B.

DONATIONS PROPER NUPTIAS

G.R. No. 146683 November 22, 2001

CIRILA ARCABA, petitioner,

vs.
ERLINDA TABANCURA VDA. DE BATOCAEL, SEIGFREDO C. TABANCURA, DORIS C.
TABANCURA, LUZELLI C. TABANCURA, BELEN C. TABANCURA, RAUL A. COMILLE,
BERNADETTE A. COMILLE, and ABNER A. COMILLE, respondents.

MENDOZA, J.:

Petitioner Cirila Arcaba seeks review on certiorari of the decision1 of the Court of Appeals, which
affirmed with modification the decision2 of the Regional Trial Court, Branch 10, Dipolog City,
Zamboanga del Norte in Civil Case No. 4593, declaring as void a deed of donation inter
vivos executed by the late Francisco T. Comille in her favor and its subsequent resolution3 denying
reconsideration.

The facts are as follows:

On January 16, 1956, Francisco Comille and his wife Zosima Montallana became the registered
owners of Lot No. 437-A located at the corner of Calle Santa Rosa (now Balintawak Street) and
Calle Rosario (now Rizal Avenue) in Dipolog City, Zamboanga del Norte. The total area of the lot
was 418 square meters.4 After the death of Zosima on October 3, 1980, Francisco and his mother-in-
law, Juliana Bustalino Montallana, executed a deed of extrajudicial partition with waiver of rights, in
which the latter waived her share consisting of one-fourth (1/4) of the property to Francisco.5 On
June 27, 1916, Francisco registered the lot in his name with the Registry of Deeds.6

Having no children to take care of him after his retirement, Francisco asked his niece Leticia
Bellosillo,7 the latter's cousin, Luzviminda Paghacian,8 and petitioner Cirila Arcaba, then a widow, to
take care of his house, as well as the store inside.9

Conflicting testimonies were offered as to the nature of the relationship between Cirila and
Francisco. Leticia Bellosillo said Francisco and Cirila were lovers since they slept in the same
room,10 while Erlinda Tabancura,11 another niece of Francisco, claimed that the latter had told her
that Cirila was his mistress.12 On the other hand, Cirila said she was a mere helper who could enter
the master's bedroom only when the old man asked her to and that Francisco in any case was too
old for her. She denied they ever had sexual intercourse.13

It appears that when Leticia and Luzviminda were married, only Cirila was left to take care of
Francisco.14 Cirila testified that she was a 34-year old widow while Francisco was a 75-year old
widower when she began working for the latter; that he could still walk with her assistance at that
time;15 and that his health eventually deteriorated and he became bedridden.16 Erlinda Tabancura
testified that Francisco's sole source of income consisted of rentals from his lot near the public
streets.17 He did not pay Cirila a regular cash wage as a househelper , though he provided her family
with food and lodging.18

On January 24, 1991, a few months before his death, Francisco executed an instrument
denominated "Deed of Donation Inter Vivos," in which he ceded a portion of Lot 437-A, consisting of
150 square meters, together with his house, to Cirila, who accepted the donation in the same
instrument. Francisco left the larger portion of 268 square meters in his name. The deed stated that
the donation was being made in consideration of "the faithful services [Cirila Arcaba] had rendered
over the past ten (10) years." The deed was notarized by Atty. Vic T. Lacaya, Sr.19 and later
registered by Cirila as its absolute owner .20

On October 4, 1991, Francisco died without any children. In 1993, the lot which Cirila received from
Francisco had a market value of P57,105.00 and an assessed value of P28,550.00.21

On February 18, 1993, respondents filed a complaint against petitioner 'for declaration of nullity of a
deed of donation inter vivos, recovery of possession, and damages. Respondents, who are the
decedent's nephews and nieces and his heirs by intestate succession, alleged that Cirila was the
common-law wife of Francisco and the donation inter vivos made by Francisco in her favor is void
under Article 87 of the Family Code, which provides:

Every donation or grant of gratuitous advantage, direct or indirect, between the spouses
during the marriage shall be void, except moderate gifts which the spouses may give each
other on the occasion of any family rejoicing. The prohibition shall also apply to persons
living together as husband and wife without a valid marriage.

On February 25, 1999, the trial court rendered judgment in favor of respondents, holding the
donation void under this provision of the Family Code. The trial court reached this conclusion based
on the testimony of Erlinda Tabancura and certain documents bearing the signature of one "Cirila
Comille." The documents were (1) an application for a business permit to operate as real estate
lessor, dated January 8, 1991, with a carbon copy of the signature "Cirila Comille";22 (2) a sanitary
permit to operate as real estate lessor with a health certificate showing the signature "Cirila Comille"
in black ink;23 and (3) the death certificate of the decedent with the signature "Cirila A. Comille"
written in black ink.24 The dispositive portion of the trial court's decision states:

WHEREFORE, in view of the foregoing, judgment is rendered:

1. Declaring the Deed of Donation Inter Vivos executed by the late Francisco Comille
recorded as Doc. No. 7; Page No. 3; Book No. V; Series of 1991 in the Notarial Register of
Notary Public Vic T. Lacaya (Annex " A " to the Complaint) null and void;

2. Ordering the defendant to deliver possession of the house and lot subject of the deed unto
the plaintiffs within thirty (30) days after finality of this decision; and finally

3. Ordering the defendant to pay attorney's fees in the sum of P10,000.00.

SO ORDERED.25

Petitioner appealed to the Court of Appeals, which rendered on June 19, 2000 the decision subject
of this appeal. As already stated, the appeals court denied reconsideration. Its conclusion was based
on (1) the testimonies of Leticia, Erlinda, and Cirila; (2) the copies of documents purportedly showing
Cirila's use of Francisco's surname; (3) a pleading in another civil case mentioning payment of
rentals to Cirila as Francisco's common-law wife; and (4) the fact that Cirila did not receive a regular
cash wage.

Petitioner assigns the following errors as having been committed by the Court of Appeals:

(a) The judgment of the Court of Appeals that petitioner was the common-law wife of the late
Francisco Comille is not correct and is a reversible error because it is based on a
misapprehension of facts, and unduly breaks the chain of circumstances detailed by the
 totality of the evidence, its findings being predicated on totally incompetent or hearsay
evidence, and grounded on mere speculation, conjecture or possibility. (Salazar v. Gutierrez,
33 SCRA 243 and other cases; cited in Quiason, Philippine Courts and their J urisdictions,
1993 ed., p. 604)

(b) The Court of Appeals erred in shifting the burden of evidence from the plaintiff to
defendant. (Bunyi v. Reyes, 39 SCRA 504; Quiason, id.)

(c) The Court of Appeals decided the case in away probably not in accord with law or with
the applicable jurisprudence in Rodriguez v. Rodriguez, 20 SCRA 908, and Liguez v. CA,
102 Phil. 577, 584.26

The issue in this case is whether the Court of Appeals correctly applied Art. 87 of the Family Code to
the circumstances of this case. After a review of the records, we rule in the affirmative.

The general rule is that only questions of law may be raised in a petition for review under Rule 45 of
the Rules of Court, subject only to certain exceptions: (a) when the conclusion is a finding grounded
entirely on speculations, surmises, or conjectures; (b) when the inference made is manifestly
mistaken, absurd, or impossible; (c) where there is grave abuse of discretion; (d) when the judgment
is based on a misapprehension of facts; (e) when the findings of fact are conflicting; (f) when the
Court of Appeals, in making its findings, went beyond the issues of the case and the same are
contrary to the admissions of both appellant and appellee; (g) when the findings of the Court of
Appeals are contrary to those of the trial court; (h) when the findings of fact are conclusions without
citation of specific evidence on which they are based; (i) when the finding of fact of the Court of
Appeals is premised on the supposed absence of evidence but is contradicted by the evidence on
record; and G) when the Court of Appeals manifestly overlooked certain relevant facts not disputed
by the parties and which, if properly considered, would justify a different conclusion.27 It appearing
that the Court of Appeals based its findings on evidence presented by both parties, the general rule
should apply.

In Bitangcor v. Tan,28 we held that the term "cohabitation" or "living together as husband and wife"
means not only residing under one roof, but also having repeated sexual intercourse. Cohabitation,
of course, means more than sexual intercourse, especially when one of the parties is already old
and may no longer be interested in sex. At the very least, cohabitation is public assumption by a
man and a woman of the marital relation, and dwelling together as man and wife, thereby holding
themselves out to the public as such. Secret meetings or nights clandestinely spent together, even if
often repeated, do not constitute such kind of cohabitation; they are merely meretricious.29 In this
jurisdiction, this Court has considered as sufficient proof of common-law relationship the stipulations
between the parties,30 a conviction of concubinage,31 or the existence of legitimate children.32

Was Cirila Francisco's employee or his common-law wife? Cirila admitted that she and Francisco
resided under one roof for a long time, It is very possible that the two consummated their
relationship, since Cirila gave Francisco therapeutic massage and Leticia said they slept in the same
bedroom. At the very least, their public conduct indicated that theirs was not just a relationship of
caregiver and patient, but that of exclusive partners akin to husband and wife.

Aside from Erlinda Tabancura's testimony that her uncle told her that Cirila was his mistress, there
are other indications that Cirila and Francisco were common-law spouses. Seigfredo Tabancura
presented documents apparently signed by Cirila using the surname "Comille." As previously stated,
these are an application for a business permit to operate as a real estate lessor,33 a sanitary permit
to operate as real estate lessor with a health certificate,34 and the death certificate of
Francisco.35 These documents show that Cirila saw herself as Francisco's common-law wife,
otherwise, she would not have used his last name. Similarly, in the answer filed by Francisco's
lessees in "Erlinda Tabancura, et al. vs. Gracia Adriatico Sy and Antonio Sy," RTC Civil Case
No.4719 (for collection of rentals), these lessees referred to Cirila as "the common-law spouse of
Francisco." Finally, the fact that Cirila did not demand from Francisco a regular cash wage is an
indication that she was not simply a caregiver-employee, but Francisco's common law spouse. She
was, after all, entitled to a regular cash wage under the law.36 It is difficult to believe that she stayed
with Francisco and served him out of pure beneficence. Human reason would thus lead to the
conclusion that she was Francisco's common-law spouse.

Respondents having proven by a preponderance of evidence that Cirila and Francisco lived together
as husband and wife without a valid marriage, the inescapable conclusion is that the donation made
by Francisco in favor of Cirila is void under Art. 87 of the Family Code. 1âw phi 1.nêt

WHEREFORE, the decision of the Court of Appeals affirming the decision of the trial court is hereby
AFFIRMED.

SO ORDERED.

G.R. No. L-57499 June 22, 1984

MERCEDES CALIMLIM- CANULLAS, petitioner,

vs.
HON. WILLELMO FORTUN, Judge, Court of First instance of Pangasinan, Branch I, and
CORAZON DAGUINES, respondents.

Fernandez Law Offices for petitioner.

Francisco Pulido for respondents.

MELENCIO-HERRERA, J.:

Petition for Review on certiorari assailing the Decision, dated October 6, 1980, and the Resolution
on the Motion for Reconsideration, dated November 27, 1980, of the then Court of First Instance of
Pangasinan, Branch I, in Civil Case No. 15620 entitled "Corazon DAGUINES vs. MERCEDES
Calimlim-Canullas," upholding the sale of a parcel of land in favor of DAGUINES but not of the
conjugal house thereon'

The background facts may be summarized as follows: Petitioner MERCEDES Calimlim-Canullas

and FERNANDO Canullas were married on December 19, 1962. They begot five children. They
lived in a small house on the residential land in question with an area of approximately 891 square
meters, located at Bacabac, Bugallon, Pangasinan. After FERNANDO's father died in 1965,
FERNANDO inherited the land.

In 1978, FERNANDO abandoned his family and was living with private respondent Corazon
DAGUINES. During the pendency of this appeal, they were convicted of concubinage in a judgment
rendered on October 27, 1981 by the then Court of First Instance of Pangasinan, Branch II, which
judgment has become final.
On April 15, 1980, FERNANDO sold the subject property with the house thereon to DAGUINES for
the sum of P2,000.00. In the document of sale, FERNANDO described the house as "also inherited
by me from my deceased parents."

Unable to take possession of the lot and house, DAGUINES initiated a complaint on June 19, 1980
for quieting of title and damages against MERCEDES. The latter resisted and claimed that the house
in dispute where she and her children were residing, including the coconut trees on the land, were
built and planted with conjugal funds and through her industry; that the sale of the land together with
the house and improvements to DAGUINES was null and void because they are conjugal properties
and she had not given her consent to the sale,

In its original judgment, respondent Court principally declared DAGUINES "as the lawful owner of
the land in question as well as the one-half () of the house erected on said land." Upon
reconsideration prayed for by MERCEDES, however, respondent Court resolved:

WHEREFORE, the dispositive portion of the Decision of this Court, promulgated on

October 6, 1980, is hereby amended to read as follows:

(1) Declaring plaintiff as the true and lawful owner of the land in question and the 10
coconut trees;

(2) Declaring as null and void the sale of the conjugal house to plaintiff on April 15,
1980 (Exhibit A) including the 3 coconut trees and other crops planted during the
conjugal relation between Fernando Canullas (vendor) and his legitimate wife, herein
defendant Mercedes Calimlim- Canullas;

xxx xxx xxx

The issues posed for resolution are (1) whether or not the construction of a conjugal house on the
exclusive property of the husband ipso facto gave the land the character of conjugal property; and
(2) whether or not the sale of the lot together with the house and improvements thereon was valid
under the circumstances surrounding the transaction.

The determination of the first issue revolves around the interpretation to be given to the second
paragraph of Article 158 of the Civil Code, which reads:

xxx xxx xxx

Buildings constructed at the expense of the partnership during the marriage on land
belonging to one of the spouses also pertain to the partnership, but the value of the
land shall be reimbursed to the spouse who owns the same.

We hold that pursuant to the foregoing provision both the land and the building belong to the
conjugal partnership but the conjugal partnership is indebted to the husband for the value of the
land. The spouse owning the lot becomes a creditor of the conjugal partnership for the value of the
lot, 1 which value would be reimbursed at the liquidation of the conjugal partnership. 2

In his commentary on the corresponding provision in the Spanish Civil Code (Art. 1404), Manresa
stated:
 El articulo cambia la doctrine; los edificios construidos durante el matrimonio en
suelo propio de uno de los conjuges son gananciales, abonandose el valor del suelo
al conj uge a quien pertenezca.

It is true that in the case of Maramba vs. Lozano, 3 relied upon by respondent Judge, it was held that
the land belonging to one of the spouses, upon which the spouses have built a house, becomes
conjugal property only when the conjugal partnership is liquidated and indemnity paid to the owner of
the land. We believe that the better rule is that enunciated by Mr. Justice J.B.L. Reyes in Padilla vs.
Paterno, 3 SCRA 678, 691 (1961), where the following was explained:

As to the above properties, their conversion from paraphernal to conjugal assets

should be deemed to retroact to the time the conjugal buildings were first constructed
thereon or at the very latest, to the time immediately before the death of Narciso A.
Padilla that ended the conjugal partnership. They can not be considered to have
become conjugal property only as of the time their values were paid to the estate of
the widow Concepcion Paterno because by that time the conjugal partnership no
longer existed and it could not acquire the ownership of said properties. The
acquisition by the partnership of these properties was, under the 1943 decision,
subject to the suspensive condition that their values would be reimbursed to the
widow at the liquidation of the conjugal partnership; once paid, the effects of the
fulfillment of the condition should be deemed to retroact to the date the obligation
was constituted (Art. 1187, New Civil Code) ...

The foregoing premises considered, it follows that FERNANDO could not have alienated the house
and lot to DAGUINES since MERCEDES had not given her consent to said sale. 4

Anent the second issue, we find that the contract of sale was null and void for being contrary to
morals and public policy. The sale was made by a husband in favor of a concubine after he had
abandoned his family and left the conjugal home where his wife and children lived and from whence
they derived their support. That sale was subversive of the stability of the family, a basic social
institution which public policy cherishes and protects. 5

Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purpose is
contrary to law, morals, good customs, public order, or public policy are void and inexistent from the
very beginning.

Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect
whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or
public policy."

Additionally, the law emphatically prohibits the spouses from selling property to each other subject to
certain exceptions.6 Similarly, donations between spouses during marriage are prohibited. 7 And this
is so because if transfers or con conveyances between spouses were allowed during marriage, that
would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to
prevent the exercise of undue influence by one spouse over the other,8 as well as to protect the
institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple
living as husband and wife without benefit of marriage, otherwise, "the condition of those who
incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by
public interest and their criterion must be imposed upon the wig of the parties. That was the ruling
in Buenaventura vs. Bautista, also penned by Justice JBL Reyes (CA) 50 O.G. 3679, and cited
in Matabuena vs. Cervantes. 9 We quote hereunder the pertinent dissertation on this point:
 We reach a different conclusion. While Art. 133 of the Civil Code considers as void a
donation between the spouses during the marriage, policy considerations of the most
exigent character as wen as the dictates of morality require that the same prohibition
should apply to a common-law relationship.

As announced in the outset of this opinion, a 1954 Court of Appeals decision,

Buenaventura vs. Bautista, 50 OG 3679, interpreting a similar provision of the old
Civil Code speaks unequivocally. If the policy of the law is, in the language of the
opinion of the then Justice J.B.L. Reyes of that Court, 'to prohibit donations in favor
of the other consort and his descendants because of fear of undue influence
and improper pressure upon the donor, a prejudice deeply rooted in our ancient law,
..., then there is every reason to apply the same prohibitive policy to persons living
together as husband and wife without benefit of nuptials. For it is not to be doubted
that assent to such irregular connection for thirty years bespeaks greater influence of
one party over the other, so that the danger that the law seeks to avoid is
correspondingly increased'. Moreover, as pointed out by Ulpian (in his lib 32 ad
Sabinum, fr. 1), "It would not be just that such donations — should subsist, lest the
conditions of those who incurred guilt should turn out to be better." So long as
marriage remains the cornerstone of our family law, reason and morality alike
demand that the disabilities attached to marriage should likewise attach
to concubinage (Emphasis supplied),

WHEREFORE, the Decision of respondent Judge, dated October 6, 1980, and his Resolution of
November 27, 1980 on petitioner's Motion for Reconsideration, are hereby set aside and the sale of
the lot, house and improvements in question, is hereby declared null and void. No costs.

SO ORDERED.

C. ABSOLUTE COMMUNITY OF PROPERTY:

1. APPLICABILITY

G.R. No. 122749 July 31, 1996

ANTONIO A. S. VALDEZ, petitioner,

vs.
REGIONAL TRIAL COURT, BRANCH 102, QUEZON CITY, and CONSUELO M. GOMEZ-
VALDEZ, respondents.

VITUG, J.:p

The petition for new bewails, purely on the question of law, an alleged error committed by the Regional Trial Court in Civil Case No. Q-92-
12539. Petitioner avers that the court a quo has failed to apply the correct law that should govern the disposition of a family dwelling in a
situation where a marriage is declared void ab initio because of psychological incapacity on the part of either or both parties in the contract.

The pertinent facts giving rise to this incident are, by large, not in dispute.

Antonio Valdez and Consuelo Gomez were married on 05 January 1971. Begotten during the
marriage were five children. In a petition, dated 22 June 1992, Valdez sought the declaration of
nullity of the marriage pursuant to Article 36 of the Family code (docketed Civil Case No. Q-92-
12539, Regional Trial Court of Quezon City, Branch 102). After the hearing the parties following the
joinder of issues, the trial court,1 in its decision of 29 July 1994, granted the petition, viz:

WHEREFORE, judgment is hereby rendered as follows:

(1) The marriage of petitioner Antonio Valdez and respondent Consuelo Gomez-Valdez is
hereby declared null and void under Article 36 of the Family Code on the ground of their
mutual psychological incapacity to comply with their essential marital obligations;

(2) The three older children, Carlos Enrique III, Antonio Quintin and Angela Rosario shall
choose which parent they would want to stay with.

Stella Eloisa and Joaquin Pedro shall be placed in the custody of their mother, herein
respondent Consuelo Gomez-Valdes.

The petitioner and respondent shall have visitation rights over the children who are in the
custody of the other.

(3) The petitioner and the respondent are directed to start proceedings on the liquidation of
their common properties as defined by Article 147 of the Family Code, and to comply with
the provisions of Articles 50, 51, and 52 of the same code, within thirty (30) days from notice
of this decision.

Let a copy of this decision be furnished the Local Civil Registrar of Mandaluyong, Metro
Manila, for proper recording in the registry of marriages.2 (Emphasis ours.)

Consuelo Gomez sought a clarification of that portion of the decision directing compliance with
Articles 50, 51 and 52 of the Family Code. She asserted that the Family Code contained no
provisions on the procedure for the liquidation of common property in "unions without marriage."
Parenthetically, during the hearing of the motion, the children filed a joint affidavit expressing their
desire to remain with their father, Antonio Valdez, herein petitioner.

In an order, dated 05 May 1995, the trial court made the following clarification:

Consequently, considering that Article 147 of the Family Code explicitly provides that the
property acquired by both parties during their union, in the absence of proof to the contrary,
are presumed to have been obtained through the joint efforts of the parties and will be owned
by them in equal shares, plaintiff and defendant will own their "family home" and all their
properties for that matter in equal shares.

In the liquidation and partition of properties owned in common by the plaintiff and defendant,
the provisions on ownership found in the Civil Code shall apply.3 (Emphasis supplied.)

In addressing specifically the issue regarding the disposition of the family dwelling, the trial court
said:

Considering that this Court has already declared the marriage between petitioner and
respondent as null and void ab initio, pursuant to Art. 147, the property regime of petitioner
and respondent shall be governed by the rules on ownership.
 The provisions of Articles 102 and 129 of the Family Code finds no application since Article
102 refers to the procedure for the liquidation of the conjugal partnership property and Article
129 refers to the procedure for the liquidation of the absolute community of property.4

Petitioner moved for a reconsideration of the order. The motion was denied on 30 October 1995.

In his recourse to this Court, petitioner submits that Articles 50, 51 and 52 of the Family Code should
be held controlling: he argues that:

Article 147 of the Family Code does not apply to cases where the parties are psychologically
incapacitated.

II

Articles 50, 51 and 52 in relation to Articles 102 and 129 of the Family Code govern the
disposition of the family dwelling in cases where a marriage is declared void ab initio,
including a marriage declared void by reason of the psychological incapacity of the spouses.

III

Assuming arguendo that Article 147 applies to marriages declared void ab initio on the
ground of the psychological incapacity of a spouse, the same may be read consistently with
Article 129.

IV

It is necessary to determine the parent with whom majority of the children wish to stay.5

The trial court correctly applied the law. In a void marriage, regardless of the cause thereof, the
property relations of the parties during the period of cohabitation is governed by the provisions of
Article 147 or Article 148, such as the case may be, of the Family Code. Article 147 is a remake of
Article 144 of the Civil Code as interpreted and so applied in previous cases;6 it 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 in the former's 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 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 innocent party. In all cases, the forfeiture shall take place upon the termination
of the cohabitation.

This particular kind of co-ownership applies when a man and a woman, suffering no illegal
impediment to marry each other, so exclusively live together as husband and wife under a void
marriage or without the benefit of marriage. The term "capacitated" in the provision (in the first
paragraph of the law) refers to the legal capacity of a party to contract marriage, i.e., any "male or
female of the age of eighteen years or upwards not under any of the impediments mentioned in
Articles 37 and 38"7 of the Code.

Under this property regime, property acquired by both spouses through their work and industry shall
be governed by the rules on equal co-ownership. Any property acquired during the union is prima
facie presumed to have been obtained through their joint efforts. A party who did not participate in
the acquisition of the property shall be considered as having contributed thereto jointly if said party's
"efforts consisted in the care and maintenance of the family household."8 Unlike the conjugal
partnership of gains, the fruits of the couple's separate property are not included in the co-
ownership.

