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G.R. No. 125172 June 26, 1998

Spouses ANTONIO and LUZVIMINDA GUIANG, petitioners, vs.COURT OF APPEALS and GILDA COPUZ, respondents.

PANGANIBAN, J.:

The sale of a conjugal property requires the consent of both the husband and the wife. The absence of the consent of one renders the sale null and void, while the vitiation thereof makes it merely voidable. Only in the latter case can ratification cure the defect.

The Case

These were the principles that guided the Court in deciding this petition for review of the Decision 1 dated January 30, 1996 and the Resolution 2 dated May 28, 1996, promulgated by the Court of Appeals in CA-GR CV No. 41758, affirming the Decision of the lower court and denying reconsideration, respectively.

On May 28, 1990, Private Respondent Gilda Corpuz filed an Amended Complainant 3 against her husband Judie Corpuz and Petitioner-Spouses Antonio and Luzviminda Guiang. The said Complaint sought the declaration of a certain deed of sale, which involved the conjugal property of private respondent and her husband, null and void. The case was raffled to the Regional Trial Court of Koronadal, South Cotabato, Branch 25. In due course, the trial court rendered a Decision 4 dated September 9, 1992, disposing as follow: 5

ACCORDINGLY, judgment is rendered for the plaintiff and against the defendants,

1. Declaring both the Deed of Transfer of Rights dated March 1, 1990 (Exh. "A") and the "amicable settlement" dated March 16, 1990 (Exh. "B") as null void and of no effect;

2. Recognizing as lawful and valid the ownership and possession of plaintiff Gilda Corpuz over the remaining one-half portion of Lot 9, Block 8, (LRC) Psd-165409 which has been the subject of the Deed of Transfer of Rights (Exh. "A");

3. Ordering plaintiff Gilda Corpuz to reimburse defendants Luzviminda Guiang the amount of NINE THOUSAND (P9,000.00) PESOS corresponding to the payment made by defendants Guiangs to Manuel Callejo for the unpaid balance of the account of plaintiff in favor of Manuel Callejo, and another sum of P379.62 representing one-half of the amount of realty taxes paid by defendants Guiangs on Lot 9, Block 8, (LRC) Psd-165409, both with legal interests thereon computed from the finality of the decision.

No pronouncement as to costs in view of the factual circumstances of the case.

Dissatisfied, petitioners-spouses filed an appeal with the Court of Appeals. Respondent Court, in its challenged Decision, ruled as follow: 6

WHEREFORE, the appealed of the lower court in Civil Case No. 204 is hereby AFFIRMED by this Court. No costs considering plaintiff-appellee's failure to file her brief despite notice.

Reconsideration was similarly denied by the same court in its assailed Resolution: 7

Finding that the issues raised in defendants-appellants motion for reconsideration of Our decision in this case of January 30, 1996, to be a mere rehash of the same issues which we have already passed upon in the said decision, and there [being] no cogent reason to disturb the same, this Court RESOLVED to DENY the instant motion for reconsideration for lack of merit.

The Facts

The facts of this case are simple. Over the objection of private respondent and while she was in Manila seeking employment, her husband sold to the petitioners-spouses one half of their conjugal peoperty, consisting of their residence and the lot on which it stood. The circumstances of this sale are set forth in the Decision of Respondent Court, which quoted from the Decision of the trial court as follows: 8

1. Plaintiff Gilda Corpuz and defendant Judie Corpuz are legally married spouses. They were married on December 24, 1968 in Bacolod City, before a judge. This is admitted by defendants-spouses Antonio and Luzviminda Guiang in their answer, and also admitted by defendant Judie Corpuz when he testified in court (tsn. p. 3, June 9, 1992), although the latter says that they were married in 1967. The couple have three children, namely: Junie — 18 years old, Harriet — 17 years of age, and Jodie or Joji, the youngest, who was 15 years of age in August, 1990 when her mother testified in court.

Sometime on February 14, 1983, the couple Gilda and Judie Corpuz, with plaintiff-wife Gilda Corpuz as vendee, bought a 421 sq. meter lot located in Barangay Gen. Paulino Santos (Bo. 1), Koronadal, South Cotabato, and particularly known as Lot 9, Block 8, (LRC) Psd-165409 from Manuel Callejo who signed as vendor through a conditional deed of sale for a total consideration of P14,735.00. The consideration was payable in

installment, with right of cancellation in favor of vendor should vendee fail to pay three successive installments (Exh. "2", tsn p. 6, February 14, 1990).

2. Sometime on April 22, 1988, the couple Gilda and Judie Corpuz sold one-half portion of their Lot No. 9, Block 8, (LRC) Psd-165409 to the defendants-spouses Antonio and Luzviminda Guiang. The latter have since then occupied the one-half portion [and] built their house thereon (tsn. p. 4, May 22, 1992). They are thus adjoining neighbors of the Corpuzes.

3. Plaintiff Gilda Corpuz left for Manila sometime in June 1989. She was trying to look for work abroad, in [the] Middle East. Unfortunately, she became a victim of an unscrupulous illegal recruiter. She was not able to go abroad. She stayed for sometime in Manila however, coming back to Koronadal, South Cotabato, . . . on March 11, 1990. Plaintiff's departure for Manila to look for work in the Middle East was with the consent of her husband Judie Corpuz (tsn. p. 16, Aug. 12, 1990; p. 10 Sept. 6, 1991).

After his wife's departure for Manila, defendant Judie Corpuz seldom went home to the conjugal dwelling. He stayed most of the time at his place of work at Samahang Nayon Building, a hotel, restaurant, and a cooperative. Daughter Herriet Corpuz went to school at King's College, Bo. 1, Koronadal, South Cotabato, but she was at the same time working as household help of, and staying at, the house of Mr. Panes. Her brother Junie was not working. Her younger sister Jodie (Jojie) was going to school. Her mother sometimes sent them money (tsn. p. 14, Sept. 6, 1991.)

Sometime in January 1990, Harriet Corpuz learned that her father intended to sell the remaining one-half portion including their house, of their homelot to defendants Guiangs. She wrote a letter to her mother informing her. She [Gilda Corpuz] replied that she was objecting to the sale. Harriet, however, did not inform her father about this; but instead gave the letter to Mrs. Luzviminda Guiang so that she [Guiang] would advise her father (tsn. pp. 16-17, Sept. 6, 1991).

4. However, in the absence of his wife Gilda Corpuz, defendant Judie Corpuz pushed through the sale of the remaining one-half portion of Lot 9, Block 8, (LRC) Psd-165409. On March 1, 1990, he sold to defendant Luzviminda Guiang thru a document known as "Deed of Transfer of Rights" (Exh. "A") the remaining one-half portion of their lot and the house standing thereon for a total consideration of P30,000.00 of which P5,000.00 was to be paid in June, 1990. Transferor Judie Corpuz's children Junie and Harriet signed the document as witness.

Four (4) days after March 1, 1990 or on March 5, 1990, obviously to cure whatever defect in defendant Judie Corpuz's title over the lot transferred, defendant Luzviminda Guiang as vendee executed another agreement over Lot 9, Block 8, (LRC) Psd-165408 (Exh. "3"), this time with Manuela Jimenez Callejo, a widow of the original registered owner from whom the couple Judie and Gilda Corpuz originally bought the lot (Exh. "2"), who signed as vendor for a consideration of P9,000.00. Defendant Judie Corpuz signed as a witness to the sale (Exh. "3-A"). The new sale (Exh. "3") describes the lot sold as Lot 8, Block 9, (LRC) Psd-165408 but it is obvious from the mass of evidence that the correct lot is Lot 8, Block 9, (LRC) Psd-165409, the very lot earlier sold to the couple Gilda and Judie Corpuz.

5. Sometimes on March 11, 1990, plaintiff returned home. She found her children staying with other households. Only Junie was staying in their house. Harriet and Joji were with Mr. Panes. Gilda gathered her children together and stayed at their house. Her husband was nowhere to be found. She was informed by her children that their father had a wife already.

6. For staying in their house sold by her husband, plaintiff was complained against by defendant Luzviminda Guiang and her husband Antonio Guiang before the Barangay authorities of Barangay General Paulino Santos (Bo. 1), Koronadal, South Cotabato, for trespassing (tsn. p. 34, Aug. 17, 1990). The case was docketed by the barangay authorities as Barangay Case No. 38 for "trespassing". On March 16, 1990, the parties thereat signed a document known as "amicable settlement". In full, the settlement provides for, to wit:

That respondent, Mrs. Gilda Corpuz and her three children, namely: Junie, Hariet and Judie to leave voluntarily the house of Mr. and Mrs. Antonio Guiang, where they are presently boarding without any charge, on or before April 7, 1990.

FAIL NOT UNDER THE PENALTY OF THE LAW.

Believing that she had received the shorter end of the bargain, plaintiff to the Barangay Captain of Barangay Paulino Santos to question her signature on the amicable settlement. She was referred however to the Office-In-Charge at the time, a certain Mr. de la Cruz. The latter in turn told her that he could not do anything on the matter (tsn. p. 31, Aug. 17, 1990).

This particular point not rebutted. The Barangay Captain who testified did not deny that Mrs. Gilda Corpuz approached him for the annulment of the settlement. He merely said he forgot whether Mrs. Corpuz had approached him (tsn. p. 13, Sept. 26, 1990). We thus conclude that Mrs. Corpuz really approached the Barangay Captain for the annulment of the settlement. Annulment not having been made, plaintiff stayed put in her house and lot.

7. Defendant-spouses Guiang followed thru the amicable settlement with a motion for the execution of the amicable settlement, filing the same with the Municipal Trial Court of Koronadal, South Cotabato. The proceedings [are] still pending before the said court, with the filing of the instant suit.

8. As a consequence of the sale, the spouses Guiang spent P600.00 for the preparation of the Deed of Transfer of Rights, Exh. "A", P9,000.00 as the amount they paid to Mrs. Manuela Callejo, having assumed the remaining obligation of the Corpuzes to Mrs. Callejo (Exh. "3"); P100.00 for the preparation of Exhibit "3"; a total of P759.62 basic tax and special education fund on the lot; P127.50 as the total documentary stamp tax on the various documents; P535.72 for the capital gains tax; P22.50 as transfer tax; a standard fee of P17.00; certification fee of P5.00. These expenses particularly the taxes and other expenses towards the transfer of the title to the spouses Guiangs were incurred for the whole Lot 9, Block 8, (LRC) Psd-165409.

Ruling of Respondent Court

Respondent Court found no reversible error in the trial court's ruling that any alienation or encumbrance by the husband of the conjugal propety without the consent of his wife is null and void as provided under Article 124 of the Family Code. It also rejected petitioners' contention that the "amicable sttlement" ratified said sale, citing Article 1409 of the Code which expressly bars ratification of the contracts specified therein, particularly those "prohibited or declared void by law."

Hence, this petition. 9

The Issues

In their Memorandum, petitioners assign to public respondent the following errors: 10

I

Whether or not the assailed Deed of Transfer of Rights was validly executed.

II

Whether or not the Cour of Appeals erred in not declairing as voidable contract under Art. 1390 of the Civil Code the impugned Deed of Transfer of Rights which was validly ratified thru the execution of the "amicable settlement" by the contending parties.

III

Whether or not the Court of Appeals erred in not setting aside the findings of the Court a quo which recognized as lawful and valid the ownership and possession of private respondent over the remaining one half (1/2) portion of the properly.

In a nutshell, petitioners-spouses contend that (1) the contract of sale (Deed of Transfer of Rights) was merely voidable, and (2) such contract was ratified by private respondent when she entered into an amicable sttlement with them.

This Court's Ruling

The petition is bereft of merit.

First Issue: Void or Voidable Contract?

Petitioners insist that the questioned Deed of Transfer of Rights was validly executed by the parties-litigants in good faith and for valuable consideration. The absence of private respondent's consent merely rendered the Deed voidable under Article 1390 of the Civil Code, which provides:

Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties:

xxx xxx xxx

(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.

These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification.(n)

The error in petitioners' contention is evident. Article 1390, par. 2, refers to contracts visited by vices of consent, i.e., contracts which were entered into by a person whose consent was obtained and vitiated through mistake, violence, intimidation, undue influence or fraud. In this instance, private respondent's consent to the contract of sale of their conjugal property was totally inexistent or absent. Gilda Corpuz, on direct examination, testified thus: 11

Q Now, on March 1, 1990, could you still recall where you were?

A I was still in Manila during that time.

xxx xxx xxx

ATTY. FUENTES:

Q When did you come back to Koronadal, South Cotabato?

A That was on March 11, 1990, Ma'am.

Q Now, when you arrived at Koronadal, was there any problem which arose concerning the ownership of your residential house at Callejo Subdivision?

A When I arrived here in Koronadal, there was a problem which arose regarding my residential house and lot because it was sold by my husband without my knowledge.

This being the case, said contract properly falls within the ambit of Article 124 of the Family Code, which was correctly applied by the teo lower court:

Art. 124. The administration and enjoyment of the conjugal partnerhip properly shall belong to both spouses jointly. In case of disgreement, the husband's decision shall prevail, subject 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. (165a) (Emphasis supplied)

Comparing said law with its equivalent provision in the Civil Code, the trial court adroitly explained the amendatory effect of the above provision in this wise: 12

The legal provision is clear. The disposition or encumbrance is void. It becomes still clearer if we compare the same with the equivalent provision of the Civil Code of the Philippines. Under Article 166 of the Civil Code, the husband cannot generally alienate or encumber any real property of the conjugal partnershit without the wife's consent. The alienation or encumbrance if so made however is not null and void. It is merely voidable. The offended wife may bring an action to annul the said alienation or encumbrance. Thus the provision of Article 173 of the Civil Code of the Philippines, to wit:

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.(n)

This particular provision giving the wife ten (10) years . . . during [the] marriage to annul the alienation or encumbrance was not carried over to the Family Code. It is thus clear that any alienation or encumbrance made after August 3, 1988 when the Family Code took effect by the husband of the conjugal partnership property without the consent of the wife is null and void.

Furthermore, it must be noted that the fraud and the intimidation referred to by petitioners were perpetrated in the execution of the document embodying the amicable settlement. Gilda Corpuz alleged during trial that barangay authorities made her sign said document through misrepresentation andcoercion. 13 In any event, its execution does not alter the void character of the deed of sale between the husband and the petitioners-spouses, as will be discussed later. The fact remains that such contract was entered into without the wife's consent.

In sum, the nullity of the contract of sale is premised on the absence of private respondent's consent. To constitute a valid contract, the Civil Code requires the concurrence of the following elements: (1) cause, (2) object, and (3) consent, 14 the last element being indubitably absent in the case at bar.

Second Issue: Amicable Settlement

Insisting that the contract of sale was merely voidable, petitioners aver that it was duly ratified by the contending parties through the "amicable settlement" they executed on March 16, 1990 in Barangay Case No. 38.

The position is not well taken. The trial and the appellate courts have resolved this issue in favor of the private respondent. The trial court correctly held: 15

By the specific provision of the law [Art. 1390, Civil Code] therefore, the Deed to Transfer of Rights (Exh. "A") cannot be ratified, even by an "amicable settlement". The

participation by some barangay authorities in the "amicable settlement" cannot otherwise validate an invalid act. Moreover, it cannot be denied that the "amicable settlement (Exh. "B") entered into by plaintiff Gilda Corpuz and defendent spouses Guiang is a contract. It is a direct offshoot of the Deed of Transfer of Rights (Exh. "A"). By express provision of law, such a contract is also void. Thus, the legal provision, to wit:

Art. 1422. Acontract which is the direct result of a previous illegal contract, is also void and inexistent. (Civil Code of the Philippines).

In summation therefore, both the Deed of transfer of Rights (Exh. "A") and the "amicable settlement" (Exh. "3") are null and void.

Doctrinally and clearly, a void contract cannot be ratified. 16

Neither can the "amicable settlement" be considered a continuing offer that was accepted and perfected by the parties, following the last sentence of Article 124. The order of the pertinent events is clear: after the sale, petitioners filed a complaint for trespassing against private respondent, after which the barangay authorities secured an "amicable settlement" and petitioners filed before the MTC a motion for its execution. The settlement, however, does not mention a continuing offer to sell the property or an acceptance of such a continuing offer. Its tenor was to the effect that private respondent would vacate the property. By no stretch of the imagination, can the Court interpret this document as the acceptance mentioned in Article 124.

WHEREFORE, the Court hereby DENIES the petition and AFFIRMS the challenged Decision and Resolution. Costs against petitioners.

SO ORDERED.

Davide, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur.

G.R. No. 147978 January 23, 2002

THELMA A. JADER-MANALO, petitioner, vs.NORMA FERNANDEZ C. CAMAISA and EDILBERTO CAMAISA, respondents.

KAPUNAN, J.:

The issue raised in this case is whether or not the husband may validly dispose of a conjugal property without the wife's written consent.

The present controversy had its beginning when petitioner Thelma A. Jader-Manalo allegedly came across an advertisement placed by respondents, the Spouses Norma Fernandez C. Camaisa and Edilberto Camaisa, in the Classified Ads Section of the newspaper BULLETIN TODAY in its April, 1992 issue, for the sale of their ten-door apartment in Makati, as well as that in Taytay, Rizal.

As narrated by petitioner in her complaint filed with the Regional Trial Court of Makati, Metro Manila, she was interested in buying the two properties so she negotiated for the purchase through a real estate broker, Mr. Proceso Ereno, authorized by respondent spouses.1 Petitioner made a visual inspection of the said lots with the real estate broker and was shown the tax declarations, real property tax payment receipts, location plans, and vicinity maps relating to the properties.2 Thereafter, petitioner met with the vendors who turned out to be respondent spouses. She made a definite offer to buy the properties to respondent Edilberto Camaisa with the knowledge and conformity of his wife, respondent Norma Camaisa in the presence of the real estate broker.3 After some bargaining, petitioner and Edilberto agreed upon the purchase price of P1,500,000.00 for the Taytay property and P2,100,000.00 for the Makati property4 to be paid on installment basis with downpayments of P100,000.00 and P200,000.00, respectively, on April 15, 1992. The balance thereof was to be paid as follows5:

Taytay Property

Makati Property

6th month

P200,000.00

P300,000.00

12th month

700,000.00

1,600,000.00

18th month

500,000.00

This agreement was handwritten by petitioner and signed by Edilberto.6 When petitioner pointed out the conjugal nature of the properties, Edilberto assured her of his wife's conformity and consent to the sale.7 The formal typewritten Contracts to Sell were thereafter prepared by petitioner. The following day, petitioner, the real estate broker and Edilberto met in the latter's office for the formal signing of the typewritten Contracts to Sell.8 After Edilberto signed the contracts, petitioner delivered to him two checks, namely, UCPB Check No. 62807 dated April 15, 1992 for P200,000.00 and UCPB Check No. 62808 also dated April 15, 1992 for P100,000.00 in the presence of the real estate broker and an employee in Edilberto's office.9 The contracts were given to Edilberto for the formal affixing of his wife's signature.

