with your lawful fees in the service of this Writ, all in the
Philippine Currency.

But if sufficient personal property cannot be found whereof to satisfy this execution and your lawful fees, then we
command you that of the lands and buildings of the said [petitioner], you make the said sums in the manner required
by law. You are enjoined to strictly observed Section 9, Rule 39, Rule [sic] of the 1997 Rules of Civil Procedure.

You are hereby ordered to make a return of the said proceedings immediately after the judgment has been satisfied
in part or in full in consonance with Section 14, Rule 39 of the 1997 Rules of Civil Procedure, as amended.10

On July 6, 2006, the writ was partially executed with the petitioner paying the respondents the amount
of P46,870.00, representing the following payments:

(a) P22,870.00 as petitioner's share of the payment of the conjugal share;


(b) P19,000.00 as attorney's fees; and

(c) P5,000.00 as litigation expenses.11

On July 7, 2006, or after more than nine months from the promulgation of the Decision, the petitioner filed before the
RTC a Motion for Clarification,12 asking the RTC to define the term "Net Profits Earned."

To resolve the petitioner's Motion for Clarification, the RTC issued an Order13 dated August 31, 2006, which held
that the phrase "NET PROFIT EARNED" denotes "the remainder of the properties of the parties after deducting the
separate properties of each [of the] spouse and the debts."14 The Order further held that after determining the
remainder of the properties, it shall be forfeited in favor of the common children because the offending spouse does
not have any right to any share of the net profits earned, pursuant to Articles 63, No. (2) and 43, No. (2) of the
Family Code.15 The dispositive portion of the Order states:

WHEREFORE, there is no blatant disparity when the sheriff intends to forfeit all the remaining properties after
deducting the payments of the debts for only separate properties of the defendant-respondent shall be delivered to
him which he has none.

The Sheriff is herein directed to proceed with the execution of the Decision.

IT IS SO ORDERED.16

Not satisfied with the trial court's Order, the petitioner filed a Motion for Reconsideration17 on September 8, 2006.
Consequently, the RTC issued another Order18 dated November 8, 2006, holding that although the Decision dated
October 10, 2005 has become final and executory, it may still consider the Motion for Clarification because the
petitioner simply wanted to clarify the meaning of "net profit earned."19 Furthermore, the same Order held:

ALL TOLD, the Court Order dated August 31, 2006 is hereby ordered set aside. NET PROFIT EARNED, which is
subject of forfeiture in favor of [the] parties' common children, is ordered to be computed in accordance [with] par. 4
of Article 102 of the Family Code.20

On November 21, 2006, the respondents filed a Motion for Reconsideration,21 praying for the correction and reversal
of the Order dated November 8, 2006. Thereafter, on January 8, 2007,22 the trial court had changed its ruling again
and granted the respondents' Motion for Reconsideration whereby the Order dated November 8, 2006 was set aside
to reinstate the Order dated August 31, 2006.

Not satisfied with the trial court's Order, the petitioner filed on February 27, 2007 this instant Petition for Review
under Rule 45 of the Rules of Court, raising the following:

Issues

IS THE DISSOLUTION AND THE CONSEQUENT LIQUIDATION OF THE COMMON PROPERTIES OF THE
HUSBAND AND WIFE BY VIRTUE OF THE DECREE OF LEGAL SEPARATION GOVERNED BY ARTICLE 125
(SIC) OF THE FAMILY CODE?

II

WHAT IS THE MEANING OF THE NET PROFITS EARNED BY THE CONJUGAL PARTNERSHIP FOR
PURPOSES OF EFFECTING THE FORFEITURE AUTHORIZED UNDER ARTICLE 63 OF THE FAMILY CODE?

III

WHAT LAW GOVERNS THE PROPERTY RELATIONS BETWEEN THE HUSBAND AND WIFE WHO GOT
MARRIED IN 1977? CAN THE FAMILY CODE OF THE PHILIPPINES BE GIVEN RETROACTIVE EFFECT FOR
PURPOSES OF DETERMINING THE NET PROFITS SUBJECT OF FORFEITURE AS A RESULT OF THE
DECREE OF LEGAL SEPARATION WITHOUT IMPAIRING VESTED RIGHTS ALREADY ACQUIRED UNDER
THE CIVIL CODE?

IV

WHAT PROPERTIES SHALL BE INCLUDED IN THE FORFEITURE OF THE SHARE OF THE GUILTY SPOUSE
IN THE NET CONJUGAL PARTNERSHIP AS A RESULT OF THE ISSUANCE OF THE DECREE OF LEGAL
SEPARATION?23

Our Ruling
While the petitioner has raised a number of issues on the applicability of certain laws, we are well-aware that the
respondents have called our attention to the fact that the Decision dated October 10, 2005 has attained finality when
the Motion for Clarification was filed.24 Thus, we are constrained to resolve first the issue of the finality of the
Decision dated October 10, 2005 and subsequently discuss the matters that we can clarify.

The Decision dated October 10, 2005 has become final and executory at the time the Motion for Clarification
was filed on July 7, 2006.

Section 3, Rule 41 of the Rules of Court provides:

Section 3. Period of ordinary appeal. - The appeal shall be taken within fifteen (15) days from notice of the judgment
or final order appealed from. Where a record on appeal is required, the appellant shall file a notice of appeal and a
record on appeal within thirty (30) days from notice of the judgment or final order.