Article 147 of the Family Code, in the substance and to the above extent, has clarified Article 144 of
the Civil Code; in addition, the law now expressly provides that —

(a) Neither party can dispose or encumber by act intervivos his or her share in co-ownership
property, without consent of the other, during the period of cohabitation; and

(b) In the case of a void marriage, any party in bad faith shall forfeit his or her share in the co-
ownership in favor of their common children; in default thereof or waiver by any or all of the common
children, each vacant share shall belong to the respective surviving descendants, or still in default
thereof, to the innocent party. The forfeiture shall take place upon the termination of the
cohabitation9 or declaration of nullity of the marriage. 10

When the common-law spouses suffer from a legal impediment to marry or when they do not live
exclusively with each other (as husband and wife), only the property acquired by both of them
through their actual joint contribution of money, property or industry shall be owned in common and
in proportion to their respective contributions. Such contributions and corresponding shares,
however, are prima facie presumed to be equal. The share of any party who is married to another
shall accrue to the absolute community or conjugal partnership, as the case may be, if so existing
under a valid marriage. If the party who has acted in bad faith is not validly married to another, his or
her share shall be forfeited in the manner already heretofore expressed. 11

In deciding to take further cognizance of the issue on the settlement of the parties' common property,
the trial court acted neither imprudently nor precipitately; a court which has jurisdiction to declare the
marriage a nullity must be deemed likewise clothed in authority to resolve incidental and
consequential matters. Nor did it commit a reversible error in ruling that petitioner and private
respondent own the "family home" and all their common property in equal shares, as well as in
concluding that, in the liquidation and partition of the property owned in common by them, the
provisions on co-ownership under the Civil Code, not Articles 50, 51 and 52, in relation to Articles
102 and 129, 12 of the Family Code, should aptly prevail. The rules set up to govern the liquidation of
either the absolute community or the conjugal partnership of gains, the property regimes recognized
for valid and voidable marriages (in the latter case until the contract is annulled), are irrelevant to the
liquidation of the co-ownership that exists between common-law spouses. The first paragraph of
Articles 50 of the Family Code, applying paragraphs (2), (3), (4) and 95) of Article 43, 13 relates only,
by its explicit terms, to voidable marriages and, exceptionally, to void marriages under Article 40 14 of
the Code, i.e., the declaration of nullity of a subsequent marriage contracted by a spouse of a prior
void marriage before the latter is judicially declared void. The latter is a special rule that somehow
recognizes the philosophy and an old doctrine that void marriages are inexistent from the very
beginning and no judicial decree is necessary to establish their nullity. In now requiring for purposes
of remarriage, the declaration of nullity by final judgment of the previously contracted void marriage,
the present law aims to do away with any continuing uncertainty on the status of the second
marriage. It is not then illogical for the provisions of Article 43, in relation to Articles 41 15 and 42, 16 of
the Family Code, on the effects of the termination of a subsequent marriage contracted during the
subsistence of a previous marriage to be made applicable pro hac vice. In all other cases, it is not to
be assumed that the law has also meant to have coincident property relations, on the one hand,
between spouses in valid and voidable marriages (before annulment) and, on the other, between
common-law spouses or spouses of void marriages, leaving to ordain, on the latter case, the
ordinary rules on co-ownership subject to the provisions of the Family Code on the "family
home," i.e., the provisions found in Title V, Chapter 2, of the Family Code, remain in force and effect
regardless of the property regime of the spouses.

WHEREFORE, the questioned orders, dated 05 May 1995 and 30 October 1995, of the trial court
are AFFIRMED. No costs.

G.R. No. 178044 January 19, 2011

ALAIN M. DIÑO , Petitioner,

vs.
MA. CARIDAD L. DIÑO, Respondent.

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review1 assailing the 18 October 2006 Decision2 and the 12 March
2007 Order3 of the Regional Trial Court of Las Piñas City, Branch 254 (trial court) in Civil Case No.
LP-01-0149.

The Antecedent Facts

Alain M. Diño (petitioner) and Ma. Caridad L. Diño (respondent) were childhood friends and
sweethearts. They started living together in 1984 until they decided to separate in 1994. In 1996,
petitioner and respondent decided to live together again. On 14 January 1998, they were married
before Mayor Vergel Aguilar of Las Piñas City.

On 30 May 2001, petitioner filed an action for Declaration of Nullity of Marriage against respondent,
citing psychological incapacity under Article 36 of the Family Code. Petitioner alleged that
respondent failed in her marital obligation to give love and support to him, and had abandoned her
responsibility to the family, choosing instead to go on shopping sprees and gallivanting with her
friends that depleted the family assets. Petitioner further alleged that respondent was not faithful,
and would at times become violent and hurt him.
Extrajudicial service of summons was effected upon respondent who, at the time of the filing of the
petition, was already living in the United States of America. Despite receipt of the summons,
respondent did not file an answer to the petition within the reglementary period. Petitioner later
learned that respondent filed a petition for divorce/dissolution of her marriage with petitioner, which
was granted by the Superior Court of California on 25 May 2001. Petitioner also learned that on 5
October 2001, respondent married a certain Manuel V. Alcantara.

On 30 April 2002, the Office of the Las Piñas prosecutor found that there were no indicative facts of
collusion between the parties and the case was set for trial on the merits.

Dr. Nedy L. Tayag (Dr. Tayag), a clinical psychologist, submitted a psychological report establishing
that respondent was suffering from Narcissistic Personality Disorder which was deeply ingrained in
her system since her early formative years. Dr. Tayag found that respondent’s disorder was long-
lasting and by nature, incurable.

In its 18 October 2006 Decision, the trial court granted the petition on the ground that respondent
was psychologically incapacited to comply with the essential marital obligations at the time of the
celebration of the marriage.

The Decision of the Trial Court

The trial court ruled that based on the evidence presented, petitioner was able to establish
respondent’s psychological incapacity. The trial court ruled that even without Dr. Tayag’s
psychological report, the allegations in the complaint, substantiated in the witness stand, clearly
made out a case of psychological incapacity against respondent. The trial court found that
respondent committed acts which hurt and embarrassed petitioner and the rest of the family, and
that respondent failed to observe mutual love, respect and fidelity required of her under Article 68 of
the Family Code. The trial court also ruled that respondent abandoned petitioner when she obtained
a divorce abroad and married another man.

The dispositive portion of the trial court’s decision reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1. Declaring the marriage between plaintiff ALAIN M. DIÑO and defendant MA. CARIDAD L.
DIÑO on January 14, 1998, and all its effects under the law, as NULL and VOID from the
beginning; and

2. Dissolving the regime of absolute community of property.

A DECREE OF ABSOLUTE NULLITY OF MARRIAGE shall only be issued upon compliance with
Article[s] 50 and 51 of the Family Code.

Let copies of this Decision be furnished the parties, the Office of the Solicitor General, Office of the
City Prosecutor, Las Piñas City and the Office of the Local Civil Registrar of Las Piñas City, for their
information and guidance.

SO ORDERED.4
Petitioner filed a motion for partial reconsideration questioning the dissolution of the absolute
community of property and the ruling that the decree of annulment shall only be issued upon
compliance with Articles 50 and 51 of the Family Code.

In its 12 March 2007 Order, the trial court partially granted the motion and modified its 18 October
2006 Decision as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1) Declaring the marriage between plaintiff ALAIN M. DIÑO and defendant MA. CARIDAD L.
DIÑO on January 14, 1998, and all its effects under the law, as NULL and VOID from the
beginning; and

2) Dissolving the regime of absolute community of property.

A DECREE OF ABSOLUTE NULLITY OF MARRIAGE shall be issued after liquidation, partition and
distribution of the parties’ properties under Article 147 of the Family Code.

Let copies of this Order be furnished the parties, the Office of the Solicitor General, the Office of the
City Prosecutor of Las Piñas City and the Local Civil Registrar of Las Piñas City, for their information
and guidance.5

Hence, the petition before this Court.

The Issue

The sole issue in this case is whether the trial court erred when it ordered that a decree of absolute
nullity of marriage shall only be issued after liquidation, partition, and distribution of the parties’
properties under Article 147 of the Family Code.

The Ruling of this Court

The petition has merit.

Petitioner assails the ruling of the trial court ordering that a decree of absolute nullity of marriage
shall only be issued after liquidation, partition, and distribution of the parties’ properties under Article
147 of the Family Code. Petitioner argues that Section 19(1) of the Rule on Declaration of Absolute
Nullity of Null Marriages and Annulment of Voidable Marriages6 (the Rule) does not apply to Article
147 of the Family Code.

We agree with petitioner.

The Court has ruled in Valdes v. RTC, Branch 102, Quezon City that in a void marriage, regardless
of its cause, the property relations of the parties during the period of cohabitation is governed either
by Article 147 or Article 148 of the Family Code.7 Article 147 of the Family Code applies to union of
parties who are legally capacitated and not barred by any impediment to contract marriage, but
whose marriage is nonetheless void,8 such as petitioner and respondent in the case before the
Court.

Article 147 of the Family Code provides:

Article 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
former’s 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.

For Article 147 of the Family Code to apply, the following elements must be present:

1. The man and the woman must be capacitated to marry each other;

2. They live exclusively with each other as husband and wife; and

3. Their union is without the benefit of marriage, or their marriage is void.9

All these elements are present in this case and there is no question that Article 147 of the Family
Code applies to the property relations between petitioner and respondent.

We agree with petitioner that the trial court erred in ordering that a decree of absolute nullity of
marriage shall be issued only after liquidation, partition and distribution of the parties’ properties
under Article 147 of the Family Code. The ruling has no basis because Section 19(1) of the Rule
does not apply to cases governed under Articles 147 and 148 of the Family Code. Section 19(1) of
the Rule provides:

Sec. 19. Decision. - (1) If the court renders a decision granting the petition, it shall declare therein
that the decree of absolute nullity or decree of annulment shall be issued by the court only after
compliance with Articles 50 and 51 of the Family Code as implemented under the Rule on
Liquidation, Partition and Distribution of Properties.

The pertinent provisions of the Family Code cited in Section 19(1) of the Rule are:

Article 50. The effects provided for in paragraphs (2), (3), (4) and (5) of Article 43 and in Article 44
shall also apply in proper cases to marriages which are declared void ab initio or annulled by final
judgment under Articles 40 and 45.10
The final judgment in such cases shall provide for the liquidation, partition and distribution of the
properties of the spouses, the custody and support of the common children, and the delivery of their
presumptive legitimes, unless such matters had been adjudicated in previous judicial proceedings.

All creditors of the spouses as well as of the absolute community of the conjugal partnership shall be
notified of the proceedings for liquidation.

In the partition, the conjugal dwelling and the lot on which it is situated, shall be adjudicated in
accordance with the provisions of Articles 102 and 129.

Article 51. In said partition, the value of the presumptive legitimes of all common children, computed
as of the date of the final judgment of the trial court, shall be delivered in cash, property or sound
securities, unless the parties, by mutual agreement judicially approved, had already provided for
such matters.

The children of their guardian, or the trustee of their property, may ask for the enforcement of the
judgment.

The delivery of the presumptive legitimes herein prescribed shall in no way prejudice the ultimate
successional rights of the children accruing upon the death of either or both of the parents; but the
value of the properties already received under the decree of annulment or absolute nullity shall be
considered as advances on their legitime.

It is clear from Article 50 of the Family Code that Section 19(1) of the Rule applies only to marriages
which are declared void ab initio or annulled by final judgment under Articles 40 and 45 of the
Family Code. In short, Article 50 of the Family Code does not apply to marriages which are declared
void ab initio under Article 36 of the Family Code, which should be declared void without waiting for
the liquidation of the properties of the parties.

Article 40 of the Family Code contemplates a situation where a second or bigamous marriage was
contracted. Under Article 40, "[t]he absolute nullity of a previous marriage may be invoked for
1avvphil

purposes of remarriage on the basis solely of a final judgment declaring such previous marriage
void." Thus we ruled:

x x x where the absolute nullity of a previous marriage is sought to be invoked for purposes of
contracting a second marriage, the sole basis acceptable in law, for said projected marriage to be
free from legal infirmity, is a final judgment declaring a previous marriage void.11

Article 45 of the Family Code, on the other hand, refers to voidable marriages, meaning, marriages
which are valid until they are set aside by final judgment of a competent court in an action for
annulment.12 In both instances under Articles 40 and 45, the marriages are governed either by
absolute community of property13 or conjugal partnership of gains14 unless the parties agree to a
complete separation of property in a marriage settlement entered into before the marriage. Since the
property relations of the parties is governed by absolute community of property or conjugal
partnership of gains, there is a need to liquidate, partition and distribute the properties before a
decree of annulment could be issued. That is not the case for annulment of marriage under Article
36 of the Family Code because the marriage is governed by the ordinary rules on co-ownership.

In this case, petitioner’s marriage to respondent was declared void under Article 3615 of the Family
Code and not under Article 40 or 45. Thus, what governs the liquidation of properties owned in
common by petitioner and respondent are the rules on co-ownership. In Valdes, the Court ruled that
the property relations of parties in a void marriage during the period of cohabitation is governed
either by Article 147 or Article 148 of the Family Code.16 The rules on co-ownership apply and the
properties of the spouses should be liquidated in accordance with the Civil Code provisions on co-
ownership. Under Article 496 of the Civil Code, "[p]artition may be made by agreement between the
parties or by judicial proceedings. x x x." It is not necessary to liquidate the properties of the spouses
in the same proceeding for declaration of nullity of marriage.

WHEREFORE, we AFFIRM the Decision of the trial court with the MODIFICATION that the decree
of absolute nullity of the marriage shall be issued upon finality of the trial court’s decision without
waiting for the liquidation, partition, and distribution of the parties’ properties under Article 147 of the
Family Code.

SO ORDERED.

2. ALIEN SPOUSE

G.R. No. 149615 August 29, 2006

IN RE: PETITION FOR SEPARATION OF PROPERTY ELENA BUENAVENTURA

MULLER, Petitioner,
vs.
HELMUT MULLER, Respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari 1 assails the February 26, 2001 Decision 2 of the Court of
Appeals in CA-G.R. CV No. 59321 affirming with modification the August 12, 1996 Decision 3 of the
Regional Trial Court of Quezon City, Branch 86 in Civil Case No. Q-94-21862, which terminated the
regime of absolute community of property between petitioner and respondent, as well as the
Resolution 4 dated August 13, 2001 denying the motion for reconsideration.

The facts are as follows:

Petitioner Elena Buenaventura Muller and respondent Helmut Muller were married in Hamburg,
Germany on September 22, 1989. The couple resided in Germany at a house owned by
respondent’s parents but decided to move and reside permanently in the Philippines in 1992. By this
time, respondent had inherited the house in Germany from his parents which he sold and used the
proceeds for the purchase of a parcel of land in Antipolo, Rizal at the cost of P528,000.00 and the
construction of a house amounting to P2,300,000.00. The Antipolo property was registered in the
name of petitioner under Transfer Certificate of Title No. 219438 5 of the Register of Deeds of
Marikina, Metro Manila.

Due to incompatibilities and respondent’s alleged womanizing, drinking, and maltreatment, the
spouses eventually separated. On September 26, 1994, respondent filed a petition 6 for separation of
properties before the Regional Trial Court of Quezon City.

On August 12, 1996, the trial court rendered a decision which terminated the regime of absolute
community of property between the petitioner and respondent. It also decreed the separation of
properties between them and ordered the equal partition of personal properties located within the
country, excluding those acquired by gratuitous title during the marriage. With regard to the Antipolo
property, the court held that it was acquired using paraphernal funds of the respondent. However, it
ruled that respondent cannot recover his funds because the property was purchased in violation of
Section 7, Article XII of the Constitution. Thus –

However, pursuant to Article 92 of the Family Code, properties acquired by gratuitous title by either
spouse during the marriage shall be excluded from the community property. The real property,
therefore, inherited by petitioner in Germany is excluded from the absolute community of property of
the herein spouses. Necessarily, the proceeds of the sale of said real property as well as the
personal properties purchased thereby, belong exclusively to the petitioner. However, the part of that
inheritance used by the petitioner for acquiring the house and lot in this country cannot be recovered
by the petitioner, its acquisition being a violation of Section 7, Article XII of the Constitution which
provides that "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." The law will leave the parties in the situation where they are in without prejudice to a
voluntary partition by the parties of the said real property. x x x

xxxx

As regards the property covered by Transfer Certificate of Title No. 219438 of the Registry of Deeds
of Marikina, Metro Manila, situated in Antipolo, Rizal and the improvements thereon, the Court shall
not make any pronouncement on constitutional grounds. 7

Respondent appealed to the Court of Appeals which rendered the assailed decision modifying the
trial court’s Decision. It held that respondent merely prayed for reimbursement for the purchase of
the Antipolo property, and not acquisition or transfer of ownership to him. It also considered
petitioner’s ownership over the property in trust for the respondent. As regards the house, the Court
of Appeals ruled that there is nothing in the Constitution which prohibits respondent from acquiring
the same. The dispositive portion of the assailed decision reads:

WHEREFORE, in view of the foregoing, the Decision of the lower court dated August 12, 1996 is
hereby MODIFIED. Respondent Elena Buenaventura Muller is hereby ordered to REIMBURSE the
petitioner the amount of P528,000.00 for the acquisition of the land and the amount of
P2,300,000.00 for the construction of the house situated in Atnipolo, Rizal, deducting therefrom the
amount respondent spent for the preservation, maintenance and development of the aforesaid real
property including the depreciation cost of the house or in the alternative to SELL the house and lot
in the event respondent does not have the means to reimburse the petitioner out of her own money
and from the proceeds thereof, reimburse the petitioner of the cost of the land and the house
deducting the expenses for its maintenance and preservation spent by the respondent. Should there
be profit, the same shall be divided in proportion to the equity each has over the property. The case
is REMANDED to the lower court for reception of evidence as to the amount claimed by the
respondents for the preservation and maintenance of the property.

SO ORDERED. 8

Hence, the instant petition for review raising the following issues:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE

RESPONDENT HEREIN IS ENTITLED TO REIMBURSEMENT OF THE AMOUNT USED TO
PURCHASE THE LAND AS WELL AS THE COSTS FOR THE CONSTRUCTION OF THE HOUSE,
FOR IN SO RULING, IT INDIRECTLY ALLOWED AN ACT DONE WHICH OTHERWISE COULD
NOT BE DIRECTLY x x x DONE, WITHOUT DOING VIOLENCE TO THE CONSTITUTIONAL
PROSCRIPTION THAT AN ALIEN IS PROHIBITED FROM ACQUIRING OWNERSHIP OF REAL
PROPERTIES LOCATED IN THE PHILIPPINES.

II

THE COURT OF APPEALS GRAVELY ERRED IN SUSTAINING RESPONDENT’S CAUSE OF

ACTION WHICH IS ACTUALLY A DESPERATE ATTEMPT TO OBTAIN OWNERSHIP OVER THE
LOT IN QUESTION, CLOTHED UNDER THE GUISE OF CLAIMING REIMBURSEMENT.

Petitioner contends that respondent, being an alien, is disqualified to own private lands in the
Philippines; that respondent was aware of the constitutional prohibition but circumvented the same;
and that respondent’s purpose for filing an action for separation of property is to obtain exclusive
possession, control and disposition of the Antipolo property.

Respondent claims that he is not praying for transfer of ownership of the Antipolo property but
merely reimbursement; that the funds paid by him for the said property were in consideration of his
marriage to petitioner; that the funds were given to petitioner in trust; and that equity demands that
respondent should be reimbursed of his personal funds.

The issue for resolution is whether respondent is entitled to reimbursement of the funds used for the
acquisition of the Antipolo property.

The petition has merit.

Section 7, Article XII of the 1987 Constitution states:

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.

Aliens, whether individuals or corporations, are disqualified from acquiring lands of the public
domain. Hence, they are also disqualified from acquiring private lands. 9 The primary purpose of the
constitutional provision is the conservation of the national patrimony. In the case of Krivenko v.
Register of Deeds, 10 the Court held:

Under section 1 of Article XIII of the Constitution, "natural resources, with the exception of public
agricultural land, shall not be alienated," and with respect to public agricultural lands, their alienation
is limited to Filipino citizens. But this constitutional purpose conserving agricultural resources in the
hands of Filipino citizens may easily be defeated by the Filipino citizens themselves who may
alienate their agricultural lands in favor of aliens. It is partly to prevent this result that section 5 is
included in Article XIII, and it reads as follows:

"Sec. 5. Save in cases of hereditary succession, no private agricultural land will be transferred or
assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the
public domain in the Philippines."

This constitutional provision closes the only remaining avenue through which agricultural resources
may leak into aliens’ hands. It would certainly be futile to prohibit the alienation of public agricultural
lands to aliens if, after all, they may be freely so alienated upon their becoming private agricultural
lands in the hands of Filipino citizens. x x x
xxxx

If the term "private agricultural lands" is to be construed as not including residential lots or lands not
strictly agricultural, the result would be that "aliens may freely acquire and possess not only
residential lots and houses for themselves but entire subdivisions, and whole towns and cities," and
that "they may validly buy and hold in their names lands of any area for building homes, factories,
industrial plants, fisheries, hatcheries, schools, health and vacation resorts, markets, golf courses,
playgrounds, airfields, and a host of other uses and purposes that are not, in appellant’s words,
strictly agricultural." (Solicitor General’s Brief, p. 6.) That this is obnoxious to the conservative spirit
of the Constitution is beyond question.

Respondent was aware of the constitutional prohibition and expressly admitted his knowledge
thereof to this Court. 11 He declared that he had the Antipolo property titled in the name of petitioner
because of the said prohibition. 12 His attempt at subsequently asserting or claiming a right on the
said property cannot be sustained.

The Court of Appeals erred in holding that an implied trust was created and resulted by operation of
law in view of petitioner’s marriage to respondent. Save for the exception provided in cases of
hereditary succession, respondent’s disqualification from owning lands in the Philippines is absolute.
Not even an ownership in trust is allowed. Besides, where the purchase is made in violation of an
existing statute and in evasion of its express provision, no trust can result in favor of the party who is
guilty of the fraud. 13 To hold otherwise would allow circumvention of the constitutional prohibition.

Invoking the principle that a court is not only a court of law but also a court of equity, is likewise
misplaced. It has been held 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. 14 He who seeks equity must do
equity, and he who comes into equity must come with clean hands. The latter is a frequently stated
maxim which is also expressed in the principle that he who has done inequity shall not have equity.
It signifies that 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 as to the controversy in issue. 15

Thus, in the instant case, respondent cannot seek reimbursement on the ground of equity where it is
clear that he willingly and knowingly bought the property despite the constitutional prohibition.

Further, the distinction made between transfer of ownership as opposed to recovery of funds is a
futile exercise on respondent’s part. To allow reimbursement would in effect permit respondent to
enjoy the fruits of a property which he is not allowed to own. Thus, it is likewise proscribed by law.
As expressly held in Cheesman v. Intermediate Appellate Court: 16

Finally, the fundamental law prohibits the sale to aliens of residential land. Section 14, Article XIV of
the 1973 Constitution ordains that, "Save in cases of hereditary succession, no private land shall be
transferred or conveyed except to individuals, corporations, or associations qualified to acquire or
hold lands of the public domain." Petitioner Thomas Cheesman was, of course, charged with
knowledge of this prohibition. Thus, assuming that it was his intention that the lot in question be
purchased by him and his wife, he acquired no right whatever over the property by virtue of that
purchase; and in attempting to acquire a right or interest in land, vicariously and clandestinely, he
knowingly violated the Constitution; the sale as to him was null and void. In any event, he had and
has no capacity or personality to question the subsequent sale of the same property by his wife on
the theory that in so doing he is merely exercising the prerogative of a husband in respect of
conjugal property. To sustain such a theory would permit indirect controversion of the constitutional
prohibition. If the property were to be declared conjugal, this would accord to the alien husband a not
insubstantial interest and right over land, as he would then have a decisive vote as to its transfer or
disposition. This is a right that the Constitution does not permit him to have.

As already observed, the finding that his wife had used her own money to purchase the property
cannot, and will not, at this stage of the proceedings be reviewed and overturned. But even if it were
a fact that said wife had used conjugal funds to make the acquisition, the considerations just set out
to militate, on high constitutional grounds, against his recovering and holding the property so
acquired, or any part thereof. And whether in such an event, he may recover from his wife any share
of the money used for the purchase or charge her with unauthorized disposition or expenditure of
conjugal funds is not now inquired into; that would be, in the premises, a purely academic exercise.
(Emphasis added)

WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The Decision dated
February 26, 2001 of the Court of Appeals in CA-G.R. CV No. 59321 ordering petitioner Elena
Buenaventura Muller to reimburse respondent Helmut Muller the amount of P528,000 for the
acquisition of the land and the amount of P2,300,000 for the construction of the house in Antipolo
City, and the Resolution dated August 13, 2001 denying reconsideration thereof, are REVERSED
and SET ASIDE. The August 12, 1996 Decision of the Regional Trial Court of Quezon City, Branch
86 in Civil Case No. Q-94-21862 terminating the regime of absolute community between the
petitioner and respondent, decreeing a separation of property between them and ordering the
partition of the personal properties located in the Philippines equally, is REINSTATED.

SO ORDERED.

3. FOR THE BENEFIT

G.R. No. 118305 February 12, 1998

AYALA INVESTMENT & DEVELOPMENT CORP. and ABELARDO MAGSAJO, petitioners,

vs.
COURT OF APPEALS and SPOUSES ALFREDO & ENCARNACION CHING, respondents.

MARTINEZ, J.:

Under Article 161 of the Civil Code, what debts and obligations contracted by the husband alone are
considered "for the benefit of the conjugal partnership" which are chargeable against the conjugal
partnership? Is a surety agreement or an accommodation contract entered into by the husband in
favor of his employer within the contemplation of the said provision?