The following day, petitioner received a call from respondent Norma, requesting a meeting to clarify some provisions of the contracts.10 To accommodate her queries, petitioner, accompanied by her lawyer, met with Edilberto and Norma and the real estate broker at Cafe Rizal in Makati.11 During the meeting, handwritten notations were made on the contracts to sell, so they arranged to incorporate the notations and to meet again for the formal signing of the contracts.12

When petitioner met again with respondent spouses and the real estate broker at Edilberto's office for the formal affixing of Norma's signature, she was surprised when respondent spouses informed her that they were backing out of the agreement because they needed "spot cash" for the full amount of the consideration.13 Petitioner reminded respondent spouses that the contracts to sell had already been duly perfected and Norma's refusal to sign the same would unduly prejudice petitioner. Still, Norma refused to sign the contracts prompting petitioner to file a complaint for specific performance and damages against respondent spouses before the Regional Trial Court of Makati, Branch 136 on April 29, 1992, to compel respondent Norma Camaisa to sign the contracts to sell.

A Motion to Dismiss14 was filed by respondents which was denied by the trial court in its Resolution of July 21, 1992.15

Respondents then filed their Answer with Compulsory Counter-claim, alleging that it was an agreement between herein petitioner and respondent Edilberto Camaisa that the sale of the subject properties was still subject to the approval and conformity of his wife Norma Camaisa.16 Thereafter, when Norma refused to give her consent to the sale, her refusal was duly communicated by Edilberto to petitioner.17 The checks issued by petitioner were returned to her by Edilberto and she accepted the same without any objection.18 Respondent further claimed that the acceptance of the checks returned to petitioner signified her assent to the cancellation of the sale of the subject properties.19 Respondent Norma denied that she ever participated in the negotiations for the sale of the subject properties and that she gave her consent and conformity to the same.20

On October 20, 1992, respondent Norma F. Camaisa filed a Motion for Summary Judgment21 asserting that there is no genuine issue as to any material fact on the basis of the pleadings and admission of the parties considering that the wife's written consent was not obtained in the contract to sell, the subject conjugal properties belonging to respondents; hence, the contract was null and void.

On April 14, 1993, the trial court rendered a summary judgment dismissing the complaint on the ground that under Art. 124 of the Family Code, the court cannot intervene to authorize the transaction in the absence of the consent of the wife since said wife who refused to give consent had not been shown to be incapacitated. The dispositive portion of the trial court's decision reads:

WHEREFORE, considering these premises, judgment is hereby rendered:

1. Dismissing the complaint and ordering the cancellation of the Notice of Lis Pendens by reason of its filing on TCT Nos. (464860) S-8724 and (464861) S-8725 of the Registry of Deeds at Makati and on TCT Nos. 295976 and 295971 of the Registry of Rizal.

2. Ordering plaintiff Thelma A. Jader to pay defendant spouses Norma and Edilberto Camaisa, FIFTY THOUSAND (P50,000.00) as Moral Damages and FIFTY THOUSAND (P50,000.00) as Attorney's Fees.

Costs against plaintiff.22

Petitioner, thus, elevated the case to the Court of Appeals. On November 29, 2000, the Court of Appeals affirmed the dismissal by the trial court but deleted the award of P50,000.00 as damages and P50,000.00 as attorney's fees.

The Court of Appeals explained that the properties subject of the contracts were conjugal properties and as such, the consent of both spouses is necessary to give effect to the sale. Since private respondent Norma Camaisa refused to sign the contracts, the sale was never perfected. In fact, the downpayment was returned by respondent spouses and was accepted by petitioner. The Court of Appeals also stressed that the authority of the court to allow sale or encumbrance of a conjugal property without the consent of the other spouse is applicable only in cases where the said spouse is incapacitated or otherwise unable to participate in the administration of the conjugal property.

Hence, the present recourse assigning the following errors:

THE HONORABLE COURT OF APPEALS GRIEVIOUSLY ERRED IN RENDERING SUMMARY JUDGMENT IN DISMISSING THE COMPLAINT ENTIRELY AND ORDERING THE CANCELLATION OF NOTICE OF LIS PENDENS ON THE TITLES OF THE SUBJECT REAL PROPERTIES;

THE HONORABLE COURT OF APPEALS GRIEVIOUSLY ERRED IN FAILING TO CONSIDER THAT THE SALE OF REAL PROPERTIES BY RESPONDENTS TO PETITIONER HAVE ALREADY BEEN PERFECTED, FOR AFTER THE LATTER PAID P300,000.00 DOWNPAYMENT, RESPONDENT MRS. CAMAISA NEVER OBJECTED TO STIPULATIONS WITH RESPECT TO PRICE, OBJECT AND TERMS OF PAYMENT IN THE CONTRACT TO SELL ALREADY SIGNED BY THE PETITIONER, RESPONDENT MR. CAMAISA AND WITNESSES MARKED AS ANNEX "G" IN THE COMPLAINT EXCEPT, FOR MINOR PROVISIONS ALREADY IMPLIED BY LAW, LIKE EJECTMENT OF TENANTS, SUBDIVISION OF TITLE AND RESCISSION IN CASE OF NONPAYMENT, WHICH PETITIONER READILY AGREED AND ACCEDED TO THEIR INCLUSION;

THE HONORABLE COURT OF APPEALS GRIEVIOUSLY ERRED WHEN IT FAILED TO CONSIDER THAT CONTRACT OF SALE IS CONSENSUAL AND IT IS PERFECTED BY THE MERE CONSENT OF THE PARTIES AND THE APPLICABLE PROVISIONS ARE ARTICLES 1157, 1356, 1357, 1358, 1403, 1405 AND 1475 OF THE CIVIL CODE OF THE PHILIPPINES AND GOVERNED BY THE STATUTE OF FRAUD.23

The Court does not find error in the decisions of both the trial court and the Court of Appeals.

Petitioner alleges that the trial court erred when it entered a summary judgment in favor of respondent spouses there being a genuine issue of fact. Petitioner maintains that the issue of whether the contracts to sell between petitioner and respondent spouses was perfected is a question of fact necessitating a trial on the merits.

The Court does not agree. A summary judgment is one granted by the court upon motion by a party for an expeditious settlement of a case, there appearing from the pleadings, depositions, admissions and affidavits that there are no important questions or issues of fact involved, and that therefore the moving party is entitled to judgment as a matter of law.24 A perusal of the pleadings submitted by both parties show that there is no genuine controversy as to the facts involved therein.

Both parties admit that there were negotiations for the sale of four parcels of land between petitioner and respondent spouses; that petitioner and respondent Edilberto Camaisa came to an agreement as to the price and the terms of payment, and a downpayment was paid by petitioner to the latter; and that respondent Norma refused to sign the contracts to sell. The issue thus posed for resolution in the trial court was whether or not the contracts to sell between petitioner and respondent spouses were already perfected such that the latter could no longer back out of the agreement.

The law requires that the disposition of a conjugal property by the husband as administrator in appropriate cases requires the written consent of the wife, otherwise, the disposition is void. Thus, Article 124 of the Family Code provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the 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. (Underscoring ours.)

The properties subject of the contracts in this case were conjugal; hence, for the contracts to sell to be effective, the consent of both husband and wife must concur.

Respondent Norma Camaisa admittedly did not give her written consent to the sale. Even granting that respondent Norma actively participated in negotiating for the sale of the subject properties, which she denied, her written consent to the sale is required by law for its validity. Significantly, petitioner herself admits that Norma refused to sign the contracts to sell. Respondent Norma may have been aware of the negotiations for the sale of their conjugal properties. However, being merely aware of a transaction is not consent.25

Finally, petitioner argues that since respondent Norma unjustly refuses to affix her signatures to the contracts to sell, court authorization under Article 124 of the Family Code is warranted.

The argument is bereft of merit. Petitioner is correct insofar as she alleges that if the written consent of the other spouse cannot be obtained or is being withheld, the matter may be brought to court which will give such authority if the same is warranted by the circumstances. However, it should be stressed that court authorization under Art. 124 is only resorted to in cases where the spouse who does not give consent is incapacitated.26

In this case, petitioner failed to allege and prove that respondent Norma was incapacitated to give her consent to the contracts. In the absence of such showing of the wife's incapacity, court authorization cannot be sought.

Under the foregoing facts, the motion for summary judgment was proper considering that there was no genuine issue as to any material fact. The only issue to be resolved by the trial court was whether the contract to sell involving conjugal properties was valid without the written consent of the wife.

WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals dated November 29, 2000 in CA-G.R. CV No. 43421 AFFIRMED.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.

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

HOMEOWNERS SAVINGS & LOAN BANK, Petitioner, vs.MIGUELA C. DAILO, Respondents.

D E C I S I O N

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 P300,000.00 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 P40,000.00 representing the value of the car which was burned.

ON BOTH CAUSES OF ACTION

1. The defendant to pay the plaintiff the sum of P25,000.00 as attorney’s fees;

2. The defendant to pay plaintiff P25,000.00 as moral damages;

3. The defendant to pay the plaintiff the sum of P10,000.00 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.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

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.

D E C I S I O N

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 (P17,000.00) 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 (P 100,000.00) to plaintiff Mary Abrille as moral damages.

4. C. Fifty Thousand Pesos (P50,000.00) to each of the four children as moral damages, namely:

a) Ingrid Villa Abrille – Fifty Thousand Pesos (P50,000.00), b) Ingremark Villa Abrille – Fifty Thousand Pesos (P50,000.00), c) Ingresoll Villa Abrille – Fifty Thousand Pesos (P50,000.00) and d) Ingrelyn Villa Abrille – Fifty Thousand Pesos (P50,000.00).

5. Ten Thousand Pesos (P10,000.00) 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 (P100,000.00) to plaintiff Mary Villa Abrille as moral damages.

b) Fifty Thousand Pesos (P50,000.00) 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 (P10,000.00) 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.1avvphi1

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.161avvphi1

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.

LEONARDO A. QUISUMBINGActing Chief Justice

WE CONCUR:

CONCHITA CARPIO MORALESAssociate Justice

ARTURO D. BRIONAssociate Justice LUCAS P. BERSAMINAssociate JusticeROBERTO A. ABADAssociate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBINGActing Chief Justice

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.

D E C I S I O N

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 P60,000.00 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 P140,000.00 or P160,000.00, depending on whether or not he succeeded in demolishing the house standing on it. If Tarciano was unable to comply with these conditions, the Fuentes spouses would become owners of the lot without any further formality and payment.

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

Eight years later in 1997, the children of Tarciano and Rosario, namely, respondents Conrado G. Roca, Annabelle R. Joson, and Rose Marie R. Cristobal, together with 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.1avvphi1

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

Further, the Fuentes spouses appear to have acted in good faith in entering the land and building improvements on it. Atty. Plagata, whom the parties mutually entrusted with closing and documenting the transaction, represented that he got 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

P200,000.00 that the latter paid Tarciano T. Roca, with legal interest from January 11, 1989 until fully paid, chargeable against his estate;

4. Respondents Gonzalo G. Roca, Annabelle R. Joson, Rose Marie R. Cristobal, and Pilar Malcampo are further ORDERED, at their option, to indemnify petitioner spouses Manuel and Leticia Fuentes with their expenses for introducing useful improvements on the subject land or pay the increase in value which it may have acquired by reason of those improvements, with the spouses entitled to the right of retention of the land until the indemnity is made; and

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

SO ORDERED.

ROBERTO A. ABADAssociate Justice

WE CONCUR:

REYNATO S. PUNOChief Justice

ANTONIO T. CARPIOAssociate Justice RENATO C. CORONAAssociate JusticeCONCHITA CARPIO MORALESAssociate Justice (On Leave)PRESBITERO J. VELASCO, JR.Associate JusticeANTONIO EDUARDO B. NACHURAAssociate Justice TERESITA J. LEONARDO-DE CASTROAssociate JusticeARTURO D. BRIONAssociate Justice DIOSDADO M. PERALTAAssociate JusticeLUCAS P. BERSAMINAssociate Justice MARIANO C. DEL CASTILLOAssociate JusticeMARTIN S. VILLARAMA, JR.Associate Justice JOSE PORTUGAL PEREZAssociate JusticeJOSE CATRAL MENDOZAAssociate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court.

REYNATO S. PUNOChief Justice

G.R. No. 166496 November 9, 2006

JOSEFA BAUTISTA FERRER, Petitioner, vs.SPS. MANUEL M. FERRER & VIRGINIA FERRER and SPS. ISMAEL M. FERRER and FLORA FERRER, Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

Before this Court is an Appeal by Certiorari which assails the Decision1 of the Court of Appeals dated 16 August 2004 in CA-G.R. SP No. 78525, reversing and setting aside the Order2 dated 16 December 2002 of the Regional Trial Court (RTC), Mandaluyong City, Branch 212 in Civil Case No. MC02-1780. The Court of Appeals ordered the dismissal of the Complaint3 filed by petitioner Josefa Bautista Ferrer against respondents Sps. Manuel M. Ferrer and Virginia Ferrer, and Sps. Ismael M. Ferrer and Flora Ferrer in the aforesaid Civil Case No. MC02-1780.

In her Complaint for payment of conjugal improvements, sum of money, and accounting with prayer for injunction and damages, petitioner alleged that she is the widow of Alfredo Ferrer (Alfredo), a half-brother of respondents Manuel M. Ferrer (Manuel) and Ismael M. Ferrer (Ismael). Before her marriage to Alfredo, the latter acquired a piece of lot, covered by Transfer Certificate of Title (TCT) No. 67927.4 He applied for a loan with the Social Security System (SSS) to build improvements thereon, including a residential house and a two-door apartment building. However, it was during their marriage that payment of the loan was made using the couple’s conjugal funds. From their conjugal funds, petitioner posited, they constructed a warehouse on the lot. Moreover, petitioner averred that respondent Manuel occupied one door of the apartment building, as well as the warehouse; however, in September 1991, he stopped paying rentals thereon, alleging that he had acquired ownership over the property by virtue of a Deed of Sale executed by Alfredo in favor of respondents, Manuel and Ismael and their spouses. TCT No. 67927 was cancelled, and TCT. No. 2728 was issued and registered in the names of respondents.

It is petitioner’s contention that on 2 October 1989, when her husband was already bedridden, respondents Ismael and Flora Ferrer made him sign a document, purported to be his last will and testament. The document, however, was a Deed of Sale covering Alfredo’s lot and the improvements thereon. Learning of this development, Alfredo filed with the RTC of Pasig, a Complaint for Annulment of the said sale against respondents, docketed as Civil Case No. 61327.5 On 22 June 1993, the RTC dismissed the same.6 The RTC found that the terms and conditions of the Deed of Sale are not contrary to law, morals, good customs, and public policy, and should be complied with by the parties in good faith, there being no compelling reason

under the law to do otherwise. The dismissal was affirmed by the Court of Appeals. Subsequently, on 7 November 1994, this Court, in G.R. No. L-117067, finding no reversible error committed by the appellate court in affirming the dismissal of the RTC, affirmed the Decision of the Court of Appeals.7

Further, in support of her Complaint, petitioner alluded to a portion of the Decision dated 22 June 1993 of the RTC in Civil Case No. 61327, which stated, to wit:

In determining which property is the principal and which is the accessory, the property of greater value shall be considered the principal. In this case, the lot is the principal and the improvements the accessories. Since Article 120 of the Family Code provides the rule that the ownership of accessory follows the ownership of the principal, then the subject lot with all its improvements became an exclusive and capital property of Alfredo with an obligation to reimburse the conjugal partnership of the cost of improvements at the time of liquidation of [the] conjugal partnership. Clearly, Alfredo has all the rights to sell the subject property by himself without need of Josefa’s consent.8

According to petitioner, the ruling of the RTC shows that, when Alfredo died on 29 September 1999, or at the time of the liquidation of the conjugal partnership, she had the right to be reimbursed for the cost of the improvements on Alfredo’s lot. She alleged that the cost of the improvements amounted to P500,000.00; hence, one-half thereof should be reimbursed and paid by respondents as they are now the registered owners of Alfredo’s lot. She averred that respondents cannot claim lack of knowledge about the fact that the improvements were constructed using conjugal funds as they had occupied one of the apartment buildings on Alfredo’s lot, and even paid rentals to petitioner. In addition, petitioner prayed that respondents be ordered to render an accounting from September, 1991, on the income of the boarding house constructed thereon which they had appropriated for themselves, and to remit one-half thereof as her share. Finally, petitioner sought from respondents moral and exemplary damages, litigation and incidental expenses.

For their part, respondents filed a Motion to Dismiss,9 contending that petitioner had no cause of action against them, and that the cause of action was barred by prior judgment.

On 16 December 2002, the RTC rendered an Order,10 denying the Motion to Dismiss. According to the RTC, no pronouncement as to the improvements constructed on Alfredo’s lot has been made in Civil Case No. 61327, and the payment of petitioner’s

share in the conjugal partnership constitutes a separate cause of action. A subsequent Order11 dated 17 January 2003 was issued by the RTC, denying respondents’ Motion for Reconsideration.

Aggrieved, respondents elevated the case to the Court of Appeals by way of a Petition for Certiorari, alleging grave abuse of discretion amounting to lack or excess of jurisdiction on the RTC in denying the dismissal.

On 16 August 2004, the Court of Appeals rendered a Decision granting the Petition. It held that petitioner’s Complaint failed to state a cause of action. The appellate court rationalized as follows:

[W]e believe that the instant complaint is not the proper action for the respondent to enforce her right of reimbursement of the cost of the improvement[s] on the subject property. As correctly pointed out by the petitioners, the same should be made and directed in the settlement of estate of her deceased husband Alfredo Ferrer pursuant to Article 12912 of the Family Code. Such being the case, it appears that the complaint herein fails to state a cause of action against the petitioners, the latter not being the proper parties against whom the subject action for reimbursement must be directed to. A complaint states a cause of action where it contains three essential elements of a cause of action, namely: (1) the legal right of the plaintiff; (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of said legal right. If these elements are absent, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action. Albeit the respondent herein has the legal right to be reimbursed of the cost of the improvements of the subject property, it is not the petitioners but the estate of her deceased husband which has the obligation to pay the same. The complaint herein is therefore dismissible for failure to state a cause of action against the petitioners. Needless to say, the respondent is not without any further recourse as she may file her claim against the estate of her deceased husband.

In light of the foregoing, we find that the public respondent committed grave abuse of discretion in denying the petitioners’ motion to dismiss for failure to state a cause of action.13

Aggrieved, petitioner filed a Motion for Reconsideration thereon. However, on 17 December 2004, the Court of Appeals rendered a Resolution14 denying the motion.

Hence, the present recourse.

Petitioner submits the following grounds for the allowance of the instant Petition, to wit:

A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT PETITIONER’S COMPLAINT FAILS TO STATE A CAUSE OF ACTION AGAINST THE RESPONDENTS, THE LATTER NOT BEING THE PROPER PARTIES AGAINST WHOM THE SUBJECT ACTION FOR REIMBURSEMENT MUST BE DIRECTED TO.

B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE PUBLIC RESPONDENT, HON. RIZALINA T. CAPCO-UMALI, COMMITTED GRAVE ABUSE OF DISCRETION IN DENYING THE [RESPONDENTS’] MOTION TO DISMISS FOR FAILURE TO STATE A CAUSE OF ACTION.15

Both arguments raise the sole issue of whether the Court of Appeals erred in dismissing petitioner’s Complaint for failure to state a cause of action.