The period of appeal shall be interrupted by a timely motion for new trial or reconsideration. No motion for extension
of time to file a motion for new trial or reconsideration shall be allowed.

In Neypes v. Court of Appeals,25 we clarified that to standardize the appeal periods provided in the Rules and to
afford litigants fair opportunity to appeal their cases, we held that "it would be practical to allow a fresh period of 15
days within which to file the notice of appeal in the RTC, counted from receipt of the order dismissing a motion for a
new trial or motion for reconsideration."26

In Neypes, we explained that the "fresh period rule" shall also apply to Rule 40 governing appeals from the
Municipal Trial Courts to the RTCs; Rule 42 on petitions for review from the RTCs to the Court of Appeals (CA);
Rule 43 on appeals from quasi-judicial agencies to the CA and Rule 45 governing appeals by certiorari to the
Supreme Court. We also said, "The new rule aims to regiment or make the appeal period uniform, to be counted
from receipt of the order denying the motion for new trial, motion for reconsideration (whether full or partial) or any
final order or resolution."27 In other words, a party litigant may file his notice of appeal within a fresh 15-day period
from his receipt of the trial court's decision or final order denying his motion for new trial or motion for
reconsideration. Failure to avail of the fresh 15-day period from the denial of the motion for reconsideration makes
the decision or final order in question final and executory.

In the case at bar, the trial court rendered its Decision on October 10, 2005. The petitioner neither filed a motion for
reconsideration nor a notice of appeal. On December 16, 2005, or after 67 days had lapsed, the trial court issued an
order granting the respondent's motion for execution; and on February 10, 2006, or after 123 days had lapsed, the
trial court issued a writ of execution. Finally, when the writ had already been partially executed, the petitioner, on
July 7, 2006 or after 270 days had lapsed, filed his Motion for Clarification on the definition of the "net profits
earned." From the foregoing, the petitioner had clearly slept on his right to question the RTCs Decision dated
October 10, 2005. For 270 days, the petitioner never raised a single issue until the decision had already been
partially executed. Thus at the time the petitioner filed his motion for clarification, the trial courts decision has
become final and executory. A judgment becomes final and executory when the reglementary period to appeal
lapses and no appeal is perfected within such period. Consequently, no court, not even this Court, can arrogate unto
itself appellate jurisdiction to review a case or modify a judgment that became final.28

The petitioner argues that the decision he is questioning is a void judgment. Being such, the petitioner's thesis is
that it can still be disturbed even after 270 days had lapsed from the issuance of the decision to the filing of the
motion for clarification. He said that "a void judgment is no judgment at all. It never attains finality and cannot be a
source of any right nor any obligation."29 But what precisely is a void judgment in our jurisdiction? When does a
judgment becomes void?

"A judgment is null and void when the court which rendered it had no power to grant the relief or no jurisdiction over
the subject matter or over the parties or both."30 In other words, a court, which does not have the power to decide a
case or that has no jurisdiction over the subject matter or the parties, will issue a void judgment or a coram non
judice.31

The questioned judgment does not fall within the purview of a void judgment. For sure, the trial court has jurisdiction
over a case involving legal separation. Republic Act (R.A.) No. 8369 confers upon an RTC, designated as the
Family Court of a city, the exclusive original jurisdiction to hear and decide, among others, complaints or petitions
relating to marital status and property relations of the husband and wife or those living together.32 The Rule on Legal
Separation33 provides that "the petition [for legal separation] shall be filed in the Family Court of the province or city
where the petitioner or the respondent has been residing for at least six months prior to the date of filing or in the
case of a non-resident respondent, where he may be found in the Philippines, at the election of the petitioner."34In
the instant case, herein respondent Rita is found to reside in Tungao, Butuan City for more than six months prior to
the date of filing of the petition; thus, the RTC, clearly has jurisdiction over the respondent's petition below.
Furthermore, the RTC also acquired jurisdiction over the persons of both parties, considering that summons and a
copy of the complaint with its annexes were served upon the herein petitioner on December 14, 2000 and that the
herein petitioner filed his Answer to the Complaint on January 9, 2001.35 Thus, without doubt, the RTC, which has
rendered the questioned judgment, has jurisdiction over the complaint and the persons of the parties.
From the aforecited facts, the questioned October 10, 2005 judgment of the trial court is clearly not void ab initio,
since it was rendered within the ambit of the court's jurisdiction. Being such, the same cannot anymore be disturbed,
even if the modification is meant to correct what may be considered an erroneous conclusion of fact or law.36 In fact,
we have ruled that for "[as] long as the public respondent acted with jurisdiction, any error committed by him or it in
the exercise thereof will amount to nothing more than an error of judgment which may be reviewed or corrected only
by appeal."37 Granting without admitting that the RTC's judgment dated October 10, 2005 was erroneous, the
petitioner's remedy should be an appeal filed within the reglementary period. Unfortunately, the petitioner failed to
do this. He has already lost the chance to question the trial court's decision, which has become immutable and
unalterable. What we can only do is to clarify the very question raised below and nothing more.