These are the issues which we will resolve in this petition for review.

The petitioner assails the decision dated April 14, 1994 of the respondent Court of Appeals in
"Spouses Alfredo and Encarnacion Ching vs. Ayala Investment and Development Corporation, et.
al.," docketed as CA-G.R. CV No. 29632,1 upholding the decision of the Regional Trial Court of
Pasig, Branch 168, which ruled that the conjugal partnership of gains of respondents-
spouses Alfredo and Encarnacion Ching is not liable for the payment of the debts secured by
respondent-husband Alfredo Ching.
A chronology of the essential antecedent facts is necessary for a clear understanding of the
case at bar.

Philippine Blooming Mills (hereinafter referred to as PBM) obtained a P50,300,000.00 loan

from petitioner Ayala Investment and Development Corporation (hereinafter referred to as
AIDC). As added security for the credit line extended to PBM, respondent Alfredo Ching,
Executive Vice President of PBM, executed security agreements on December 10, 1980 and
on March 20, 1981 making himself jointly and severally answerable with PBM's indebtedness
to AIDC.

PBM failed to pay the loan. Thus, on July 30, 1981, AIDC filed a case for sum of money
against PBM and respondent-husband Alfredo Ching with the then Court of First Instance of
Rizal (Pasig), Branch VIII, entitled "Ayala Investment and Development Corporation vs.
Philippine Blooming Mills and Alfredo Ching," docketed as Civil Case No. 42228.

After trial, the court rendered judgment ordering PBM and respondent-husband Alfredo
Ching to jointly and severally pay AIDC the principal amount of P50,300,000.00 with interests.

Pending appeal of the judgment in Civil Case No. 42228, upon motion of AIDC, the lower
court issued a writ of execution pending appeal. Upon AIDC's putting up of an P8,000,000.00
bond, a writ of execution dated May 12, 1982 was issued. Thereafter, petitioner Abelardo
Magsajo, Sr., Deputy Sheriff of Rizal and appointed sheriff in Civil Case No. 42228, caused the
issuance and service upon respondents-spouses of a notice of sheriff sale dated May 20,
1982 on three (3) of their conjugal properties. Petitioner Magsajo then scheduled the auction
sale of the properties levied.

On June 9, 1982, private respondents filed a case of injunction against petitioners with the
then Court of First Instance of Rizal (Pasig), Branch XIII, to enjoin the auction sale alleging
that petitioners cannot enforce the judgment against the conjugal partnership levied on the
ground that, among others, the subject loan did not redound to the benefit of the said
conjugal partnership. 2 Upon application of private respondents, the lower court issued a
temporary restraining order to prevent petitioner Magsajo from proceeding with the
enforcement of the writ of execution and with the sale of the said properties at public auction.

AIDC filed a petition for certiorari before the Court of Appeals,3 questioning the order of the
lower court enjoining the sale. Respondent Court of Appeals issued a Temporary Restraining
Order on June 25, 1982, enjoining the lower court4 from enforcing its Order of June 14, 1982,
thus paving the way for the scheduled auction sale of respondents-spouses conjugal
properties.

On June 25, 1982, the auction sale took place. AIDC being the only bidder, was issued a
Certificate of Sale by petitioner Magsajo, which was registered on July 2, 1982. Upon
expiration of the redemption period, petitioner sheriff issued the final deed of sale on August
4, 1982 which was registered on August 9, 1983.

In the meantime, the respondent court, on August 4, 1982, decided CA-G.R. SP No. 14404, in
this manner:

WHEREFORE, the petition for certiorari in this case is granted and the
challenged order of the respondent Judge dated June 14, 1982 in Civil Case
No. 46309 is hereby set aside and nullified. The same petition insofar as it
 seeks to enjoin the respondent Judge from proceeding with Civil Case No.
46309 is, however, denied. No pronouncement is here made as to costs. . . . 5

On September 3, 1983, AIDC filed a motion to dismiss the petition for injunction filed before
Branch XIII of the CFI of Rizal (Pasig) on the ground that the same had become moot and
academic with the consummation of the sale. Respondents filed their opposition to the
motion arguing, among others, that where a third party who claim is ownership of the
property attached or levied upon, a different legal situation is presented; and that in this
case, two (2) of the real properties are actually in the name of Encarnacion Ching, a non-party
to Civil Case No. 42228.

The lower court denied the motion to dismiss. Hence, trial on the merits proceeded. Private
respondents presented several witnesses. On the other hand, petitioners did not present any
evidence.

On September 18, 1991, the trial court promulgated its decision declaring the sale on
execution null and void. Petitioners appealed to the respondent court, which was docketed as
CA-G.R. CV No. 29632.

On April 14, 1994, the respondent court promulgated the assailed decision, affirming the
decision of the regional trial court. It held that:

The loan procured from respondent-appellant AIDC was for the advancement
and benefit of Philippine Blooming Mills and not for the benefit of the conjugal
partnership of petitioners-appellees.

xxx xxx xxx

As to the applicable law, whether it is Article 161 of the New Civil Code or
Article 1211 of the Family Code-suffice it to say that the two provisions are
substantially the same. Nevertheless, We agree with the trial court that the
Family Code is the applicable law on the matter . . . . . . .

Article 121 of the Family Code provides that "The conjugal partnership shall be
liable for: . . . (2) All debts and obligations contracted during the marriage by
the designated Administrator-Spouse for the benefit of the conjugal
partnership of gains . . . ." The burden of proof that the debt was contracted for
the benefit of the conjugal partnership of gains, lies with the creditor-party
litigant claiming as such. In the case at bar, respondent-appellant AIDC failed
to prove that the debt was contracted by appellee-husband, for the benefit of
the conjugal partnership of gains.

The dispositive portion of the decision reads:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered

DISMISSING the appeal. The decision of the Regional Trial Court is
AFFIRMED in toto.6

Petitioner filed a Motion for Reconsideration which was denied by the respondent court in a
Resolution dated November 28, 1994.7
Hence, this petition for review. Petitioner contends that the "respondent court erred in ruling
that the conjugal partnership of private respondents is not liable for the obligation by the
respondent-husband."

Specifically, the errors allegedly committed by the respondent court are as follows:

I. RESPONDENT COURT ERRED IN RULING THAT THE

OBLIGATION INCURRED RESPONDENT HUSBAND DID NOT
REDOUND TO THE BENEFIT OF THE CONJUGAL PARTNERSHIP
OF THE PRIVATE RESPONDENT.

II. RESPONDENT COURT ERRED IN RULING THAT THE ACT OF

RESPONDENT HUSBAND IN SECURING THE SUBJECT LOAN IS
NOT PART OF HIS INDUSTRY, BUSINESS OR CAREER FROM
WHICH HE SUPPORTS HIS FAMILY.

Petitioners in their appeal point out that there is no need to prove that actual benefit
redounded to the benefit of the partnership; all that is necessary, they say, is that the
transaction was entered into for the benefit of the conjugal partnership. Thus, petitioners
aver that:

The wordings of Article 161 of the Civil Code is very clear: for the partnership
to be held liable, the husband must have contracted the debt "for the benefit of
the partnership, thus:

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 . . . .

There is a difference between the phrases: "redounded to the benefit of" or

"benefited from" (on the one hand) and "for the benefit of (on the other). The
former require that actual benefit must have been realized; the latter requires
only that the transaction should be one which normally would produce benefit
to the partnership, regardless of whether or not actual benefit accrued.8

We do not agree with petitioners that there is a difference between the terms "redounded to
the benefit of" or "benefited from" on the one hand; and "for the benefit of" on the other.
They mean one and the same thing. Article 161 (1) of the Civil Code and Article 121 (2) of the
Family Code are similarly worded, i.e., both use the term "for the benefit of." On the other
hand, Article 122 of the Family Code provides that "The payment of personal debts by the
husband or the wife before or during the marriage shall not be charged to the conjugal
partnership except insofar as they redounded to the benefit of the family." As can be seen,
the terms are used interchangeably.

Petitioners further contend that the ruling of the respondent court runs counter to the
pronouncement of this Court in the case of Cobb-Perez vs. Lantin,9 that the husband as head
of the family and as administrator of the conjugal partnership is presumed to have contracted
obligations for the benefit of the family or the conjugal partnership.
Contrary to the contention of the petitioners, the case of Cobb-Perez is not applicable in the
case at bar. This Court has, on several instances, interpreted the term "for the benefit of the
conjugal partnership."

In the cases of Javier vs. Osmeña, 10 Abella de Diaz vs. Erlanger & Galinger, Inc., 11 Cobb-
Perez vs. Lantin 12 and G-Tractors, Inc. vs. Court of Appeals, 13 cited by the petitioners, we
held that:

The debts contracted by the husband during the marriage relation, for and in
the exercise of the industry or profession by which he contributes toward the
support of his family, are not his personal and private debts, and the products
or income from the wife's own property, which, like those of her husband's, are
liable for the payment of the marriage expenses, cannot be excepted from the
payment of such debts. (Javier)

The husband, as the manager of the partnership (Article 1412, Civil Code), has
a right to embark the partnership in an ordinary commercial enterprise for
gain, and the fact that the wife may not approve of a venture does not make it a
private and personal one of the husband. (Abella de Diaz)

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. (Cobb-Perez).

. . . if he incurs an indebtedness in the legitimate pursuit of his career or

profession or suffers losses in a legitimate business, the conjugal partnership
must equally bear the indebtedness and the losses, unless he deliberately
acted to the prejudice of his family. (G-Tractors)

However, in the cases of Ansaldo vs. Sheriff of Manila, Fidelity Insurance & Luzon Insurance
Co.,14 Liberty Insurance Corporation vs. Banuelos, 15 and Luzon Surety Inc. vs. De
Garcia, 16 cited by the respondents, we ruled that:

The fruits of the paraphernal property which form part of the assets of the
conjugal partnership, are subject to the payment of the debts and expenses of
the spouses, but not to the payment of the personal obligations (guaranty
agreements) of the husband, unless it be proved that such obligations were
productive of some benefit to the family." (Ansaldo; parenthetical phrase ours.)

When there is no showing that the execution of an indemnity agreement by the

husband redounded to the benefit of his family, the undertaking is not a
conjugal debt but an obligation personal to him. (Liberty Insurance)

In the most categorical language, a conjugal partnership under Article 161 of

the new Civil Code is liable only for such "debts and obligations contracted by
the husband for the benefit of the conjugal partnership." There must be the
requisite showing then of some advantage which clearly accrued to the welfare
of the spouses. Certainly, to make a conjugal partnership respond for a liability
that should appertain to the husband alone is to defeat and frustrate the
avowed objective of the new Civil Code to show the utmost concern for the
solidarity and well-being of the family as a unit. The husband, therefore, is
 denied the power to assume unnecessary and unwarranted risks to the
financial stability of the conjugal partnership. (Luzon Surety, Inc.)

From the foregoing jurisprudential rulings of this Court, we can derive the following
conclusions:

(A) 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 . . . . 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 time of 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.

(B) On the other hand, if the money or services are given to another person or entity, and the
husband acted only as a surety or guarantor, that contract cannot, by itself, alone be
categorized as falling within the context of "obligations for the benefit of the conjugal
partnership." The contract of loan or services is clearly for the benefit of the principal debtor
and not for the surety or his family. No presumption can be inferred that, when a husband
enters into a contract of surety or accommodation agreement, it is "for the benefit of the
conjugal partnership." Proof must be presented to establish benefit redounding to the
conjugal partnership.

Thus, the distinction between the Cobb-Perez case, and we add, that of the three other
companion cases, on the one hand, and that of Ansaldo, Liberty Insurance and Luzon Surety,
is that in the former, the husband contracted the obligation for his own business; while in the
latter, the husband merely acted as a surety for the loan contracted by another for the latter's
business.

The evidence of petitioner indubitably show that co-respondent Alfredo Ching signed as
surety for the P50M loan contracted on behalf of PBM. petitioner should have adduced
evidence to prove that Alfredo Ching's acting as surety redounded to the benefit of the
conjugal partnership. The reason for this is as lucidly explained by the respondent court:

The loan procured from respondent-appellant AIDC was for the advancement
and benefit of Philippine Blooming Mills and not for the benefit of the conjugal
partnership of petitioners-appellees. Philippine Blooming Mills has a
personality distinct and separate from the family of petitioners-appellees —
this despite the fact that the members of the said family happened to be
stockholders of said corporate entity.

xxx xxx xxx

. . . . The burden of proof that the debt was contracted for the benefit of the
conjugal partnership of gains, lies with the creditor-party litigant claiming as
such. In the case at bar, respondent-appellant AIDC failed to prove that the
debt was contracted by appellee-husband, for the benefit of the conjugal
partnership of gains. What is apparent from the facts of the case is that the
judgment debt was contracted by or in the name of the Corporation Philippine
 Blooming Mills and appellee-husband only signed as surety thereof. The debt
is clearly a corporate debt and respondent-appellant's right of recourse against
appellee-husband as surety is only to the extent of his corporate
stockholdings. It does not extend to the conjugal partnership of gains of the
family of petitioners-appellees. . . . . . .17

Petitioners contend that no actual benefit need accrue to the conjugal partnership. To
support this contention, they cite Justice J.B.L. Reyes' authoritative opinion in the Luzon
Surety Company case:

I concur in the result, but would like to make of record that, in my opinion, the
words "all debts and obligations contracted by the husband for the benefit of
the conjugal partnership" used in Article 161 of the Civil Code of the
Philippines in describing the charges and obligations for which the conjugal
partnership is liable do not require that actual profit or benefit must accrue to
the conjugal partnership from the husband's transaction; but it suffices that
the transaction should be one that normally would produce such benefit for
the partnership. This is the ratio behind our ruling in Javier vs. Osmeña, 34
Phil. 336, that obligations incurred by the husband in the practice of his
profession are collectible from the conjugal partnership.

The aforequoted concurring opinion agreed with the majority decision that the conjugal
partnership should not be made liable for the surety agreement which was clearly for the
benefit of a third party. Such opinion merely registered an exception to what may be
construed as a sweeping statement that in all cases actual profit or benefit must accrue to
the conjugal partnership. The opinion merely made it clear that no actual benefits to the
family need be proved in some cases such as in the Javier case. There, the husband was the
principal obligor himself. Thus, said transaction was found to be "one that would normally
produce . . . benefit for the partnership." In the later case of G-Tractors, Inc., the husband was
also the principal obligor — not merely the surety. This latter case, therefore, did not create
any precedent. It did not also supersede the Luzon Surety Company case, nor any of the
previous accommodation contract cases, where this Court ruled that they were for the benefit
of third parties.

But it could be argued, as the petitioner suggests, that even in such kind of contract of
accommodation, a benefit for the family may also result, when the guarantee is in favor of the
husband's employer.

In the case at bar, petitioner claims that the benefits the respondent family would reasonably
anticipate were the following:

(a) The employment of co-respondent Alfredo Ching would be

prolonged and he would be entitled to his monthly salary of
P20,000.00 for an extended length of time because of the loan he
guaranteed;

(b) The shares of stock of the members of his family would

appreciate if the PBM could be rehabilitated through the loan
obtained;
 (c) His prestige in the corporation would be enhanced and his
career would be boosted should PBM survive because of the
loan.

However, these are not the benefits contemplated by Article 161 of the Civil Code. The
benefits must be one directly resulting from the loan. It cannot merely be a by-product or a
spin-off of the loan itself.

In all our decisions involving accommodation contracts of the husband, 18 we underscored

the requirement that: "there must be the requisite showing . . . of some advantage which
clearly accrued to the welfare of the spouses" or "benefits to his family" or "that such
obligations are productive of some benefit to the family." Unfortunately, the petition did not
present any proof to show: (a) Whether or not the corporate existence of PBM was prolonged
and for how many months or years; and/or (b) Whether or not the PBM was saved by the loan
and its shares of stock appreciated, if so, how much and how substantial was the holdings of
the Ching family.

Such benefits (prospects of longer employment and probable increase in the value of stocks)
might have been already apparent or could be anticipated at the time the accommodation
agreement was entered into. But would those "benefits" qualify the transaction as one of the
"obligations . . . for the benefit of the conjugal partnership"? Are indirect and remote
probable benefits, the ones referred to in Article 161 of the Civil Code? The Court of Appeals
in denying the motion for reconsideration, disposed of these questions in the following
manner:

No matter how one looks at it, the debt/credit respondents-appellants is purely

a corporate debt granted to PBM, with petitioner-appellee-husband merely
signing as surety. While such petitioner-appellee-husband, as such surety, is
solidarily liable with the principal debtor AIDC, such liability under the Civil
Code provisions is specifically restricted by Article 122 (par. 1) of the Family
Code, so that debts for which the husband is liable may not be charged against
conjugal partnership properties. Article 122 of the Family Code is explicit —
"The payment of personal debts contracted by the husband or the wife before
or during the marriage shall not be charged to the conjugal partnership except
insofar as they redounded to the benefit of the family.

Respondents-appellants insist that the corporate debt in question falls under

the exception laid down in said Article 122 (par. one). We do not agree. The
loan procured from respondent-appellant AIDC was for the sole advancement
and benefit of Philippine Blooming Mills and not for the benefit of the conjugal
partnership of petitioners-appellees.

. . . appellee-husband derives salaries, dividends benefits from Philippine

Blooming Mills (the debtor corporation), only because said husband is an
employee of said PBM. These salaries and benefits, are not the "benefits"
contemplated by Articles 121 and 122 of the Family Code. The "benefits"
contemplated by the exception in Article 122 (Family Code) is that benefit
derived directly from the use of the loan. In the case at bar, the loan is a
corporate loan extended to PBM and used by PBM itself, not by petitioner-
appellee-husband or his family. The alleged benefit, if any, continuously
harped by respondents-appellants, are not only incidental but also
speculative. 19
We agree with the respondent court. Indeed, considering the odds involved in guaranteeing a
large amount (P50,000,000.00) of loan, the probable prolongation of employment in PBM and
increase in value of its stocks, would be too small to qualify the transaction as one "for the
benefit" of the surety's family. Verily, no one could say, with a degree of certainty, that the
said contract is even "productive of some benefits" to the conjugal partnership.

We likewise agree with the respondent court (and this view is not contested by the
petitioners) that the provisions of the Family Code is applicable in this case. These
provisions highlight the underlying concern of the law for the conservation of the conjugal
partnership; for the husband's duty to protect and safeguard, if not augment, not to dissipate
it.

This is the underlying reason why the Family Code clarifies that the obligations entered into
by one of the spouses must be those that redounded to the benefit of the family and that the
measure of the partnership's liability is to "the extent that the family is benefited."20

These are all in keeping with the spirit and intent of the other provisions of the Civil Code
which prohibits any of the spouses to donate or convey gratuitously any part of the conjugal
property. 21 Thus, when co-respondent Alfredo Ching entered into a surety agreement he,
from then on, definitely put in peril the conjugal property (in this case, including the family
home) and placed it in danger of being taken gratuitously as in cases of donation.

In the second assignment of error, the petitioner advances the view that acting as surety is
part of the business or profession of the respondent-husband.

This theory is new as it is novel.

The respondent court correctly observed that:

Signing as a surety is certainly not an exercise of an industry or profession,

hence the cited cases of Cobb-Perez vs. Lantin; Abella de Diaz vs. Erlanger &
Galinger; G-Tractors, Inc. vs. CA do not apply in the instant case. Signing as a
surety is not embarking in a business.22

We are likewise of the view that no matter how often an executive acted or was persuaded to
act, as a surety for his own employer, this should not be taken to mean that he had thereby
embarked in the business of suretyship or guaranty.

This is not to say, however, that we are unaware that executives are often asked to stand as
surety for their company's loan obligations. This is especially true if the corporate officials
have sufficient property of their own; otherwise, their spouses' signatures are required in
order to bind the conjugal partnerships.

The fact that on several occasions the lending institutions did not require the signature of the
wife and the husband signed alone does not mean that being a surety became part of his
profession. Neither could he be presumed to have acted for the conjugal partnership.

Article 121, paragraph 3, of the Family Code is emphatic that the payment of personal debts
contracted by the husband or the wife before or during the marriage shall not be charged to
the conjugal partnership except to the extent that they redounded to the benefit of the family.
Here, the property in dispute also involves the family home. The loan is a corporate loan not a
personal one. Signing as a surety is certainly not an exercise of an industry or profession nor
an act of administration for the benefit of the family.

On the basis of the facts, the rules, the law and equity, the assailed decision should be
upheld as we now uphold it. This is, of course, without prejudice to petitioner's right to
enforce the obligation in its favor against the PBM receiver in accordance with the
rehabilitation program and payment schedule approved or to be approved by the Securities &
Exchange Commission.

WHEREFORE, the petition for review should be, as it is hereby, DENIED for lack of merit.

SO ORDERED.

4. NET PROFIT

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 [₱]45,740.00.

[Petitioner’s] 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 [₱]19,000.00 as attorney's fees and
litigation expenses of [₱]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 ₱46,870.00, representing the following payments:

(a) ₱22,870.00 – as petitioner's share of the payment of the conjugal share;

(b) ₱19,000.00 – as attorney's fees; and

(c) ₱5,000.00 – 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 RTC’s 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 court’s
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."34 In
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 ₱503,862.10 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 ₱19,000.00 as
attorney's fees and litigation expenses of ₱5,000.00.54

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,61 we 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 title—legal or equitable—to 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.

D. CONJUGAL PARTNERSHIP OF GAINS

1. PRESUMPTION

G.R. No. 146942 April 22, 2003

CORAZON G. RUIZ, petitioner,

vs.
COURT OF APPEALS and CONSUELO TORRES, respondents.

PUNO, J.:

On appeal is the decision1 of the Court of Appeals in CA-G.R. CV No. 56621 dated 25 August 2000,
setting aside the decision2 of the trial court dated 19 May 1997 and lifting the permanent injunction
on the foreclosure sale of the subject lot covered by TCT No. RT-96686, as well as its subsequent
Resolution3 dated 26 January 2001, denying petitioner’s Motion for Reconsideration.

The facts of the case are as follows:

Petitioner Corazon G. Ruiz is engaged in the business of buying and selling jewelry.4 She obtained
loans from private respondent Consuelo Torres on different occasions, in the following amounts:
P100,000.00; P200,000.00; P300,000.00; and P150,000.00.5 Prior to their maturity, the loans were
consolidated under one (1) promissory note dated March 22, 1995, which reads as follows:6

"P750,000.00 Quezon City, March

22, 1995

PROMISSORY NOTE

For value received, I, CORAZON RUIZ, as principal and ROGELIO RUIZ as surety in
solidum, jointly and severally promise to pay to the order of CONSUELO P. TORRES the
sum of SEVEN HUNDRED FIFTY THOUSAND PESOS (P750,000.00) Philippine Currency,
to earn an interest at the rate of three per cent (3%) a month, for thirteen months, payable
 every _____ of the month, and to start on April 1995 and to mature on April 1996, subject to
renewal.

If the amount due is not paid on date due, a SURCHARGE of ONE PERCENT of the
principal loan, for every month default, shall be collected.

Remaining balance as of the maturity date shall earn an interest at the rate of ten percent a
month, compounded monthly.

It is finally agreed that the principal and surety in solidum, shall pay attorney’s fees at the
rate of twenty-five percent (25%) of the entire amount to be collected, in case this note is not
paid according to the terms and conditions set forth, and same is referred to a lawyer for
collection.

In computing the interest and surcharge, a fraction of the month shall be considered one full
month.

In the event of an amicable settlement, the principal and surety in solidum shall reimburse
the expenses of the plaintiff.