Section 1(g) Rule 1616 of the 1997 Rules of Civil Procedure makes it clear that failure to make a sufficient allegation of a cause of action in the complaint warrants the dismissal thereof. Section 2, Rule 2 of the 1997 Rules of Civil Procedure defines a cause of action as the act or omission by which a party violates the right of another. It is the delict or the wrongful act or omission committed by the defendant in violation of the primary right of the plaintiff.17

A cause of action has the following essential elements, viz:

(1) A right in favor of the plaintiff by whatever means and under whatever law it arises or is created;

(2) An obligation on the part of the named defendant to respect or not to violate such right; and

(3) Act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action for recovery of damages or other appropriate relief.18

A complaint states a cause of action only when it has the three indispensable elements.19

In the determination of the presence of these elements, inquiry is confined to the four corners of the complaint. Only the statements in the Complaint may be properly considered.20 The absence of any of these elements makes a complaint vulnerable to a Motion to Dismiss on the ground of a failure to state a cause of action.21

After a reading of the allegations contained in petitioner’s Complaint, we are convinced that the same failed to state a cause of action.

In the case at bar, petitioner asserts a legal right in her favor by relying on the Decision of the RTC in Civil Case No. 61327. It can be recalled that the aforesaid case is an action for Annulment filed by Alfredo and petitioner against the respondents to seek annulment of the Deed of Sale, executed by Alfredo in respondents’ favor and covering the herein subject premises. The Complaint was dismissed by the RTC, and subsequently affirmed by the Court of Appeals and by this Court in G.R. No. L-117067.

According to petitioner, while the RTC in Civil Case No. 61327 recognized that the improvements constructed on Alfredo’s lots were deemed as Alfredo’s exclusive and capital property, the court also held that petitioner, as Alfredo’s spouse, has the right to claim reimbursement from the estate of Alfredo. It is argued by petitioner that her husband had no other property, and his only property had been sold to the respondents; hence, she has the legal right to claim for reimbursement from the respondents who are now the owners of the lot and the improvements thereon. In fine, petitioner asseverates that the Complaint cannot be dismissed on the ground of failure to state a cause of action because the respondents have the correlative obligation to pay the value of the improvements.

Petitioner was not able to show that there is an obligation on the part of the respondents to respect or not to violate her right. While we could concede that Civil Case No. 61327 made a reference to the right of the spouse as contemplated in Article 12022 of the Family Code to be reimbursed for the cost of the improvements, the obligation to reimburse rests on the spouse upon whom ownership of the entire property is vested. There is no obligation on the part of the purchaser of the property, in case the property is sold by the owner-spouse.

Indeed, Article 120 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. Thus, 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. The subject property was precisely declared as the exclusive property of Alfredo on the basis of Article 120 of the Family Code.

What is incontrovertible is that the respondents, despite the allegations contained in the Complaint that they are the buyers of the subject premises, are not petitioner’s spouse nor can they ever be deemed as the owner-spouse upon whom the obligation to reimburse petitioner for her costs rested. It is the owner-spouse who has the obligation to reimburse the conjugal partnership or the spouse who expended the acts or efforts, as the case may be. Otherwise stated, respondents do not have the obligation to respect petitioner’s right to be reimbursed.

On this matter, we do not find an act or omission on the part of respondents in violation of petitioner’s rights. The right of the respondents to acquire as buyers the subject premises from Alfredo under the assailed Deed of Sale in Civil Case No. 61327 had been laid to rest. This is because the validity of the Deed of Sale had already been determined and upheld with finality. The same had been similarly admitted by petitioner in her Complaint. It can be said, thus, that respondents’ act of acquiring the subject property by sale was not in violation of petitioner’s rights. The same can also be said of the respondents’ objection to reimburse petitioner. Simply, no correlative obligation exists on the part of the respondents to reimburse the petitioner. Corollary thereto, neither can it be said that their refusal to reimburse constituted a violation of petitioner’s rights. As has been shown in the foregoing, no obligation by the respondents under the law exists. Petitioner’s Complaint failed to state a cause of action against the respondents, and for this reason, the Court of Appeals was not in error in dismissing the same.

WHEREFORE, the Petition is DENIED. The Decision dated 16 August 2004 and the Resolution dated 17 December 2004 of the Court of Appeals in CA G.R. SP. No. 78525 are AFFIRMED. Costs de oficio.

SO ORDERED.

MINITA V. CHICO-NAZARIOAssociate Justice

WE CONCUR:

ARTEMIO V. PANGANIBANChief JusticeChairperson

CONSUELO YNARES-SANTIAGOAssociate Justice MA. ALICIA AUSTRIA-MARTINEZAssociate JusticeROMEO J. CALLEJO, SR.Associate Justice

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ARTEMIO V. PANGANIBANChief Justice

G.R. No. 149615 August 29, 2006

IN RE: PETITION FOR SEPARATION OF PROPERTY ELENA BUENAVENTURA MULLER, Petitioner,vs.HELMUT MULLER, Respondent.

D E C I S I O N

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

x x x x

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:

I

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

x x x x

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.

CONSUELO YNARES-SANTIAGO

Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN

Chief JusticeChairperson

MA. ALICIA AUSTRIA-MARTINEZ, ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIOAssociate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ARTEMIO V. PANGANIBANChief Justice

G.R. NO. 155409 June 8, 2007

VIRGILIO MAQUILAN, petitioner, vs.DITA MAQUILAN, respondent.

D E C I S I O N

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. P500,000.00 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 P1,318,043.36, 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 P50,000.00 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 P75,000.00 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;

x x x x

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

x x x x

(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.

G.R. No. 195670 December 3, 2012

WILLEM BEUMER, Petitioner, vs.AVELINA AMORES, Respondent.

D E C I S I O N

PERLAS-BERNABE, J.:

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

The Factual Antecedents

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

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

By Purchase:

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

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

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

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

By way of inheritance:

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

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

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

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

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

The RTC Ruling

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

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

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

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

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

No pronouncement as to costs.

SO ORDERED.16

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

The CA Ruling

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

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

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

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

The Ruling of the Court

The petition lacks merit.

The issue to be resolved is not of first impression. In In Re: Petition For Separation of Property-Elena Buenaventura Muller v. Helmut Muller23 the Court had already denied a claim for reimbursement of the value of purchased parcels of Philippine land instituted by a foreigner Helmut Muller, against his former Filipina spouse, Elena Buenaventura Muller. It held that Helmut Muller cannot seek reimbursement on the ground of equity where it is clear that he willingly and knowingly bought the property despite the prohibition against foreign ownership of Philippine land24 enshrined under Section 7, Article XII of the 1987 Philippine Constitution which reads:

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

Undeniably, petitioner openly admitted that he "is well aware of the above-cited constitutional prohibition"25 and even asseverated that, because of such prohibition, he

and respondent registered the subject properties in the latter’s name.26 Clearly,

petitioner’s actuations showed his palpable intent to skirt the constitutional prohibition. On the basis of such admission, the Court finds no reason why it should not apply the

Muller ruling and accordingly, deny petitioner’s claim for reimbursement.

As also explained in Muller, the time-honored principle is that he who seeks equity must do equity, and he who comes into equity must come with clean hands. Conversely stated, he who has done inequity shall not be accorded equity. Thus, a litigant may be denied relief by a court of equity on the ground that his conduct has been inequitable, unfair and dishonest, or fraudulent, or deceitful.27

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

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

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

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

Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.1âwphi1

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

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

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

SO ORDERED.

ESTELA M. PERLAS-BERNABEAssociate Justice

WE CONCUR:

ANTONIO T. CARPIOAssociate JusticeChairperson

ARTURO D. BRIONAssociate Justice MARIANO C. DEL CASTILLOAssociate JusticeJOSE PORTUGAL PEREZ

Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

ANTONIO T. CARPIOAssociate JusticeChairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENOChief Justice

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:

I

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 cohabitation 9 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.

Padilla, Kapunan and Hermosisima, Jr., JJ., concur.

Bellosillo, J., is on leave.

G.R. No. 50837 December 28, 1992

NARCISO BUENAVENTURA and MARIA BUENAVENTURA, Petitioners, vs.HON. COURT OF APPEALS and MANOTOK REALTY, INC. Respondents.

MELO, J.:

Before Us is a petition for review on certiorari of a Decision of the Special Former Ninth Division of the Court of Appeals rendered on February 19, 1979, in CA-G.R. No. 08249-SP (Reyes, Sundiam [P], and Cortez, JJ; Rollo, [pp. 22-28) ordering the dismissal of the complaint in Civil Case No. C-6095 filed by herein petitioners against Lorenzo Caiña. Francisco Caiña-Rivera, the National Housing Authority (formerly PHHC). Francisco M. Custodio, and respondent Manotok Realty, Inc., before then Court of First Instance of Rizal, Branch XXXIII, Caloocan City.

The relevant antecedents, as narrated by respondent court, are as follows:

(1) During his lifetime, Julian Caiña, was the occupant and tenant of a parcel of land, owned by the Republic of the Philippines but administered at first by the then Rural Progress Administration and later by the Peoples Homesite and Housing Corporation (PHHC) described as Lot 20 of Consolidated Sub-division plan LRC Pcs-1828, and in Transfer Certificate of Title No. 365557 of the Registry of Deeds of Caloocan City, with an area of 25,776 square meters;

(2) The Republic of the Philippines acquired the aforesaid lot, together with other lots in the Gonzales Estate by Expropriation to be resold to qualified and bonafide tenants-occupants and, to achieve this end, the President of the Philippines, on August 30, 1961, designated the PHHC with the task of selling and transferring the said lots to qualified tenants concerned and/or their lawful heirs;

(3) Julian Caiña had a brother, Justo Caiña. The latter had three children, namely, Emeteria Caiña Buenaventura, Lorenzo Caiña and Francisca Caiña. Emeteria Caiña Buenaventura died as early as July 11, 1937 and was survived by Maria Buenaventura and Narciso Buenaventura, the Private Respondents in this case;

(4) However the Gonzales Estate still had to be sub-divided into lots; but before the subdivision of the property and the subdivision plan thereof could be approved and said lot transferred to Julian Caiña, the latter died on December 17, 1961. Justo Caiña, the brother, died later on May 3, 1962;

(5) Thus, at the time Julian Caiña died, he was survived as his sole heirs, by his brother, Justo Caiña and the latter's children, Lorenzo Caiña and Francisca Caiña: also surviving him were the private respondents Narciso Buenaventura and Maria Buenaventura, the children of Emeteria Buenaventura who died earlier in 1937;

(6) On November 4, 1965, the People Homesite and Housing Corporation executed a 'Deed of Absolutes Sale' over the said lot to Lorenzo Caiña and Francisca Caiña-Rivera, as the sole heirs and successor-in-interest of Julian Caiña for and in consideration of the purchase price of P96,048.80 (a certified xerox copy of the aforesaid Deed is hereto attached as Annex 'A' hereof):

(7) By virtue of the said sale, Lorenzo Caiña and Francisca Caiña-Rivera were issued, on November 5, 1965. Transfer Certificate of Title No. 21013 over the said lot by the Registry of Deeds of Caloocan City (certified xerox copy of the aforesaid title is hereto attached as Annex "B" hereof);

(8) On January 26, 1966, Lorenzo Caiña and Francisca Caiña-Rivera executed a 'Deed of Absolutes Sale' over the said lot in favor of Francisco M. Custodio after which the latter was issued on January 26, 1966. Transfer Certificate of Title No. 21484 of the Registry of Deeds of Caloocan City (a certified xerox copy of the aforesaid Deed of Absolute Sale and Transfer Certificate of tile are hereto attached as Annexes "C" and ''D" hereof respectively);

(9) On January 26, 1966, Francisco Custodio executed a 'Deed of Absolute Sale' over the said lot in favor of the Petitioner for which the latter was issued on January 26, 1966. Transfer Certificate of Title No. 2145 of the Registry of Deeds of Caloocan City (a certified xerox copy of the said Deed of Absolute Sale and Title are hereto attached as Annexes "E" and "F" hereof respectively);

(10) On December 24, 1976, Private Respondents [now petitioners] filed a complaint with the respondent court docketed as Civil Case No. C-6095 entitled 'Narciso Buenaventura and Maria Buenaventura vs. Lorenzo Caiña, Francisca Caiña, National Housing Authority (formerly PHHC). Francisco M. Custodio. Manotok Realty, Inc.' for Annulment of Titles, Contracts and/or Sales. Reconveyance and Damages (a copy of the aforesaid complaint attached hereto as Annex "G" hereof);

(11) The Petitioner [now private respondent Manotok Realty] subsequently filed with the Respondent Court a 'Motion to Dismiss' the aforesaid complaint on the ground of, inter alia, prescription (a copy of the aforesaid motion is hereto attached as Annex "H" hereof);

(12) The Private Respondents, however filed their Opposition to the aforesaid motion of the Petitioner (a copy of the aforesaid opposition is hereto attached as Annex "'1"' hereof);

(13) On July 28, 1977, the Respondent Court issued an Order denying the aforesaid Motion of the Petitioner (a certified xerox copy of the aforesaid order is hereto attached as Annex "J" hereof);

(14) The Petitioner thereafter filed a 'Motion for Reconsideration' of the aforesaid Order, to which the private respondents filed their opposition. The petitioner however, filed its Reply to the aforesaid opposition of the private respondents despite which the respondent court, on July 21, 1978 issued an order denying the aforesaid motion of the petitioner (a copy of each aforesaid motion, opposition and reply are hereto attached as Annexes "K","'L" and "M", hereof respectively; while a certified xerox copy of the aforesaid Order is hereto attached as Annex 'N' hereof). Decision, pp. 1-3: rollo, pp. 22-24.).

Aggrieved by the rules of the trial court, herein private respondents filed a petitioner with the Court of Appeals which later granted the petitioner and ordered the dismissal of the complaint of then private respondents, now herein petitioners, on the ground that their action has already prescribed. A subsequent motion for reconsideration was to no avail.

Hence, the instant petition.

Both sides offer conflicting opinions on the applicability of Article 1410 of the Civil Code of the Philippines.

The Court of Appeals, in directing the dismissal of the complaint filed by they petitioners in the court of origin, held that Article 1410 of the Civil Code on imprescriptibility of actions is not applicable because fraud in the transfer of the property was alleged in petitioner's complaint. The Court of Appeals was, of course, referring to paragraph 20 of the Complaint which reads:

20. That in executing the said 'Deed of Absolute Sale' over Lot 20 in favor of defendants Lorenzo Caiña and Francisca Caiña-Rivera, defendant NHA acted with evident bad faith, gross negligence and carelessness, while defendants Lorenzo Caiña and Francisca Caiña acted with false representations, fraud and deceit and the three defendants connived, conspired and schemed to deprive the plaintiffs of their rights over 1/3 portion of Lot 20 of the Gonzales Estate administered by defendant NHA, to the damage and prejudice of the herein plaintiffs; (Rollo, p. 17).

Respondent court further stated that due to the allegation that fraud was supposedly employed in the execution of the deed of sale and thereafter in the issuance of Transfer Certificate of Title No. 21484, there was created in favor of then private respondents, now petitioners, an implied or constructive trust, such that the action for reconveyance must be filed by the defrauded party within the a period of ten (10) years from the date of issuance of the title, otherwise, the action prescribed. Consequently, respondent court held that because the complaint in Civil Case No. C-6095 was filed only on December 28, 1976 or after more than ten years from the issuance of the transfer certificate of title on January 26, 1966, the assertion for recovery of property based on fraudulent transfer and registration can no longer be entertained (Rollo, pp. 27-28).

Petitioners, on the other hand, argue otherwise. They claim that the action for reconveyance is based both on the grounds of fraud and simulation of contracts, hence, it cannot be made subject to the rule on prescription of action. (Rollo, p. 15).

We agree with respondent court.

Petitioners' allegation in their complaint filed in the court of origin, that fraud was employed in the execution of a deed of sale and subsequently, in the issuance of a transfer certificate of title, renders their action for reconveyance susceptible to prescription either within 4 years or 10 years. In the present case, even if one bends backwards and considers the circumstances alleged as having created an implied or constructive trust, such that the action for reconveyance would prescribed in the longer period of 10 years (Duque vs. Doming, 80 SCRA 654 [1977]; Cerantes vs. Court of Appeals, 76 SCRA 514 [1977]; Jaramil vs. Court of Appeals 78 SCRA 420 [1977]), still petitioners' action is plainly time-barred. Considering that the deed of sale executed by the Philippine Homesite and Housing Corporation in favor of Lorenzo Caiña and Francisca Caiña-Rivera was executed on November 4, 1965 and on the following day, Transfer Certificate of Title No. 21484 was issued in favor of the vendees (private respondents), the party allegedly defrauded in the transaction, herein petitioners, had only 10 years or until September 5, 1975 within which to file the appropriate action. In the instant case, the action was filed only on December 28, 1976, which was beyond the prescribed period set by law.

Verily, the principle on prescription of actions is designed to cover situations such as the case at bar, where there have been a series of transfers to innocent purchasers for value. To set aside these transactions only to accommodate a party who has slept on his rights is anathema to good order.

Independently of the principal of prescription of actions working against petitioners, the doctrine of laches may further be counted against them, which latter tenet finds

application even to imprescriptible actions. Thus, in Rafols vs. Barba (199 SCRA 146 [1982]), We find the following words of wisdom:

In the least, plaintiffs-appellants are already guilty of laches as would effectively derail there cause of action. While it is true that technically, the action to annul a void or inexistent contract does not prescribe, it may nonetheless be barred by laches. As was stated in Nielson & Co. v. Lepanto Consolidated Mining Co., L-21601. December 17, 1966, 18 SCRA [1040]:

The defense of laches applied independently of prescription. Laches is different from the statute of limitations. Prescription is concerned with the fact of delay, whereas laches is concerned with the effect of delay. Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this inequity being founded on the same change in the condition of the property or the relation of the parties. Prescription is statutory; laches is not. Laches applies in equity, whereas prescription is based on fixed time; laches is not.

The essential elements of the principle of laches are all present herein, to wit:

... (1) conduct on the part of the defendant, or one under whom he claims, giving rise to the situation that led to the complaint for which the complaint seeks a remedy: (2) delay in asserting the complainant's rights, the complainant having had knowledge or notice of the defendant's conduct and having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant or the suit is not held barred. (Yusingco vs. Ong Hing Lian, 42 SCRA 589.)

The defendant-appellee purchased the parcel of land in question giving rise to the complaint of herein plaintiffs-appellants. The latter delayed the assertion of their supposed right to annul the sale for a period of over fifteen (15) years despite knowledge or notice of such sale. They had all the opportunity within that period of time to take action to set aside or annul the sale. Defendant-appellee was never apprised of any intention on the part of plaintiffs-appellants to annul the sale until this action was filed. Finally, the defendant-appellee stands to lose the property in question if the suit filed against him by plaintiffs-appellants shall be deemed barred. (at pp. 154-155.)

WHEREFORE, premises considered,. the judgment appealed from is hereby AFFIRMED in toto.

SO ORDERED.

Gutierrez, Jr., (Chairman), Bidin, Davide, Jr., and Romero, JJ., concur.