For our convenience, the following matters cannot anymore be disturbed since the October 10, 2005 judgment has
already become immutable and unalterable, to wit:

(a) The finding that the petitioner is the offending spouse since he cohabited with a woman who is not his
wife;38

(b) The trial court's grant of the petition for legal separation of respondent Rita;39

(c) The dissolution and liquidation of the conjugal partnership;40

(d) The forfeiture of the petitioner's right to any share of the net profits earned by the conjugal partnership;41

(e) The award to the innocent spouse of the minor children's custody;42

(f) The disqualification of the offending spouse from inheriting from the innocent spouse by intestate
succession;43

(g) The revocation of provisions in favor of the offending spouse made in the will of the innocent spouse;44

(h) The holding that the property relation of the parties is conjugal partnership of gains and pursuant to
Article 116 of the Family Code, all properties acquired during the marriage, whether acquired by one or both
spouses, is presumed to be conjugal unless the contrary is proved;45

(i) The finding that the spouses acquired their real and personal properties while they were living together;46

(j) The list of properties which Rizal Commercial Banking Corporation (RCBC) foreclosed;47

(k) The list of the remaining properties of the couple which must be dissolved and liquidated and the fact that
respondent Rita was the one who took charge of the administration of these properties;48

(l) The holding that the conjugal partnership shall be liable to matters included under Article 121 of the
Family Code and the conjugal liabilities totaling P503,862.10 shall be charged to the income generated by
these properties;49

(m) The fact that the trial court had no way of knowing whether the petitioner had separate properties which
can satisfy his share for the support of the family;50

(n) The holding that the applicable law in this case is Article 129(7);51

(o) The ruling that the remaining properties not subject to any encumbrance shall therefore be divided
equally between the petitioner and the respondent without prejudice to the children's legitime;52

(p) The holding that the petitioner's share of the net profits earned by the conjugal partnership is forfeited in
favor of the common children;53 and

(q) The order to the petitioner to reimburse the respondents the sum of P19,000.00 as attorney's fees and
litigation expenses of P5,000.00.54

After discussing lengthily the immutability of the Decision dated October 10, 2005, we will discuss the following
issues for the enlightenment of the parties and the public at large.

Article 129 of the Family Code applies to the present case since the parties' property relation is governed by
the system of relative community or conjugal partnership of gains.

The petitioner claims that the court a quo is wrong when it applied Article 129 of the Family Code, instead of Article
102. He confusingly argues that Article 102 applies because there is no other provision under the Family Code
which defines net profits earned subject of forfeiture as a result of legal separation.
Offhand, the trial court's Decision dated October 10, 2005 held that Article 129(7) of the Family Code applies in this
case. We agree with the trial court's holding.

First, let us determine what governs the couple's property relation. From the record, we can deduce that the
petitioner and the respondent tied the marital knot on January 6, 1977. Since at the time of the exchange of marital
vows, the operative law was the Civil Code of the Philippines (R.A. No. 386) and since they did not agree on a
marriage settlement, the property relations between the petitioner and the respondent is the system of relative
community or conjugal partnership of gains.55 Article 119 of the Civil Code provides:

Art. 119. The future spouses may in the marriage settlements agree upon absolute or relative community of
property, or upon complete separation of property, or upon any other regime. In the absence of marriage
settlements, or when the same are void, the system of relative community or conjugal partnership of gains as
established in this Code, shall govern the property relations between husband and wife.

Thus, from the foregoing facts and law, it is clear that what governs the property relations of the petitioner and of the
respondent is conjugal partnership of gains. And under this property relation, "the husband and the wife place in a
common fund the fruits of their separate property and the income from their work or industry."56 The husband and
wife also own in common all the property of the conjugal partnership of gains.57

Second, since at the time of the dissolution of the petitioner and the respondent's marriage the operative law is
already the Family Code, the same applies in the instant case and the applicable law in so far as the liquidation of
the conjugal partnership assets and liabilities is concerned is Article 129 of the Family Code in relation to Article
63(2) of the Family Code. The latter provision is applicable because according to Article 256 of the Family Code
"[t]his Code shall have retroactive effect insofar as it does not prejudice or impair vested or acquired rights in
accordance with the Civil Code or other law."58

Now, the petitioner asks: Was his vested right over half of the common properties of the conjugal partnership
violated when the trial court forfeited them in favor of his children pursuant to Articles 63(2) and 129 of the Family
Code?

We respond in the negative.

Indeed, the petitioner claims that his vested rights have been impaired, arguing: "As earlier adverted to, the
petitioner acquired vested rights over half of the conjugal properties, the same being owned in common by the
spouses. If the provisions of the Family Code are to be given retroactive application to the point of authorizing the
forfeiture of the petitioner's share in the net remainder of the conjugal partnership properties, the same impairs his
rights acquired prior to the effectivity of the Family Code."59 In other words, the petitioner is saying that since the
property relations between the spouses is governed by the regime of Conjugal Partnership of Gains under the Civil
Code, the petitioner acquired vested rights over half of the properties of the Conjugal Partnership of Gains, pursuant
to Article 143 of the Civil Code, which provides: "All property of the conjugal partnership of gains is owned in
common by the husband and wife."60 Thus, since he is one of the owners of the properties covered by the conjugal
partnership of gains, he has a vested right over half of the said properties, even after the promulgation of the Family
Code; and he insisted that no provision under the Family Code may deprive him of this vested right by virtue of
Article 256 of the Family Code which prohibits retroactive application of the Family Code when it will prejudice a
person's vested right.

However, the petitioner's claim of vested right is not one which is written on stone. In Go, Jr. v. Court of
Appeals,61we define and explained "vested right" in the following manner:

A vested right is one whose existence, effectivity and extent do not depend upon events foreign to the will of the
holder, or to the exercise of which no obstacle exists, and which is immediate and perfect in itself and not dependent
upon a contingency. The term "vested right" expresses the concept of present fixed interest which, in right reason
and natural justice, should be protected against arbitrary State action, or an innately just and imperative right which
enlightened free society, sensitive to inherent and irrefragable individual rights, cannot deny.