(Sgd.) Corazon Ruiz __________________

Principal Surety"

The consolidated loan of P750,000.00 was secured by a real estate mortgage on a 240-square
meter lot in New Haven Village, Novaliches, Quezon City, covered by Transfer Certificate of Title
(TCT) No. RT-96686, and registered in the name of petitioner.7 The mortgage was signed by
Corazon Ruiz for herself and as attorney-in-fact of her husband Rogelio. It was executed on 20
March 1995, or two (2) days before the execution of the subject promissory note.8

Thereafter, petitioner obtained three (3) more loans from private respondent, under the following
promissory notes: (1) promissory note dated 21 April 1995, in the amount of P100,000.00;9 (2)
promissory note dated May 23, 1995, in the amount of P100,000.00;10 and (3) promissory note dated
December 21, 1995, in the amount of P100,000.00.11 These combined loans of P300,000.00 were
secured by P571,000.00 worth of jewelry pledged by petitioner to private respondent.12

From April 1995 to March 1996, petitioner paid the stipulated 3% monthly interest on the
P750,000.00 loan,13 amounting to P270,000.00.14 After March 1996, petitioner was unable to make
interest payments as she had difficulties collecting from her clients in her jewelry business.15

Due to petitioner’s failure to pay the principal loan of P750,000.00, as well as the interest payment
for April 1996, private respondent demanded payment not only of the P750,000.00 loan, but also of
the P300,000.00 loan.16 When petitioner failed to pay, private respondent sought the extra-judicial
foreclosure of the aforementioned real estate mortgage.17

On September 5, 1996, Acting Clerk of Court and Ex-Officio Sheriff Perlita V. Ele, Deputy Sheriff In-
Charge Rolando G. Acal and Supervising Sheriff Silverio P. Bernas issued a Notice of Sheriff’s Sale
of subject lot. The public auction was scheduled on October 8, 1996.18

On October 7, 1996, one (1) day before the scheduled auction sale, petitioner filed a complaint with
the RTC of Quezon City docketed as Civil Case No. Q-96-29024, with a prayer for the issuance of a
Temporary Restraining Order to enjoin the sheriff from proceeding with the foreclosure sale and to
fix her indebtedness to private respondent to P706,000.00. The computed amount of P706,000.00
was based on the aggregate loan of P750,000.00, covered by the March 22, 1995 promissory note,
plus the other loans of P300,000.00, covered by separate promissory notes, plus interest, minus
P571,000.00 representing the amount of jewelry pledged in favor of private respondent.19

The trial court granted the prayer for the issuance of a Temporary Restraining Order,20 and on 29
October 1996, issued a writ of preliminary injunction.21 In its Decision dated May 19, 1997, it ordered
the Clerk of Court and Ex-Officio Sheriff to desist with the foreclosure sale of the subject property,
and it made permanent the writ of preliminary injunction. It held that the real estate mortgage is
unenforceable because of the lack of the participation and signature of petitioner’s husband. It noted
that although the subject real estate mortgage stated that petitioner was "attorney-in-fact for herself
and her husband," the Special Power of Attorney was never presented in court during the trial.22

The trial court further held that the promissory note in question is a unilateral contract of adhesion
drafted by private respondent. It struck down the contract as repugnant to public policy because it
was imposed by a dominant bargaining party (private respondent) on a weaker party
(petitioner).23 Nevertheless, it held that petitioner still has an obligation to pay the private respondent.
Private respondent was further barred from imposing on petitioner the obligation to pay the
surcharge of one percent (1%) per month from March 1996 onwards, and interest of ten percent
(10%) a month, compounded monthly from September 1996 to January 1997. Petitioner was thus
ordered to pay the amount of P750,000.00 plus three percent (3%) interest per month, or a total of
P885,000.00, plus legal interest from date of [receipt of] the decision until the total amount of
P885,000.00 is paid.24

Aside from the foregoing, the trial court took into account petitioner’s proposal to pay her other
obligations to private respondent in the amount of P392,000.00.25

The trial court also recognized the expenses borne by private respondent with regard the foreclosure
sale and attorney’s fees. As the notice of the foreclosure sale has already been published, it ordered
the petitioner to reimburse private respondent the amount of P15,000.00 plus attorney’s fees of the
same amount.26

Thus, the trial court computed petitioner’s obligation to private respondent, as follows:

Principal Loan ……………. P 750,000.00

Interest…………………….. 135,000.00
Other Loans………………. 392,000.00
Publication Fees……………. 15,000.00
Attorney’s Fees …………… 15,000.00
TOTAL…………………… P1,307,000.00

with legal interest from date of receipt of decision until payment of total amount of P1,307,000.00
has been made.27

Private respondent’s motion for reconsideration was denied in an Order dated July 21, 1997.

Private respondent appealed to the Court of Appeals. The appellate court set aside the decision of
the trial court. It ruled that the real estate mortgage is valid despite the non-participation of
petitioner’s husband in its execution because the land on which it was constituted is paraphernal
property of petitioner-wife. Consequently, she may encumber the lot without the consent of her
husband.28 It allowed its foreclosure since the loan it secured was not paid.

Nonetheless, the appellate court declared as invalid the 10% compounded monthly interest29 and the
10% surcharge per month stipulated in the promissory notes dated May 23, 1995 and December 1,
1995,30 and so too the 1% compounded monthly interest stipulated in the promissory note dated 21
April 1995,31 for being excessive, iniquitous, unconscionable, and contrary to morals. It held that the
legal rate of interest of 12% per annum shall apply after the maturity dates of the notes until full
payment of the entire amount due, and that the only permissible rate of surcharge is 1% per month,
without compounding.32 The appellate court also granted attorney’s fees in the amount of
P50,000.00, and not the stipulated 25% of the amount due, following the ruling in the case of Medel
v. Court of Appeals.33

Now, before this Court, petitioner assigns the following errors:

(1) PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT

THE PROMISSORY NOTE OF P750,000.00 IS NOT A CONTRACT OF ADHESION
DESPITE THE CLEAR SHOWING THAT THE SAME IS A READY-MADE CONTRACT
PREPARED BY (THE) RESPONDENT CONSUELO TORRES AND DID NOT REFLECT
THEIR TRUE INTENTIONS AS IT WEIGHED HEAVILY IN FAVOR OF RESPONDENT AND
AGAINST PETITIONER.

(2) PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING

THAT THE PROPERTY COVERED BY THE SUBJECT DEED OF MORTGAGE OF MARCH
20, 1995 IS A PARAPHERNAL PROPERTY OF THE PETITIONER AND NOT CONJUGAL
EVEN THOUGH THE ISSUE OF WHETHER OR NOT THE MORTGAGED PROPERTY IS
PARAPHERNAL WAS NEVER RAISED, NOR DISCUSSED AND ARGUED BEFORE THE
TRIAL COURT.

(3) PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DISREGARDING

THE TRIAL COURT’S COMPUTATION OF THE ACTUAL OBLIGATIONS OF THE
PETITIONER WITH (THE) RESPONDENT TORRES EVEN THOUGH THE SAME IS
BASED ON EVIDENCE SUBMITTED BEFORE IT.

The pertinent issues to be resolved are:

(1) Whether the promissory note of P750,000.00 is a contract of adhesion;

(2) Whether the real property covered by the subject deed of mortgage dated March 20, 1995 is
paraphernal property of petitioner; and

(3) Whether the rates of interests and surcharges on the obligation of petitioner to private
respondent are valid.

We hold that the promissory note in the case at bar is not a contract of adhesion. In Sweet Lines,
Inc. vs. Teves,34 this Court discussed the nature of a contract of adhesion as follows:

". . . there are certain contracts almost all the provisions of which have been drafted only by
one party, usually a corporation. Such contracts are called contracts of adhesion, because
 the only participation of the other party is the signing of his signature or his ‘adhesion’
thereto. Insurance contracts, bills of lading, contracts of sale of lots on the installment plan
fall into this category.35

" . . . it is drafted only by one party, usually the corporation, and is sought to be accepted or
adhered to by the other party . . . who cannot change the same and who are thus made to
adhere hereto on the ‘take it or leave it’ basis . . . "36

In said case of Sweet Lines,37 the conditions of the contract on the 4 x 6 inches passenger ticket are
in fine print. Thus we held:

" . . . it is hardly just and proper to expect the passengers to examine their tickets received
from crowded/congested counters, more often than not during rush hours, for conditions that
may be printed thereon, much less charge them with having consented to the conditions, so
printed, especially if there are a number of such conditions in fine print, as in this case."38

We further stressed in the said case that the questioned ‘Condition No. 14’ was prepared solely by
one party which was the corporation, and the other party who was then a passenger had no say in
its preparation. The passengers have no opportunity to examine and consider the terms and
conditions of the contract prior to the purchase of their tickets.39

In the case at bar, the promissory note in question did not contain any fine print provision which
could not have been examined by the petitioner. Petitioner had all the time to go over and study the
stipulations embodied in the promissory note. Aside from the March 22, 1995 promissory note for
P750,000.00, three other promissory notes of different dates and amounts were executed by
petitioner in favor of private respondent. These promissory notes contain similar terms and
conditions, with a little variance in the terms of interests and surcharges. The fact that petitioner and
private respondent had entered into not only one but several loan transactions shows that petitioner
was not in any way compelled to accept the terms allegedly imposed by private respondent.
Moreover, petitioner, in her complaint40 dated October 7, 1996 filed with the trial court, never claimed
that she was forced to sign the subject note. Paragraph five of her complaint states:

"That on or about March 22, 1995 plaintiff was required by the defendant Torres to execute a
promissory note consolidating her unpaid principal loan and interests which said defendant
computed to be in the sum of P750,000.00 . . ."

To be required is certainly different from being compelled. She could have rejected the conditions
made by private respondent. As an experienced business- woman, she ought to understand all the
conditions set forth in the subject promissory note. As held by this Court in Lee, et al. vs. Court of
Appeals, et al.,41 it is presumed that a person takes ordinary care of his concerns.42 Hence, the
natural presumption is that one does not sign a document without first informing himself of its
contents and consequences. This presumption acquires greater force in the case at bar where not
only one but several documents were executed at different times by petitioner in favor of private
respondent.

II

We also affirm the ruling of the appellate court that the real property covered by the subject deed of
mortgage is paraphernal property. The property subject of the mortgage is registered in the name of
"Corazon G. Ruiz, of legal age, married to Rogelio Ruiz, Filipinos." Thus, title is registered in the
name of Corazon alone because the phrase "married to Rogelio Ruiz" is merely descriptive of the
civil status of Corazon and should not be construed to mean that her husband is also a registered
owner. Furthermore, registration of the property in the name of "Corazon G. Ruiz, of legal age,
married to Rogelio Ruiz" is not proof that such property was acquired during the marriage, and thus,
is presumed to be conjugal. The property could have been acquired by Corazon while she was still
single, and registered only after her marriage to Rogelio Ruiz. Acquisition of title and registration
thereof are two different acts.43 The presumption under Article 116 of the Family Code that properties
acquired during the marriage are presumed to be conjugal cannot apply in the instant case. Before
such presumption can apply, it must first be established that the property was in fact acquired during
the marriage. In other words, proof of acquisition during the marriage is a condition sine qua non for
the operation of the presumption in favor of conjugal ownership.44 No such proof was offered nor
presented in the case at bar. Thus, on the basis alone of the certificate of title, it cannot be
presumed that said property was acquired during the marriage and that it is conjugal property. 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.45 The only import of the title is that Corazon is the owner of said property, the same
having been registered in her name alone, and that she is married to Rogelio Ruiz.46

III

We now resolve the issue of whether the rates of interests and surcharges on the obligation of
petitioner to private respondent are legal.

The four (4) unpaid promissory notes executed by petitioner in favor of private respondent are in the
following amounts and maturity dates:

(1) P750,000.00, dated March 22, 1995 matured on April 21, 1996;

(2) P100,000.00, dated April 21, 1995 matured on August 21, 1995;

(3) P100,000.00, dated May 23, 1995 matured on November 23, 1995; and

(4) P100,000.00, dated December 21, 1995 matured on March 1, 1996.

The P750,000.00 promissory note dated March 22, 1995 has the following provisions:

(1) 3% monthly interest, from the signing of the note until its maturity date;

(2) 10% compounded monthly interest on the remaining balance at maturity date;

(3) 1% surcharge on the principal loan for every month of default; and

(4) 25% attorney’s fees.

The P100,000.00 promissory note dated April 21, 1995 has the following provisions:

(1) 3% monthly interest, from the signing of the note until its maturity date;

(2) 10% monthly interest on the remaining balance at maturity date;

(3) 1% compounded monthly surcharge on the principal loan for every month of default; and
 (4) 10% attorney’s fees.

The two (2) other P100,000.00 promissory notes dated May 23, 1995 and December 1, 1995 have
the following provisions:

(1) 3% monthly interest, from the signing of the note until its maturity date;

(2) 10% compounded monthly interest on the remaining balance at maturity date;

(3) 10% surcharge on the principal loan for every month of default; and

(4) 10% attorney’s fees.

We affirm the ruling of the appellate court, striking down as invalid the 10% compounded monthly
interest, the 10% surcharge per month stipulated in the promissory notes dated May 23, 1995 and
December 1, 1995, and the 1% compounded monthly interest stipulated in the promissory note
dated April 21, 1995. The legal rate of interest of 12% per annum shall apply after the maturity dates
of the notes until full payment of the entire amount due. Also, the only permissible rate of surcharge
is 1% per month, without compounding. We also uphold the award of the appellate court of
attorney’s fees, the amount of which having been reasonably reduced from the stipulated 25% (in
the March 22, 1995 promissory note) and 10% (in the other three promissory notes) of the entire
amount due, to a fixed amount of P50,000.00. However, we equitably reduce the 3% per month or
36% per annum interest present in all four (4) promissory notes to 1% per month or 12% per annum
interest.

The foregoing rates of interests and surcharges are in accord with Medel vs. Court of
Appeals,47 Garcia vs. Court of Appeals,48 Bautista vs. Pilar Development Corporation,49 and the
recent case of Spouses Solangon vs. Salazar.50 This Court invalidated a stipulated 5.5% per month
or 66% per annum interest on a P500,000.00 loan in Medel51 and a 6% per month or 72% per
annum interest on a P60,000.00 loan in Solangon52 for being excessive, iniquitous, unconscionable
and exorbitant. In both cases, we reduced the interest rate to 12% per annum. We held that while
the Usury Law has been suspended by Central Bank Circular No. 905, s. 1982, effective on January
1, 1983, and parties to a loan agreement have been given wide latitude to agree on any interest rate,
still stipulated interest rates are illegal if they are unconscionable. Nothing in the said circular grants
lenders carte blanche authority to raise interest rates to levels which will either enslave their
borrowers or lead to a hemorrhaging of their assets.53 On the other hand, in Bautista vs. Pilar
Development Corp.,54 this Court upheld the validity of a 21% per annum interest on a P142,326.43
loan, and in Garcia vs. Court of Appeals, sustained the agreement of the parties to a 24% per
annum interest on an P8,649,250.00 loan. It is on the basis of these cases that we reduce the 36%
per annum interest to 12%. An interest of 12% per annum is deemed fair and reasonable. While it is
true that this Court invalidated a much higher interest rate of 66% per annum in Medel55 and 72%
in Solangon56 it has sustained the validity of a much lower interest rate of 21% in Bautista57 and 24%
in Garcia.58 We still find the 36% per annum interest rate in the case at bar to be substantially greater
than those upheld by this Court in the two (2) aforecited cases.

The 1% surcharge on the principal loan for every month of default is valid. This surcharge or penalty
stipulated in a loan agreement in case of default partakes of the nature of liquidated damages under
Art. 2227 of the New Civil Code, and is separate and distinct from interest payment.59 Also referred
to as a penalty clause, it is expressly recognized by law. It is an accessory undertaking to assume
greater liability on the part of an obligor in case of breach of an obligation.60 The obligor would then
be bound to pay the stipulated amount of indemnity without the necessity of proof on the existence
and on the measure of damages caused by the breach.61 Although the courts may not at liberty
ignore the freedom of the parties to agree on such terms and conditions as they see fit that
contravene neither law nor morals, good customs, public order or public policy, a stipulated penalty,
nevertheless, may be equitably reduced if it is iniquitous or unconscionable.62 In the instant case, the
10% surcharge per month stipulated in the promissory notes dated May 23, 1995 and December 1,
1995 was properly reduced by the appellate court.

In sum, petitioner shall pay private respondent the following:

1. Principal of loan under promissory note dated March P750,000.00

22, 1995

a. 1% interest per month on principal from March 22,

1995 until fully paid, less P270,000.00 paid by
petitioner as interest from April 1995 to March
1996

b. 1% surcharge per month on principal from May

1996 until fully paid

2. Principal of loan under promissory note dated April 21, P100,000.00

1995

a. 1% interest per month on principal from April 21,

1995 until fully paid

b. 1% surcharge per month on principal from

September 1995 until fully paid

3. Principal of loan under promissory note dated May 23, P100,000.00

1995

a. 1% interest per month on principal from May 23,

1995 until fully paid

b. 1% surcharge per month on principal from

December 1995 until fully paid

4. Principal of loan under promissory note dated P100,000.00

December 1, 1995

a. 1% interest per month on principal from

December 1, 1995 until fully paid

b. 1% surcharge per month on principal from April

1996 until fully paid

5. Attorney’s fees P 50,000.00

Hence, since the mortgage is valid and the loan it secures remains unpaid, the foreclosure
proceedings may now proceed.

IN VIEW WHEREOF, the appealed Decision of the Court of Appeals is AFFIRMED, subject to the
MODIFICATION that the interest rate of 36% per annum is ordered reduced to 12 % per annum.
SO ORDERED.

2. VOID DISPOSITIONS

G.R. No. 153802. March 11, 2005

HOMEOWNERS SAVINGS & LOAN BANK, Petitioner,

vs.
MIGUELA C. DAILO, Respondents.

DECISION

TINGA, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, assailing
the Decision1 of the Court of Appeals in CA-G.R. CV No. 59986 rendered on June 3, 2002, which
affirmed with modification the October 18, 1997 Decision2 of the Regional Trial Court, Branch 29,
San Pablo City, Laguna in Civil Case No. SP-4748 (97).

The following factual antecedents are undisputed.

Respondent Miguela C. Dailo and Marcelino Dailo, Jr. were married on August 8, 1967. During their
marriage, the spouses purchased a house and lot situated at Barangay San Francisco, San Pablo
City from a certain Sandra Dalida. The subject property was declared for tax assessment purposes
under Assessment of Real Property No. 94-051-2802. The Deed of Absolute Sale, however, was
executed only in favor of the late Marcelino Dailo, Jr. as vendee thereof to the exclusion of his wife.3

On December 1, 1993, Marcelino Dailo, Jr. executed a Special Power of Attorney (SPA) in favor of
one Lilibeth Gesmundo, authorizing the latter to obtain a loan from petitioner Homeowners Savings
and Loan Bank to be secured by the spouses Dailo’s house and lot in San Pablo City. Pursuant to
the SPA, Gesmundo obtained a loan in the amount of ₱300,000.00 from petitioner. As security
therefor, Gesmundo executed on the same day a Real Estate Mortgage constituted on the subject
property in favor of petitioner. The abovementioned transactions, including the execution of the SPA
in favor of Gesmundo, took place without the knowledge and consent of respondent.4

Upon maturity, the loan remained outstanding. As a result, petitioner instituted extrajudicial
foreclosure proceedings on the mortgaged property. After the extrajudicial sale thereof, a Certificate
of Sale was issued in favor of petitioner as the highest bidder. After the lapse of one year without the
property being redeemed, petitioner, through its vice-president, consolidated the ownership thereof
by executing on June 6, 1996 an Affidavit of Consolidation of Ownership and a Deed of Absolute
Sale.5

In the meantime, Marcelino Dailo, Jr. died on December 20, 1995. In one of her visits to the subject
property, respondent learned that petitioner had already employed a certain Roldan Brion to clean its
premises and that her car, a Ford sedan, was razed because Brion allowed a boy to play with fire
within the premises.

Claiming that she had no knowledge of the mortgage constituted on the subject property, which was
conjugal in nature, respondent instituted with the Regional Trial Court, Branch 29, San Pablo City,
Civil Case No. SP-2222 (97) for Nullity of Real Estate Mortgage and Certificate of Sale, Affidavit of
Consolidation of Ownership, Deed of Sale, Reconveyance with Prayer for Preliminary Injunction and
Damages against petitioner. In the latter’s Answer with Counterclaim, petitioner prayed for the
dismissal of the complaint on the ground that the property in question was the exclusive property of
the late Marcelino Dailo, Jr.

After trial on the merits, the trial court rendered a Decision on October 18, 1997. The dispositive
portion thereof reads as follows:

WHEREFORE, the plaintiff having proved by the preponderance of evidence the allegations of the
Complaint, the Court finds for the plaintiff and hereby orders:

ON THE FIRST CAUSE OF ACTION:

1. The declaration of the following documents as null and void:

(a) The Deed of Real Estate Mortgage dated December 1, 1993 executed before Notary Public
Romulo Urrea and his notarial register entered as Doc. No. 212; Page No. 44, Book No. XXI, Series
of 1993.

(b) The Certificate of Sale executed by Notary Public Reynaldo Alcantara on April 20, 1995.

(c) The Affidavit of Consolidation of Ownership executed by the defendant

(c) The Affidavit of Consolidation of Ownership executed by the defendant over the residential lot
located at Brgy. San Francisco, San Pablo City, covered by ARP No. 95-091-1236 entered as Doc.
No. 406; Page No. 83, Book No. III, Series of 1996 of Notary Public Octavio M. Zayas.

(d) The assessment of real property No. 95-051-1236.

2. The defendant is ordered to reconvey the property subject of this complaint to the plaintiff.

ON THE SECOND CAUSE OF ACTION

1. The defendant to pay the plaintiff the sum of ₱40,000.00 representing the value of the car which
was burned.

ON BOTH CAUSES OF ACTION

1. The defendant to pay the plaintiff the sum of ₱25,000.00 as attorney’s fees;

2. The defendant to pay plaintiff ₱25,000.00 as moral damages;

3. The defendant to pay the plaintiff the sum of ₱10,000.00 as exemplary damages;

4. To pay the cost of the suit.

The counterclaim is dismissed.

SO ORDERED.6
Upon elevation of the case to the Court of Appeals, the appellate court affirmed the trial court’s
finding that the subject property was conjugal in nature, in the absence of clear and convincing
evidence to rebut the presumption that the subject property acquired during the marriage of spouses
Dailo belongs to their conjugal partnership.7 The appellate court declared as void the mortgage on
the subject property because it was constituted without the knowledge and consent of respondent, in
accordance with Article 124 of the Family Code. Thus, it upheld the trial court’s order to reconvey the
subject property to respondent.8 With respect to the damage to respondent’s car, the appellate court
found petitioner to be liable therefor because it is responsible for the consequences of the acts or
omissions of the person it hired to accomplish the assigned task.9 All told, the appellate court
affirmed the trial court’s Decision, but deleted the award for damages and attorney’s fees for lack of
basis.10

Hence, this petition, raising the following issues for this Court’s consideration:

1. WHETHER OR NOT THE MORTGAGE CONSTITUTED BY THE LATE MARCELINO DAILO, JR.
ON THE SUBJECT PROPERTY AS CO-OWNER THEREOF IS VALID AS TO HIS UNDIVIDED
SHARE.

2. WHETHER OR NOT THE CONJUGAL PARTNERSHIP IS LIABLE FOR THE PAYMENT OF THE
LOAN OBTAINED BY THE LATE MARCELINO DAILO, JR. THE SAME HAVING REDOUNDED TO
THE BENEFIT OF THE FAMILY.11

First, petitioner takes issue with the legal provision applicable to the factual milieu of this case. It
contends that Article 124 of the Family Code should be construed in relation to Article 493 of the
Civil Code, which states:

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 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.

Article 124 of the Family Code provides in part:

ART. 124. The administration and enjoyment of the conjugal partnership property shall belong to
both spouses jointly. . . .

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. . . .

Petitioner argues that although Article 124 of the Family Code requires the consent of the other
spouse to the mortgage of conjugal properties, the framers of the law could not have intended to
curtail the right of a spouse from exercising full ownership over the portion of the conjugal property
pertaining to him under the concept of co-ownership.12 Thus, petitioner would have this Court uphold
the validity of the mortgage to the extent of the late Marcelino Dailo, Jr.’s share in the conjugal
partnership.

In Guiang v. Court of Appeals,13 it was held that the sale of a conjugal property requires the consent
of both the husband and wife.14 In applying Article 124 of the Family Code, this Court declared that
the absence of the consent of one renders the entire sale null and void, including the portion of the
conjugal property pertaining to the husband who contracted the sale. The same principle
in Guiang squarely applies to the instant case. As shall be discussed next, there is no legal basis to
construe Article 493 of the Civil Code as an exception to Article 124 of the Family Code.

Respondent and the late Marcelino Dailo, Jr. were married on August 8, 1967. In the absence of a
marriage settlement, the system of relative community or conjugal partnership of gains governed the
property relations between respondent and her late husband.15 With the effectivity of the Family
Code on August 3, 1988, Chapter 4 on Conjugal Partnership of Gains in the Family Code was made
applicable to conjugal partnership of gains already established before its effectivity unless vested
rights have already been acquired under the Civil Code or other laws.16

The rules on co-ownership do not even apply to the property relations of respondent and the late
Marcelino Dailo, Jr. even in a suppletory manner. The regime of conjugal partnership of gains is a
special type of partnership, where the husband and wife place in a common fund the proceeds,
products, fruits and income from their separate properties and those acquired by either or both
spouses through their efforts or by chance.17 Unlike the absolute community of property wherein the
rules on co-ownership apply in a suppletory manner,18 the conjugal partnership shall be governed by
the rules on contract of partnership in all that is not in conflict with what is expressly determined in
the chapter (on conjugal partnership of gains) or by the spouses in their marriage
settlements.19 Thus, the property relations of respondent and her late husband shall be governed,
foremost, by Chapter 4 on Conjugal Partnership of Gains of the Family Code and, suppletorily, by
the rules on partnership under the Civil Code. In case of conflict, the former prevails because the
Civil Code provisions on partnership apply only when the Family Code is silent on the matter.