G.R. No. 146294 July 31, 2006

JOHN ABING, petitioner, vs.JULIET WAEYAN, respondent.

D E C I S I O N

GARCIA, J.:

In this appeal by way of a petition for review under Rule 45 of the Rules of Court, petitioner John Abing (John, hereafter) seeks to set aside the Decision1 dated October 24, 2000 of the Court of Appeals (CA) in CA-G.R. SP No. 48675, reversing that of the Regional Trial Court (RTC) of Benguet, Branch 64, which affirmed an earlier decision of the Municipal Trial Court (MTC) of Mankayan, Benguet in an ejectment suit thereat commenced by the petitioner against the respondent.

In the main, the controversy is between a man and a woman who, during the good old days, lived together as husband and wife without the benefit of marriage. During their cohabitation, they acquired properties. Later, they parted ways, and with it this litigation between them involving one of their common properties.

The facts:

Sometime in 1986, John and respondent Juliet Waeyan (Juliet, for short) met and fell in love with each other. In time, the duo cohabited as husband and wife without the benefit of marriage. Together, the couple bought a 2-storey residential house from one Benjamin Macua which was erected on a lot owned by a certain Alejandro Diño on Aurora Street, Mankayan, Benguet. Consequent to the purchase, the tax declaration of the 2-storey house was transferred in the name of Juliet.

On December 2, 1991, Juliet left for overseas employment in Korea. She would send money to John who deposited the same in their joint bank account.

In 1992, the original 2-storey residential house underwent renovation. To it was annexed a new structure which housed a sari-sari store. This new structure and the sari-sari store thereat are the properties involved in this case.

In 1994, Juliet returned from Korea and continued to live with John. She managed the sari-sari store while John worked as a mine employee of the Lepanto Consolidated Mining, Inc.

In 1995, the relationship between the two turned from bad to worse. Hence, they decided to partition their properties. For the purpose, they executed on October 7, 1995 a Memorandum of Agreement. Unfortunately, the document was left unsigned by the parties although signed by the witnesses thereto. Under their unsigned agreement, John shall leave the couples' dwelling with Juliet paying him the amount of P428,870.00 representing John's share in all their properties. On the same date – October 7, 1995 – Juliet paid John the sum of P232,397.66 by way of partial payment of his share, with the balance of P196,472.34 to be paid by Juliet in twelve monthly installment beginning November 1995.

Juliet, however, failed to make good the balance. On account thereof, John demanded of her to vacate the annex structure housing the sari-sari store. Juliet refused, prompting John to file an ejectment suit against her before the MTC of Mankayan, Benguet.

In his complaint, John alleged that he alone spent for the construction of the annex structure with his own funds and thru money he borrowed from his relatives. In fact, he added that the tax declaration for the structure was under his name. On this premise, John claimed exclusive ownership of the subject structure, which thereby gave him the right to eject Juliet therefrom upon the latter's failure to pay the agreed balance due him under the aforementioned Memorandum of Agreement.

In her answer, Juliet countered that their original house was renovated thru their common funds and that the subject structure annexed thereto was merely an attachment or an extension of their original residential house, hence the same pertained to the two of them in common.

In a decision2 dated March 15, 1997, the MTC, on its finding that the money used in the construction of the structure in question solely came from John, ruled that the same exclusively pertained to the latter, and accordingly ordered Juliet's eviction therefrom, including the sari-sari store thereat, and required her to surrender possession thereof to John, thus:

WHEREFORE, judgment is rendered in favor of the plaintiff (John) and against the defendant (Juliet).

Defendant is hereby ordered to vacate the premises of the store in litigation covered by Tax Declaration No. 96-001-00445 in the name of the Plaintiff and turn over possession thereof to the latter.

Defendant is hereby further ordered to pay the Plaintiff the sum of P2,500.00 a month from the time she withheld possession of the store in litigation in June 1996 until she vacates the same and turn over possession thereof to the Plaintiff.

Defendant is finally ordered, to pay the sum of P5,000.00 to the Plaintiff by way of Attorney's fees; and to pay the costs.

SO ORDERED.

On Juliet's appeal to the RTC, the latter, in its decision of July 29, 1995, affirmed that of the MTC. Undaunted, Juliet then went to the CA in CA-G.R. SP No. 48675.

As stated at the threshold hereof, the CA, in its Decision of October 24, 2000,3 reversed that of the RTC, to wit:

WHEREFORE, the petition is GRANTED. The assailed decision of the Regional Trial Court is hereby reversed and set aside. Petitioner, Juliet Waeyan is entitled to possess the property and maintain therein her business.

SO ORDERED.

Partly says the CA in its reversal disposition:

It is undisputed that the parties lived together as husband and wife without the benefit of marriage from 1986 to 1995 and that they acquired certain properties which must be divided between them upon the termination of their common law relationship.

xxx xxx xxx

. . . their property relations cannot be governed by the provision of the Civil Code on conjugal partnership... but by the rule on co-ownership.

xxx xxx xxx

. . . the parties' share in respect of the properties they have accumulated during their cohabitation shall be equal unless there is proof to the contrary.

To the CA, John's evidence failed to establish that he alone spent for the construction of the annex structure. Hence, the same pertained to both, and being a co-owner herself, Juliet cannot be evicted therefrom, adding that if ever, John's cause of action should have been for a sum of money "because he claims that Juliet still owes him the payment for the extension." According to the CA, ejectment cannot lie against Juliet because Juliet's possession of the premises in dispute was not by virtue of a contract, express or implied, nor did she obtain such possession thru force, intimidation, threat, strategy or stealth.

Hence, John's present recourse, submitting that the CA erred in –

1. not giving effect to the parties' Memorandum of Agreement which should have been binding between them albeit unsigned by both;

2. in holding that the subject premises (annex structure housing the sari-sari store) is owned by the two of them in common;

3. in ruling that the parties should settle their common properties in a separate action for partition even as the community character of the subject premises has not been proven.

We AFFIRM with modification.

Essentially, the issues raised center on the core question of whether or not the property subject of the suit pertains to the exclusive ownership of petitioner, John. Departing from the factual findings of the two courts before it, the CA found that the premises in dispute is owned in common by Juliet and John, the latter having failed to establish by the required quantum of proof that the money spent for the construction thereof solely came from him. Being a co-owner of the same structure, Juliet may not be ejected therefrom.

While the question raised is essentially one of fact, of which the Court normally eschews from, yet, given the conflicting factual findings of the three courts below, the Court shall go by the exception4 to the general rule and proceed to make its own assessment of the evidence.

First and foremost, it is undisputed that the parties hereto lived together as husband and wife from 1986 to 1995 without the benefit of marriage. Neither is it disputed that sometime in December 1991, Juliet left for Korea and worked thereat, sending money to John which the latter deposited in their joint account. In fact, Juliet was still in Korea when the annex structure was constructed in 1992.

Other than John's bare allegation that he alone, thru his own funds and money he borrowed from his relatives, spent for the construction of the annex structure, evidence is wanting to support such naked claim. For sure, John even failed to reveal how much he spent therefor. Neither did he divulge the names of the alleged relatives from whom he made his borrowings, let alone the amount of money he borrowed from them. All

that petitioner could offer by way of reinforcing his claim of spending his own funds and borrowed money in putting up the subject structure was the affidavit executed by a certain Manuel Macaraeg to the effect that petitioner borrowed P30,000.00 from him. Even then, Macaraeg stated in his affidavit that it was sometime in 1990 when John borrowed said amount from him. With the petitioner's own admission that the subject structure was constructed only in 1992, or two years after he borrowed P30,000.00 from Macaraeg, it is even doubtful whether the amount he allegedly borrowed from the latter went into the construction of the structure in dispute. More, it is noted that while petitioner was able to present in evidence the Macaraeg affidavit, he failed to introduce similar affidavits, if any, of his close relatives from whom he claimed to have made similar borrowings. For sure, not a single relative came forward to confirm petitioner's tale. In short, there is a paucity of evidence, testimonial or documentary, to support petitioner's self-serving allegation that the annex structure which housed the sari-sari store was put up thru his own funds and/or money borrowed by him. Sure, petitioner has in his favor the tax declaration covering the subject structure. We have, however, ruled time and again that tax declarations do not prove ownership but at best an indicia of claims of ownership.5 Payment of taxes is not proof of ownership, any more than indicating possession in the concept of an owner.6 Neither tax receipts nor declaration of ownership for taxation purposes are evidence of ownership or of the right to possess realty when not supported by other effective proofs.7

In this connection, Article 147 of the Family Code is instructive. It reads:

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 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.

The law is clear. In the absence, as here, of proofs to the contrary, any property acquired by common-law spouses during their period of cohabitation is presumed to have been obtained thru their joint efforts and is owned by them in equal shares. Their property relationship is governed by the rules on co-ownership. And under this regime, they owned their properties in common "in equal shares." Being herself a co-owner of the structure in question, Juliet, as correctly ruled by the CA, may not be ejected therefrom.

True it is that under Article 4878 of the Civil Code, a co-owner may bring an action for ejectment against a co-owner who takes exclusive possession and asserts exclusive ownership of a common property. It bears stressing, however, that in this case, evidence is totally wanting to establish John's or Juliet's exclusive ownership of the property in question. Neither did Juliet obtain possession thereof by virtue of a contract, express or implied, or thru intimidation, threat, strategy or stealth. As borne by the record, Juliet was in possession of the subject structure and the sari-sari store thereat by virtue of her being a co-owner thereof. As such, she is as much entitled to enjoy its possession and ownership as John.

We, however, disagree with the ruling of the CA that the subject Memorandum of Agreement, being unsigned by Juliet and John, has no binding effect between them.

It is a matter of record that pursuant to said Agreement, Juliet did pay John the amount of P232,397.66, as initial payment for John's share in their common properties, with the balance of P196,472.34 payable in twelve monthly installments beginning November 1995. It is also a matter of record that the Agreement was signed by the witnesses thereto. Hence, the irrelevant circumstances that the Agreement was left unsigned by Juliet and John cannot adversely affect its binding force or effect between them, as evidently, Juliet's initial payment of P232,397.66 to John was in fulfillment of what the parties had agreed upon thereunder. However, and as correctly held by the CA, Juliet's failure to pay John the balance of the latter's share in their common properties could at best give rise to an action for a sum of money against Juliet, or for rescission of the said agreement and not for ejectment.

WHEREFORE, the petition is DENIED and the assailed CA Decision is AFFIRMED, except that portion thereof denying effect to the parties' Memorandum of Agreement for being unsigned by both.

Costs against petitioner.

SO ORDERED.

Puno, Chairperson, Sandoval-Gutierrez, Corona, Azcuna, J.J., concur.

G.R. No. 163744 February 29, 2008

METROPOLITAN BANK AND TRUST CO., petitioner, vs.NICHOLSON PASCUAL a.k.a. NELSON PASCUAL, respondent.

D E C I S I O N

VELASCO, JR., J.:

Respondent Nicholson Pascual and Florencia Nevalga were married on January 19, 1985. During the union, Florencia bought from spouses Clarito and Belen Sering a 250-square meter lot with a three-door apartment standing thereon located in Makati City. Subsequently, Transfer Certificate of Title (TCT) No. S-101473/T-510 covering the purchased lot was canceled and, in lieu thereof, TCT No. 1562831 of the Registry of Deeds of Makati City was issued in the name of Florencia, "married to Nelson Pascual" a.k.a. Nicholson Pascual.

In 1994, Florencia filed a suit for the declaration of nullity of marriage under Article 36 of the Family Code, docketed as Civil Case No. Q-95-23533. After trial, the Regional Trial Court (RTC), Branch 94 in Quezon City rendered, on July 31, 1995, a Decision,2 declaring the marriage of Nicholson and Florencia null and void on the ground of psychological incapacity on the part of Nicholson. In the same decision, the RTC, inter alia, ordered the dissolution and liquidation of the ex-spouses’ conjugal partnership of gains. Subsequent events saw the couple going their separate ways without liquidating their conjugal partnership.

On April 30, 1997, Florencia, together with spouses Norberto and Elvira Oliveros, obtained a PhP 58 million loan from petitioner Metropolitan Bank and Trust Co. (Metrobank). To secure the obligation, Florencia and the spouses Oliveros executed several real estate mortgages (REMs) on their properties, including one involving the lot covered by TCT No. 156283. Among the documents Florencia submitted to procure the loan were a copy of TCT No. 156283, a photocopy of the marriage-nullifying RTC decision, and a document denominated as "Waiver" that Nicholson purportedly executed on April 9, 1995. The waiver, made in favor of Florencia, covered the conjugal properties of the ex-spouses listed therein, but did not incidentally include the lot in question.

Due to the failure of Florencia and the spouses Oliveros to pay their loan obligation when it fell due, Metrobank, on November 29, 1999, initiated foreclosure proceedings under Act No. 3135, as amended, before the Office of the Notary Public of Makati City. Subsequently, Metrobank caused the publication of the notice of sale on three issues of Remate.3 At the auction sale on January 21, 2000, Metrobank emerged as the highest bidder.

Getting wind of the foreclosure proceedings, Nicholson filed on June 28, 2000, before the RTC in Makati City, a Complaint to declare the nullity of the mortgage of the disputed property, docketed as Civil Case No. 00-789 and eventually raffled to Branch 65 of the court. In it, Nicholson alleged that the property, which is still conjugal property, was mortgaged without his consent.

Metrobank, in its Answer with Counterclaim and Cross-Claim,4 alleged that the disputed lot, being registered in Florencia’s name, was paraphernal. Metrobank also asserted having approved the mortgage in good faith.

Florencia did not file an answer within the reglementary period and, hence, was subsequently declared in default.

The RTC Declared the REM Invalid

After trial on the merits, the RTC rendered, on September 24, 2001, judgment finding for Nicholson. The fallo reads:

PREMISES CONSIDERED, the Court renders judgment declaring the real estate mortgage on the property covered by [TCT] No. 156283 of the Registry of Deeds for the City of Makati as well as all proceedings thereon null and void.

The Court further orders defendants [Metrobank and Florencia] jointly and severally to pay plaintiff [Nicholson]:

1. PhP100,000.00 by way of moral damages;

2. PhP75,000.00 by way of attorney’s fees; and

3. The costs.

SO ORDERED.5

Even as it declared the invalidity of the mortgage, the trial court found the said lot to be conjugal, the same having been acquired during the existence of the marriage of Nicholson and Florencia. In so ruling, the RTC invoked Art. 116 of the Family Code, providing that "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." To the trial court,

Metrobank had not overcome the presumptive conjugal nature of the lot. And being conjugal, the RTC concluded that the disputed property may not be validly encumbered by Florencia without Nicholson’s consent.

The RTC also found the deed of waiver Florencia submitted to Metrobank to be fatally defective. For let alone the fact that Nicholson denied executing the same and that the signature of the notarizing officer was a forgery, the waiver document was allegedly executed on April 9, 1995 or a little over three months before the issuance of the RTC decision declaring the nullity of marriage between Nicholson and Florencia.

The trial court also declared Metrobank as a mortgagee in bad faith on account of negligence, stating the observation that certain data appeared in the supporting contract documents, which, if properly scrutinized, would have put the bank on guard against approving the mortgage. Among the data referred to was the date of execution of the deed of waiver.

The RTC dismissed Metrobank’s counterclaim and cross-claim against the ex-spouses.

Metrobank’s motion for reconsideration was denied. Undeterred, Metrobank appealed to the Court of Appeals (CA), the appeal docketed as CA-G.R. CV No. 74874.

The CA Affirmed with Modification the RTC’s Decision

On January 28, 2004, the CA rendered a Decision affirmatory of that of the RTC, except for the award therein of moral damages and attorney’s fees which the CA ordered deleted. The dispositive portion of the CA’s Decision reads:

WHEREFORE, premises considered, the appealed decision is hereby AFFIRMED WITH MODIFICATION with respect to the award of moral damages and attorney’s fees which is hereby DELETED.

SO ORDERED.6

Like the RTC earlier held, the CA ruled that Metrobank failed to overthrow the presumption established in Art. 116 of the Family Code. And also decreed as going against Metrobank was Florencia’s failure to comply with the prescriptions of the succeeding Art. 124 of the Code on the disposition of conjugal partnership property. Art. 124 states:

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 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 disposition or encumbrance without authority of the court or 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.

As to the deletion of the award of moral damages and attorney’s fees, the CA, in gist, held that Metrobank did not enter into the mortgage contract out of ill-will or for some fraudulent purpose, moral obliquity, or like dishonest considerations as to justify damages.

Metrobank moved but was denied reconsideration by the CA.

Thus, Metrobank filed this Petition for Review on Certiorari under Rule 45, raising the following issues for consideration:

a. Whether or not the [CA] erred in declaring subject property as conjugal by applying Article 116 of the Family Code.

b. Whether or not the [CA] erred in not holding that the declaration of nullity of marriage between the respondent Nicholson Pascual and Florencia Nevalga ipso facto dissolved the regime of community of property of the spouses.

c. Whether or not the [CA] erred in ruling that the petitioner is an innocent purchaser for value.7

Our Ruling

A modification of the CA’s Decision is in order.

The Disputed Property is Conjugal

It is Metrobank’s threshold posture that Art. 160 of the Civil Code providing that "[a]ll property of the marriage is presumed to belong to the conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife," applies. To Metrobank, Art. 116 of the Family Code could not be of governing application inasmuch as Nicholson and Florencia contracted marriage before the effectivity of the Family Code

on August 3, 1988. Citing Manongsong v. Estimo,8 Metrobank asserts that the presumption of conjugal ownership under Art. 160 of the Civil Code applies when there is proof that the property was acquired during the marriage. Metrobank adds, however, that for the presumption of conjugal ownership to operate, evidence must be adduced to prove that not only was the property acquired during the marriage but that conjugal funds were used for the acquisition, a burden Nicholson allegedly failed to discharge.

To bolster its thesis on the paraphernal nature of the disputed property, Metrobank cites Francisco v. Court of Appeals9 and Jocson v. Court of Appeals,10 among other cases, where this Court held that a property registered in the name of a certain person with a description of being married is no proof that the property was acquired during the spouses’ marriage.

On the other hand, Nicholson, banking on De Leon v. Rehabilitation Finance Corporation11 and Wong v. IAC,12 contends that Metrobank failed to overcome the legal presumption that the disputed property is conjugal. He asserts that Metrobank’s arguments on the matter of presumption are misleading as only one postulate needs to be shown for the presumption in favor of conjugal ownership to arise, that is, the fact of acquisition during marriage. Nicholson dismisses, as inapplicable, Francisco and Jocson, noting that they are relevant only when there is no indication as to the exact date of acquisition of the property alleged to be conjugal.

As a final point, Nicholson invites attention to the fact that Metrobank had virtually recognized the conjugal nature of the property in at least three instances. The first was when the bank lumped him with Florencia in Civil Case No. 00-789 as co-mortgagors and when they were referred to as "spouses" in the petition for extrajudicial foreclosure of mortgage. Then came the published notice of foreclosure sale where Nicholson was again designated as co-mortgagor. And third, in its demand-letter13 to vacate the disputed lot, Metrobank addressed Nicholson and Florencia as "spouses," albeit the finality of the decree of nullity of marriage between them had long set in.