To be vested, a right must have become a titlelegal or equitableto the present or future enjoyment of
property.62(Citations omitted)

In our en banc Resolution dated October 18, 2005 for ABAKADA Guro Party List Officer Samson S. Alcantara, et al.
v. The Hon. Executive Secretary Eduardo R. Ermita,63 we also explained:

The concept of "vested right" is a consequence of the constitutional guaranty of due process that expresses a
present fixed interest which in right reason and natural justice is protected against arbitrary state action; it includes
not only legal or equitable title to the enforcement of a demand but also exemptions from new obligations created
after the right has become vested. Rights are considered vested when the right to enjoyment is a present interest,
absolute, unconditional, and perfect or fixed and irrefutable.64 (Emphasis and underscoring supplied)

From the foregoing, it is clear that while one may not be deprived of his "vested right," he may lose the same if there
is due process and such deprivation is founded in law and jurisprudence.
In the present case, the petitioner was accorded his right to due process. First, he was well-aware that the
respondent prayed in her complaint that all of the conjugal properties be awarded to her.65 In fact, in his Answer, the
petitioner prayed that the trial court divide the community assets between the petitioner and the respondent as
circumstances and evidence warrant after the accounting and inventory of all the community properties of the
parties.66 Second, when the Decision dated October 10, 2005 was promulgated, the petitioner never questioned the
trial court's ruling forfeiting what the trial court termed as "net profits," pursuant to Article 129(7) of the Family
Code.67 Thus, the petitioner cannot claim being deprived of his right to due process.

Furthermore, we take note that the alleged deprivation of the petitioner's "vested right" is one founded, not only in
the provisions of the Family Code, but in Article 176 of the Civil Code. This provision is like Articles 63 and 129 of
the Family Code on the forfeiture of the guilty spouse's share in the conjugal partnership profits. The said provision
says:

Art. 176. In case of legal separation, the guilty spouse shall forfeit his or her share of the conjugal partnership
profits, which shall be awarded to the children of both, and the children of the guilty spouse had by a prior marriage.
However, if the conjugal partnership property came mostly or entirely from the work or industry, or from the wages
and salaries, or from the fruits of the separate property of the guilty spouse, this forfeiture shall not apply.

In case there are no children, the innocent spouse shall be entitled to all the net profits.

From the foregoing, the petitioner's claim of a vested right has no basis considering that even under Article 176 of
the Civil Code, his share of the conjugal partnership profits may be forfeited if he is the guilty party in a legal
separation case. Thus, after trial and after the petitioner was given the chance to present his evidence, the
petitioner's vested right claim may in fact be set aside under the Civil Code since the trial court found him the guilty
party.

More, in Abalos v. Dr. Macatangay, Jr.,68 we reiterated our long-standing ruling that:

[P]rior to the liquidation of the conjugal partnership, the interest of each spouse in the conjugal assets is inchoate, a
mere expectancy, which constitutes neither a legal nor an equitable estate, and does not ripen into title until it
appears that there are assets in the community as a result of the liquidation and settlement. The interest of each
spouse is limited to the net remainder or "remanente liquido" (haber ganancial) resulting from the liquidation of the
affairs of the partnership after its dissolution. Thus, the right of the husband or wife to one-half of the conjugal assets
does not vest until the dissolution and liquidation of the conjugal partnership, or after dissolution of the marriage,
when it is finally determined that, after settlement of conjugal obligations, there are net assets left which can be
divided between the spouses or their respective heirs.69 (Citations omitted)

Finally, as earlier discussed, the trial court has already decided in its Decision dated October 10, 2005 that the
applicable law in this case is Article 129(7) of the Family Code.70 The petitioner did not file a motion for
reconsideration nor a notice of appeal. Thus, the petitioner is now precluded from questioning the trial court's
decision since it has become final and executory. The doctrine of immutability and unalterability of a final judgment
prevents us from disturbing the Decision dated October 10, 2005 because final and executory decisions can no
longer be reviewed nor reversed by this Court.71

From the above discussions, Article 129 of the Family Code clearly applies to the present case since the parties'
property relation is governed by the system of relative community or conjugal partnership of gains and since the trial
court's Decision has attained finality and immutability.

The net profits of the conjugal partnership of gains are all the fruits of the separate properties of the
spouses and the products of their labor and industry.

The petitioner inquires from us the meaning of "net profits" earned by the conjugal partnership for purposes of
effecting the forfeiture authorized under Article 63 of the Family Code. He insists that since there is no other
provision under the Family Code, which defines "net profits" earned subject of forfeiture as a result of legal
separation, then Article 102 of the Family Code applies.

What does Article 102 of the Family Code say? Is the computation of "net profits" earned in the conjugal partnership
of gains the same with the computation of "net profits" earned in the absolute community?

Now, we clarify.