The basic and established fact is that during his lifetime, without the knowledge and consent of his
wife, Marcelino Dailo, Jr. constituted a real estate mortgage on the subject property, which formed
part of their conjugal partnership. By express provision of Article 124 of the Family Code, in the
absence of (court) authority or written consent of the other spouse, any disposition or encumbrance
of the conjugal property shall be void.

The aforequoted provision does not qualify with respect to the share of the spouse who makes the
disposition or encumbrance in the same manner that the rule on co-ownership under Article 493 of
the Civil Code does. Where the law does not distinguish, courts should not distinguish.20 Thus, both
the trial court and the appellate court are correct in declaring the nullity of the real estate mortgage
on the subject property for lack of respondent’s consent.

Second, petitioner imposes the liability for the payment of the principal obligation obtained by the
late Marcelino Dailo, Jr. on the conjugal partnership to the extent that it redounded to the benefit of
the family.21

Under Article 121 of the Family Code, "[T]he conjugal partnership shall be liable for: . . . (3) Debts
and obligations contracted by either spouse without the consent of the other to the extent that the
family may have been benefited; . . . ." For the subject property to be held liable, the obligation
contracted by the late Marcelino Dailo, Jr. must have redounded to the benefit of the conjugal
partnership. There must be the requisite showing then of some advantage which clearly accrued to
the welfare of the spouses. Certainly, to make a conjugal partnership respond for a liability that
should appertain to the husband alone is to defeat and frustrate the avowed objective of the new
Civil Code to show the utmost concern for the solidarity and well-being of the family as a unit.22

The burden of proof that the debt was contracted for the benefit of the conjugal partnership of gains
lies with the creditor-party litigant claiming as such.23 Ei incumbit probatio qui dicit, non qui negat (he
who asserts, not he who denies, must prove).24 Petitioner’s sweeping conclusion that the loan
obtained by the late Marcelino Dailo, Jr. to finance the construction of housing units without a doubt
redounded to the benefit of his family, without adducing adequate proof, does not persuade this
Court. Other than petitioner’s bare allegation, there is nothing from the records of the case to compel
a finding that, indeed, the loan obtained by the late Marcelino Dailo, Jr. redounded to the benefit of
the family. Consequently, the conjugal partnership cannot be held liable for the payment of the
principal obligation.

In addition, a perusal of the records of the case reveals that during the trial, petitioner vigorously
asserted that the subject property was the exclusive property of the late Marcelino Dailo, Jr.
Nowhere in the answer filed with the trial court was it alleged that the proceeds of the loan
redounded to the benefit of the family. Even on appeal, petitioner never claimed that the family
benefited from the proceeds of the loan. When a party adopts a certain theory in the court below, he
will not be permitted to change his theory on appeal, for to permit him to do so would not only be
unfair to the other party but it would also be offensive to the basic rules of fair play, justice and due
process.25 A party may change his legal theory on appeal only when the factual bases thereof would
not require presentation of any further evidence by the adverse party in order to enable it to properly
meet the issue raised in the new theory.26

WHEREFORE, the petition is DENIED. Costs against petitioner.

SO ORDERED.

G.R. No. 160708 October 16, 2009

PATROCINIA RAVINA AND WILFREDO RAVINA, Petitioners,

vs.
MARY ANN P. VILLA ABRILLE, for herself and in behalf of INGRID D'LYN P. VILLA ABRILLE,
INGREMARK D'WIGHT VILLA ABRILLE, INGRESOLL DIELS VILLA ABRILLE AND INGRELYN
DYAN VILLA ABRILLE, Respondents.

DECISION

QUISUMBING, Acting C.J.:

For review are the Decision1 dated February 21, 2002 and the Resolution2 dated October 7, 2003 of
the Court of Appeals in CA-G.R. CV No. 54560. The appellate court modified the Decision3 dated
September 26, 1995 of the Regional Trial Court (RTC) of Davao City, Branch 15.

Simply stated, the facts as found by the Court of Appeals4 are as follows:

Respondent Mary Ann Pasaol Villa Abrille and Pedro Villa Abrille are husband and wife. They have
four children, who are also parties to the instant case and are represented by their mother, Mary
Ann.

In 1982, the spouses acquired a 555-square meter parcel of land denominated as Lot 7, located at
Kamuning Street, Juna Subdivision, Matina, Davao City, and covered by Transfer Certificate of Title
(TCT) No. T-88674 in their names. Said lot is adjacent to a parcel of land which Pedro acquired
when he was still single and which is registered solely in his name under TCT No. T-26471.
Through their joint efforts and the proceeds of a loan from the Development Bank of the Philippines
(DBP), the spouses built a house on Lot 7 and Pedro’s lot. The house was finished in the early
1980’s but the spouses continuously made improvements, including a poultry house and an annex.

In 1991, Pedro got a mistress and began to neglect his family. Mary Ann was forced to sell or
mortgage their movables to support the family and the studies of her children. By himself, Pedro
offered to sell the house and the two lots to herein petitioners, Patrocinia and Wilfredo Ravina. Mary
Ann objected and notified the petitioners of her objections, but Pedro nonetheless sold the house
and the two lots without Mary Ann’s consent, as evidenced by a Deed of Sale5 dated June 21, 1991.
It appears on the said deed that Mary Ann did not sign on top of her name.

On July 5, 1991 while Mary Ann was outside the house and the four children were in school, Pedro
together with armed members of the Civilian Armed Forces Geographical Unit (CAFGU) and acting
in connivance with petitioners6 began transferring all their belongings from the house to an
apartment.

When Mary Ann and her daughter Ingrid Villa Abrille came home, they were stopped from entering it.
They waited outside the gate until evening under the rain. They sought help from the Talomo Police
Station, but police authorities refused to intervene, saying that it was a family matter. Mary Ann
alleged that the incident caused stress, tension and anxiety to her children, so much so that one
flunked at school. Thus, respondents Mary Ann and her children filed a complaint for Annulment of
Sale, Specific Performance, Damages and Attorney’s Fees with Preliminary Mandatory
Injunction7 against Pedro and herein petitioners (the Ravinas) in the RTC of Davao City.

During the trial, Pedro declared that the house was built with his own money. Petitioner Patrocinia
Ravina testified that they bought the house and lot from Pedro, and that her husband, petitioner
Wilfredo Ravina, examined the titles when they bought the property.

On September 26, 1995, the trial court ruled in favor of herein respondent Mary Ann P. Villa Abrille
as follows:

WHEREFORE, judgment is rendered as follows:

1. The sale of lot 8 covered by TCT No. 26471 by defendant Pedro Abrille appearing in the
Deed of Sale marked as Exh. "E" is void as to one half or 277.5 square meters representing
the share of plaintiff Mary Villa Abrille.

2. That sale of Lot 7 covered by TCT No. [88674] by defendant Pedro Villa Abrille in the
Deed of Sale (Exh. "A") is valid as to one half or 277.5 square meters of the 555 square
meters as one half belongs to defendant Pedro Abrille but it is void as to the other half or
277.5 square meters as it belongs to plaintiff Mary Abrille who did not sell her share nor give
her consent to the sale.

3. That sale of the house mentioned in the Deed of Sale (Exh. "A") is valid as far as the one
half of the house representing the share of defendant Pedro Abrille is concerned but void as
to the other half which is the share of plaintiff Mary Abrille because she did not give her
consent/sign the said sale.

4. The defendants shall jointly pay the plaintiffs.

 4. A. Seventeen Thousand Pesos (₱17,000.00) representing the value of the
movables and belonging[s] that were lost when unknown men unceremoniously and
without their knowledge and consent removed their movables from their house and
brought them to an apartment.

4. B. One Hundred Thousand Pesos (₱ 100,000.00) to plaintiff Mary Abrille as moral

damages.

4. C. Fifty Thousand Pesos (₱50,000.00) to each of the four children as moral

damages, namely:

a) Ingrid Villa Abrille – Fifty Thousand Pesos (₱50,000.00), b) Ingremark Villa Abrille
– Fifty Thousand Pesos (₱50,000.00), c) Ingresoll Villa Abrille – Fifty Thousand
Pesos (₱50,000.00) and d) Ingrelyn Villa Abrille – Fifty Thousand Pesos
(₱50,000.00).

5. Ten Thousand Pesos (₱10,000.00) as exemplary damages by way of example and

correction for the public good.

6. The costs of suit.8

On appeal, the Court of Appeals modified the decision, thus:

WHEREFORE, the appealed judgment is hereby MODIFIED as follows:

1. The sale of lot covered by TCT No. 26471 in favor of defendants spouses Wilfredo and
Patrocinia Ravina is declared valid.

2. The sale of lot covered by TCT No. 88674 in favor of said defendants spouses Ravina,
together with the house thereon, is declared null and void.

3. Defendant Pedro Abrille is ordered to return the value of the consideration for the lot
covered by TCT No. 88674 and the house thereon to co-defendants spouses Ravina.

4. Defendants spouses Ravina [a]re ordered to reconvey the lot and house covered by TCT
No. 88674 in favor of spouses Pedro and Mary Villa Abrille and to deliver possession to
them.

5. Plaintiffs are given the option to exercise their rights under Article [450] of the New Civil
Code with respect to the improvements introduced by defendant spouses Ravina.

6. Defendants Pedro Villa Abrille and spouses Ravina are ordered to pay jointly and
severally the plaintiffs as follows:

a) One Hundred Thousand Pesos (₱100,000.00) to plaintiff Mary Villa Abrille as

moral damages.

b) Fifty Thousand Pesos (₱50,000.00) as moral damages to each of the four

children, namely: Ingrid Villa Abrille, Ingremark Villa Abrille, Ingresoll Villa Abrille and
Ingrelyn Villa Abrille.
 c) Ten Thousand (₱10,000.00) as exemplary damages by way of example and
correction for the public good.

SO ORDERED.9

Their Motion for Reconsideration having been denied, petitioners filed this petition. Petitioners argue
that:

I.

THE COURT OF APPEALS ERRED WHEN IT DECLARED x x x THE SALE OF LOT COVERED BY
TCT NO. 88674 IN FAVOR OF SPOUSES RAVINA, TOGETHER WITH THE HOUSE THEREON,
AS NULL AND VOID SINCE IT IS CLEARLY CONTRARY TO LAW AND EVIDENCE.

II.

THE COURT OF APPEALS ERRED WHEN IT RULED THAT PETITIONERS PATROCIN[I]A

RAVINA AND WILFREDO RAVINA ARE NOT INNOCENT PURCHASERS FOR VALUE, THE
SAME BEING CONTRARY TO LAW AND EVIDENCE.

III.

THE COURT OF APPEALS ERRED WHEN IT RULED THAT PETITIONERS PATROCIN[I]A

RAVINA AND WILFREDO RAVINA ARE LIABLE FOR DAMAGES, THE SAME BEING CONTRARY
TO LAW AND EVIDENCE.10

In essence, petitioners assail the appellate court’s declaration that the sale to them by Pedro of the
lot covered by TCT No. T-88674 is null and void. However, in addressing this issue, it is imperative
to determine: (1) whether the subject property covered by TCT No. T-88674 is an exclusive property
of Pedro or conjugal property, and (2) whether its sale by Pedro was valid considering the absence
of Mary Ann’s consent.

Petitioners assert that the subject lot covered by TCT No. T-88674 was the exclusive property of
Pedro having been acquired by him through barter or exchange.11 They allege that the subject lot
was acquired by Pedro with the proceeds of the sale of one of his exclusive properties. Allegedly,
Pedro and his sister Carmelita initially agreed to exchange their exclusive lots covered by TCT No.
T-26479 and TCT No. T-26472, respectively. Later, however, Pedro sold the lot covered by TCT No.
T-26472 to one Francisca Teh Ting and purchased the property of Carmelita using the proceeds of
the sale. A new title, TCT No. T-88674, was issued thereafter. Thus, petitioners insist that the
subject lot remains to be an exclusive property of Pedro as it was acquired or purchased through the
exclusive funds or money of the latter.

We are not persuaded. Article 160 of the New Civil Code provides, "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."

There is no issue with regard to the lot covered by TCT No. T-26471, which was an exclusive
property of Pedro, having been acquired by him before his marriage to Mary Ann. However, the lot
covered by TCT No. T-88674 was acquired in 1982 during the marriage of Pedro and Mary Ann. No
evidence was adduced to show that the subject property was acquired through exchange or barter.
The presumption of the conjugal nature of the property subsists in the absence of clear, satisfactory
and convincing evidence to overcome said presumption or to prove that the subject property is
exclusively owned by Pedro.12 Petitioners’ bare assertion would not suffice to overcome the
presumption that TCT No. T-88674, acquired during the marriage of Pedro and Mary Ann, is
conjugal. Likewise, the house built thereon is conjugal property, having been constructed through
the joint efforts of the spouses, who had even obtained a loan from DBP to construct the house. 1avv phi 1

Significantly, a sale or encumbrance of conjugal property concluded after the effectivity of the Family
Code on August 3, 1988, is governed by Article 124 of the same Code that now treats such a
disposition to be void if done (a) without the consent of both the husband and the wife, or (b) in case
of one spouse’s inability, the authority of the court. Article 124 of the Family Code, the governing law
at the time the assailed sale was contracted, is explicit:

ART. 124. The administration and enjoyment of the conjugal partnership property shall belong to
both spouses jointly. In case of disagreement, the husband’s 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 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. 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.)

The particular provision in the New Civil Code giving the wife ten (10) years to annul the alienation or
encumbrance was not carried over to the Family Code. It is thus clear that alienation or
encumbrance of the conjugal partnership property by the husband without the consent of the wife is
null and void.

Hence, just like the rule in absolute community of property, if the husband, without knowledge and
consent of the wife, sells conjugal property, such sale is void. If the sale was with the knowledge but
without the approval of the wife, thereby resulting in a disagreement, such sale is annullable at the
instance of the wife who is given five (5) years from the date the contract implementing the decision
of the husband to institute the case.13

Here, respondent Mary Ann timely filed the action for annulment of sale within five (5) years from the
date of sale and execution of the deed. However, her action to annul the sale pertains only to the
conjugal house and lot and does not include the lot covered by TCT No. T-26471, a property
exclusively belonging to Pedro and which he can dispose of freely without Mary Ann’s consent.

On the second assignment of error, petitioners contend that they are buyers in good
faith.14 Accordingly, they need not inquire whether the lot was purchased by money exclusively
belonging to Pedro or of the common fund of the spouses and may rely on the certificates of title.

The contention is bereft of merit. As correctly held by the Court of Appeals, 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 a full and fair price for the same at the time of such purchase, or
before he has notice of the claim or interest of some other person in the property.15 To establish his
status as a buyer for value in good faith, a person dealing with land registered in the name of and
occupied by the seller need only show that he relied on the face of the seller’s certificate of title. But
for a person dealing with land registered in the name of and occupied by the seller whose capacity to
sell is restricted, such as by Articles 166 and 173 of the Civil Code or Article 124 of the Family
Code, he must show that he inquired into the latter’s capacity to sell in order to establish himself as a
buyer for value in good faith.16
1av vphi1

In the present case, the property is registered in the name of Pedro and his wife, Mary Ann.
Petitioners cannot deny knowledge that during the time of the sale in 1991, Pedro was married to
Mary Ann. However, Mary Ann’s conformity did not appear in the deed. Even assuming that
petitioners believed in good faith that the subject property is the exclusive property of Pedro, they
were apprised by Mary Ann’s lawyer of her objection to the sale and yet they still proceeded to
purchase the property without Mary Ann’s written consent. Moreover, the respondents were the ones
in actual, visible and public possession of the property at the time the transaction was being made.
Thus, at the time of sale, petitioners knew that Mary Ann has a right to or interest in the subject
properties and yet they failed to obtain her conformity to the deed of sale. Hence, petitioners cannot
now invoke the protection accorded to purchasers in good faith.

Now, if a voidable contract is annulled, the restoration of what has been given is proper. The
relationship between the parties in any contract even if subsequently annulled must always be
characterized and punctuated by good faith and fair dealing.17 Hence, in consonance with justice and
equity and the salutary principle of non-enrichment at another’s expense, we sustain the appellate
court’s order directing Pedro to return to petitioner spouses the value of the consideration for the lot
covered by TCT No. T-88674 and the house thereon.

However, this court rules that petitioners cannot claim reimbursements for improvements they
introduced after their good faith had ceased. As correctly found by the Court of Appeals, petitioner
Patrocinia Ravina made improvements and renovations on the house and lot at the time when the
complaint against them was filed. Ravina continued introducing improvements during the pendency
of the action.18

Thus, Article 449 of the New Civil Code is applicable. It provides that, "(h)e who builds, plants or
sows in bad faith on the land of another, loses what is built, planted or sown without right to
indemnity."19

On the last issue, petitioners claim that the decision awarding damages to respondents is not
supported by the evidence on record.20

The claim is erroneous to say the least. The manner by which respondent and her children were
removed from the family home deserves our condemnation. On July 5, 1991, while respondent was
out and her children were in school, Pedro Villa Abrille acting in connivance with the
petitioners21 surreptitiously transferred all their personal belongings to another place. The
respondents then were not allowed to enter their rightful home or family abode despite their
impassioned pleas.

Firmly established in our civil law is the doctrine that: "Every person must, in the exercise of his
rights and in the performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith."22 When a right is exercised in a manner that does not conform with such
norms and results in damages to another, a legal wrong is thereby committed for which the wrong
doer must be held responsible. Similarly, any person who willfully causes loss or injury to another in
a manner that is contrary to morals, good customs or public policy shall compensate the latter for the
damages caused.23 It is patent in this case that petitioners’ alleged acts fall short of these
established civil law standards.
WHEREFORE, we deny the instant petition for lack of merit. The Decision dated February 21, 2002
and the Resolution dated October 7, 2003 of the Court of Appeals in CA-G.R. CV No. 54560 are
AFFIRMED.

Costs against petitioners.

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 husband’s 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 ₱60,000.00 for
the transfer of the lot’s 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 Tarciano’s compliance with these conditions, the Fuentes spouses were to take
possession of the lot and pay him an additional ₱140,000.00 or ₱160,000.00, 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 Rosario’s 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
₱140,000.00 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 Tarciano’s 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 Tarciano’s 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
Rosario’s 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. Plagata’s testimony remained technically
unrebutted.11

Finally, the RTC noted that Atty. Plagata’s 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 Rosario’s 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. Plagata’s 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 attorney’s 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 Rosario’s signature on the document of consent to her husband Tarciano’s
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 Court’s Rulings

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

The CA found that Rosario’s 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. Plagata’s 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 CA’s observation that Rosario’s 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, Rosario’s 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 Rosario’s
consent to the sale of the land. That the Fuentes spouses honestly relied on the notarized affidavit
as proof of Rosario’s 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 wife’s consent. Still, if he sold the same without his wife’s 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.18 Further, 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 husband’s sale of the real property. It
simply provides that without the other spouse’s 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 spouse’s
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 mother’s (his wife’s) 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 Rosario’s 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 husband’s 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 phi 1

In fairness to the Fuentes spouses, however, they should be entitled, among other things, to recover
from Tarciano’s heirs, the Rocas, the ₱200,000.00 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 Rosario’s 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
₱200,000.00 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. 109557 November 29, 2000

JOSE UY and his Spouse GLENDA J. UY and GILDA L. JARDELEZA, petitioners,

vs.
COURT OF APPEALS and TEODORO L. JARDELEZA, respondents.

DECISION

PARDO, J.:

The case is an appeal via certiorari from the decision1 of the Court of Appeals and its resolution
denying reconsideration2 reversing that of the Regional Trial Court, Iloilo, Branch 323 and declaring
void the special proceedings instituted therein by petitioners to authorize petitioner Gilda L.
Jardeleza, in view of the comatose condition of her husband, Ernesto Jardeleza, Sr., with the
approval of the court, to dispose of their conjugal property in favor of co-petitioners, their daughter
and son in law, for the ostensible purpose of "financial need in the personal, business and medical
expenses of her ‘incapacitated’ husband."

The facts, as found by the Court of Appeals, are as follows:

"This case is a dispute between Teodoro L. Jardeleza (herein respondent) on the one hand, against
his mother Gilda L. Jardeleza, and sister and brother-in-law, the spouses Jose Uy and Glenda
Jardeleza (herein petitioners) on the other hand. The controversy came about as a result of Dr.
Ernesto Jardeleza, Sr.’s suffering of a stroke on March 25, 1991, which left him comatose and bereft
of any motor or mental faculties. Said Ernesto Jardeleza, Sr. is the father of herein respondent
Teodoro Jardeleza and husband of herein private respondent Gilda Jardeleza.

"Upon learning that one piece of real property belonging to the senior Jardeleza spouses was about
to be sold, petitioner Teodoro Jardeleza, on June 6, 1991, filed a petition (Annex "A") before the
R.T.C. of Iloilo City, Branch 25, where it was docketed as Special Proceeding No. 4689, in the
matter of the guardianship of Dr. Ernesto Jardeleza, Sr. The petitioner averred therein that the
present physical and mental incapacity of Dr. Ernesto Jardeleza, Sr. prevent him from competently
administering his properties, and in order to prevent the loss and dissipation of the Jardelezas’ real
and personal assets, there was a need for a court-appointed guardian to administer said properties.
It was prayed therein that Letters of Guardianship be issued in favor of herein private respondent
Gilda Ledesma Jardeleza, wife of Dr. Ernesto Jardeleza, Sr. It was further prayed that in the
meantime, no property of Dr. Ernesto Jardeleza, Sr. be negotiated, mortgaged or otherwise
alienated to third persons, particularly Lot No. 4291 and all the improvements thereon, located along
Bonifacio Drive, Iloilo City, and covered by T.C.T. No. 47337.

"A few days later, or on June 13, 1991, respondent Gilda L. Jardeleza herself filed a petition
docketed as Special Proceeding NO. 4691, before Branch 32 of the R.T.C. of Iloilo City, regarding
the declaration of incapacity of Ernesto Jardeleza, Sr., assumption of sole powers of administration
of conjugal properties, and authorization to sell the same (Annex "B"). Therein, the petitioner Gilda L.
Jardeleza averred the physical and mental incapacity of her husband, who was then confined for
intensive medical care and treatment at the Iloilo Doctor’s Hospital. She signified to the court her
desire to assume sole powers of administration of their conjugal properties. She also alleged that her
husband’s medical treatment and hospitalization expenses were piling up, accumulating to several
hundred thousands of pesos already. For this, she urgently needed to sell one piece of real property,
specifically Lot No. 4291 and its improvements. Thus, she prayed for authorization from the court to
sell said property.

"The following day, June 14, 1991, Branch 32 of the R.T.C. of Iloilo City issued an Order (Annex "C")
finding the petition in Spec. Proc. No. 4691 to be sufficient in form and substance, and setting the
hearing thereof for June 20, 1991. The scheduled hearing of the petition proceeded, attended by
therein petitioner Gilda Jardeleza, her counsel, her two children, namely Ernesto Jardeleza, Jr., and
Glenda Jardeleza Uy, and Dr. Rolando Padilla, one of Ernesto Jardeleza, Sr.’s attending physicians.

"On that same day, June 20, 1991, Branch 32 of the RTC of Iloilo City rendered its Decision (Annex
"D"), finding that it was convinced that Ernesto Jardeleza, Sr. was truly incapacitated to participate in
the administration of the conjugal properties, and that the sale of Lot No. 4291 and the
improvements thereon was necessary to defray the mounting expenses for treatment and
Hospitalization. The said court also made the pronouncement that the petition filed by Gilda L.
Jardeleza was "pursuant to Article 124 of the Family Code, and that the proceedings thereon are
governed by the rules on summary proceedings sanctioned under Article 253 of the same Code x x
x.

"The said court then disposed as follows:

"WHEREFORE, there being factual and legal bases to the petition dated June 13, 1991, the Court
hereby renders judgment as follows:

"1) declaring Ernesto Jardeleza, Sr., petitioner’s husband, to be incapacitated and unable to
participate in the administration of conjugal properties;

"2) authorizing petitioner Gilda L. Jardeleza to assume sole powers of administration of their
conjugal properties; and

"3) authorizing aforesaid petitioner to sell Lot No. 4291 of the Cadastral Survey of Iloilo, situated in
Iloilo City and covered by TCT No. 47337 issued in the names of Ernesto Jardeleza, Sr. and Gilda L.
Jardeleza and the buildings standing thereof.
"SO ORDERED.

"On June 24, 1991, herein petitioner Teodoro Jardeleza filed his Opposition to the proceedings
before Branch 32 in Spec. Proc. Case No. 4691, said petitioner being unaware and not knowing that
a decision has already been rendered on the case by public respondent.