We find for Nicholson.

First, while Metrobank is correct in saying that Art. 160 of the Civil Code, not Art. 116 of the Family Code, is the applicable legal provision since the property was acquired prior to the enactment of the Family Code, it errs in its theory that, before conjugal ownership could be legally presumed, there must be a showing that the property was acquired during marriage using conjugal funds. Contrary to Metrobank’s submission, the Court did not, in Manongsong,14 add the matter of the use of conjugal funds as an essential requirement for the presumption of conjugal ownership to arise. Nicholson is correct in pointing out that only proof of acquisition during the marriage is needed to raise the presumption that the property is conjugal. Indeed, if proof on the use of conjugal is still required as a necessary condition before the presumption can arise, then the legal presumption set forth in the law would veritably be a superfluity. As we stressed in Castro v. Miat:

Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the marriage is presumed to be conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife." This article does not require proof that the property was acquired with funds of the partnership. The presumption applies even when the manner in which the property was acquired does not appear.15 (Emphasis supplied.)

Second, Francisco and Jocson do not reinforce Metrobank’s theory. Metrobank would thrust on the Court, invoking the two cases, the argument that the registration of the property in the name of "Florencia Nevalga, married to Nelson Pascual" operates to describe only the marital status of the title holder, but not as proof that the property was acquired during the existence of the marriage.

Metrobank is wrong. As Nicholson aptly points out, if proof obtains on the acquisition of the property during the existence of the marriage, then the presumption of conjugal ownership applies. The correct lesson of Francisco and Jocson is that proof of acquisition during the marital coverture is a condition sine qua non for the operation of the presumption in favor of conjugal ownership. When there is no showing as to when the property was acquired by the spouse, the fact that a title is in the name of the spouse is an indication that the property belongs exclusively to said spouse.16

The Court, to be sure, has taken stock of Nicholson’s arguments regarding Metrobank having implicitly acknowledged, thus being in virtual estoppel to question, the conjugal ownership of the disputed lot, the bank having named the former in the foreclosure proceedings below as either the spouse of Florencia or her co-mortgagor. It is felt, however, that there is no compelling reason to delve into the matter of estoppel, the same having been raised only for the first time in this petition. Besides, however Nicholson was designated below does not really change, one way or another, the classification of the lot in question.

Termination of Conjugal Property Regime doesnot ipso facto End the Nature of Conjugal Ownership

Metrobank next maintains that, contrary to the CA’s holding, Art. 129 of the Family Code is inapplicable. Art. 129 in part reads:

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

x x x x

(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.

Apropos the aforequoted provision, Metrobank asserts that the waiver executed by Nicholson, effected as it were before the dissolution of the conjugal property regime, vested on Florencia full ownership of all the properties acquired during the marriage.

Nicholson counters that the mere declaration of nullity of marriage, without more, does not automatically result in a regime of complete separation when it is shown that there was no liquidation of the conjugal assets.

We again find for Nicholson.

While the declared nullity of marriage of Nicholson and Florencia severed their marital bond and dissolved the conjugal partnership, the character of the properties acquired before such declaration continues to subsist as conjugal properties until and after the liquidation and partition of the partnership. This conclusion holds true whether we apply Art. 129 of the Family Code on liquidation of the conjugal partnership’s assets and liabilities which is generally prospective in application, or Section 7, Chapter 4, Title IV, Book I (Arts. 179 to 185) of the Civil Code on the subject, Conjugal Partnership of Gains. For, the relevant provisions of both Codes first require the liquidation of the conjugal properties before a regime of separation of property reigns.

In Dael v. Intermediate Appellate Court, we ruled that pending its liquidation following its dissolution, the conjugal partnership of gains is converted into an implied ordinary co-ownership among the surviving spouse and the other heirs of the deceased.17

In this pre-liquidation scenario, Art. 493 of the Civil Code shall govern the property relationship between the former spouses, where:

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. (Emphasis supplied.)

In the case at bar, Florencia constituted the mortgage on the disputed lot on April 30, 1997, or a little less than two years after the dissolution of the conjugal partnership on July 31, 1995, but before the liquidation of the partnership. Be that as it may, what governed the property relations of the former spouses when the mortgage was given is the aforequoted Art. 493. Under it, Florencia has the right to mortgage or even sell her one-half (1/2) undivided interest in the disputed property even without the consent of Nicholson. However, the rights of Metrobank, as mortgagee, are limited only to the 1/2 undivided portion that Florencia owned. Accordingly, the mortgage contract insofar as it covered the remaining 1/2 undivided portion of the lot is null and void, Nicholson not having consented to the mortgage of his undivided half.

The conclusion would have, however, been different if Nicholson indeed duly waived his share in the conjugal partnership. But, as found by the courts a quo, the April 9, 1995 deed of waiver allegedly executed by Nicholson three months prior to the dissolution of the marriage and the conjugal partnership of gains on July 31, 1995 bore his forged signature, not to mention that of the notarizing officer. A spurious deed of waiver does not transfer any right at all, albeit it may become the root of a valid title in the hands of an innocent buyer for value.

Upon the foregoing perspective, Metrobank’s right, as mortgagee and as the successful bidder at the auction of the lot, is confined only to the 1/2 undivided portion thereof heretofore pertaining in ownership to Florencia. The other undivided half belongs to Nicholson. As owner pro indiviso of a portion of the lot in question, Metrobank may ask for the partition of the lot and its property rights "shall be limited to the portion which may be allotted to [the bank] in the division upon the termination of the co-ownership."18 This disposition is in line with 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.19

In view of our resolution on the validity of the auction of the lot in favor of Metrobank, there is hardly a need to discuss at length whether or not Metrobank was a mortgagee in good faith. Suffice it to state for the nonce that where the mortgagee is a banking institution, the general rule that a purchaser or mortgagee of the land need not look beyond the four corners of the title is inapplicable.20 Unlike private individuals, it behooves banks to exercise greater care and due diligence before entering into a mortgage contract. The ascertainment of the status or condition of the property offered as security and the validity of the mortgagor’s title must be standard and indispensable part of the bank’s operation.21 A bank that failed to observe due diligence cannot be accorded the status of a bona fide mortgagee,22 as here.

But as found by the CA, however, Metrobank’s failure to comply with the due diligence requirement was not the result of a dishonest purpose, some moral obliquity or breach

of a known duty for some interest or ill-will that partakes of fraud that would justify damages.

WHEREFORE, the petition is PARTLY GRANTED. The appealed Decision of the CA dated January 28, 2004, upholding with modification the Decision of the RTC, Branch 65 in Makati City, in Civil Case No. 00-789, is AFFIRMED with the MODIFICATION that the REM over the lot covered by TCT No. 156283 of the Registry of Deeds of Makati City is hereby declared valid only insofar as the pro indiviso share of Florencia thereon is concerned.

As modified, the Decision of the RTC shall read:

PREMISES CONSIDERED, the real estate mortgage on the property covered by TCT No. 156283 of the Registry of Deeds of Makati City and all proceedings thereon are NULL and VOID with respect to the undivided 1/2 portion of the disputed property owned by Nicholson, but VALID with respect to the other undivided 1/2 portion belonging to Florencia.

The claims of Nicholson for moral damages and attorney’s fees are DENIED for lack of merit.

No pronouncement as to costs.

SO ORDERED.

G.R. No. 178044 January 19, 2011

ALAIN M. DIÑO , Petitioner, vs.MA. CARIDAD L. DIÑO, Respondent.

D E C I S I O N

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.1avvphil Under Article 40, "[t]he absolute nullity of a previous marriage may be invoked for 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.

G.R. No. 202370 September 23, 2013

JUAN SEVILLA SALAS, JR., Petitioner, vs.EDEN VILLENA AGUILA, Respondent.

D E C I S I O N

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 P200,000.00; and (3) motor vehicles, specifically Honda City and Toyota Tamaraw FX(collectively, "Waived Properties"). Thus, Salas contended that the conjugal properties were deemed partitioned.

The Ruling of the Regional Trial Court

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

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

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

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

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

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

SO ORDERED.13

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

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

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

Hence, Salas filed an appeal with the CA.

The Ruling of the Court of Appeals

On 16 March 2012, the CA affirmed the order of the RTC.15 The CA ruled that 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.1âwphi1 Both the RTC and the CA agreed that the Discovered Properties registered in Salas’ name were acquired during his marriage with Aguila. The TCTs of the Discovered Properties were entered on 2 July 1999 and 29 September 2003, or during the validity of Salas and 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.

G.R. No. 202932 October 23, 2013

EDILBERTO U. VENTURA JR., Petitioner, vs.SPOUSES PAULINO and EVANGELINE ABUDA, Respondents.

D E C I S I O N

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 P195,259.52 for Unit D-9 as shown by the 37 pieces of receipts x x x and the aggregate amount of P188,596.09 for Unit D-10, as evidenced by 36 receipts x x x.15

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

Aggrieved, Edilberto filed an appeal before the CA.

The Ruling of the CA

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

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

SO ORDERED.18

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

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

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

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

The CA applied our ruling in Saguid v. Court of Appeals,19 and held that the foregoing provision applies "even if the cohabitation or the acquisition of the property occurred before the effectivity of the Family Code."20 The CA found that Edilberto failed to prove that Socorro contributed to the purchase of the Vitas and Delpan properties. Edilberto was unable to provide any documentation evidencing 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.1âwphi1 The phrase "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.1âwphi1 On the other hand, Edilberto failed to show any evidence showing Socorro s 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.

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 herebyrendered —

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 store 10 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.

G.R. No. 137650 April 12, 2000

GUILLERMA TUMLOS, petitioner, vs.SPOUSES MARIO FERNANDEZ and LOURDES FERNANDEZ, respondents.

PANGANIBAN, J.:

Under Article 148 of the Family Code, a man and a woman who are not legally capacitated to marry each other, but who nonetheless live together conjugally, may be deemed co-owners of a property acquired during the cohabitation only upon proof that each made an actual contribution to its acquisition. Hence, mere cohabitation without proof of contribution will not result in a co-ownership.

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the November 19, 1998 Decision of the Court of Appeals 1 (CA), which reversed the October 7, 1997 Order of the Regional Trial Court (RTC). 2 The dispositive part of the CA Decision reads:

WHEREFORE, the instant petition is GRANTED, and the questioned orders of the court a quo dated October 7, 1997 and November 11, 1997, are hereby REVERSED and SET ASIDE. The judgment of the court a quo dated June 5, 1997 is hereby REINSTATED. Costs against the private respondents.3

The assailed Order of the RTC disposed as follows:

Wherefore, the decision of this Court rendered on June 5, 1997 affirming in toto the appealed judgment of the [MTC] is hereby reconsidered and a new one is entered reversing said decision of the [MTC] and dismissing the complaint in the above-entitled case. 4

Petitioner also assails the February 14, 1999 CA Resolution denying the Motion for Reconsideration.

The Facts

The Court of Appeals narrates the facts as follows:

[Herein respondents] were the plaintiffs in Civil Case No. 6756, an action for ejectment filed before Branch 82 of the MTC of Valenzuela, Metro Manila against [herein Petitioner] Guillerma Tumlos, Toto Tumlos, and Gina Tumlos. In their complaint dated July 5, 1996, the said spouses alleged that they are the absolute owners of an apartment building located at ARTE SUBDIVISION III, Lawang Bato, Valenzuela, Metro Manila; that through tolerance they had allowed the defendants-private respondents to occupy the apartment building for the last seven (7) years, since 1989, without the payment of any rent; that it was agreed upon that after a few months, defendant Guillerma Tumlos will pay P1,600.00 a month while the other defendants promised to pay P1,000.00 a month, both as rental, which agreement was not complied with by the said defendants; that they have demanded several times [that] the defendants . . . vacate the premises, as they are in need of the property for the construction of a new building; and that they have also demanded payment of P84,000.00 from Toto and Gina Tumlos representing rentals for seven (7) years and payment of P143,600.00 from Guillerma Tumlos as unpaid rentals for seven (7) years, but the said demands went unheeded. They then prayed that the defendants be ordered to vacate the property in question and to pay the stated unpaid rentals, as well as to jointly pay P30,000.00 in attorney’s fees.

[Petitioner] Guillerma Tumlos was the only one who filed an answer to the complaint. She averred therein that the Fernandez spouses had no cause of action against her, since she is a co-owner of the subject premises as evidenced by a Contract to Sell wherein it was stated that she is a co-vendee of the property in question together with [Respondent] Mario Fernandez. She then asked for the dismissal of the complaint.

After an unfruitful preliminary conference on November 15, 1996, the MTC required the parties to submit their affidavits and other evidence on the factual issues defined in their pleadings within ten (10) days from receipt of such order, pursuant to section 9 of the Revised Rule on Summary Procedure. [Petitioner] Guillerma Tumlos submitted her affidavit/position paper on November 29, 1996, while the [respondents] filed their position paper on December 5, 1996, attaching thereto their marriage contract, letters of demand to the defendants, and the Contract to Sell over the disputed property. The MTC thereafter promulgated its judgment on January 22, 1997[.]

x x x x x x x x x

Upon appeal to the [RTC], [petitioner and the two other] defendants alleged in their memorandum on appeal that [Respondent] Mario Fernandez and [Petitioner] Guillerma had an amorous relationship, and that they acquired the property in question as their "love nest." It was further alleged that they lived together in the said apartment building with their two (2) children for around ten (10) years, and that Guillerma administered the property by collecting rentals from the lessees of the other apartments, until she discovered that [Respondent Mario] deceived her as to the annulment of his marriage. It

was also during the early part of 1996 when [Respondent Mario] accused her of being unfaithful and demonstrated his baseless [jealousy].

In the same memorandum, [petitioner and the two other] defendants further averred that it was only recently that Toto Tumlos was temporarily accommodated in one of the rooms of the subject premises while Gina Tumlos acted as a nanny for the children. In short, their presence there [was] only transient and they [were] not tenants of the Fernandez spouses.

On June 5, 1997, the [RTC] rendered a decision affirming in toto the judgment of the MTC.

The [petitioner and the two other defendants] seasonably filed a motion for reconsideration on July 3, 1997, alleging that the decision of affirmance by the RTC was constitutionally flawed for failing to point out distinctly and clearly the findings of facts and law on which it was based vis-à-vis the statements of issues they have raised in their memorandum on appeal. They also averred that the Contract to Sell presented by the plaintiffs which named the buyer as "Mario P. Fernandez, of legal age, married to Lourdes P. Fernandez," should not be given credence as it was falsified to appear that way. According to them, the Contract to Sell originally named "Guillerma Fernandez" as the spouse of [Respondent Mario]. As found by the [RTC] in its judgment, a new Contract to Sell was issued by the sellers naming the [respondents] as the buyers after the latter presented their marriage contract and requested a change in the name of the vendee-wife. Such facts necessitate the conclusion that Guillerma was really a co-owner thereof, and that the [respondents] manipulated the evidence in order to deprive her of her rights to enjoy and use the property as recognized by law.

x x x x x x x x x

The [RTC], in determining the question of ownership in order to resolve the issue of possession, ruled therein that the Contract to Sell submitted by the Fernandez spouses appeared not to be authentic, as there was an alteration in the name of the wife of [Respondent] Mario Fernandez. Hence, the contract presented by the [respondents] cannot be given any weight. The court further ruled that Guillerma and [Respondent Mario] acquired the property during their cohabitation as husband and wife, although without the benefit of marriage. From such findings, the court concluded that [Petitioner] Guillerma Tumlos was a co-owner of the subject property and could not be ejected therefrom.

The [respondents] then filed a motion for reconsideration of the order of reversal, but the same was denied by the [RTC]. 5

As earlier stated, the CA reversed the RTC. Hence, this Petition filed by Guillerma Tumlos only. 6

Ruling of the Court of Appeals

The CA rejected petitioner's claim that she and Respondent Mario Fernandez were co-owners of the disputed property. The CA ruled:

From the inception of the instant case, the only defense presented by private respondent Guillerma is her right as a co-owner of the subject property[.]

x x x x x x x x x

This claim of co-ownership was not satisfactorily proven by Guillerma, as correctly held by the trial court. No other evidence was presented to validate such claim, except for the said affidavit/position paper. As previously stated, it was only on appeal that Guillerma alleged that she cohabited with the petitioner-husband without the benefit of marriage, and that she bore him two (2) children. Attached to her memorandum on appeal are the birth certificates of the said children. Such contentions and documents should not have been considered by the . . . (RTC), as they were not presented in her affidavit/position paper before the trial court (MTC).

x x x x x x x x x

However, even if the said allegations and documents could be considered, the claim of co-ownership must still fail. As [herein Respondent] Mario Fernandez is validly married to [Respondent] Lourdes Fernandez (as per Marriage Contract dated April 27, 1968, p. 45, Original Record), Guillerma and Mario are not capacitated to marry each other. Thus, the property relations governing their supposed cohabitation is that found in Article 148 of Executive Order No. 209, as amended, otherwise known as the Family Code of the Philippines[.]

x x x x x x x x x

It is clear that actual contribution is required by this provision, in contrast to Article 147 of the Family Code 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 (Agapay v. Palang, 276 SCRA 340). The care given by one party [to] the home, children, and household, or spiritual or moral inspiration provided to the other, is not included in Article 148 (Handbook on the Family Code of the Philippines by Alicia V. Sempio-Diy, 1988 ed., p. 209). Hence, if actual contribution of the party is not proved, there will be no co-ownership and no

presumption of equal shares (Agapay, supra at p. 348, citing Commentaries and Jurisprudence on the Civil Code of the Philippines Volume I by Arturo M. Tolentino, 1990 ed., p. 500).

In the instant case, no proof of actual contribution by Guillerma Tumlos in the purchase of the subject property was presented. Her only evidence was her being named in the Contract to Sell as the wife of [Respondent] Mario Fernandez. Since she failed to prove that she contributed money to the purchase price of the subject apartment building, We find no basis to justify her co-ownership with [Respondent Mario]. The said property is thus presumed to belong to the conjugal partnership property of Mario and Lourdes Fernandez, it being acquired during the subsistence of their marriage and there being no other proof to the contrary (please see Article 116 of the Family Code).

The court a quo (RTC) also found that [Respondent Mario] has two (2) children with Guillerma who are in her custody, and that to eject them from the apartment building would be to run counter with the obligation of the former to give support to his minor illegitimate children, which indispensably includes dwelling. As previously discussed, such finding has no leg to stand on, it being based on evidence presented for the first time on appeal.

x x x x x x x x x

Even assuming arguendo that the said evidence was validly presented, the RTC failed to consider that the need for support cannot be presumed. Article 203 of the Family Code expressly provides that the obligation to give support shall be demandable from the time the person who has a right to receive the same needs it for maintenance, but it shall not be paid except from the date of judicial or extrajudicial demand. . . .1âwphi1.nêt

In contrast to the clear pronouncement of the Supreme Court, the RTC instead presumed that Guillerma and her children needed support from [Respondent Mario]. Worse, it relied on evidence not properly presented before the trial court (MTC).