First and foremost, we must distinguish between the applicable law as to the property relations between the parties
and the applicable law as to the definition of "net profits." As earlier discussed, Article 129 of the Family Code
applies as to the property relations of the parties. In other words, the computation and the succession of events will
follow the provisions under Article 129 of the said Code. Moreover, as to the definition of "net profits," we cannot but
refer to Article 102(4) of the Family Code, since it expressly provides that for purposes of computing the net profits
subject to forfeiture under Article 43, No. (2) and Article 63, No. (2), Article 102(4) applies. In this provision, net
profits "shall be the increase in value between the market value of the community property at the time of the
celebration of the marriage and the market value at the time of its dissolution."72 Thus, without any iota of doubt,
Article 102(4) applies to both the dissolution of the absolute community regime under Article 102 of the Family
Code, and to the dissolution of the conjugal partnership regime under Article 129 of the Family Code. Where lies the
difference? As earlier shown, the difference lies in the processes used under the dissolution of the absolute
community regime under Article 102 of the Family Code, and in the processes used under the dissolution of the
conjugal partnership regime under Article 129 of the Family Code.

Let us now discuss the difference in the processes between the absolute community regime and the conjugal
partnership regime.

On Absolute Community Regime:

When a couple enters into a regime of absolute community, the husband and the wife becomes joint owners of all
the properties of the marriage. Whatever property each spouse brings into the marriage, and those acquired during
the marriage (except those excluded under Article 92 of the Family Code) form the common mass of the couple's
properties. And when the couple's marriage or community is dissolved, that common mass is divided between the
spouses, or their respective heirs, equally or in the proportion the parties have established, irrespective of the value
each one may have originally owned.73

Under Article 102 of the Family Code, upon dissolution of marriage, an inventory is prepared, listing separately all
the properties of the absolute community and the exclusive properties of each; then the debts and obligations of the
absolute community are paid out of the absolute community's assets and if the community's properties are
insufficient, the separate properties of each of the couple will be solidarily liable for the unpaid balance. Whatever is
left of the separate properties will be delivered to each of them. The net remainder of the absolute community is its
net assets, which shall be divided between the husband and the wife; and for purposes of computing the net profits
subject to forfeiture, said profits shall be the increase in value between the market value of the community property
at the time of the celebration of the marriage and the market value at the time of its dissolution.74

Applying Article 102 of the Family Code, the "net profits" requires that we first find the market value of the properties
at the time of the community's dissolution. From the totality of the market value of all the properties, we subtract the
debts and obligations of the absolute community and this result to the net assets or net remainder of the properties
of the absolute community, from which we deduct the market value of the properties at the time of marriage, which
then results to the net profits.75

Granting without admitting that Article 102 applies to the instant case, let us see what will happen if we apply Article
102:

(a) According to the trial court's finding of facts, both husband and wife have no separate properties, thus,
the remaining properties in the list above are all part of the absolute community. And its market value at the
time of the dissolution of the absolute community constitutes the "market value at dissolution."

(b) Thus, when the petitioner and the respondent finally were legally separated, all the properties which
remained will be liable for the debts and obligations of the community. Such debts and obligations will be
subtracted from the "market value at dissolution."

(c) What remains after the debts and obligations have been paid from the total assets of the absolute
community constitutes the net remainder or net asset. And from such net asset/remainder of the petitioner
and respondent's remaining properties, the market value at the time of marriage will be subtracted and the
resulting totality constitutes the "net profits."

(d) Since both husband and wife have no separate properties, and nothing would be returned to each of
them, what will be divided equally between them is simply the "net profits." However, in the Decision dated
October 10, 2005, the trial court forfeited the half-share of the petitioner in favor of his children. Thus, if we
use Article 102 in the instant case (which should not be the case), nothing is left to the petitioner since both
parties entered into their marriage without bringing with them any property.

On Conjugal Partnership Regime:

Before we go into our disquisition on the Conjugal Partnership Regime, we make it clear that Article 102(4) of the
Family Code applies in the instant case for purposes only of defining "net profit." As earlier explained, the
definition of "net profits" in Article 102(4) of the Family Code applies to both the absolute community regime and
conjugal partnership regime as provided for under Article 63, No. (2) of the Family Code, relative to the provisions
on Legal Separation.

Now, when a couple enters into a regime of conjugal partnership of gains under Article 142 of the Civil Code,
"the husband and the wife place in common fund the fruits of their separate property and income from their work or
industry, and divide equally, upon the dissolution of the marriage or of the partnership, the net gains or benefits
obtained indiscriminately by either spouse during the marriage."76 From the foregoing provision, each of the couple
has his and her own property and debts. The law does not intend to effect a mixture or merger of those debts or
properties between the spouses. Rather, it establishes a complete separation of capitals.77
Considering that the couple's marriage has been dissolved under the Family Code, Article 129 of the same Code
applies in the liquidation of the couple's properties in the event that the conjugal partnership of gains is dissolved, to
wit:

Art. 129. Upon the dissolution of the conjugal partnership regime, the following procedure shall apply:

(1) An inventory shall be prepared, listing separately all the properties of the conjugal partnership and the
exclusive properties of each spouse.

(2) Amounts advanced by the conjugal partnership in payment of personal debts and obligations of either
spouse shall be credited to the conjugal partnership as an asset thereof.

(3) Each spouse shall be reimbursed for the use of his or her exclusive funds in the acquisition of property or
for the value of his or her exclusive property, the ownership of which has been vested by law in the conjugal
partnership.

(4) The debts and obligations of the conjugal partnership shall be paid out of the conjugal assets. In case of
insufficiency of said assets, the spouses shall be solidarily liable for the unpaid balance with their separate
properties, in accordance with the provisions of paragraph (2) of Article 121.

(5) Whatever remains of the exclusive properties of the spouses shall thereafter be delivered to each of
them.