"On July 3, 1991, herein petitioner Teodoro Jardeleza filed a motion for reconsideration of the
judgment in Spec. Proc. No. 4691 and a motion for consolidation of the two cases (Annex "F"). He
propounded the argument that the petition for declaration of incapacity, assumption of sole powers
of administration, and authority to sell the conjugal properties was essentially a petition for
guardianship of the person and properties of Ernesto Jardeleza, Sr. As such, it cannot be
prosecuted in accordance with the provisions on summary proceedings set out in Article 253 of the
Family Code. It should follow the rules governing special proceedings in the Revised Rules of Court
which require procedural due process, particularly the need for notice and a hearing on the merits.
On the other hand, even if Gilda Jardeleza’s petition can be prosecuted by summary proceedings,
there was still a failure to comply with the basic requirements thereof, making the decision in Spec.
Proc. No. 4691 a defective one. He further alleged that under the New Civil Code, Ernesto
Jardeleza, Sr. had acquired vested rights as a conjugal partner, and that these rights cannot be
impaired or prejudiced without his consent. Neither can he be deprived of his share in the conjugal
properties through mere summary proceedings. He then restated his position that Spec. Proc. No.
4691 should be consolidated with Spec. Proc. No. 4689 which was filed earlier and pending before
Branch 25.

"Teodoro Jardeleza also questioned the propriety of the sale of Lot No. 4291 and the improvements
thereon supposedly to pay the accumulated financial obligations arising from Ernesto Jardeleza,
Sr.’s hospitalization. He alleged that the market value of the property would be around Twelve to
Fifteen Million Pesos, but that he had been informed that it would be sold for much less. He also
pointed out that the building thereon which houses the Jardeleza Clinic is a monument to Ernesto
Jardeleza Sr.’s industry, labor and service to his fellowmen. Hence, the said property has a lot of
sentimental value to his family. Besides, argued Teodoro Jardeleza, then conjugal partnership had
other liquid assets to pay off all financial obligations. He mentioned that apart from sufficient cash,
Jardeleza, Sr. owned stocks of Iloilo Doctors’ Hospital which can be off-set against the cost of
medical and hospital bills. Furthermore, Ernesto Jardeleza, Sr. enjoys certain privileges at the said
hospital which allows him to pay on installment basis. Moreover, two of Ernesto Jardeleza Sr.’s
attending physicians are his own sons who do not charge anything for their professional services.

"On July 4, 1991, Teodoro Jardeleza filed in Spec. Proc. No. 4691 a supplement to his motion for
reconsideration (Annex "G"). He reiterated his contention that summary proceedings was irregularly
applied. He also noted that the provisions on summary proceedings found in Chapter 2 of the Family
Code comes under the heading on "Separation in Fact Between Husband and Wife" which
contemplates of a situation where both spouses are of disposing mind. Thus, he argued that were
one spouse is "comatose without motor and mental faculties," the said provisions cannot be made to
apply.

"While the motion for reconsideration was pending, Gilda Jardeleza disposed by absolute sale Lot
No. 4291 and all its improvements to her daughter, Ma. Glenda Jardeleza Uy, for Eight Million Pesos
(P8,000,000.00), as evidenced by a Deed Absolute Sale dated July 8, 1991 executed between them
(p. 111, Rollo). Under date of July 23, 1991, Gilda Jardeleza filed an urgent ex-parte motion for
approval of the deed of absolute sale.

"On August 12, 1991 Teodoro Jardeleza filed his Opposition to the motion for approval of the deed
of sale on the grounds that: (1) the motion was prematurely filed and should be held in abeyance
until the final resolution of the petition; (2) the motion does not allege nor prove the justifications for
the sale; and (3) the motion does not allege that had Ernesto Jardeleza, Sr. been competent, he
would have given his consent to the sale.

"Judge Amelita K. del Rosario-Benedicto of Branch 32 of the respondent Court, who had penned the
decision in Spec. Proc. No. 4691 had in the meantime formally inhibited herself from further acting in
this case (Annex "I"). The case was then reraffled to Branch 28 of the said court.

"On December 19, 1991, the said court issued an Order (Annex "M") denying herein petitioner’s
motion for reconsideration and approving respondent Jardeleza’s motion for approval of the deed of
absolute sale. The said court ruled that:

"After a careful and thorough perusal of the decision, dated June 20, 1991, the Motion for
Reconsideration, as well as its supplements filed by "oppositor", Teodoro L. Jardeleza, through
counsel, and the opposition to the Motion for Reconsideration, including its supplements, filed by
petitioner, through counsel, this Court is of the opinion and so holds, that her Honor, Amelita K. del
Rosario-Benedicto, Presiding Judge of Branch 32, of this Court, has properly observed the
procedure embodied under Article 253, in relation to Article 124, of the Family Code, in rendering her
decision dated June 20, 1991.

"Also, as correctly stated by petitioner, through counsel, that "oppositor" Teodor L. Jardeleza does
not have the personality to oppose the instant petition considering that the property or properties,
subject of the petition, belongs to the conjugal partnership of the spouses Ernesto and Gilda
Jardeleza, who are both still alive.

"In view thereof, the Motion for Reconsideration of "oppositor" Teodoro L. Jardeleza, is hereby
denied for lack of merit.

"Considering the validity of the decision dated June 20, 1991, which among others, authorized Gilda
L. Jardeleza to sell Lot No. 4291 of the Cadastral Survey of Iloilo, covered by Transfer Certificate of
Title No. 47337 issued in the names of Ernesto Jardeleza, Sr., and Gilda L. Jardeleza and the
building standing thereon, the Urgent Ex-Parte Motion for Approval of Deed of Absolute Sale dated
July 23, 1991, filed by petitioner, through counsel, is hereby granted and the deed of absolute sale,
executed and notarized on July 8, 1991, by and between Gilda L. Jardeleza, as vendor, and Ma.
Glenda Jardeleza, as vendee, is hereby approved, and the Register of Deeds of Iloilo City, is
directed to register the sale and issue the corresponding transfer certificate of title to the vendee.

"SO ORDERED."4

On December 9, 1992, the Court of Appeals promulgated its decision reversing the appealed
decision and ordering the trial court to dismiss the special proceedings to approve the deed of sale,
which was also declared void.5

On December 29, 1992, petitioners filed a motion for reconsideration,6 however, on March 29, 1993,
the Court of Appeals denied the motion, finding no cogent and compelling reason to disturb the
decision.7

Hence, this appeal.8

The issue raised is whether petitioner Gilda L. Jardeleza as the wife of Ernesto Jardeleza, Sr. who
suffered a stroke, a cerebrovascular accident, rendering him comatose, without motor and mental
faculties, and could not manage their conjugal partnership property may assume sole powers of
administration of the conjugal property under Article 124 of the Family Code and dispose of a parcel
of land with its improvements, worth more than twelve million pesos, with the approval of the court in
a summary proceedings, to her co-petitioners, her own daughter and son-in-law, for the amount of
eight million pesos.

The Court of Appeals ruled that in the condition of Dr. Ernesto Jardeleza, Sr., the procedural rules
on summary proceedings in relation to Article 124 of the Family Code are not applicable. Because
Dr. Jardeleza, Sr. was unable to take care of himself and manage the conjugal property due to
illness that had rendered him comatose, the proper remedy was the appointment of a judicial
guardian of the person or estate or both of such incompetent, under Rule 93, Section 1, 1964
Revised Rules of Court. Indeed, petitioner earlier had filed such a petition for judicial guardianship.

Article 124 of the Family Code provides as follows:

"ART. 124. The administration and enjoyment of the conjugal partnership property shall belong to
both spouses jointly. In case of disagreement, the husband’s decision shall prevail, subject to
recourse to the court by the wife for a 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 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. 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. (165a)."

In regular manner, the rules on summary judicial proceedings under the Family Code govern the
proceedings under Article 124 of the Family Code. The situation contemplated is one where the
spouse is absent, or separated in fact or has abandoned the other or consent is withheld or cannot
be obtained. Such rules do not apply to cases where the non-consenting spouse is incapacitated or
incompetent to give consent. In this case, the trial court found that the subject spouse "is an
incompetent" who was in comatose or semi-comatose condition, a victim of stroke, cerebrovascular
accident, without motor and mental faculties, and with a diagnosis of brain stem infarct.9 In such
case, the proper remedy is a judicial guardianship proceedings under Rule 93 of the 1964 Revised
Rules of Court.

Even assuming that the rules of summary judicial proceedings under the Family Code may apply to
the wife's administration of the conjugal property, the law provides that the wife who assumes sole
powers of administration has the same powers and duties as a guardian under the Rules of Court.10

Consequently, a spouse who desires to sell real property as such administrator of the conjugal
property must observe the procedure for the sale of the ward’s estate required of judicial guardians
under Rule 95, 1964 Revised Rules of Court, not the summary judicial proceedings under the Family
Code.

In the case at bar, the trial court did not comply with the procedure under the Revised Rules of
Court. Indeed, the trial court did not even observe the requirements of the summary judicial
1âwphi1

proceedings under the Family Code. Thus, the trial court did not serve notice of the petition to the
incapacitated spouse; it did not require him to show cause why the petition should not be granted.
Hence, we agree with the Court of Appeals that absent an opportunity to be heard, the decision
rendered by the trial court is void for lack of due process. The doctrine consistently adhered to by
this Court is that a denial of due process suffices to cast on the official act taken by whatever branch
of the government the impress of nullity.11 A decision rendered without due process is void ab
initio and may be attacked directly or collaterally.12 "A decision is void for lack of due process if, as a
result, a party is deprived of the opportunity of being heard."13 "A void decision may be assailed or
impugned at any time either directly or collaterally, by means of a separate action, or by resisting
such decision in any action or proceeding where it is invoked."14

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals in CA-G. R. SP No.
26936, in toto.

Costs against petitioners.

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 Rito’s 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 Tolentino’s 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 RTC’s 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 Marta’s
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 Marta’s share in the
conjugal partnership, could not yet assert or claim title to any specific portion of Marta’s 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 Marta’s 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 Marta’s 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 Marta’s 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]. 1av vphi1

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
1âw phi1

that half of the property thus alienated or mortgaged 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 husband’s 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 husband’s 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.

3. CONVERSION

G.R. No. 156125 August 25, 2010

FRANCISCO MUÑOZ, 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 Muñoz, 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 petitioner’s 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
Erlinda’s consent, to the Government Service Insurance System (GSIS) to secure a ₱136,500.00
housing loan, payable within twenty (20) years, through monthly salary deductions of
₱1,687.66.8 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 ₱602,000.00.9

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 petitioner’s name were falsified.

The respondents alleged that in April 1992, the petitioner granted them a ₱600,000.00 loan, to be
secured by a first mortgage on TCT No. 1427; the petitioner gave Erlinda a ₱200,000.0010 advance
to cancel the GSIS mortgage, and made her sign a document purporting to be the mortgage
contract; the petitioner promised to give the ₱402,000.00 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 ₱200,000.00 advance, Erlinda paid GSIS
₱176,445.2711 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 Eliseo’s affidavit, unsigned; since Eliseo’s
affidavit was unsigned, the petitioner refused to give the ₱402,000.00 balance and to cancel the
mortgage, and demanded that Erlinda return the ₱200,000.00 advance; since Erlinda could not
return the ₱200,000.00 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 petitioner’s 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 ₱500.00;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 Eliseo’s 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 Erlinda’s name; the residential lot was part of a large parcel of
land owned by Pedro Ramirez and Fructuosa Urcla, Erlinda’s 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, Erlinda’s 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 Erlinda’s exclusive paraphernal property that was inherited from her father. It also
upheld the sale to the petitioner, even without Eliseo’s 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 Eliseo’s signatures in the special power of attorney and in the affidavit were
forgeries was immaterial because Eliseo’s 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
Erlinda’s exclusive paraphernal property, became conjugal property when it was used as collateral
for a housing loan that was paid through conjugal funds – Eliseo’s monthly salary deductions; the
subject property, therefore, cannot be validly sold or mortgaged without Eliseo’s 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 ₱200,000.00 only of the total stated price of
₱602,000.00.

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 Erlinda’s 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 CA’s 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 ₱60,755.76,44 not the entire
amount of the GSIS housing loan plus interest, since the petitioner advanced the ₱176,445.2745 paid
by Erlinda to cancel the mortgage in 1992. Considering the ₱136,500.00 amount of the GSIS
housing loan, it is fairly reasonable to assume that the value of the residential lot is considerably
more than the ₱60,755.76 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 Eliseo’s 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 ₱200,000.00
advance to settle the GSIS housing loan, but refused to give the ₱402,000.00 balance when Erlinda
failed to submit Eliseo’s 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;50 payment 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 ₱384,660.00, and the daily interest, starting February 21,
1993, was ₱641.10.52 Thus, the parties clearly intended an equitable mortgage and not a contract of
sale.

That the petitioner advanced the sum of ₱200,000.00 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 ₱200,000.00 to the petitioner,
plus legal interest of 12% per annum, computed from April 30, 1992.

We cannot sustain the ballooned obligation of ₱384,660.00, 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 ₱641.10 or ₱19,233.00 per month for a ₱200,000.00 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 ₱200,000.00, 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.

4. LIABILITY

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 Efren’s 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
Melecia’s 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.14 Although 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 Melecia’s 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 RTC’s 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. 1âwphi1

Contrary to Efren’s 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.
E. SEPARATION OF PROPERTY

G.R. No. 82606 December 18, 1992

PRIMA PARTOSA-JO, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and HO HANG (with aliases JOSE JO and
CONSING), respondents.

CRUZ, J.:

The herein private respondent, Jose Jo, admits to having cohabited with three women and fathered
fifteen children. The first of these women, the herein petitioner, claims to be his legal wife whom he
begot a daughter, Monina Jo. The other women and their respective offspring are not parties of
these case.

In 1980, the petitioner filed a complaint against Jo for judicial separation of conjugal property,
docketed as Civil Case No. 51, in addition to an earlier action for support, also against him and
docketed as Civil Case No. 36, in the Regional Trial Court of Negros Oriental, Branch 35.

The two cases were consolidated and tried jointly. On November 29, 1983, Judge German G. Lee,
Jr. rendered an extensive decision, the dispositive portion of which read:

WHEREFORE, in view of all the foregoing arguments and considerations, this court
hereby holds that the plaintiff Prima Partosa was legally married to Jose Jo alias Ho
Hang, alias Consing, and, therefore, is entitled to support as the lawfully wedded wife
and the defendant is hereby ordered to give a monthly support of P500.00 to the
plaintiff Prima Partosa, to be paid on or before the 5th day of every month, and to
give to the plaintiff the amount of P40,000.00 for the construction of the house in
Zamboanguita, Negros Oriental where she may live separately from the defendant
being entitled under the law to separate maintenance being the innocent spouse and
to pay the amount of P19,200.00 to the plaintiff by way of support in arrears and to
pay the plaintiff the amount of P3,000.00 in the concept of attorney's fees.

As will be noticed, there was a definite disposition of the complaint for support but none of the
complaint for judicial separation of conjugal property.

Jo elevated the decision to the Court of Appeals, which affirmed the ruling of the trial court in the
complaint for support. 1 The complaint for judicial separation of conjugal property was dismissed for
lack of a cause of action and on the ground that separation by agreement was not covered by Article
178 of the Civil Code.

When their motions for reconsideration were denied, both parties came to this Court for relief. The
private respondent's petition for review on certiorari was dismissed for tardiness in our resolution
dated February 17, 1988, where we also affirmed the legality of the marriage between Jose and
Prima and the obligation of the former to support her and her daughter.

This petition deals only with the complaint for judicial separation of conjugal property.
It is here submitted that the Court of Appeals erred in holding that: a) the judicial separation of
conjugal property sought was not allowed under Articles 175, 178 and 191 of the Civil Code; and b)
no such separation was decreed by the trial court in the dispositive portion of its decision.

The private respondent contends that the decision of the trial court can longer be reviewed at this
time because it has a long since become final and executory. As the decretal portion clearly made
no disposition of Civil Case No. 51, that case should be considered impliedly dismissed. The
petitioner should have called the attention of the trial court to the omission so that the proper
rectification could be made on time. Not having done so, she is now concluded by the said decision,
which can no longer be corrected at this late hour.

We deal first with the second ground.

While admitting that no mention was made of Civil Case No. 51 in the dispositive portion of the
decision of the trial court, the petitioner argues that a disposition of the case was nonetheless made
in the penultimate paragraph of the decision reading as follows:

It is, therefore, hereby ordered that all properties in question are considered
properties of Jose Jo, the defendant in this case, subject to separation of property
under Article 178, third paragraph of the Civil Code, which is subject of separate
proceedings as enunciated herein.

The petitioner says she believed this to be disposition enough and so did not feel it was necessary
for her to appeal, particularly since the order embodied in that paragraph was in her favor. It was
only when the respondent court observed that there was no dispositive portion regarding that case
and so ordered its dismissal that she found it necessary to come to this Court for relief.

The petitioner has a point.

The dispositive portion of the decision in question was incomplete insofar as it carried no ruling on
the complaint for judicial separation of conjugal property although it was extensively discussed in the
body of the decision. The drafting of the decision was indeed not exactly careful. The petitioner's
counsel, noting this, should have taken immediate steps for the rectification for the omission so that
the ruling expressed in the text of the decision could have been embodied in the decretal portion.
Such alertness could have avoided this litigation on a purely technical issue.

Nevertheless, the technicality invoked in this case should not be allowed to prevail over
considerations of substantive justive. After all, the technical defect is not insuperable. We have said
time and again that where there is an ambiguity caused by an omission or a mistake in the
dispositive portion of the decision, this Court may clarify such an ambiguity by an amendment even
after the judgment have become final. 2 In doing so, the Court may resort to the pleading filed by the
parties and the findings of fact and the conclusions of law expressed in the text or body of the
decision. 3

The trial court made definite findings on the complaint for judicial separation of conjugal property,
holding that the petitioner and the private respondent were legally married and that the properties
mentioned by the petitioner were acquired by Jo during their marriage although they were registered
in the name of the apparent dummy.

There is no question therefore that the penultimate paragraph of the decision of the trial court was a
ruling based upon such findings and so should have been embodied in the dispositive portion. The
respondent court should have made the necessary modification instead of dismissing Civil Case No.
51 and thus upholding mere form over substance.

In the interest of substantive justice, and to expedite these proceedings, we hereby make such
modification.

And now to the merits of Civil Case No. 51.

The Court of Appeals dismissed the complaint on the ground that the separation of the parties was
due to their agreement and not because of abondonment. The respondent court relied mainly on the
testimony of the petitioner, who declared under oath that she left Dumaguete City, where she and Jo
were living together "because that was our agreement." It held that a agreement to live separately
without just cause was void under Article 221 of the Civil Code and could not sustain any claim of
abandonment by the aggrieved spouse. Its conclusion was that the only remedy availabe to the
petitioner was legal separation under Article 175 of the Civil Code, 4 by virtue of which the conjugal
partnership of property would be terminated.

The petitioner contends that the respondent court has misinterpreted Articles 175, 178 and 191 of
the Civil Code. She submits that the agreement between her and the private respondent was for her
to temporarily live with her parents during the initial period of her pregnancy and for him to visit and
support her. They never agreed to separate permanently. And even if they did, this arrangement was
repudiated and ended in 1942, when she returned to him at Dumaguete City and he refused to
accept her.

The petitioner invokes Article 178 (3) of the Civil Code, which reads:

Art. 178. The separation in fact between husband and wife without judicial approval,
shall not affect the conjugal partnership, except that:

xxx xxx xxx

(3) If the husband has abandoned the wife without just cause for at least one year,
she may petition the court for a receivership, or administration by her of the conjugal
partnership property or separation of property.

The above-quoted provision has been superseded by Article 128 of the Family Code, which states:

Art. 128. If a spouse without just cause abandons the other or fails to comply with his
or her obligations to the family, the aggrieved spouse may petition the court for
receivership, for judicial separation of property, of for authority to be the sole
administrator of the conjugal partnership property, subject to such precautionary
conditions as the court may impose.

The obligations to the family mentioned in the preceding paragraph refer to martial,
parental or property relations.

A spouse is deemed to have abondoned the other when he or she has left the
conjugal dwelling without any intention of returning. The spouse who has left the
conjugal dwelling for a period of three months or has failed within the same period to
give any information as to his or her whereabouts shall be prima facie presumed to
have no intention of returning to the conjugal dwelling.
Under the this provision, the aggrieved spouse may petition for judicial separation on either of these
grounds:

1. Abondonment by a spouse of the other without just cause; and

2. Failure of one spouse to comply with his or her obligations to the family without
just cause, even if she said spouse does not leave the other spouse.

Abandonment implies a departure by one spouse with the avowed intent never to return, followed by
prolonged absence without just cause, and without in the meantime providing in the least for one's
family although able to do so. 5 There must be absolute cessation of marital relations, duties and
rights, with the intention of perpetual separation. 6 This idea is clearly expressed in the above-quoted
provision, which states that "a spouse is deemed to have abandoned the other when he or she has
left the conjugal dwelling without any intention of returning."

The record shows that as early as 1942, the private respondent had already rejected the petitioner,
whom he denied admission to their conjugal home in Dumaguete City when she returned from
Zamboanguita. The fact that she was not accepted by Jo demonstrates all too clearly that he had no
intention of resuming their conjugal relationship. Moreover, beginning 1968 until the determination by
this Court of the action for support in 1988, the private respondent refused to give financial support
to the petitioner. The physical separation of the parties, coupled with the refusal by the private
respondent to give support to the petitioner, sufficed to constitute abandonment as a ground for the
judicial separation of their conjugal property.

In addition, the petitioner may also invoke the second ground allowed by Article 128, for the fact is
that he has failed without just cause to comply with his obligations to the family as husband or
parent. Apart form refusing to admit his lawful wife to their conjugal home in Dumaguete City, Jo has
freely admitted to cohabiting with other women and siring many children by them. It was his refusal
to provide for the petitioner and their daughter that prompted her to file the actions against him for
support and later for separation of the conjugal property, in which actions, significantly, he even
denied being married to her. The private respondent has not established any just cause for his
refusal to comply with his obligations to his wife as dutiful husband.

Their separation thus falls also squarely under Article 135 of the Family Code, providing as follows:

Art. 135. Any of the following shall be considered sufficient cause for judicial
separation of property:

xxx xxx xxx

(6) That at the time of the petition, the spouse have been separated in fact for at
least one year and reconciliation is highly improbable.

The amendments introduced in the Family Code are applicable to the case before us although they
became effective only on August 3, 1988. As we held in Ramirez v. Court of Appeals: 7

The greater weight of authority is inclined to the view that an appellate court, in
reviewing a judgment on appeal, will dispose of a question according to the law
prevailing at the term of such disposition, and not according to the law prevailing at
the time of rendition of the appealed judgement. The court will therefore reverse a
judgement which was correct at the time it was originally rendered where, by statute,
 there has been an intermediate change in the law which renders such judgement
erroneous at the time the case was finally disposed of on appeal.

The order of judicial separation of the properties in question is based on the finding of both the trial
and respondent courts that the private respondent is indeed their real owner. It is these properties
that should now be divided between him and the petitioner, on the assumption that they were
acquired during coverture and so belong to the spouses half and half. As the private respondent is a
Chinese citizen, the division must include such properties properly belonging to the conjugal
partnership as may have been registered in the name of other persons in violation of the Anti-
Dummy Law.

The past has caught up with the private respondent. After his extramarital flings and a succession of
illegitimate children, he must now make an accounting to his lawful wife of the properties he denied
her despite his promise to their of his eternal love and care.

WHEREFORE, the petition is GRANTED and the assailed decision of the respondent court is
MODIFIED. Civil Case No. 51 is hereby decided in favor the plaintiff, the petitioner herein, and the
conjugal property of the petitioner and the private respondent is hereby ordered divided between
them, share and share alike. This division shall be implemented by the trial court after determination
of all the properties pertaining to the said conjugal partnership, including those that may have been
illegally registered in the name of the persons.

SO ORDERED.

G.R. NO. 155409 June 8, 2007

VIRGILIO MAQUILAN, petitioner,

vs.
DITA MAQUILAN, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing
the Decision1 dated August 30, 2002 promulgated by the Court of Appeals (CA) in CA-G.R. SP No.
69689, which affirmed the Judgment on Compromise Agreement dated January 2, 2002 of the
Regional Trial Court (RTC), Branch 3, Nabunturan, Compostela Valley, and the RTC Orders dated
January 21, 2002 and February 7, 2002 (ORDERS) in Civil Case No. 656.