With regard to the other [defendants], Gina and Toto Tumlos, a close perusal of the records shows that they did not file any responsive pleading. Hence, judgment may be rendered against them as may be warranted by the facts alleged in the complaint and limited to what is prayed for therein, as provided for in Section 6 of the Revised Rules on Summary Procedure. There was no basis for the public respondent to dismiss the complaint against them. 7 (emphasis in the original)

The Issues

In her Memorandum, petitioner submits the following issues for the consideration of the Court:

I. The Court of Appeals gravely erred and abused its discretion in not outrightly dismissing the petition for review filed by respondents.

II. The Court of Appeals erred in finding that petitioner is not the co-owner of the property in litis.

III. Corollary thereto, the Court of Appeals erred in applying Art. 148 of the Family Code in the case at bar.

IV. The Court of Appeals erred in disregarding the substantive right of support vis-à-vis the remedy of ejectment resorted to by respondents. 8

In resolving this case, we shall answer two questions: (a) Is the petitioner a co-owner of the property? (b) Can the claim for support bar this ejectment suit? We shall also discuss these preliminary matters: (a) whether the CA was biased in favor of respondents and (b) whether the MTC had jurisdiction over the ejectment suit.

The Court’s Ruling

The Petition has no merit.

Preliminary Matters

Petitioner submits that the CA exhibited partiality in favor of herein respondents. This bias, she argues, is manifest in the following:

1. The CA considered the respondents’ Petition for Review 9 despite their failure to attach several pleadings as well as the explanation for the proof of service, despite the clear mandate of Section 11 10 of Rule 13 of the Revised Rules of Court and despite the ruling in Solar Team Entertainment, Inc. v. Ricafort. 11

2. It allowed respondents to submit the pleadings that were not attached.

3. It considered respondents' Reply dated May 20, 1998, which had allegedly been filed out of time.

4. It declared that the case was submitted for decision without first determining whether to give due course to the Petition, pursuant to Section 6, Rule 42 of the Rules of Court. 12

The CA, for its part, succinctly dismissed these arguments in this wise:

It is too late in the day now to question the alleged procedural error after we have rendered the decision. More importantly, when the private respondent filed their comment to the petition on April 26, 1998, they failed to question such alleged procedural error. Neither have they questioned all the resolutions issued by the Court after their filing of such comment. They should, therefore, be now considered in estoppel to question the same. 13

We agree with the appellate court. Petitioner never raised these matters before the CA. She cannot be allowed now to challenge its Decision on grounds of alleged technicalities being belatedly raised as an afterthought. In this light, she cannot invoke Solar 14 because she never raised this issue before the CA.

More important, we find it quite sanctimonious indeed on petitioner’s part to rely, on the one hand, on these procedural technicalities to overcome the appealed Decision and, on the other hand, assert that the RTC may consider the new evidence she presented for the first time on appeal. Such posturing only betrays the futility of petitioner's assertion, if not its absence of merit.

One other preliminary matter. Petitioner implies that the court of origin, the Municipal Trial Court (MTC), did not have jurisdiction over the "nature of the case," alleging that the real question involved is one of ownership. Since the issue of possession cannot be settled without passing upon that of ownership, she maintains that the MTC should have dismissed the case.

This contention is erroneous. The issue of ownership may be passed upon by the MTC to settle the issue of possession. 15 Such disposition, however, is not final insofar as the issue of ownership is concerned, 16 which may be the subject of another proceeding brought specifically to settle that question.

Having resolved these preliminary matters, we now move on to petitioner’s substantive contentions.

First Issue:

Petitioner as Co-owner

Petitioner’s central theory and main defense against respondents' action for ejectment is her claim of co-ownership over the property with Respondent Mario Fernandez. At the first instance before the MTC, she presented a Contract to Sell indicating that she was his spouse. The MTC found this document insufficient to support her claim. The RTC, however, after considering her allegation that she had been cohabiting with Mario Fernandez as shown by evidence presented before it, 17 ruled in her favor.

On the other hand, the CA held that the pieces of evidence adduced before the RTC could no longer be considered because they had not been submitted before the MTC. Hence, the appellate court concluded that "[t]he claim of co-ownership was not satisfactorily proven . . ." 18

We agree with the petitioner that the RTC did not err in considering the evidence presented before it. Nonetheless, we reject her claim that she was a co-owner of the disputed property.

Evidence Presented onAppeal Before the RTC

In ruling that the RTC erred in considering on appeal the evidence presented by petitioner, the CA relied on the doctrine that issues not raised during trial could not be considered for the first time during appeal. 19

We disagree. In the first place, there were no new matters or issues belatedly raised during the appeal before the RTC. The defense invoked by petitioner at the very start was that she was a co-owner. To support her claim, she presented a Contract to Sell dated November 14, 1986, which stated that Mario Fernandez was legally married to her. The allegation that she was cohabiting with him was a mere elaboration of her initial theory.

In the second place, procedural rules are generally premised on considerations of fair play. Respondents never objected when the assailed evidence was presented before the RTC. Thus, they cannot claim unfair surprise or prejudice.

Petitioner Not a Co-Owner UnderArticle 144 of the Civil Code

Even considering the evidence presented before the MTC and the RTC, we cannot accept petitioner's submission that she is a co-owner of the disputed property pursuant to Article 144 of the Civil Code. 20 As correctly held by the CA, the applicable law is not Article 144 of the Civil Code, but Article 148 of the Family Code which provides:

Art. 148. In cases of cohabitation not falling under the preceding Article,21 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.

Art. 144 of the Civil Code applies only to a relationship between a man and a woman who are not incapacitated to marry each other, 22 or to one in which the marriage of the parties is void 23 from the beginning. 24 It does not apply to a cohabitation that amounts to adultery or concubinage, for it would be absurd to create a co-ownership where there exists a prior conjugal partnership or absolute community between the man and his lawful wife. 25

Based on evidence presented by respondents, as well as those submitted by petitioner herself before the RTC, it is clear that Mario Fernandez was incapacitated to marry petitioner because he was legally married to Lourdes Fernandez. It is also clear that, as readily admitted by petitioner, she cohabited with Mario in a state of concubinage. Therefore, Article 144 of the Civil Code is inapplicable.

As stated above, the relationship between petitioner and Respondent Mario Fernandez is governed by Article 148 of the Family Code. Justice Alicia V. Sempio-Diy points out 26 that "[t]he Family Code has filled the hiatus in Article 144 of the Civil Code by expressly regulating in its Article 148 the property relations of couples living in a state of adultery or concubinage.

Hence, petitioner’s argument — that the Family Code is inapplicable because the cohabitation and the acquisition of the property occurred before its effectivity — deserves scant consideration. Suffice it to say that the law itself states that it can be applied retroactively if it does not prejudice vested or acquired rights. 27 In this case, petitioner failed to show any vested right over the property in question. Moreover, to resolve similar issues, we have applied Article 148 of the Family Code retroactively. 28

No Evidence of Actual JointContribution

Another consideration militates against petitioner’s claim that she is a co-owner of the property. In Agapay, 29 the Court ruled:

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 the 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. (emphasis ours)

In this case, petitioner fails to present any evidence that she had made an actual contribution to purchase the subject property. Indeed, she anchors her claim of co-ownership merely on her cohabitation with Respondent Mario Fernandez.

Likewise, her claim of having administered the property during the cohabitation is unsubstantiated. In any event, this fact by itself does not justify her claim, for nothing in Article 148 of the Family Code provides that the administration of the property amounts to a contribution in its acquisition.

Clearly, there is no basis for petitioner’s claim of co-ownership. The property in question belongs to the conjugal partnership of respondents. Hence, the MTC and the CA were correct in ordering the ejectment of petitioner from the premises.

Second Issue:

Support versus Ejectment

Petitioner contends that since Respondent Mario Fernandez failed to repudiate her claim regarding the filiation of his alleged sons, Mark Gil and Michael Fernandez, his silence on the matter amounts to an admission. Arguing that Mario is liable for support, she advances the theory that the children’s right to support, which necessarily includes shelter, prevails over the right of respondents to eject her.

We disagree. It should be emphasized that this is an ejectment suit whereby respondents seek to exercise their possessory right over their property. It is summary in character and deals solely with the issue of possession of the property in dispute. Here, it has been shown that they have a better right to possess it than does the petitioner, whose right to possess is based merely on their tolerance.1âwphi1.nêt

Moreover, Respondent Mario Fernandez' alleged failure to repudiate petitioner's claim of filiation is not relevant to the present case.1âwphi1 Indeed, it would be highly improper for us to rule on such issue. Besides, it was not properly taken up below. 30 In any event, Article 298 31 of the Civil Code requires that there should be an extrajudicial demand. 32 None was made here. The CA was correct when it said:

Even assuming arguendo that the said evidence was validly presented, the RTC failed to consider that the need for support cannot be presumed. Article [298] of the [New Civil Code] expressly provides that the obligation to give support shall be demandable from the time the person who has a right to receive the same need it for maintenance, but it shall not be paid except from the date of judicial and extrajudicial demand. 33

WHEREFORE, the Petition is DENIED and the appealed Decision AFFIRMED. Costs against petitioner.

G.R. No. 136803 June 16, 2000EUSTAQUIO MALLILIN, JR., petitioner, vs.MA. ELVIRA CASTILLO, respondent.

MENDOZA, J.:

This is a petition for review of the amended decision1 of the Court of Appeals dated May 7, 1998 in CA G.R. CV No. 48443 granting respondent's motion for reconsideration of its decision dated November 7, 1996, and of the resolution dated December 21, 1998 denying petitioner's motion for reconsideration.

The factual and procedural antecedents are as follows:

On February 24, 1993, petitioner Eustaquio Mallilin, Jr. filed a complaint2 for "Partition and/or Payment of Co-Ownership Share, Accounting and Damages" against respondent Ma. Elvira Castillo. The complaint, docketed as Civil Case No. 93-656 at the Regional Trial Court in Makati City, alleged that petitioner and respondent, both married and with children, but separated from their respective spouses, cohabited after a brief courtship sometime in 1979 while their respective marriages still subsisted. During their union, they set up the Superfreight Customs Brokerage Corporation, with petitioner as president and chairman of the board of directors, and respondent as vice-president and treasurer. The business flourished and petitioner and respondent acquired real and personal properties which were registered solely in respondent's name. In 1992, due to irreconcilable differences, the couple separated. Petitioner demanded from respondent his share in the subject properties, but respondent refused alleging that said properties had been registered solely in her name.

In her Amended Answer,3 respondent admitted that she engaged in the customs brokerage business with petitioner but alleged that the Superfreight Customs Brokerage Corporation was organized with other individuals and duly registered with the Securities and Exchange Commission in 1987. She denied that she and petitioner lived as husband and wife because the fact was that they were still legally married to their respective spouses. She claimed to be the exclusive owner of all real personal properties involved in petitioner's action for partition on the ground that they were acquired entirely out of her own money and registered solely in her name.

On November 25, 1994, respondent filed a Motion for Summary Judgment,4 in accordance with Rule 34 of the Rules of Court.5 She contended that summary judgment was proper, because the issues raised in the pleadings were sham and not genuine, to wit:

A.The main issue is — Can plaintiff validly claim the partition and/or payment of co-ownership share, accounting and damages, considering that plaintiff and defendant are admittedly both married to their respective spouses under still valid and subsisting marriages, even assuming as claimed by plaintiff, that they lived together as husband and wife without benefit of marriage? In other words, can the parties be considered as co-owners of the properties, under the law, considering the present status of the parties as both married and incapable of marrying each other, even assuming that they lived together as husband and wife (?)

B.As a collateral issue, can the plaintiff be considered as an unregistered co-owner of the real properties under the Transfer Certificates of Title duly registered solely in the name of defendant Ma. Elvira Castillo? This issue is also true as far as the motor vehicles in question are concerned which are also registered in the name of defendant.6

On the first point, respondent contended that even if she and petitioner actually cohabited, petitioner could not validly claim a part of the subject real and personal properties because Art. 144 of the Civil Code, which provides that the rules on co-ownership shall govern the properties acquired by a man and a woman living together as husband and wife but not married, or under a marriage which is void ab initio, applies only if the parties are not in any way incapacitated to contract marriage.7 In the parties' case, their union suffered the legal impediment of a prior subsisting marriage. Thus, the question of fact being raised by petitioner, i.e., whether they lived together as husband and wife, was irrelevant as no co-ownership could exist between them.

As to the second issue, respondent maintained that petitioner cannot be considered an unregistered co-owner of the subject properties on the ground that, since titles to the land are solely in her name, to grant petitioner's prayer would be to allow a collateral attack on the validity of such titles.

Petitioner opposed respondent's Motion for Summary Judgment.8 He contended that the case presented genuine factual issues and that Art. 144 of the Civil Code had been repealed by the Family Code which now allows, under Art. 148, a limited co-ownership even though a man and a woman living together are not capacitated to marry each other. Petitioner also asserted that an implied trust was constituted when he and respondent agreed to register the properties solely in the latter's name although the same were acquired out of the profits made from their brokerage business. Petitioner invoked the following provisions of the Civil Code:

Art. 1452. If two or more persons agree to purchase property and by common consent the legal title is taken in the name of one of them for the benefit of all, a trust is created

by force of law in favor of the others in proportion to the interest of each.

Art. 1453. When the property is conveyed to a person in reliance upon his declared intention to hold it for, or transfer it to another grantor, there is an implied trust in favor of the person whose benefit is contemplated.

On January 30, 1995, the trial court rendered its decision9 granting respondent's motion for summary judgment. It ruled that an examination of the pleadings shows that the issues involved were purely legal. The trial court also sustained respondent's contention that petitioner's action for partition amounted to a collateral attack on the validity of the certificates of title covering the subject properties. It held that even if the parties really had cohabited, the action for partition could not be allowed because an action for partition among co-owners ceases to be so and becomes one for title if the defendant, as in the present case, alleges exclusive ownership of the properties in question. For these reasons, the trial court dismissed Civil Case No. 93-656.

On appeals, the Court of Appeals on November 7, 1996, ordered the case remanded to the court of origin for trial on the merits. It cited the decision in Roque v. Intermediate Appellate Court 10 to the effect that an action for partition is at once an action for declaration of co-ownership and for segregation and conveyance of a determinate portion of the properties involved. If the defendant asserts exclusive title over the property, the action for partition should not be dismissed. Rather, the court should resolve the case and if the plaintiff is unable to sustain his claimed status as a co-owner, the court should dismiss the action, not because the wrong remedy was availed of, but because no basis exists for requiring the defendant to submit to partition. Resolving the issue whether petitioner's action for partition was a collateral attack on the validity of the certificates of title, the Court of Appeals held that since petitioner sought to compel respondent to execute documents necessary to effect transfer of what he claimed was his share, petitioner was not actually attacking the validity of the titles but in fact, recognized their validity. Finally, the appellate court upheld petitioner's position that Art. 144 of the Civil Code had been repealed by Art. 148 of the Family Code.

Respondent moved for reconsideration of the decision of Court of Appeals. On May 7, 1998, nearly two years after its first decision, the Court of Appeals granted respondent's motion and reconsidered its prior decision. In its decision now challenged in the present petition, it held —

Prefatorily, and to better clarify the controversy on whether this suit is a collateral attack on the titles in issue, it must be underscored that plaintiff-appellant alleged in his complaint that all the nine (9) titles are registered in the name of defendant-appellee, Ma. Elvira T. Castillo, except one which appears in the name of Eloisa Castillo (see par. 9, Complaint). However, a verification of the annexes of such initiatory pleading shows some discrepancies, to wit:

1. TCT No. 149046 (Annex A) = Elvira T. Castillo, single2. TCT No. 168208 (Annex B) = — do —3. TCT No. 37046 (Annex C) = — do —4. TCT No. 37047 (Annex D) = — do —5. TCT No. 37048 (Annex E) = — do —6. TCT No. 30368 (Annex F) = Steelhaus Realty & Dev. Corp.7. TCT No. 30369 (Annex G) = — do —8. TCT No. 30371 (Annex F) = — do —9. TCT No. (92323) 67881 (Annex I) = Eloisa Castillo

In this action, plaintiff-appellant seeks to be declared as 1/2 co-owner of the real properties covered by the above listed titles and eventually for their partition [par. (a), Prayer; p. 4 Records]. Notably, in order to achieve such prayer for a joint co-ownership declaration, it is unavoidable that the individual titles involved be altered, changed, cancelled or modified to include therein the name of the appellee as a registered 1/2 co-owner. Yet, no cause of action or even a prayer is contained filed. Manifestly, absent any cause or prayer for the alteration, cancellation, modification or changing of the titles involved, the desired declaration of co-ownership and eventual partition will utterly be an indirect or collateral attack on the subject titled in this suit.

It is here that We fell into error, such that, if not rectified will surely lead to a procedural lapse and a possible injustice. Well settled is the rules that a certificate of title cannot be altered, modified or cancelled except in a direct proceeding in accordance with law.

In this jurisdiction, the remedy of the landowner whose property has been wrongfully or erroneously registered in another name is, after one year from the date of the decree, not to set aside the decree, but respecting it as incontrovertible and no longer open to review, to bring an action for reconveyance or, if the property had passed into the hands of an innocent purchaser for value, for damages. Verily, plaintiff-appellant should have first pursued such remedy or any other relief directly attacking the subject titles before instituting the present partition suit. Apropos, the case at bench appears to have been prematurely filed.

Lastly, to grant the partition prayed for by the appellant will in effect rule and decide against the properties registered in the names of Steelhouse Realty and Development Corporation and Eloisa Castillo, who are not parties in the case. To allow this to happen will surely result to injustice and denial of due process of law. . . . 11

Petitioner moved for reconsideration but his motion was denied by the Court of Appeals in its resolution dated December 21, 1998. Hence this petition.

Petitioner contends that: (1) the Court of Appeals, in its first decision of November 7, 1996, was correct in applying the Roque ruling and in rejecting respondent's claim that she was the sole owner of the subject properties and that the partition suit was a collateral attack on the titles; (2) the Court of Appeals correctly rules in its first decision that Art. 148 of the Family Code governs the co-ownership between the parties, hence, the complaint for partition is proper; (3) with respect to the properties registered in the name of Steelhouse Realty, respondent admitted ownership thereof and, at the very least, these properties could simply be excluded and the partition limited to the remaining real and personal properties; and (4) the Court of Appeals erred in not holding that under the Civil Code, there is an implied trust in his favor. 12

The issue in this case is really whether summary judgment, in accordance with Rule 35 of the Rules of Court, is proper. We rule in the negative.

First. Rule 35, §3 of the Rules of Court provides that summary judgment is proper only when, based on the pleadings, depositions, and admissions on file, and after summary hearing, it is shown that except as to the amount of damages, there is no veritable issue regarding any material fact in the action and the movant is entitled to judgment as a matter of law. 1 Conversely, where the pleadings tender a genuine issue, i.e., an issue of fact the resolution of which calls for the presentation of evidence, as distinguished from an issue which is sham, fictitious, contrived, set-up in bad faith, or patently unsubstantial, summary judgment is not proper. 14

In the present case, we are convinced that genuine issues exist. Petitioner anchors his claim of co-ownership on two factual grounds: first, that said properties were acquired by him and respondent during their union from 1979 to 1992 from profits derived from their brokerage business; and second, that said properties were registered solely in respondent's name only because they agreed to that arrangement, thereby giving rise to an implied trust in accordance with Art. 1452 and Art. 1453 of the Civil Code. These allegations are denied by respondent. She denies that she and petitioner lived together as husband and wife. She also claims that the properties in question were acquired solely by her with her own money and resources. With such conflicting positions, the only way to ascertain the truth is obviously through the presentation of evidence by the parties.