(6) Unless the owner had been indemnified from whatever source, the loss or deterioration of movables
used for the benefit of the family, belonging to either spouse, even due to fortuitous event, shall be paid to
said spouse from the conjugal funds, if any.

(7) The net remainder of the conjugal partnership properties shall constitute the profits, which shall be
divided equally between husband and wife, unless a different proportion or division was agreed upon in the
marriage settlements or unless there has been a voluntary waiver or forfeiture of such share as provided in
this Code.

(8) The presumptive legitimes of the common children shall be delivered upon the partition in accordance
with Article 51.

(9) In the partition of the properties, the conjugal dwelling and the lot on which it is situated shall, unless
otherwise agreed upon by the parties, be adjudicated to the spouse with whom the majority of the common
children choose to remain. Children below the age of seven years are deemed to have chosen the mother,
unless the court has decided otherwise. In case there is no such majority, the court shall decide, taking into
consideration the best interests of said children.

In the normal course of events, the following are the steps in the liquidation of the properties of the spouses:

(a) An inventory of all the actual properties shall be made, separately listing the couple's conjugal properties
and their separate properties.78 In the instant case, the trial court found that the couple has no separate
properties when they married.79 Rather, the trial court identified the following conjugal properties, to wit:

1. coffee mill in Balongagan, Las Nieves, Agusan del Norte;

2. coffee mill in Durian, Las Nieves, Agusan del Norte;

3. corn mill in Casiklan, Las Nieves, Agusan del Norte;

4. coffee mill in Esperanza, Agusan del Sur;

5. a parcel of land with an area of 1,200 square meters located in Tungao, Butuan City;

6. a parcel of agricultural land with an area of 5 hectares located in Manila de Bugabos, Butuan City;

7. a parcel of land with an area of 84 square meters located in Tungao, Butuan City;

8. Bashier Bon Factory located in Tungao, Butuan City.80

(b) Ordinarily, the benefit received by a spouse from the conjugal partnership during the marriage is returned
in equal amount to the assets of the conjugal partnership;81 and if the community is enriched at the expense
of the separate properties of either spouse, a restitution of the value of such properties to their respective
owners shall be made.82
(c) Subsequently, the couple's conjugal partnership shall pay the debts of the conjugal partnership; while the
debts and obligation of each of the spouses shall be paid from their respective separate properties. But if the
conjugal partnership is not sufficient to pay all its debts and obligations, the spouses with their separate
properties shall be solidarily liable.83

(d) Now, what remains of the separate or exclusive properties of the husband and of the wife shall be
returned to each of them.84 In the instant case, since it was already established by the trial court that the
spouses have no separate properties,85 there is nothing to return to any of them. The listed properties
above are considered part of the conjugal partnership. Thus, ordinarily, what remains in the above-listed
properties should be divided equally between the spouses and/or their respective heirs.86 However, since the
trial court found the petitioner the guilty party, his share from the net profits of the conjugal partnership is
forfeited in favor of the common children, pursuant to Article 63(2) of the Family Code. Again, lest we be
confused, like in the absolute community regime, nothing will be returned to the guilty party in the conjugal
partnership regime, because there is no separate property which may be accounted for in the guilty
party's favor.

In the discussions above, we have seen that in both instances, the petitioner is not entitled to any property at all.
Thus, we cannot but uphold the Decision dated October 10, 2005 of the trial court. However, we must clarify, as we
already did above, the Order dated January 8, 2007.

WHEREFORE, the Decision dated October 10, 2005 of the Regional Trial Court, Branch 1 of Butuan City is
AFFIRMED. Acting on the Motion for Clarification dated July 7, 2006 in the Regional Trial Court, the Order dated
January 8, 2007 of the Regional Trial Court is hereby CLARIFIED in accordance with the above discussions.

SO ORDERED.

G.R. No. 157537 September 7, 2011

THE HEIRS OF PROTACIO GO, SR. and MARTA BAROLA, namely: LEONOR, SIMPLICIO, PROTACIO, JR.,
ANTONIO, BEVERLY ANN LORRAINNE, TITA, CONSOLACION, LEONORA and ASUNCION, all surnamed
GO, represented by LEONORA B. GO, Petitioners,
vs.
ESTER L. SERVACIO and RITO B. GO, Respondents.

DECISION

BERSAMIN, J.:

The disposition by sale of a portion of the conjugal property by the surviving spouse without the prior liquidation
mandated by Article 130 of the Family Code is not necessarily void if said portion has not yet been allocated by
judicial or extrajudicial partition to another heir of the deceased spouse. At any rate, the requirement of prior
liquidation does not prejudice vested rights.

Antecedents

On February 22, 1976, Jesus B. Gaviola sold two parcels of land with a total area of 17,140 square meters situated
in Southern Leyte to Protacio B. Go, Jr. (Protacio, Jr.). Twenty three years later, or on March 29, 1999, Protacio, Jr.
executed an Affidavit of Renunciation and Waiver,1 whereby he affirmed under oath that it was his father, Protacio
Go, Sr. (Protacio, Sr.), not he, who had purchased the two parcels of land (the property).