The facts of the case, as found by the CA, are as follows:

Herein petitioner and herein private respondent are spouses who once had a blissful married life and
out of which were blessed to have a son. However, their once sugar coated romance turned bitter
when petitioner discovered that private respondent was having illicit sexual affair with her paramour,
which thus, prompted the petitioner to file a case of adultery against private respondent and the
latter’s paramour. Consequently, both the private respondent and her paramour were convicted of
the crime charged and were sentenced to suffer an imprisonment ranging from one (1) year, eight
(8) months, minimum of prision correccional as minimum penalty, to three (3) years, six (6) months
and twenty one (21) days, medium of prision correccional as maximum penalty.
Thereafter, private respondent, through counsel, filed a Petition for Declaration of Nullity of Marriage,
Dissolution and Liquidation of Conjugal Partnership of Gains and Damages on June 15, 2001 with
the Regional Trial Court, Branch 3 of Nabunturan, Compostela Valley, docketed as Civil Case No.
656, imputing psychological incapacity on the part of the petitioner.

During the pre-trial of the said case, petitioner and private respondent entered into a COMPROMISE
AGREEMENT in the following terms, to wit:

1. In partial settlement of the conjugal partnership of gains, the parties agree to the following:

a. ₱500,000.00 of the money deposited in the bank jointly in the name of the spouses shall be
withdrawn and deposited in favor and in trust of their common child, Neil Maquilan, with the deposit
in the joint account of the parties.

The balance of such deposit, which presently stands at ₱1,318,043.36, shall be withdrawn and
divided equally by the parties;

b. The store that is now being occupied by the plaintiff shall be allotted to her while the bodega shall
be for the defendant. The defendant shall be paid the sum of ₱50,000.00 as his share in the stocks
of the store in full settlement thereof.

The plaintiff shall be allowed to occupy the bodega until the time the owner of the lot on which it
stands shall construct a building thereon;

c. The motorcycles shall be divided between them such that the Kawasaki shall be owned by the
plaintiff while the Honda Dream shall be for the defendant;

d. The passenger jeep shall be for the plaintiff who shall pay the defendant the sum of ₱75,000.00
as his share thereon and in full settlement thereof;

e. The house and lot shall be to the common child.

2. This settlement is only partial, i.e., without prejudice to the litigation of other conjugal properties
that have not been mentioned;

xxxx

The said Compromise Agreement was given judicial imprimatur by the respondent judge in the
assailed Judgment On Compromise Agreement, which was erroneously dated January 2, 2002.2

However, petitioner filed an Omnibus Motion dated January 15, 2002, praying for the repudiation of
the Compromise Agreement and the reconsideration of the Judgment on Compromise Agreement by
the respondent judge on the grounds that his previous lawyer did not intelligently and judiciously
apprise him of the consequential effects of the Compromise Agreement.

The respondent Judge in the assailed Order dated January 21, 2002, denied the aforementioned
Omnibus Motion.

Displeased, petitioner filed a Motion for Reconsideration of the aforesaid Order, but the same was
denied in the assailed Order dated February 7, 2002.3 (Emphasis supplied)
The petitioner filed a Petition for Certiorari and Prohibition with the CA under Rule 65 of the Rules of
Court claiming that the RTC committed grave error and abuse of discretion amounting to lack or
excess of jurisdiction (1) in upholding the validity of the Compromise Agreement dated January 11,
2002; (2) when it held in its Order dated February 7, 2002 that the Compromise Agreement was
made within the cooling-off period; (3) when it denied petitioner’s Motion to Repudiate Compromise
Agreement and to Reconsider Its Judgment on Compromise Agreement; and (4) when it conducted
the proceedings without the appearance and participation of the Office of the Solicitor General
and/or the Provincial Prosecutor.4

On August 30, 2002, the CA dismissed the Petition for lack of merit. The CA held that the conviction
of the respondent of the crime of adultery does not ipso facto disqualify her from sharing in the
conjugal property, especially considering that she had only been sentenced with the penalty of
prision correccional, a penalty that does not carry the accessory penalty of civil interdiction which
deprives the person of the rights to manage her property and to dispose of such property inter vivos;
that Articles 43 and 63 of the Family Code, which pertain to the effects of a nullified marriage and the
effects of legal separation, respectively, do not apply, considering, too, that the Petition for the
Declaration of the Nullity of Marriage filed by the respondent invoking Article 36 of the Family Code
has yet to be decided, and, hence, it is premature to apply Articles 43 and 63 of the Family Code;
that, although adultery is a ground for legal separation, nonetheless, Article 63 finds no application in
the instant case since no petition to that effect was filed by the petitioner against the respondent; that
the spouses voluntarily separated their property through their Compromise Agreement with court
approval under Article 134 of the Family Code; that the Compromise Agreement, which embodies
the voluntary separation of property, is valid and binding in all respects because it had been
voluntarily entered into by the parties; that, furthermore, even if it were true that the petitioner was
not duly informed by his previous counsel about the legal effects of the Compromise Agreement, this
point is untenable since the mistake or negligence of the lawyer binds his client, unless such mistake
or negligence amounts to gross negligence or deprivation of due process on the part of his client;
that these exceptions are not present in the instant case; that the Compromise Agreement was
plainly worded and written in simple language, which a person of ordinary intelligence can discern
the consequences thereof, hence, petitioner’s claim that his consent was vitiated is highly incredible;
that the Compromise Agreement was made during the existence of the marriage of the parties since
it was submitted during the pendency of the petition for declaration of nullity of marriage; that the
application of Article 2035 of the Civil Code is misplaced; that the cooling-off period under Article 58
of the Family Code has no bearing on the validity of the Compromise Agreement; that the
Compromise Agreement is not contrary to law, morals, good customs, public order, and public
policy; that this agreement may not be later disowned simply because of a change of mind; that the
presence of the Solicitor General or his deputy is not indispensable to the execution and validity of
the Compromise Agreement, since the purpose of his presence is to curtail any collusion between
the parties and to see to it that evidence is not fabricated, and, with this in mind, nothing in the
Compromise Agreement touches on the very merits of the case of declaration of nullity of marriage
for the court to be wary of any possible collusion; and, finally, that the Compromise Agreement is
merely an agreement between the parties to separate their conjugal properties partially without
prejudice to the outcome of the pending case of declaration of nullity of marriage.

Hence, herein Petition, purely on questions of law, raising the following issues:

I.

WHETHER OF NOT A SPOUSE CONVICTED OF EITHER CONCUBINAGE OR ADULTERY, CAN

STILL SHARE IN THE CONJUGAL PARTNERSHIP;

II
WHETHER OR NOT A COMPROMISE AGREEMENT ENTERED INTO BY SPOUSES, ONE OF
WHOM WAS CONVICTED OF ADULTERY, GIVING THE CONVICTED SPOUSE A SHARE IN THE
CONJUGAL PROPERTY, VALID AND LEGAL;

III

WHETHER OR NOT A JUDGMENT FOR ANNULMENT AND LEGAL SEPARATION IS A PRE-

REQUISITE BEFORE A SPOUSE CONVICTED OF EITHER CONCUBINAGE OR ADULTERY, BE
DISQUALIFIED AND PROHIBITED FROM SHARING IN THE CONJUGAL PROPERTY;

IV

WHETHER OR NOT THE DISQUALIFICATION OF A CONVICTED SPOUSE OF ADULTERY

FROM SHARING IN A CONJUGAL PROPERTY, CONSTITUTES CIVIL INTERDICTION.5

The petitioner argues that the Compromise Agreement should not have been given judicial
imprimatur since it is against law and public policy; that the proceedings where it was approved is
null and void, there being no appearance and participation of the Solicitor General or the Provincial
Prosecutor; that it was timely repudiated; and that the respondent, having been convicted of
adultery, is therefore disqualified from sharing in the conjugal property.

The Petition must fail.

The essential question is whether the partial voluntary separation of property made by the spouses
pending the petition for declaration of nullity of marriage is valid.

First. The petitioner contends that the Compromise Agreement is void because it circumvents the
law that prohibits the guilty spouse, who was convicted of either adultery or concubinage, from
sharing in the conjugal property. Since the respondent was convicted of adultery, the petitioner
argues that her share should be forfeited in favor of the common child under Articles 43(2)6 and
637 of the Family Code.

To the petitioner, it is the clear intention of the law to disqualify the spouse convicted of adultery from
sharing in the conjugal property; and because the Compromise Agreement is void, it never became
final and executory.

Moreover, the petitioner cites Article 20358 of the Civil Code and argues that since adultery is a
ground for legal separation, the Compromise Agreement is therefore void.

These arguments are specious. The foregoing provisions of the law are inapplicable to the instant
case.

Article 43 of the Family Code refers to Article 42, to wit:

Article 42. The subsequent marriage referred to in the preceding Article9 shall be automatically
terminated by the recording of the affidavit of reappearance of the absent spouse, unless there is a
judgment annulling the previous marriage or declaring it void ab initio.

A sworn statement of the fact and circumstances of reappearance shall be recorded in the civil
registry of the residence of the parties to the subsequent marriage at the instance of any interested
person, with due notice to the spouses of the subsequent marriage and without prejudice to the fact
of reappearance being judicially determined in case such fact is disputed.

where a subsequent marriage is terminated because of the reappearance of an absent spouse;

while Article 63 applies to the effects of a decree of legal separation. The present case involves a
proceeding where the nullity of the marriage is sought to be declared under the ground of
psychological capacity.

Article 2035 of the Civil Code is also clearly inapplicable. The Compromise Agreement partially
divided the properties of the conjugal partnership of gains between the parties and does not deal
with the validity of a marriage or legal separation. It is not among those that are expressly prohibited
by Article 2035.

Moreover, the contention that the Compromise Agreement is tantamount to a circumvention of the
law prohibiting the guilty spouse from sharing in the conjugal properties is misplaced. Existing law
and jurisprudence do not impose such disqualification.

Under Article 143 of the Family Code, separation of property may be effected voluntarily or for
sufficient cause, subject to judicial approval. The questioned Compromise Agreement which was
judicially approved is exactly such a separation of property allowed under the law. This conclusion
holds true even if the proceedings for the declaration of nullity of marriage was still pending.
However, the Court must stress that this voluntary separation of property is subject to the rights of all
creditors of the conjugal partnership of gains and other persons with pecuniary interest pursuant to
Article 136 of the Family Code.

Second. Petitioner’s claim that since the proceedings before the RTC were void in the absence of
the participation of the provincial prosecutor or solicitor, the voluntary separation made during the
pendency of the case is also void. The proceedings pertaining to the Compromise Agreement
involved the conjugal properties of the spouses. The settlement had no relation to the questions
surrounding the validity of their marriage. Nor did the settlement amount to a collusion between the
parties.

Article 48 of the Family Code states:

Art. 48. In all cases of annulment or declaration of absolute nullity of marriage, the Court shall order
the prosecuting attorney or fiscal assigned to it to appear on behalf of the State to take steps to
prevent collusion between the parties and to take care that the evidence is not fabricated or
suppressed. (Emphasis supplied)

Section 3(e) of Rule 9 of the 1997 Rules of Court provides:

SEC. 3. Default; declaration of.- x x x x

xxxx

(e) Where no defaults allowed.— If the defending party in action for annulment or declaration of
nullity of marriage or for legal separation fails to answer, the court shall order the prosecuting
attorney to investigate whether or not a collusion between the parties exists if there is no collusion,
to intervene for the State in order to see to it that the evidence submitted is not fabricated.
(Emphasis supplied
Truly, the purpose of the active participation of the Public Prosecutor or the Solicitor General is to
ensure that the interest of the State is represented and protected in proceedings for annulment and
declaration of nullity of marriages by preventing collusion between the parties, or the fabrication or
suppression of evidence.10 While the appearances of the Solicitor General and/or the Public
Prosecutor are mandatory, the failure of the RTC to require their appearance does not per se nullify
the Compromise Agreement. This Court fully concurs with the findings of the CA:

x x x. It bears emphasizing that the intendment of the law in requiring the presence of the Solicitor
General and/or State prosecutor in all proceedings of legal separation and annulment or declaration
of nullity of marriage is to curtail or prevent any possibility of collusion between the parties and to
see to it that their evidence respecting the case is not fabricated. In the instant case, there is no
exigency for the presence of the Solicitor General and/or the State prosecutor because as already
stated, nothing in the subject compromise agreement touched into the very merits of the case of
declaration of nullity of marriage for the court to be wary of any possible collusion between the
parties. At the risk of being repetiti[ve], the compromise agreement pertains merely to an agreement
between the petitioner and the private respondent to separate their conjugal properties partially
without prejudice to the outcome of the pending case of declaration of nullity of marriage.11

Third. The conviction of adultery does not carry the accessory of civil interdiction. Article 34 of the
Revised Penal Code provides for the consequences of civil interdiction:

Art. 34. Civil Interdiction. – Civil interdiction shall deprive the offender during the time of his sentence
of the rights of parental authority, or guardianship, either as to the person or property of any ward, of
marital authority, of the right to manage his property and of the right to dispose of such property by
any act or any conveyance inter vivos.

Under Article 333 of the same Code, the penalty for adultery is prision correccional in its medium
and maximum periods. Article 333 should be read with Article 43 of the same Code. The latter
provides:

Art. 43. Prision correccional – Its accessory penalties. – The penalty of prision correccional shall
carry with it that of suspension from public office, from the right to follow a profession or calling, and
that of perpetual special disqualification from the right of suffrage, if the duration of said
imprisonment shall exceed eighteen months. The offender shall suffer the disqualification provided in
this article although pardoned as to the principal penalty, unless the same shall have been expressly
remitted in the pardon.

It is clear, therefore, and as correctly held by the CA, that the crime of adultery does not carry the
accessory penalty of civil interdiction which deprives the person of the rights to manage her property
and to dispose of such property inter vivos.

Fourth. Neither could it be said that the petitioner was not intelligently and judiciously informed of the
consequential effects of the compromise agreement, and that, on this basis, he may repudiate the
Compromise Agreement. The argument of the petitioner that he was not duly informed by his
previous counsel about the legal effects of the voluntary settlement is not convincing. Mistake or
vitiation of consent, as now claimed by the petitioner as his basis for repudiating the settlement,
could hardly be said to be evident. In Salonga v. Court of Appeals,12 this Court held:

[I]t is well-settled that the negligence of counsel binds the client. This is based on the rule that any
act performed by a lawyer within the scope of his general or implied authority is regarded as an act
of his client. Consequently, the mistake or negligence of petitioners' counsel may result in the
rendition of an unfavorable judgment against them.
Exceptions to the foregoing have been recognized by the Court in cases where reckless or gross
negligence of counsel deprives the client of due process of law, or when its application "results in the
outright deprivation of one's property through a technicality." x x x x13

None of these exceptions has been sufficiently shown in the present case.

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals is AFFIRMED with
MODIFICATION that the subject Compromise Agreement is VALID without prejudice to the rights of
all creditors and other persons with pecuniary interest in the properties of the conjugal partnership of
gains.

SO ORDERED.

G.R. No. 188289 August 20, 2014

DAVID A. NOVERAS, Petitioner,

vs.
LETICIA T. NOVERAS, Respondent.

DECISION

PEREZ, J.:

Before the Court is a petition for review assailing the 9 May 2008 Decision1 of the Court of Appeals in
CA-G.R .. CV No. 88686, which affirmed in part the 8 December 2006 Decision2 of the Regional Trial
Court (RTC) of Baler, Aurora, Branch 96.

The factual antecedents are as follow:

David A. Noveras (David) and Leticia T. Noveras (Leticia) were married on 3 December 1988 in
Quezon City, Philippines. They resided in California, United States of America (USA) where they
eventually acquired American citizenship. They then begot two children, namely: Jerome T.

Noveras, who was born on 4 November 1990 and JenaT. Noveras, born on 2 May 1993. David was
engaged in courier service business while Leticia worked as a nurse in San Francisco, California.

During the marriage, they acquired the following properties in the Philippines and in the USA:

PHILIPPINES
PROPERTY FAIR MARKET VALUE
House and Lot with an area of 150 sq. m. ₱1,693,125.00
located at 1085 Norma Street, Sampaloc,
Manila (Sampaloc property)
Agricultural land with an area of 20,742 sq. ₱400,000.00
m. located at Laboy, Dipaculao, Aurora
A parcel of land with an area of 2.5 hectares ₱490,000.00
located at Maria Aurora, Aurora
 ₱175,000.00
3
A parcel of land with an area of 175 sq.m.
located at Sabang Baler, Aurora
3-has. coconut plantation in San Joaquin ₱750,000.00
Maria Aurora, Aurora
USA
PROPERTY FAIR MARKET VALUE
House and Lot at 1155 Hanover Street, Daly
City, California
$550,000.00
(unpaid debt of $285,000.00)
Furniture and furnishings $3,000
Jewelries (ring and watch) $9,000
2000 Nissan Frontier 4x4 pickup truck $13,770.00
Bank of America Checking Account $8,000
Bank of America Cash Deposit
Life Insurance (Cash Value) $100,000.00
4
Retirement, pension, profit-sharing, annuities $56,228.00

The Sampaloc property used to beowned by David’s parents. The parties herein secured a loan from
a bank and mortgaged the property. When said property was about to be foreclosed, the couple paid
a total of ₱1.5 Million for the redemption of the same.

Due to business reverses, David left the USA and returned to the Philippines in 2001. In December
2002,Leticia executed a Special Power of Attorney (SPA) authorizing David to sell the Sampaloc
property for ₱2.2 Million. According to Leticia, sometime in September 2003, David abandoned his
family and lived with Estrellita Martinez in Aurora province. Leticia claimed that David agreed toand
executed a Joint Affidavit with Leticia in the presence of David’s father, Atty. Isaias Noveras, on 3
December 2003 stating that: 1) the ₱1.1Million proceeds from the sale of the Sampaloc property
shall be paid to and collected by Leticia; 2) that David shall return and pay to Leticia ₱750,000.00,
which is equivalent to half of the amount of the redemption price of the Sampaloc property; and 3)
that David shall renounce and forfeit all his rights and interest in the conjugal and real properties
situated in the Philippines.5 David was able to collect ₱1,790,000.00 from the sale of the Sampaloc
property, leaving an unpaid balance of ₱410,000.00.

Upon learning that David had an extra-marital affair, Leticia filed a petition for divorce with the
Superior Court of California, County of San Mateo, USA. The California court granted the divorce on
24 June 2005 and judgment was duly entered on 29 June 2005.6 The California court granted to
Leticia the custody of her two children, as well as all the couple’s properties in the USA.7

On 8 August 2005, Leticia filed a petition for Judicial Separation of Conjugal Property before the
RTC of Baler, Aurora. She relied on the 3 December 2003 Joint Affidavit and David’s failure to
comply with his obligation under the same. She prayed for: 1) the power to administer all conjugal
properties in the Philippines; 2) David and his partner to cease and desist from selling the subject
conjugal properties; 3) the declaration that all conjugal properties be forfeited in favor of her children;
4) David to remit half of the purchase price as share of Leticia from the sale of the Sampaloc
property; and 5) the payment of₱50,000.00 and ₱100,000.00 litigation expenses.8

In his Answer, David stated that a judgment for the dissolution of their marriage was entered on 29
June 2005 by the Superior Court of California, County of San Mateo. He demanded that the conjugal
partnership properties, which also include the USA properties, be liquidated and that all expenses of
liquidation, including attorney’s fees of both parties be charged against the conjugal partnership.9

The RTC of Baler, Aurora simplified the issues as follow:

1. Whether or not respondent David A. Noveras committed acts of abandonment and marital
infidelity which can result intothe forfeiture of the parties’ properties in favor of the petitioner
and their two (2) children.

2. Whether or not the Court has jurisdiction over the properties in California, U.S.A. and the
same can be included in the judicial separation prayed for.

3. Whether or not the "Joint Affidavit" x x x executed by petitioner Leticia T. Noveras and
respondent David A. Noveras will amount to a waiver or forfeiture of the latter’s property
rights over their conjugal properties.

4. Whether or not Leticia T. Noveras isentitled to reimbursement of onehalf of the ₱2.2

[M]illion sales proceeds of their property in Sampaloc, Manila and one-half of the ₱1.5
[M]illion used to redeem the property of Atty. Isaias Noveras, including interests and charges.

5. How the absolute community properties should be distributed.

6. Whether or not the attorney’s feesand litigation expenses of the parties were chargeable
against their conjugal properties.

Corollary to the aboveis the issue of:

Whether or not the two common children of the parties are entitled to support and presumptive
legitimes.10

On 8 December 2006, the RTC rendered judgment as follows:

1. The absolute community of property of the parties is hereby declared DISSOLVED;

2. The net assets of the absolute community of property ofthe parties in the Philippines are
hereby ordered to be awarded to respondent David A. Noveras only, with the properties in
the United States of America remaining in the sole ownership of petitioner Leticia Noveras
a.k.a. Leticia Tacbiana pursuant to the divorce decree issuedby the Superior Court of
California, County of San Mateo, United States of America, dissolving the marriage of the
parties as of June 24, 2005. The titles presently covering said properties shall be cancelled
and new titles be issued in the name of the party to whom said properties are awarded;

3. One-half of the properties awarded to respondent David A. Noveras in the preceding

paragraph are hereby given to Jerome and Jena, his two minor children with petitioner
LeticiaNoveras a.k.a. Leticia Tacbiana as their presumptive legitimes and said legitimes must
be annotated on the titles covering the said properties.Their share in the income from these
 properties shall be remitted to them annually by the respondent within the first half of
January of each year, starting January 2008;

4. One-half of the properties in the United States of America awarded to petitioner Leticia
Noveras a.k.a. Leticia Tacbiana in paragraph 2 are hereby given to Jerome and Jena, her
two minor children with respondent David A. Noveras as their presumptive legitimes and said
legitimes must be annotated on the titles/documents covering the said properties. Their
share in the income from these properties, if any, shall be remitted to them annually by the
petitioner within the first half of January of each year, starting January 2008;

5. For the support of their two (2) minor children, Jerome and Jena, respondent David A.
Noveras shall give them US$100.00 as monthly allowance in addition to their income from
their presumptive legitimes, while petitioner Leticia Tacbiana shall take care of their food,
clothing, education and other needs while they are in her custody in the USA. The monthly
allowance due from the respondent shall be increased in the future as the needs of the
children require and his financial capacity can afford;

6. Of the unpaid amount of ₱410,000.00 on the purchase price of the Sampaloc property, the
Paringit Spouses are hereby ordered to pay ₱5,000.00 to respondent David A. Noveras and
₱405,000.00 to the two children. The share of the respondent may be paid to him directly but
the share of the two children shall be deposited with a local bank in Baler, Aurora, in a joint
account tobe taken out in their names, withdrawal from which shall only be made by them or
by their representative duly authorized with a Special Power of Attorney. Such
payment/deposit shall be made withinthe period of thirty (30) days after receipt of a copy of
this Decision, with the passbook of the joint account to be submitted to the custody of the
Clerk of Court of this Court within the same period. Said passbook can be withdrawn from
the Clerk of Court only by the children or their attorney-in-fact; and

7. The litigation expenses and attorney’s fees incurred by the parties shall be shouldered by
them individually.11

The trial court recognized that since the parties are US citizens, the laws that cover their legal and
personalstatus are those of the USA. With respect to their marriage, the parties are divorced by
virtue of the decree of dissolution of their marriage issued by the Superior Court of California, County
of San Mateo on 24June 2005. Under their law, the parties’ marriage had already been dissolved.
Thus, the trial court considered the petition filed by Leticia as one for liquidation of the absolute
community of property regime with the determination of the legitimes, support and custody of the
children, instead of an action for judicial separation of conjugal property.

With respect to their property relations, the trial court first classified their property regime as absolute
community of property because they did not execute any marriage settlement before the
solemnization of their marriage pursuant to Article 75 of the Family Code. Then, the trial court ruled
that in accordance with the doctrine of processual presumption, Philippine law should apply because
the court cannot take judicial notice of the US law since the parties did not submit any proof of their
national law. The trial court held that as the instant petition does not fall under the provisions of the
law for the grant of judicial separation of properties, the absolute community properties cannot
beforfeited in favor of Leticia and her children. Moreover, the trial court observed that Leticia failed to
prove abandonment and infidelity with preponderant evidence.

The trial court however ruled that Leticia is not entitled to the reimbursements she is praying for
considering that she already acquired all of the properties in the USA. Relying still on the principle of
equity, the Court also adjudicated the Philippine properties to David, subject to the payment of the
children’s presumptive legitimes. The trial court held that under Article 89 of the Family Code, the
waiver or renunciation made by David of his property rights in the Joint Affidavit is void.