The trial court ruled that it is immaterial whether the parties actually lived together as husband and wife because Art. 144 of the Civil Code can not be made to apply to them as they were both incapacitated to marry each other. Hence, it was impossible for a co-ownership to exist between them.

We disagree.Art. 144 of the Civil Code provides:

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.

This provision of the Civil Code, applies only to cases in which a man and a woman live together as husband and wife without the benefit of marriage provided they are not incapacitated or are without impediment to marry each other, 15 or in which the marriage is void ab initio, provided it is not bigamous. Art. 144, therefore, does not cover parties living in an adulterous relationship. However, Art. 148 of the Family Code now provides for a limited co-ownership in cases where the parties in union are incapacitated to marry each other. It states:

In cases of cohabitation not falling under the preceding article, 16 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 credits.

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.

It was error for the trial court to rule that, because the parties in this case were not capacitated to marry each other at the time that they were alleged to have been living together, they could not have owned properties in common. The Family Code, in addition to providing that a co-ownership exists between a man and a woman who live together as husband and wife without the benefit of marriage, likewise provides that, if the parties are incapacitated to marry each other, properties acquired by them through their joint contribution of money, property or industry shall be owned by them in common in proportion to their contributions which, in the absence of proof to the contrary, is presumed to be equal. There is thus co-ownership eventhough the couple are not capacitated to marry each other.

In this case, there may be a co-ownership between the parties herein. Consequently, whether petitioner and respondent cohabited and whether the properties involved in the case are part of the alleged co-ownership are genuine and material. All but one of the properties involved were alleged to have been acquired after the Family Code took effect on August 3, 1988. With respect to the property acquired before the Family Code took effect if it is shown that it was really acquired under the regime of the Civil Code, then it should be excluded.

Petitioner also alleged in paragraph 7 of his complaint that:

Due to the effective management, hardwork and enterprise of plaintiff assisted by defendant, their customs brokerage business grew and out of the profits therefrom, the parties acquired real and personal properties which were, upon agreement of the parties, listed and registered in defendant's name with plaintiff as the unregistered co-owner of all said properties. 17

On the basis of this, he contends that an implied trust existed pursuant to Art. 1452 of the Civil Code which provides that "(I)f two or more persons agree to purchase property and by common consent the legal title is taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of each." We do not think this is correct. The legal relation of the parties is already specifically covered by Art. 148 of the Family Code under which all the properties acquired by the parties out of their actual joint contributions of money, property or industry shall constitute a co-ownership. Co-ownership is a form of trust and every co-owner is a trustee for the other. 18 The provisions of Art. 1452 and Art. 1453 of the Civil Code, then are no longer material since a trust relation already inheres in a co-ownership which is governed under Title III, Book II of the Civil Code.

Second. The trial court likewise dismissed petitioner's action on the ground that the same amounted to a collateral attack on the certificates of title involved. As already noted, at first, the Court of Appeals ruled that petitioner's action does not challenge the validity of respondent's titles. However, on reconsideration, it reversed itself and affirmed the trial court. It noted that petitioner's complaint failed to include a prayer for the alteration, cancellation, modification, or changing of the titles involved. Absent such prayer, the appellate court ruled that a declaration of co-ownership and eventual partition would involve an indirect or collateral attack on the titles. We disagree.

A torrens title, as a rule, is conclusive and indefeasible. Proceeding from this, P.D. No. 1529, 19 §48 provides that a certificate of title shall not be subject to collateral attack and can not be altered, modified, or canceled except in a direct proceeding. When is an action an attack on a title? It is when the object of the action or proceeding is to nullify the title, and thus challenge the judgment pursuant to which the title was decreed. The attack is direct when the object of an action or proceeding is to annul or set aside such judgment, or enjoin its enforcement. On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment is nevertheless made as an incident thereof. 20

In his complaint for partition, consistent with our ruling in Roque regarding the nature of an action for partition, petitioner seeks first, a declaration that he is a co-owner of the subject properties; and second, the conveyance of his lawful shares. He does not attack respondent's titles. Petitioner alleges no fraud, mistake, or any other irregularity that would justify a review of the registration decree in respondent's favor. His theory is that although the subject properties were registered solely in respondent's name, but since by agreement between them as well as under the Family Code, he is co-owner of these properties and as such is entitled to the conveyance of his shares. On the premise that he is a co-owner, he can validly seek the partition of the properties in co-ownership and the conveyance to him of his share.

Thus, in Guevara v. Guevara, 21 in which a parcel of land bequeathed in a last will and testament was registered in the name of only one of the heirs, with the understanding that he would deliver to the others their shares after the debts of the original owner had been paid, this Court ruled that notwithstanding the registration of the land in the name of only one of the heirs, the other heirs can claim their shares in "such action, judicial or extrajudicial, as may be necessary to partition the estate of the testator." 22

Third. The Court of Appeals also reversed its first decision on the ground that to order partition will, in effect, rule and decide against Steelhouse Realty Development Corporation and Eloisa Castillo, both strangers to the present case, as to the properties registered in their names. This reasoning, however, ignores the fact that the majority of the properties involved in the present case are registered in respondent's name, over which petitioner claims rights as a co-owner. Besides, other than the real properties, petitioner also seeks partition of a substantial amount of personal properties consisting of motor vehicles and several pieces of jewelry. By dismissing petitioner's complaint for partition on grounds of due process and equity, the appellate court unwittingly denied petitioner his right to prove ownership over the claimed real and personal properties. The dismissal of petitioner's complaint is unjustified since both ends may be amply served by simply excluding from the action for partition the properties registered in the name of Steelhouse Realty and Eloisa Castillo.

WHEREFORE, the amended decision of the Court of Appeals, dated May 7, 1998, is REVERSED and the case is REMANDED to the Regional Trial Court, Branch 59, Makati City for further proceedings on the merits.

G.R. No. 132529. February 2, 2001

SUSAN NICDAO CARIÑO, petitioner, vs.SUSAN YEE CARIÑO, respondent.

D E C I S I O N

YNARES-SANTIAGO, J.:

The issue for resolution in the case at bar hinges on the validity of the two marriages contracted by the deceased SPO4 Santiago S. Cariño, whose “death benefits” is now the subject of the controversy between the two Susans whom he married. 1âwphi1.nêt

Before this Court is a petition for review on certiorari seeking to set aside the decision 1 of the Court of Appeals in CA-G.R. CV No. 51263, which affirmed in toto the decision 2 of the Regional Trial Court of Quezon City, Branch 87, in Civil Case No. Q-93-18632.

During the lifetime of the late SPO4 Santiago S. Cariño, he contracted two marriages, the first was on June 20, 1969, with petitioner Susan Nicdao Cariño (hereafter referred to as Susan Nicdao), with whom he had two offsprings, namely, Sahlee and Sandee Cariño; and the second was on November 10, 1992, with respondent Susan Yee Cariño (hereafter referred to as Susan Yee), with whom he had no children in their almost ten year cohabitation starting way back in 1982.

In 1988, SPO4 Santiago S. Cariño became ill and bedridden due to diabetes complicated by pulmonary tuberculosis. He passed away on November 23, 1992, under the care of Susan Yee, who spent for his medical and burial expenses. Both petitioner and respondent filed claims for monetary benefits and financial assistance pertaining to the deceased from various government agencies. Petitioner Susan Nicdao was able to collect a total of P146,000.00 from “MBAI, PCCUI, Commutation, NAPOLCOM, [and] Pag-ibig,” 3 while respondent Susan Yee received a total of P21,000.00 from “GSIS Life, Burial (GSIS) and burial (SSS).” 4

On December 14, 1993, respondent Susan Yee filed the instant case for collection of sum of money against petitioner Susan Nicdao praying, inter alia, that petitioner be ordered to return to her at least one-half of the one hundred forty-six thousand pesos (P146,000.00) collectively denominated as “death benefits” which she (petitioner) received from “MBAI, PCCUI, Commutation, NAPOLCOM, [and] Pag-ibig.” Despite service of summons, petitioner failed to file her answer, prompting the trial court to declare her in default.

Respondent Susan Yee admitted that her marriage to the deceased took place during the subsistence of, and without first obtaining a judicial declaration of nullity of, the marriage between petitioner and the deceased. She, however, claimed that she had no knowledge of the previous marriage and that she became aware of it only at the funeral of the deceased, where she met petitioner who introduced herself as the wife of the deceased. To bolster her action for collection of sum of money, respondent contended that the marriage of petitioner and the deceased is void ab initio because the same was solemnized without the required marriage license. In support thereof, respondent presented: 1) the marriage certificate of the deceased and the petitioner which bears no marriage license number; 5 and 2) a certification dated March 9, 1994, from the Local Civil Registrar of San Juan, Metro Manila, which reads –

This is to certify that this Office has no record of marriage license of the spouses SANTIAGO CARINO (sic) and SUSAN NICDAO, who are married in this municipality on June 20, 1969. Hence, we cannot issue as requested a true copy or transcription of Marriage License number from the records of this archives.

This certification is issued upon the request of Mrs. Susan Yee Cariño for whatever legal purpose it may serve. 6

On August 28, 1995, the trial court ruled in favor of respondent, Susan Yee, holding as follows:

WHEREFORE, the defendant is hereby ordered to pay the plaintiff the sum of P73,000.00, half of the amount which was paid to her in the form of death benefits arising from the death of SPO4 Santiago S. Cariño, plus attorney’s fees in the amount of P5,000.00, and costs of suit.

IT IS SO ORDERED. 7

On appeal by petitioner to the Court of Appeals, the latter affirmed in toto the decision of the trial court. Hence, the instant petition, contending that:

I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE FINDINGS OF THE LOWER COURT THAT VDA. DE CONSUEGRA VS. GSIS IS APPLICABLE TO THE CASE AT BAR.

II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN APPLYING EQUITY IN THE INSTANT CASE INSTEAD OF THE CLEAR AND UNEQUIVOCAL MANDATE OF THE FAMILY CODE.

III.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THE CASE OF VDA. DE CONSUEGRA VS GSIS TO HAVE BEEN MODIFIED, AMENDED AND EVEN ABANDONED BY THE ENACTMENT OF THE FAMILY CODE. 8

Under Article 40 of the Family Code, the absolute nullity of a previous marriage may be invoked for purposes of remarriage on the basis solely of a final judgment declaring such previous marriage void. Meaning, 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 the previous marriage void. 9 However, for purposes other than remarriage, no judicial action is necessary to declare a marriage an absolute nullity. For other purposes, such as but not limited to the determination of heirship, legitimacy or illegitimacy of a child, settlement of estate, dissolution of property regime, or a criminal case for that matter, the court may pass upon the validity of marriage even after the death of the parties thereto, and even in a suit not directly instituted to question the validity of said marriage, so long as it is essential to the determination of the case. 10 In such instances, evidence must be adduced, testimonial or documentary, to prove the existence of grounds rendering such a previous marriage an absolute nullity. These need not be limited solely to an earlier final judgment of a court declaring such previous marriage void. 11

It is clear therefore that the Court is clothed with sufficient authority to pass upon the validity of the two marriages in this case, as the same is essential to the determination of who is rightfully entitled to the subject “death benefits” of the deceased.

Under the Civil Code, which was the law in force when the marriage of petitioner Susan Nicdao and the deceased was solemnized in 1969, a valid marriage license is a requisite of marriage, 12 and the absence thereof, subject to certain exceptions, 13 renders the marriage void ab initio. 14

In the case at bar, there is no question that the marriage of petitioner and the deceased does not fall within the marriages exempt from the license requirement. A marriage license, therefore, was indispensable to the validity of their marriage. This notwithstanding, the records reveal that the marriage contract of petitioner and the deceased bears no marriage license number and, as certified by the Local Civil Registrar of San Juan, Metro Manila, their office has no record of such marriage license. In Republic v. Court of Appeals, 15 the Court held that such a certification is adequate to prove the non-issuance of a marriage license. Absent any circumstance of suspicion, as in the present case, the certification issued by the local civil registrar enjoys probative value, he being the officer charged under the law to keep a record of all data relative to the issuance of a marriage license.

Such being the case, the presumed validity of the marriage of petitioner and the deceased has been sufficiently overcome. It then became the burden of petitioner to prove that their marriage is valid and that they secured the required marriage license. Although she was declared in default before the trial court, petitioner could have squarely met the issue and explained the absence of a marriage license in her pleadings before the Court of Appeals and this Court. But petitioner conveniently avoided the issue and chose to refrain from pursuing an argument that will put her case in jeopardy. Hence, the presumed validity of their marriage cannot stand.

It is beyond cavil, therefore, that the marriage between petitioner Susan Nicdao and the deceased, having been solemnized without the necessary marriage license, and not being one of the marriages exempt from the marriage license requirement, is undoubtedly void ab initio.

It does not follow from the foregoing disquisition, however, that since the marriage of petitioner and the deceased is declared void ab initio, the “death benefits” under scrutiny would now be awarded to respondent Susan Yee. To reiterate, under Article 40 of the Family Code, for purposes of remarriage, there must first be a prior judicial declaration of the nullity of a previous marriage, though void, before a party can enter into a second marriage, otherwise, the second marriage would also be void.

Accordingly, the declaration in the instant case of nullity of the previous marriage of the deceased and petitioner Susan Nicdao does not validate the second marriage of the deceased with respondent Susan Yee. The fact remains that their marriage was solemnized without first obtaining a judicial decree declaring the marriage of petitioner Susan Nicdao and the deceased void. Hence, the marriage of respondent Susan Yee and the deceased is, likewise, void ab initio.

One of the effects of the declaration of nullity of marriage is the separation of the property of the spouses according to the applicable property regime. 16 Considering that the two marriages are void ab initio, the applicable property regime would not be absolute community or conjugal partnership of property, but rather, be governed by the provisions of Articles 147 and 148 of the Family Code on “Property Regime of Unions Without Marriage.”

Under Article 148 of the Family Code, which refers to the property regime of bigamous marriages, adulterous relationships, relationships in a state of concubine, relationships where both man and woman are married to other persons, multiple alliances of the same married man, 17 -

“... [O]nly 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 this property regime, the properties acquired by the parties through their actual joint contribution shall belong to the co-ownership. Wages and salaries earned by each party belong to him or her exclusively. Then too, contributions in the form of care of the home, children and household, or spiritual or moral inspiration, are excluded in this regime. 18

Considering that the marriage of respondent Susan Yee and the deceased is a bigamous marriage, having been solemnized during the subsistence of a previous marriage then presumed to be valid (between petitioner and the deceased), the application of Article 148 is therefore in order.

The disputed P146,000.00 from MBAI [AFP Mutual Benefit Association, Inc.], NAPOLCOM, Commutation, Pag-ibig, and PCCUI, are clearly renumerations, incentives and benefits from governmental agencies earned by the deceased as a police officer. Unless respondent Susan Yee presents proof to the contrary, it could not be said that she contributed money, property or industry in the acquisition of these monetary benefits. Hence, they are not owned in common by respondent and the deceased, but belong to the deceased alone and respondent has no right whatsoever to claim the same. By intestate succession, the said “death benefits” of the deceased shall pass to his legal heirs. And, respondent, not being the legal wife of the deceased is not one of them.

As to the property regime of petitioner Susan Nicdao and the deceased, Article 147 of the Family Code governs. This article applies to unions of parties who are legally capacitated and not barred by any impediment to contract marriage, but whose marriage is nonetheless void for other reasons, like the absence of a marriage license. Article 147 of the Family Code reads -

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.

x x x

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.

In contrast to Article 148, under the foregoing article, wages and salaries earned by either party during the cohabitation shall be owned by the parties in equal shares and will be divided equally between them, even if only one party earned the wages and the other did not contribute thereto. 19 Conformably, even if the disputed “death benefits” were earned by the deceased alone as a government employee, Article 147 creates a co-ownership in respect thereto, entitling the petitioner to share one-half thereof. As there is no allegation of bad faith in the present case, both parties of the first marriage are presumed to be in good faith. Thus, one-half of the subject “death benefits” under scrutiny shall go to the petitioner as her share in the property regime, and the other half pertaining to the deceased shall pass by, intestate succession, to his legal heirs, namely, his children with Susan Nicdao.

In affirming the decision of the trial court, the Court of Appeals relied on the case of Vda. de Consuegra v. Government Service Insurance System, 20 where the Court awarded one-half of the retirement benefits of the deceased to the first wife and the other half, to the second wife, holding that:

“... [S]ince the defendant’s first marriage has not been dissolved or declared void the conjugal partnership established by that marriage has not ceased. Nor has the first wife lost or relinquished her status as putative heir of her husband under the new Civil Code, entitled to share in his estate upon his death should she survive him. Consequently, whether as conjugal partner in a still subsisting marriage or as such putative heir she has an interest in the husband’s share in the property here in dispute....” And with respect to the right of the second wife, this Court observed that although the second marriage can be presumed to be void ab initio as it was celebrated while the first marriage was

still subsisting, still there is need for judicial declaration of such nullity. And inasmuch as the conjugal partnership formed by the second marriage was dissolved before judicial declaration of its nullity, “[t]he only just and equitable solution in this case would be to recognize the right of the second wife to her share of one-half in the property acquired by her and her husband, and consider the other half as pertaining to the conjugal partnership of the first marriage.” 21

It should be stressed, however, that the aforecited decision is premised on the rule which requires a prior and separate judicial declaration of nullity of marriage. This is the reason why in the said case, the Court determined the rights of the parties in accordance with their existing property regime.

In Domingo v. Court of Appeals, 22 however, the Court, construing Article 40 of the Family Code, clarified that a prior and separate declaration of nullity of a marriage is an all important condition precedent only for purposes of remarriage. That is, if a party who is previously married wishes to contract a second marriage, he or she has to obtain first a judicial decree declaring the first marriage void, before he or she could contract said second marriage, otherwise the second marriage would be void. The same rule applies even if the first marriage is patently void because the parties are not free to determine for themselves the validity or invalidity or their marriage. However, for purposes other than to remarry, like for filing a case for collection of sum of money anchored on a marriage claimed to be valid, no prior and separate judicial declaration of nullity is necessary. All that a party has to do is to present evidence, testimonial or documentary, that would prove that the marriage from which his or her rights flow is in fact valid. Thereupon, the court, if material to the determination of the issues before it, will rule on the status of the marriage involved and proceed to determine the rights of the parties in accordance with the applicable laws and jurisprudence. Thus, in Niñal v. Bayadog, 23 the Court explained:

[T]he court may pass upon the validity of marriage even in a suit not directly instituted to question the same so long as it is essential to the determination of the case. This is without prejudice to any issue that may arise in the case. When such need arises, a final judgment of declaration of nullity is necessary even if the purpose is other than to remarry. The clause “on the basis of a final judgment declaring such previous marriage void” in Article 40 of the Family Code connoted that such final judgment need not be obtained only for purpose of remarriage.