On November 25, 1987, Marta Barola Go died. She was the wife of Protacio, Sr. and mother of the petitioners.2 On
December 28, 1999, Protacio, Sr. and his son Rito B. Go (joined by Ritos wife Dina B. Go) sold a portion of the
property with an area of 5,560 square meters to Ester L. Servacio (Servacio) for 5,686,768.00.3 On March 2, 2001,
the petitioners demanded the return of the property,4 but Servacio refused to heed their demand. After barangay
proceedings failed to resolve the dispute,5 they sued Servacio and Rito in the Regional Trial Court in Maasin City,
Southern Leyte (RTC) for the annulment of the sale of the property.

The petitioners averred that following Protacio, Jr.s renunciation, the property became conjugal property; and that
the sale of the property to Servacio without the prior liquidation of the community property between Protacio, Sr. and
Marta was null and void.6

Servacio and Rito countered that Protacio, Sr. had exclusively owned the property because he had purchased it with
his own money.7

On October 3, 2002,8 the RTC declared that the property was the conjugal property of Protacio, Sr. and Marta, not
the exclusive property of Protacio, Sr., because there were three vendors in the sale to Servacio (namely: Protacio,
Sr., Rito, and Dina); that the participation of Rito and Dina as vendors had been by virtue of their being heirs of the
late Marta; that under Article 160 of the Civil Code, the law in effect when the property was acquired, all property
acquired by either spouse during the marriage was conjugal unless there was proof that the property thus acquired
pertained exclusively to the husband or to the wife; and that Protacio, Jr.s renunciation was grossly insufficient to
rebut the legal presumption.9

Nonetheless, the RTC affirmed the validity of the sale of the property, holding that: "xxx As long as the portion sold,
alienated or encumbered will not be allotted to the other heirs in the final partition of the property, or to state it
plainly, as long as the portion sold does not encroach upon the legitimate (sic) of other heirs, it is valid."10 Quoting
Tolentinos commentary on the matter as authority,11 the RTC opined:

In his comment on Article 175 of the New Civil Code regarding the dissolution of the conjugal partnership, Senator
Arturo Tolentino, says" [sic]

"Alienation by the survivor. After the death of one of the spouses, in case it is necessary to sell any portion of the
community property in order to pay outstanding obligation of the partnership, such sale must be made in the manner
and with the formalities established by the Rules of Court for the sale of the property of the deceased persons. Any
sale, transfer, alienation or disposition of said property affected without said formalities shall be null and void, except
as regards the portion that belongs to the vendor as determined in the liquidation and partition. Pending the
liquidation, the disposition must be considered as limited only to the contingent share or interest of the vendor in the
particular property involved, but not to the corpus of the property.

This rule applies not only to sale but also to mortgages. The alienation, mortgage or disposal of the conjugal
property without the required formality, is not however, null ab initio, for the law recognizes their validity so long as
they do not exceed the portion which, after liquidation and partition, should pertain to the surviving spouse who
made the contract." [underlining supplied]

It seems clear from these comments of Senator Arturo Tolentino on the provisions of the New Civil Code and the
Family Code on the alienation by the surviving spouse of the community property that jurisprudence remains the
same - that the alienation made by the surviving spouse of a portion of the community property is not wholly void ab
initio despite Article 103 of the Family Code, and shall be valid to the extent of what will be allotted, in the final
partition, to the vendor. And rightly so, because why invalidate the sale by the surviving spouse of a portion of the
community property that will eventually be his/her share in the final partition? Practically there is no reason for that
view and it would be absurd.

Now here, in the instant case, the 5,560 square meter portion of the 17,140 square-meter conjugal lot is certainly
mush (sic) less than what vendors Protacio Go and his son Rito B. Go will eventually get as their share in the final
partition of the property. So the sale is still valid.

WHEREFORE, premises considered, complaint is hereby DISMISSED without pronouncement as to cost and
damages.

SO ORDERED.12

The RTCs denial of their motion for reconsideration13 prompted the petitioners to appeal directly to the Court on a
pure question of law.

Issue

The petitioners claim that Article 130 of the Family Code is the applicable law; and that the sale by Protacio, Sr., et
al. to Servacio was void for being made without prior liquidation.

In contrast, although they have filed separate comments, Servacio and Rito both argue that Article 130 of the Family
Code was inapplicable; that the want of the liquidation prior to the sale did not render the sale invalid, because the
sale was valid to the extent of the portion that was finally allotted to the vendors as his share; and that the sale did
not also prejudice any rights of the petitioners as heirs, considering that what the sale disposed of was within the
aliquot portion of the property that the vendors were entitled to as heirs.14

Ruling

The appeal lacks merit.

Article 130 of the Family Code reads:

Article 130. Upon the termination of the marriage by death, the conjugal partnership property shall be liquidated in
the same proceeding for the settlement of the estate of the deceased.
If no judicial settlement proceeding is instituted, the surviving spouse shall liquidate the conjugal partnership
property either judicially or extra-judicially within one year from the death of the deceased spouse. If upon the lapse
of the six month period no liquidation is made, any disposition or encumbrance involving the conjugal partnership
property of the terminated marriage shall be void.

Should the surviving spouse contract a subsequent marriage without compliance with the foregoing requirements, a
mandatory regime of complete separation of property shall govern the property relations of the subsequent
marriage.

Article 130 is to be read in consonance with Article 105 of the Family Code, viz:

Article 105. In case the future spouses agree in the marriage settlements that the regime of conjugal partnership of
gains shall govern their property relations during marriage, the provisions in this Chapter shall be of supplementary
application.