On appeal, the Court of Appeals modified the trial court’s Decision by directing the equal division of
the Philippine properties between the spouses. Moreover with respect to the common children’s
presumptive legitime, the appellate court ordered both spouses to each pay their children the
amount of ₱520,000.00, thus:

WHEREFORE, the instant appeal is PARTLY GRANTED. Numbers 2, 4 and 6 of the

assailedDecision dated December 8, 2006 of Branch 96, RTC of Baler, Aurora Province, in Civil
Case No. 828 are hereby MODIFIED to read as follows:

2. The net assets of the absolute community of property of the parties in the Philippines are
hereby divided equally between petitioner Leticia Noveras a.k.a. Leticia Tacbiana (sic) and
respondent David A. Noveras;

xxx

4. One-half of the properties awarded to petitioner Leticia Tacbiana (sic) in paragraph 2 shall
pertain to her minor children, Jerome and Jena, as their presumptive legitimes which shall be
annotated on the titles/documents covering the said properties. Their share in the income
therefrom, if any, shall be remitted to them by petitioner annually within the first half of
January, starting 2008;

xxx

6. Respondent David A. Noveras and petitioner Leticia Tacbiana (sic) are each ordered to
pay the amount of₱520,000.00 to their two children, Jerome and Jena, as their presumptive
legitimes from the sale of the Sampaloc property inclusive of the receivables therefrom,
which shall be deposited to a local bank of Baler, Aurora, under a joint account in the latter’s
names. The payment/deposit shall be made within a period of thirty (30) days from receipt
ofa copy of this Decision and the corresponding passbook entrusted to the custody ofthe
Clerk of Court a quowithin the same period, withdrawable only by the children or their
attorney-in-fact.

A number 8 is hereby added, which shall read as follows:

8. Respondent David A. Noveras is hereby ordered to pay petitioner Leticia Tacbiana (sic)
the amount of ₱1,040,000.00 representing her share in the proceeds from the sale of the
Sampaloc property.

The last paragraph shall read as follows:

Send a copy of this Decision to the local civil registry of Baler, Aurora; the local civil registry of
Quezon City; the Civil RegistrarGeneral, National Statistics Office, Vibal Building, Times Street
corner EDSA, Quezon City; the Office of the Registry of Deeds for the Province of Aurora; and to the
children, Jerome Noveras and Jena Noveras.

The rest of the Decision is AFFIRMED.12

In the present petition, David insists that the Court of Appeals should have recognized the California
Judgment which awarded the Philippine properties to him because said judgment was part of the
pleading presented and offered in evidence before the trial court. David argues that allowing Leticia
to share in the Philippine properties is tantamount to unjust enrichment in favor of Leticia considering
that the latter was already granted all US properties by the California court.

In summary and review, the basic facts are: David and Leticia are US citizens who own properties in
the USA and in the Philippines. Leticia obtained a decree of divorce from the Superior Court of
California in June 2005 wherein the court awarded all the properties in the USA to Leticia. With
respect to their properties in the Philippines, Leticiafiled a petition for judicial separation ofconjugal
properties.

At the outset, the trial court erred in recognizing the divorce decree which severed the bond of
marriage between the parties. In Corpuz v. Sto. Tomas,13 we stated that:

The starting point in any recognition of a foreign divorce judgment is the acknowledgment that our
courts do not take judicial notice of foreign judgments and laws. Justice Herrera explained that, as a
rule, "no sovereign is bound to give effect within its dominion to a judgment rendered by a tribunal of
another country." This means that the foreign judgment and its authenticity must beproven as facts
under our rules on evidence, together with the alien’s applicable national law to show the effect of
the judgment on the alien himself or herself. The recognition may be made in an action instituted
specifically for the purpose or in another action where a party invokes the foreign decree as an
integral aspect of his claim or defense.14

The requirements of presenting the foreign divorce decree and the national law of the foreigner must
comply with our Rules of Evidence. Specifically, for Philippine courts to recognize a foreign judgment
relating to the status of a marriage, a copy of the foreign judgment may be admitted in evidence and
proven as a fact under Rule 132, Sections 24 and 25, in relation to Rule 39, Section 48(b) of the
Rules of Court.15

Under Section 24 of Rule 132, the record of public documents of a sovereign authority or tribunal
may be proved by: (1) an official publication thereof or (2) a copy attested by the officer having the
legal custody thereof. Such official publication or copy must beaccompanied, if the record is not kept
in the Philippines, with a certificate that the attesting officer has the legal custody thereof. The
certificate may be issued by any of the authorized Philippine embassy or consular officials stationed
in the foreign country in which the record is kept, and authenticated by the seal of his office. The
attestation must state, in substance, that the copy is a correct copy of the original, or a specific part
thereof, asthe case may be, and must be under the official seal of the attesting officer.

Section 25 of the same Rule states that whenever a copy of a document or record is attested for the
purpose of evidence, the attestation must state, in substance, that the copy is a correct copy of the
original, or a specific part thereof, as the case may be. The attestation must be under the official seal
of the attesting officer, if there be any, or if hebe the clerk of a court having a seal, under the seal of
such court.

Based on the records, only the divorce decree was presented in evidence. The required certificates
to prove its authenticity, as well as the pertinent California law on divorce were not presented.

It may be noted that in Bayot v. Court of Appeals,16 we relaxed the requirement on certification where
we held that "[petitioner therein] was clearly an American citizenwhen she secured the divorce and
that divorce is recognized and allowed in any of the States of the Union, the presentation of a copy
of foreign divorce decree duly authenticatedby the foreign court issuing said decree is, as here,
sufficient." In this case however, it appears that there is no seal from the office where the divorce
decree was obtained.

Even if we apply the doctrine of processual presumption17 as the lower courts did with respect to the
property regime of the parties, the recognition of divorce is entirely a different matter because, to
begin with, divorce is not recognized between Filipino citizens in the Philippines. Absent a valid
recognition of the divorce decree, it follows that the parties are still legally married in the Philippines.
The trial court thus erred in proceeding directly to liquidation.

As a general rule, any modification in the marriage settlements must be made before the celebration
of marriage. An exception to this rule is allowed provided that the modification isjudicially approved
and refers only to the instances provided in Articles 66,67, 128, 135 and 136 of the Family Code.18

Leticia anchored the filing of the instant petition for judicial separation of property on paragraphs 4
and 6 of Article 135 of the Family Code, to wit:

Art. 135. Any of the following shall be considered sufficient cause for judicial separation of property:

(1) That the spouse of the petitioner has been sentenced to a penalty which carries with it
civil interdiction;

(2) That the spouse of the petitioner has been judicially declared an absentee;

(3) That loss of parental authority ofthe spouse of petitioner has been decreed by the court;

(4) That the spouse of the petitioner has abandoned the latter or failed to comply with his or
her obligations to the family as provided for in Article 101;

(5) That the spouse granted the power of administration in the marriage settlements has
abused that power; and

(6) That at the time of the petition, the spouses have been separated in fact for at least one
year and reconciliation is highly improbable.

In the cases provided for in Numbers (1), (2), and (3), the presentation of the final judgment against
the guiltyor absent spouse shall be enough basis for the grant of the decree ofjudicial separation of
property. (Emphasis supplied).

The trial court had categorically ruled that there was no abandonment in this case to necessitate
judicial separation of properties under paragraph 4 of Article 135 of the Family Code. The trial court
ratiocinated:

Moreover, abandonment, under Article 101 of the Family Code quoted above, must be for a valid
cause and the spouse is deemed to have abandoned the other when he/she has left the conjugal
dwelling without intention of returning. The intention of not returning is prima facie presumed if the
allegedly [sic] abandoning spouse failed to give any information as to his or her whereabouts within
the period of three months from such abandonment.

In the instant case, the petitioner knows that the respondent has returned to and stayed at his
hometown in Maria Aurora, Philippines, as she even went several times to visit him there after the
alleged abandonment. Also, the respondent has been going back to the USA to visit her and their
children until the relations between them worsened. The last visit of said respondent was in October
2004 when he and the petitioner discussed the filing by the latter of a petition for dissolution of
marriage with the California court. Such turn for the worse of their relationship and the filing of the
saidpetition can also be considered as valid causes for the respondent to stay in the Philippines.19

Separation in fact for one year as a ground to grant a judicial separation of property was not tackled
in the trial court’s decision because, the trial court erroneously treated the petition as liquidation of
the absolute community of properties.

The records of this case are replete with evidence that Leticia and David had indeed separated for
more than a year and that reconciliation is highly improbable. First, while actual abandonment had
not been proven, it is undisputed that the spouses had been living separately since 2003 when
David decided to go back to the Philippines to set up his own business. Second, Leticia heard from
her friends that David has been cohabiting with Estrellita Martinez, who represented herself as
Estrellita Noveras. Editha Apolonio, who worked in the hospital where David was once confined,
testified that she saw the name of Estrellita listed as the wife of David in the Consent for Operation
form.20 Third and more significantly, they had filed for divorce and it was granted by the California
court in June 2005.

Having established that Leticia and David had actually separated for at least one year, the petition
for judicial separation of absolute community of property should be granted.

The grant of the judicial separation of the absolute community property automatically dissolves the
absolute community regime, as stated in the 4th paragraph of Article 99 ofthe Family Code, thus:

Art. 99. The absolute community terminates:

(1) Upon the death of either spouse;

(2) When there is a decree of legal separation;

(3) When the marriage is annulled or declared void; or

(4) In case of judicial separation of property during the marriage under Articles 134 to 138.
(Emphasis supplied).

Under Article 102 of the same Code, liquidation follows the dissolution of the absolute community
regime and the following procedure should apply:

Art. 102. Upon dissolution of the absolute community regime, the following procedure shall apply:

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

(2) The debts and obligations of the absolute community shall be paid out of its 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 the second
paragraph of Article 94.

(3) Whatever remains of the exclusive properties of the spouses shall thereafter be delivered
to each of them.
 (4) The net remainder of the properties of the absolute community shall constitute its net
assets, 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 of such share provided in this Code. For purposes of computing the net
profits subject to forfeiture in accordance with Articles 43, No. (2) and 63, No. (2),the 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.

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

(6) Unless otherwise agreed upon by the parties, in the partition of the properties, the
conjugal dwelling and the lot on which it is situated shall be adjudicated tothe 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. At the risk of being repetitious, we will not remand the
case to the trial court. Instead, we shall adopt the modifications made by the Court of
Appeals on the trial court’s Decision with respect to liquidation.

We agree with the appellate court that the Philippine courts did not acquire jurisdiction over the
California properties of David and Leticia. Indeed, Article 16 of the Civil Code clearly states that real
property as well as personal property is subject to the law of the country where it is situated. Thus,
liquidation shall only be limited to the Philippine properties.

We affirm the modification madeby the Court of Appeals with respect to the share of the spouses in
the absolutecommunity properties in the Philippines, as well as the payment of their children’s
presumptive legitimes, which the appellate court explained in this wise:

Leticia and David shall likewise have an equal share in the proceeds of the Sampaloc
property. While both claimed to have contributed to the redemption of the Noveras property, absent
1âwphi1

a clear showing where their contributions came from, the same is presumed to have come from the
community property. Thus, Leticia is not entitled to reimbursement of half of the redemption money.

David's allegation that he used part of the proceeds from the sale of the Sampaloc property for the
benefit of the absolute community cannot be given full credence. Only the amount of ₱120,000.00
incurred in going to and from the U.S.A. may be charged thereto. Election expenses in the amount of
₱300,000.00 when he ran as municipal councilor cannot be allowed in the absence of receipts or at
least the Statement of Contributions and Expenditures required under Section 14 of Republic Act
No. 7166 duly received by the Commission on Elections. Likewise, expenses incurred to settle the
criminal case of his personal driver is not deductible as the same had not benefited the family. In
sum, Leticia and David shall share equally in the proceeds of the sale net of the amount of
₱120,000.00 or in the respective amounts of ₱1,040,000.00.

xxxx

Under the first paragraph of Article 888 of the Civil Code, "(t)he legitime of legitimate children and
descendants consists of one-half or the hereditary estate of the father and of the mother." The
children arc therefore entitled to half of the share of each spouse in the net assets of the absolute
community, which shall be annotated on the titles/documents covering the same, as well as to their
respective shares in the net proceeds from the sale of the Sampaloc property including the
receivables from Sps. Paringit in the amount of ₱410,000.00. Consequently, David and Leticia
should each pay them the amount of ₱520,000.00 as their presumptive legitimes therefrom.21

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals in CA G.R.
CV No. 88686 is AFFIRMED.

SO ORDERED.

F. PROPERTY REGIME OF UNIONS WITHOUT MARRIAGE

G.R. No. 116668 July 28, 1997

ERLINDA A. AGAPAY, petitioner,

vs.
CARLINA (CORNELIA) V. PALANG and HERMINIA P. DELA CRUZ, respondents.

ROMERO, J.:

Before us is a petition for review of the decision of the Court of Appeals in CA-G.R. CV No. 24199
entitled "Erlinda Agapay v. Carlina (Cornelia) Palang and Herminia P. Dela Cruz" dated June 22,
1994 involving the ownership of two parcels of land acquired during the cohabitation of petitioner
and private respondent's legitimate spouse.

Miguel Palang contracted his first marriage on July 16, 1949 when he took private respondent
Carlina (or Cornelia) Vallesterol as a wife at the Pozorrubio Roman Catholic Church in Pangasinan.
A few months after the wedding, in October 1949, he left to work in Hawaii. Miguel and Carlina's only
child, Herminia Palang, was born on May 12, 1950.

Miguel returned in 1954 for a year. His next visit to the Philippines was in 1964 and during the entire
duration of his year-long sojourn he stayed in Zambales with his brother, not in Pangasinan with his
wife and child. The trial court found evidence that as early as 1957, Miguel had attempted to divorce
Carlina in Hawaii.1 When he returned for good in 1972, he refused to live with private respondents,
but stayed alone in a house in Pozorrubio, Pangasinan.

On July 15, 1973, the then sixty-three-year-old Miguel contracted his second marriage with nineteen-
year-old Erlinda Agapay, herein petitioner.2 Two months earlier, on May 17, 1973, Miguel and
Erlinda, as evidenced by the Deed of Sale, jointly purchased a parcel of agricultural land located at
San Felipe, Binalonan, Pangasinan with an area of 10,080 square meters. Consequently, Transfer
Certificate of Title No. 101736 covering said rice land was issued in their names.

A house and lot in Binalonan, Pangasinan was likewise purchased on September 23, 1975,
allegedly by Erlinda as the sole vendee. TCT No. 143120 covering said property was later issued in
her name.

On October 30, 1975, Miguel and Cornelia Palang executed a Deed of Donation as a form of
compromise agreement to settle and end a case filed by the latter.3 The parties therein agreed to
donate their conjugal property consisting of six parcels of land to their only child, Herminia Palang.4
Miguel and Erlinda's cohabitation produced a son, Kristopher A. Palang, born on December 6, 1977.
In 1979, Miguel and Erlinda were convicted of Concubinage upon Carlina's complaint.5 Two years
later, on February 15, 1981, Miguel died.

On July 11, 1981, Carlina Palang and her daughter Herminia Palang de la Cruz, herein private
respondents, instituted the case at bar, an action for recovery of ownership and possession with
damages against petitioner before the Regional Trial Court in Urdaneta, Pangasinan (Civil Case No.
U-4265). Private respondents sought to get back the riceland and the house and lot both located at
Binalonan, Pangasinan allegedly purchased by Miguel during his cohabitation with petitioner.

Petitioner, as defendant below, contended that while the riceland covered by TCT No. 101736 is
registered in their names (Miguel and Erlinda), she had already given her half of the property to their
son Kristopher Palang. She added that the house and lot covered by TCT No. 143120 is her sole
property, having bought the same with her own money. Erlinda added that Carlina is precluded from
claiming aforesaid properties since the latter had already donated their conjugal estate to Herminia.

After trial on the merits, the lower court rendered its decision on June 30, 1989 dismissing the
complaint after declaring that there was little evidence to prove that the subject properties pertained
to the conjugal property of Carlina and Miguel Palang. The lower court went on to provide for the
intestate shares of the parties, particularly of Kristopher Palang, Miguel's illegitimate son. The
dispositive portion of the decision reads.

WHEREFORE, premises considered, judgment is hereby

rendered —

1) Dismissing the complaint, with costs against plaintiffs;

2) Confirming the ownership of defendant Erlinda Agapay of the residential lot located at
Poblacion, Binalonan, Pangasinan, as evidenced by TCT No. 143120, Lot 290-B including
the old house standing therein;

3) Confirming the ownership of one-half (1/2) portion of that piece of agricultural land situated
at Balisa, San Felipe, Binalonan, Pangasinan, consisting of 10,080 square meters and as
evidenced by TCT No. 101736, Lot 1123-A to Erlinda Agapay;

4. Adjudicating to Kristopher Palang as his inheritance from his deceased father, Miguel
Palang, the one-half (1/2) of the agricultural land situated at Balisa, San Felipe, Binalonan,
Pangasinan, under TCT No. 101736 in the name of Miguel Palang, provided that the former
(Kristopher) executes, within 15 days after this decision becomes final and executory, a quit-
claim forever renouncing any claims to annul/reduce the donation to Herminia Palang de la
Cruz of all conjugal properties of her parents, Miguel Palang and Carlina Vallesterol Palang,
dated October 30, 1975, otherwise, the estate of deceased Miguel Palang will have to be
settled in another separate action;

5) No pronouncement as to damages and attorney's fees.

SO ORDERED.6

On appeal, respondent court reversed the trial court's decision. The Court of Appeals rendered its
decision on July 22, 1994 with the following dispositive portion;
 WHEREFORE, PREMISES CONSIDERED, the appealed decision in hereby REVERSED
and another one entered:

1. Declaring plaintiffs-appellants the owners of the properties in question;

2. Ordering defendant-appellee to vacate and deliver the properties in question to herein

plaintiffs-appellants;

3. Ordering the Register of Deeds of Pangasinan to cancel Transfer Certificate of Title Nos.
143120 and 101736 and to issue in lieu thereof another certificate of title in the name of
plaintiffs-appellants.

No pronouncement as to costs.7

Hence, this petition.

Petitioner claims that the Court of Appeals erred in not sustaining the validity of two deeds of
absolute sale covering the riceland and the house and lot, the first in favor of Miguel Palang and
Erlinda Agapay and the second, in favor of Erlinda Agapay alone. Second, petitioner contends that
respondent appellate court erred in not declaring Kristopher A. Palang as Miguel Palang's
illegitimate son and thus entitled to inherit from Miguel's estate. Third, respondent court erred,
according to petitioner, "in not finding that there is sufficient pleading and evidence that Kristopher A.
Palang or Christopher A. Palang should be considered as party-defendant in Civil Case No. U-4625
before the trial court and in CA-G.R. No. 24199.8

After studying the merits of the instant case, as well as the pertinent provisions of law and
jurisprudence, the Court denies the petition and affirms the questioned decision of the Court of
Appeals.

The first and principal issue is the ownership of the two pieces of property subject of this action.
Petitioner assails the validity of the deeds of conveyance over the same parcels of land. There is no
dispute that the transfer of ownership from the original owners of the riceland and the house and lot,
Corazon Ilomin and the spouses Cespedes, respectively, were valid.

The sale of the riceland on May 17, 1973, was made in favor of Miguel and Erlinda. The provision of
law applicable here is Article 148 of the Family Code providing for cases of cohabitation when a man
and a woman who are not capacitated to marry each other live exclusively with each other as
husband and wife without the benefit of marriage or under a void marriage. While Miguel and Erlinda
contracted marriage on July 15, 1973, said union was patently void because the earlier marriage of
Miguel and Carlina was still subsisting and unaffected by the latter's de facto separation.

Under Article 148, 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. It must be stressed that actual contribution is required by this provision, in
contrast to Article 147 which states that efforts in the care and maintenance of the family and
household, are regarded as contributions to the acquisition of common property by one who has no
salary or income or work or industry. If the actual contribution of the party is not proved, there will be
no co-ownership and no presumption of equal shares.9

In the case at bar, Erlinda tried to establish by her testimony that she is engaged in the business of
buy and sell and had a sari-sari store10 but failed to persuade us that she actually contributed money
to buy the subject riceland. Worth noting is the fact that on the date of conveyance, May 17, 1973,
petitioner was only around twenty years of age and Miguel Palang was already sixty-four and a
pensioner of the U.S. Government. Considering her youthfulness, it is unrealistic to conclude that in
1973 she contributed P3,750.00 as her share in the purchase price of subject property,11 there being
no proof of the same.

Petitioner now claims that the riceland was bought two months before Miguel and Erlinda actually
cohabited. In the nature of an afterthought, said added assertion was intended to exclude their case
from the operation of Article 148 of the Family Code. Proof of the precise date when they
commenced their adulterous cohabitation not having been adduced, we cannot state definitively that
the riceland was purchased even before they started living together. In any case, even assuming
that the subject property was bought before cohabitation, the rules of co-ownership would still apply
and proof of actual contribution would still be essential.

Since petitioner failed to prove that she contributed money to the purchase price of the riceland in
Binalonan, Pangasinan, we find no basis to justify her co-ownership with Miguel over the same.
Consequently, the riceland should, as correctly held by the Court of Appeals, revert to the conjugal
partnership property of the deceased Miguel and private respondent Carlina Palang.

Furthermore, it is immaterial that Miguel and Carlina previously agreed to donate their conjugal
property in favor of their daughter Herminia in 1975. The trial court erred in holding that the decision
adopting their compromise agreement "in effect partakes the nature of judicial confirmation of the
separation of property between spouses and the termination of the conjugal
partnership."12 Separation of property between spouses during the marriage shall not take place
except by judicial order or without judicial conferment when there is an express stipulation in the
marriage settlements.13 The judgment which resulted from the parties' compromise was not
specifically and expressly for separation of property and should not be so inferred.

With respect to the house and lot, Erlinda allegedly bought the same for P20,000.00 on September
23, 1975 when she was only 22 years old. The testimony of the notary public who prepared the deed
of conveyance for the property reveals the falsehood of this claim. Atty. Constantino Sagun testified
that Miguel Palang provided the money for the purchase price and directed that Erlinda's name
alone be placed as the vendee.14

The transaction was properly a donation made by Miguel to Erlinda, but one which was clearly void
and inexistent by express provision of law because it was made between persons guilty of adultery
or concubinage at the time of the donation, under Article 739 of the Civil Code. Moreover, Article 87
of the Family Code expressly provides that the prohibition against donations between spouses now
applies to donations between persons living together as husband and wife without a valid
marriage,15 for otherwise, the condition of those who incurred guilt would turn out to be better than
those in legal union.16

The second issue concerning Kristopher Palang's status and claim as an illegitimate son and heir to
Miguel's estate is here resolved in favor of respondent court's correct assessment that the trial court
erred in making pronouncements regarding Kristopher's heirship and filiation "inasmuch as questions
as to who are the heirs of the decedent, proof of filiation of illegitimate children and the determination
of the estate of the latter and claims thereto should be ventilated in the proper probate court or in a
special proceeding instituted for the purpose and cannot be adjudicated in the instant ordinary civil
action which is for recovery of ownership and possession."17

As regards the third issue, petitioner contends that Kristopher Palang should be considered as party-
defendant in the case at bar following the trial court's decision which expressly found that Kristopher
had not been impleaded as party defendant but theorized that he had submitted to the court's
jurisdiction through his mother/guardian ad litem.18 The trial court erred gravely. Kristopher, not
having been impleaded, was, therefore, not a party to the case at bar. His mother, Erlinda cannot be
called his guardian ad litem for he was not involved in the case at bar. Petitioner adds that there is
no need for Kristopher to file another action to prove that he is illegitimate son of Miguel, in order to
avoid multiplicity of suits.19 Petitioner's grave error has been discussed in the preceding paragraph
where the need for probate proceedings to resolve the settlement of Miguel's estate and Kristopher's
successional rights has been pointed out.

WHEREFORE, the instant petition is hereby DENIED. The questioned decision of the Court of
Appeals is AFFIRMED. Costs against petitioner.

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 Aguila’s 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 Aguila’s petition. According to Salas, Aguila’s 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 ₱200,000.00; 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 Aguila’s 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 Aguila’s
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 court’s 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 court’s 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 Aguila’s 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 the RTC and the CA agreed that the Discovered Properties registered in Salas’
1âw phi 1

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 Aguila’s
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
Aguila’s 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 Rubina’s 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 Rubina’s 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 Diño v. Diño,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
former’s 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 couple’s 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 Decision3 dated 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 Socorro’s marriage to Esteban.

Esteban’s prior marriage, on the other hand, was dissolved by virtue of his wife’s 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 father’s 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 Esteban’s signature
on the deeds of sale was forged. Respondents, on the other hand, argued that because of Socorro’s
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 Socorro’s 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 Niñal 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 father’s 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 Vangie’s 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 ₱195,259.52 for Unit D-9 as shown by the 37 pieces of receipts x x x
and the aggregate amount of ₱188,596.09 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 Socorro’s 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
1âwphi1

"married to Socorro Torres" is merely descriptive of his civil status, and does not show that Socorro
co-owned the property.27 The 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
1âw phi1

alleged monetary 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.