The provisions of this Chapter shall also apply to conjugal partnerships of gains already established between
spouses before the effectivity of this Code, without prejudice to vested rights already acquired in accordance with
the Civil Code or other laws, as provided in Article 256. (n) [emphasis supplied]

It is clear that conjugal partnership of gains established before and after the effectivity of the Family Code are
governed by the rules found in Chapter 4 (Conjugal Partnership of Gains) of Title IV (Property Relations Between
Husband And Wife) of the Family Code. Hence, any disposition of the conjugal property after the dissolution of the
conjugal partnership must be made only after the liquidation; otherwise, the disposition is void.

Before applying such rules, however, the conjugal partnership of gains must be subsisting at the time of the
effectivity of the Family Code. There being no dispute that Protacio, Sr. and Marta were married prior to the
effectivity of the Family Code on August 3, 1988, their property relation was properly characterized as one of
conjugal partnership governed by the Civil Code. Upon Martas death in 1987, the conjugal partnership was
dissolved, pursuant to Article 175 (1) of the Civil Code,15 and an implied ordinary co-ownership ensued among
Protacio, Sr. and the other heirs of Marta with respect to her share in the assets of the conjugal partnership pending
a liquidation following its liquidation.16 The ensuing implied ordinary co-ownership was governed by Article 493 of
the Civil Code,17 to wit:

Article 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto,
and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except
when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners,
shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership.
(399)

Protacio, Sr., although becoming a co-owner with his children in respect of Martas share in the conjugal
partnership, could not yet assert or claim title to any specific portion of Martas share without an actual partition of
the property being first done either by agreement or by judicial decree. Until then, all that he had was an ideal or
abstract quota in Martas share.18 Nonetheless, a co-owner could sell his undivided share; hence, Protacio, Sr. had
the right to freely sell and dispose of his undivided interest, but not the interest of his co-owners.19 Consequently, the
sale by Protacio, Sr. and Rito as co-owners without the consent of the other co-owners was not necessarily void, for
the rights of the selling co-owners were thereby effectively transferred, making the buyer (Servacio) a co-owner of
Martas share.20 This result conforms to the well-established principle that the binding force of a contract must be
recognized as far as it is legally possible to do so (quando res non valet ut ago, valeat quantum valere potest).21

Article 105 of the Family Code, supra, expressly provides that the applicability of the rules on dissolution of the
conjugal partnership is "without prejudice to vested rights already acquired in accordance with the Civil Code or
other laws." This provision gives another reason not to declare the sale as entirely void. Indeed, such a declaration
prejudices the rights of Servacio who had already acquired the shares of Protacio, Sr. and Rito in the property
subject of the sale.

In their separate comments,22 the respondents aver that each of the heirs had already received "a certain allotted
portion" at the time of the sale, and that Protacio, Sr. and Rito sold only the portions adjudicated to and owned by
them. However, they did not present any public document on the allocation among her heirs, including themselves,
of specific shares in Martas estate. Neither did they aver that the conjugal properties had already been liquidated
and partitioned. Accordingly, pending a partition among the heirs of Marta, the efficacy of the sale, and whether the
extent of the property sold adversely affected the interests of the petitioners might not yet be properly decided with
finality. The appropriate recourse to bring that about is to commence an action for judicial partition, as instructed
in Bailon-Casilao v. Court of Appeals,23 to wit:

From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided share, a sale of the
entire property by one

co-owner without the consent of the other co-owners is not null and void. However, only the rights of the co-owner-
seller are transferred, thereby making the buyer a co-owner of the property.
The proper action in cases like this is not for the nullification of the sale or for the recovery of possession of the thing
owned in common from the third person who substituted the co-owner or co-owners who alienated their shares, but
the DIVISION of the common property as if it continued to remain in the possession of the co-owners who
possessed and administered it [Mainit v. Bandoy, supra]. 1avvphi1

Thus, it is now settled that the appropriate recourse of co-owners in cases where their consent were not secured in
a sale of the entire property as well as in a sale merely of the undivided shares of some of the co-owners is an
action for PARTITION under Rule 69 of the Revised Rules of Court. xxx24

In the meanwhile, Servacio would be a trustee for the benefit of the co-heirs of her vendors in respect of any portion
that might not be validly sold to her. The following observations of Justice Paras are explanatory of this result, viz:

xxx [I]f it turns out that the property alienated or mortgaged really would pertain to the share of the surviving spouse,
then said transaction is valid. If it turns out that there really would be, after liquidation, no more conjugal assets then
the whole transaction is null and void. But if it turns out that half of the property thus alienated or mortgaged
1wphi1

belongs to the husband as his share in the conjugal partnership, and half should go to the estate of the wife, then
that corresponding to the husband is valid, and that corresponding to the other is not. Since all these can be
determined only at the time the liquidation is over, it follows logically that a disposal made by the surviving spouse is
not void ab initio. Thus, it has been held that the sale of conjugal properties cannot be made by the surviving spouse
without the legal requirements. The sale is void as to the share of the deceased spouse (except of course as to that
portion of the husbands share inherited by her as the surviving spouse). The buyers of the property that could not
be validly sold become trustees of said portion for the benefit of the husbands other heirs, the cestui que trust ent.
Said heirs shall not be barred by prescription or by laches (See Cuison, et al. v. Fernandez, et al.,L-11764, Jan.31,
1959.)25

WHEREFORE, we DENY the petition for review on certiorari; and AFFIRM the decision of the Regional Trial Court.

The petitioners shall pay the costs of suit.

SO ORDERED.