WHEREFORE, the petition is GRANTED, and the decision of the Court of Appeals in CA-G.R. CV No. 51263 which affirmed the decision of the Regional Trial Court of Quezon City ordering petitioner to pay respondent the sum of P73,000.00 plus attorney’s fees in the amount of P5,000.00, is REVERSED and SET ASIDE. The complaint in Civil Case No. Q-93-18632, is hereby DISMISSED. No pronouncement as to costs.1âwphi1.nêt

SO ORDERED.

G.R. No. 150611 June 10, 2003

JACINTO SAGUID, petitioner, vs.HON. COURT OF APPEALS, THE REGIONAL TRIAL COURT, BRANCH 94, BOAC, MARINDUQUE AND GINA S. REY, respondents.

YNARES-SANTIAGO, J.:

The regime of limited co-ownership of property governing the union of parties who are not legally capacitated to marry each other, but who nonetheless live together as husband and wife, applies to properties acquired during said cohabitation in proportion to their respective contributions. Co-ownership will only be up to the extent of the proven actual contribution of money, property or industry. Absent proof of the extent thereof, their contributions and corresponding shares shall be presumed to be equal.1

Seventeen-year old Gina S. Rey was married,2 but separated de facto from her husband, when she met petitioner Jacinto Saguid in Marinduque, sometime in July 1987.3 After a brief courtship, the two decided to cohabit as husband and wife in a house built on a lot owned by Jacinto’s father.4 Their cohabitation was not blessed with any children. Jacinto made a living as the patron of their fishing vessel "Saguid Brothers."5 Gina, on the other hand, worked as a fish dealer, but decided to work as an entertainer in Japan from 1992 to 1994 when her relationship with Jacinto’s relatives turned sour. Her periodic absence, however, did not ebb away the conflict with petitioner’s relatives. In 1996, the couple decided to separate and end up their 9-year cohabitation.6

On January 9, 1997, private respondent filed a complaint for Partition and Recovery of Personal Property with Receivership against the petitioner with the Regional Trial Court of Boac, Marinduque. She alleged that from her salary of $1,500.00 a month as entertainer in Japan, she was able to contribute P70,000.00 in the completion of their unfinished house. Also, from her own earnings as an entertainer and fish dealer, she was able to acquire and accumulate appliances, pieces of furniture and household effects, with a total value of P111,375.00. She prayed that she be declared the sole owner of these personal properties and that the amount of P70,000.00, representing her contribution to the construction of their house, be reimbursed to her.

Private respondent testified that she deposited part of her earnings in her savings account with First Allied Development Bank.7 Her Pass Book shows that as of May 23, 1995, she had a balance of P21,046.08.8 She further stated that she had a total of P35,465.009 share in the joint account deposit which she and the petitioner maintained with the same bank.10 Gina declared that said deposits were spent for the purchase of construction materials, appliances and other personal properties.11

In his answer12 to the complaint, petitioner claimed that the expenses for the construction of their house were defrayed solely from his income as a captain of their fishing vessel. He averred that private respondent’s meager income as fish dealer rendered her unable to contribute in the construction of said house. Besides, selling fish was a mere pastime to her; as such, she was contented with the small quantity of fish allotted to her from his fishing trips. Petitioner further contended that Gina did not work continuously in Japan from 1992 to 1994, but only for a 6-month duration each year. When their house was repaired and improved sometime in 1995-1996, private respondent did not share in the expenses because her earnings as entertainer were spent on the daily needs and business of her parents. From his income in the fishing business, he claimed to have saved a total of P130,000.00, P75,000.00 of which was placed in a joint account deposit with private respondent. This savings, according to petitioner was spent in purchasing the disputed personal properties.

On May 21, 1997, the trial court declared the petitioner as in default for failure to file a pre-trial brief as required by Supreme Court Circular No. 1-89.13

On May 26, 1997, petitioner filed a motion for reconsideration14 of the May 21, 1997 order, which was denied on June 2, 1997, and private respondent was allowed to present evidence ex parte.15 Petitioner filed another motion for reconsideration but the same was also denied on October 8, 1997.

On July 15, 1998, a decision16 was rendered in favor of private respondent, the dispositive portion of which reads:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the plaintiff Gina S. Rey against defendant Jacinto Saguid:

a) Ordering the partition of the house identified as plaintiff’s Exhibit C and D and directing the defendant to return and/or reimburse to the plaintiff the amount of seventy thousand pesos (P70,000,00) which the latter actually contributed to its construction and completion;

b) Declaring the plaintiff as the exclusive owner of the personal properties listed on Exhibit M;

c) Ordering the defendant, and/or anyone in possession of the aforesaid personal properties, to return and/or deliver the same to the plaintiff; and

d) Ordering the defendant to pay the plaintiff moral damages in the sum of fifty thousand pesos (P50,000.00) plus the costs of suit.

SO ORDERED.17

On appeal, said decision was affirmed by the Court of Appeals; however, the award of P50,000.00 as moral damages was deleted for lack of basis.18 The appellate court ruled that the propriety of the order which declared the petitioner as in default became moot and academic in view of the effectivity of the 1997 Rules of Civil Procedure. It explained that the new rules now require the filing of a pre-trial brief and the defendant’s non-compliance therewith entitles the plaintiff to present evidence ex parte.

Both parties filed motions for reconsideration which were denied; hence, petitioner filed the instant petition based on the following assigned errors:

A.

THE HONORABLE COURT OF APPEALS COMMIT[TED] A REVERSIBLE ERROR IN APPLYING RETROACTIVELY THE 1997 RULES OF CIVIL PROCEDURE IN THE PRESENT CASE AND HOLDING THE FIRST ASSIGNED ERROR THEREIN MOOT AND ACADEMIC THUS, FAILED TO RULE ON THE PROPRIETY OF THE TRIAL COURT’S REFUSAL TO SET ASIDE THE ORDER OF DEFAULT DUE TO MISTAKE AND/OR EXCUSABLE NEGLIGENCE COMMITTED BY PETITIONER.

B.

THE HONORABLE COURT OF APPEALS COMMIT[TED] A REVERSIBLE ERROR IN RELYING ON THE FACTUAL FINDINGS OF THE TRIAL COURT WHICH RECEIVED THE EVIDENCE OF HEREIN RESPONDENT ONLY EX PARTE.19

The issues for resolution are: (1) whether or not the trial court erred in allowing private respondent to present evidence ex parte; and (2) whether or not the trial court’s decision is supported by evidence.

Under Section 6, Rule 18 of the 1997 Rules of Civil Procedure, the failure of the defendant to file a pre-trial brief shall have the same effect as failure to appear at the pre-trial, i.e., the plaintiff may present his evidence ex parte and the court shall render judgment on the basis thereof.20 The remedy of the defendant is to file a motion for reconsideration21 showing that his failure to file a pre-trial brief was due to fraud, accident, mistake or excusable neglect.22 The motion need not really stress the fact that the defendant has a valid and meritorious defense because his answer which contains his defenses is already on record.23

In the case at bar, petitioner insists that his failure to file a pre-trial brief is justified because he was not represented by counsel. This justification is not, however, sufficient to set aside the order directing private respondent to present evidence ex parte, inasmuch as the petitioner chose at his own risk not to be represented by counsel. Even without the assistance of a lawyer, petitioner was able to file a motion for extension to file answer,24 the required answer stating therein the special and affirmative defenses,25 and several other motions.26 If it were true that petitioner did not understand the import of the April 23, 1997 order directing him to file a pre-trial brief, he could have inquired from the court or filed a motion for extension of time to file the brief. Instead, he waited until May 26, 1997, or 14 days from his alleged receipt of the April 23, 1997 order before he filed a motion asking the court to excuse his failure to file a brief. Pre-trial rules are not to be belittled or dismissed because their non-observance may result in prejudice to a party’s substantive rights. Like all rules, they should be followed except only for the most persuasive of reasons when they may be relaxed to relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed.27

In the instant case, the fact that petitioner was not assisted by a lawyer is not a persuasive reason to relax the application of the rules. There is nothing in the Constitution which mandates that a party in a non-criminal proceeding be represented by counsel and that the absence of such representation amounts to a denial of due process. The assistance of lawyers, while desirable, is not indispensable. The legal profession is not engrafted in the due process clause such that without the participation of its members the safeguard is deemed ignored or violated.28

However, the Court of Appeals erred in ruling that the effectivity of the 1997 Rules of Civil Procedure, specifically, Section 6, Rule 18 thereof, rendered moot and academic the issue of whether or not the plaintiff may be allowed to present evidence ex parte for failure of the defendant to file a pre-trial brief. While the rules may indeed be applied retroactively, the same is not called for in the case at bar. Even before the 1997 Rules of Civil Procedure took effect on July 1, 1997, the filing of a pre-trial brief was required under Circular No. 1-89 which became effective on February 1, 1989. Pursuant to the said circular, "[f]ailure to file pre-trial briefs may be given the same effect as the failure to appear at the pre-trial," that is, the party may be declared non-suited or considered as in default.29

Coming now to the substantive issue, it is not disputed that Gina and Jacinto were not capacitated to marry each other because the former was validly married to another man at the time of her cohabitation with the latter. Their property regime therefore is

governed by Article 14830 of the Family Code, which applies to bigamous marriages, adulterous relationships, relationships in a state of concubinage, relationships where both man and woman are married to other persons, and multiple alliances of the same married man. Under this regime, "…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 ..."31 Proof of actual contribution is required.32

In the case at bar, although the adulterous cohabitation of the parties commenced in 1987, which is before the date of the effectivity of the Family Code on August 3, 1998, Article 148 thereof applies because this provision was intended precisely to fill up the hiatus in Article 144 of the Civil Code.33 Before Article 148 of the Family Code was enacted, there was no provision governing property relations of couples living in a state of adultery or concubinage. Hence, even if the cohabitation or the acquisition of the property occurred before the Family Code took effect, Article 148 governs.34

In the cases of Agapay v. Palang,35 and Tumlos v. Fernandez,36 which involved the issue of co-ownership of properties acquired by the parties to a bigamous marriage and an adulterous relationship, respectively, we ruled that proof of actual contribution in the acquisition of the property is essential. The claim of co-ownership of the petitioners therein who were parties to the bigamous and adulterous union is without basis because they failed to substantiate their allegation that they contributed money in the purchase of the disputed properties. Also in Adriano v. Court of Appeals,37 we ruled that the fact that the controverted property was titled in the name of the parties to an adulterous relationship is not sufficient proof of co-ownership absent evidence of actual contribution in the acquisition of the property.

As in other civil cases, the burden of proof rests upon the party who, as determined by the pleadings or the nature of the case, asserts an affirmative issue. Contentions must be proved by competent evidence and reliance must be had on the strength of the party’s own evidence and not upon the weakness of the opponent’s defense.38 This applies with more vigor where, as in the instant case, the plaintiff was allowed to present evidence ex parte. The plaintiff is not automatically entitled to the relief prayed for. The law gives the defendant some measure of protection as the plaintiff must still prove the allegations in the complaint. Favorable relief can be granted only after the court is convinced that the facts proven by the plaintiff warrant such relief.39 Indeed, the party alleging a fact has the burden of proving it and a mere allegation is not evidence.40

In the case at bar, the controversy centers on the house and personal properties of the parties. Private respondent alleged in her complaint that she contributed P70,000.00 for the completion of their house. However, nowhere in her testimony did she specify the extent of her contribution. What appears in the record are receipts41 in her name for the purchase of construction materials on November 17, 1995 and December 23, 1995, in the total amount of P11,413.00.

On the other hand, both parties claim that the money used to purchase the disputed personal properties came partly from their joint account with First Allied Development Bank. While there is no question that both parties contributed in their joint account deposit, there is, however, no sufficient proof of the exact amount of their respective shares therein. Pursuant to Article 148 of the Family Code, in the absence of proof of extent of the parties’ respective contribution, their share shall be presumed to be equal. Here, the disputed personal properties were valued at P111,375.00, the existence and value of which were not questioned by the petitioner. Hence, their share therein is equivalent to one-half, i.e., P55,687.50 each.

The Court of Appeals thus erred in affirming the decision of the trial court which granted the reliefs prayed for by private respondent. On the basis of the evidence established, the extent of private respondent’s co-ownership over the disputed house is only up to the amount of P11,413.00, her proven contribution in the construction thereof. Anent the personal properties, her participation therein should be limited only to the amount of P55,687.50.

As regards the trial court’s award of P50,000.00 as moral damages, the Court of Appeals correctly deleted the same for lack of basis.

WHEREFORE, in view of all the foregoing, the Decision of the Court of Appeals in CA-G.R. CV No. 64166 is AFFIRMED with MODIFICATION. Private respondent Gina S. Rey is declared co-owner of petitioner Jacinto Saguid in the controverted house to the extent of P11,413.00 and personal properties to the extent of P55,687.50. Petitioner is ordered to reimburse the amount of P67,100.50 to private respondent, failing which the house shall be sold at public auction to satisfy private respondent’s claim.

SO ORDERED.

G.R. No. L-25014 October 17, 1973

DOLORES LAHORA VDA. DE CASTRO, ARSENIO DE CASTRO, JR., WILFREDO DE CASTRO, IRINEO DE CASTRO and VIRGINIA DE CASTRO ALEJANDRO, (in substitution for the deceased defendant-appellant ARSENIO DE CASTRO, SR.)., petitioners, vs.GREGORIO ATIENZA, respondent.

Arsenio de Castro, Jr. and F.T. Papa for petitioners.

Dakila Castro and Z.D. de Mesa for respondent.

TEEHANKEE, J.:

The Court rejects petitioners' appeal as without merit and affirms the judgment of the appellate court. Petitioners' predecessor-in-interest as co-owner of an undivided one-half interest in the fishpond could validly lease his interest to a third party, respondent Atienza, independently of his co-owner (although said co-owner had also leased his other undivided one-half interest to the same third party) and could likewise by mutual agreement independently cancel his lease agreement with said third party. Said predecessor-in-interest (and petitioners who have substituted him as his heirs) therefore stands liable on his express undertaking to refund the advance rental paid to him by the lessee on the cancelled lease and cannot invoke the non-cancellation of the co-owner's lease to elude such liability.

The Court of Appeals, in its decision affirming in toto the judgment of the Manila court of first instance ordering therein defendant-appellant Arsenio de Castro, Sr. (now deceased and substituted by above-named petitioners as his heirs) "to return to the plaintiff (respondent) Gregorio Atienza the sum P2,500.00 with legal interest from the date of the filing of complaint until fully paid plus the sum of P250.00 as attorney's fees and the costs of the suit", found the following facts to undisputed:

On January 24, 1956 the brothers Tomas de Castro and Arsenio de Castro, Sr. leased to plaintiff a fishpond containing an area of 26 hectares situated in Polo, Bulacan and forming part of a bigger parcel of land covered by Transfer Certificate of Title No. 196450 of the registry of the property of Bulacan. The lessors are co-owners in equal shares of the leased property.

According to the contract of lease (Exh. 1) the term of the lease was for five years from January 24, 1956 at a rental of P5,000 a year, the first year's rental to be paid on February 1, 1956, the second on February 1, 1957 and the rental for the last three years on February 1, 1958. The first year's rental was paid on time.

In the meantime, Tomas de Castro died.

In the month of November, 1956, plaintiff as lessee and defendant Arsenio de Castro, Sr. as one of the lessors, agreed to set aside and annul the contract of lease and for this purpose an agreement (Exh. A) was signed by them, Exhibit A as signed by plaintiff and defendant shows that Felisa Cruz Vda. de Castro, widow of Tomas de Castro, was intended to be made a party thereof in her capacity as representative of the heirs of Tomas Castro.

Condition No. 2 of Exhibit A reads as follows:

"2. Na sa pamamagitan nito ay pinawawalang kabuluhan namin ang nasabing kasulatan at nagkasundo kami na ang bawat isa sa amin ni Arsenio de Castro at Felisa Cruz Vda. de Castro ay isauli kay GREGORIO ATIENZA ang tig P2,500.00 o kabuuang halagang P5,000.00 na paunang naibigay nito alinsunod sa nasabing kasulatan; na ang nasabing tig P2,500.00 ay isasauli ng bawat isa sa amin sa o bago dumating ang Dec. 30, 1956."

Felisa Cruz Vda. de Castro refused to sign Exhibit A. Defendant did not pay the P2,500.00 which under the above-quoted paragraph of Exhibit A, he should have paid on December 30, 1956. Demand for payment was made by plaintiff's counsel on January 7, 1957 but to no avail, hence the present action.

On the conflicting contentions between the parties as to who between them would attend to securing the signature of Mrs. Felisa Cruz Vda. de Castro (widow of Tomas de Castro) to the agreement of cancellation of the lease with respondent Atienza, the appellate court found that "the testimony of the defendant (Arsenio de Castro, Sr.) ... supports the contention of the plaintiff (Atienza) "that it was the defendant Arsenio who was interested and undertook to do so, citing Arsenio's own declaration that "I agreed to sign this document (referring to the cancellation) because of my desire to cancel our original agreement" and that his purpose in obtaining the cancellation of said lease agreement with plaintiff Atienza was "(B)ecause I had the intention of having said fishpond leased to other persons and I cannot lease it to third parties unless I can secure the signature of Felisa Vda. de Castro."

The appellate court thus held in effect that as Arsenio "was the one interested in cancelling the lease (Exh. 1), it stands to reason that he most probably undertook to obtain the signature of Mrs. Castro [widow and successor-in-interest of his brother

Tomas]" and that he could not invoke his own failure to obtain such signature to elude his own undertaking and liability to refund respondent (plaintiff) his share of the rental paid in advance by respondent on the cancelled lease in the sum of P2,500.00.

The appellate court furthermore correctly held that the consent or concurrence of Felisa Vda. de Castro (as co-owner in succession of Tomas) was not an essential condition to the validity and effectivity of the agreement of cancellation of the lease (Exhibit A) as between Arsenio and respondent-lessee, contrary to petitioners' claim, holding that "(S)ince there is no specific provision in Exhibit A supporting defendant's claim, we are not prepared to supply such condition unless the same can be deduced from other evidence or unless the terms of Exhibit A cannot be performed by plaintiff and defendant without Mrs. Castro being bound as a party thereto."

The issue is simply reduced to whether Arsenio as co-owner of the fishpond owned pro-indiviso by him with his brother Tomas (succeeded by Felisa Vda. de Castro) could validly lease his half-interest to a third party (respondent Atienza) independently of his co-owner, and in case his co-owner also leased his other half interest to the same third party, whether Arsenio could cancel his own lease agreement with said third party?

The appellate court correctly resolved the issue thus: "Our view of the contract of lease Exhibit 1 is that each of the Castro brothers, leased his undivided one-half interest in the fishpond they owned in common to the plaintiff. Could one of them have validly leased his interest without the other co-owner leasing his own? The answer to this is given by appellant in his own brief (p. 14) when he said that it would result in a partnership between the lessee and the owner of the other undivided half. If the lease could be entered into partially by one of the co-owners, insofar as his interest is concerned, then the lease, Exhibit 1, can also be cancelled partially as between plaintiff and defendant. Therefore, we conclude that the consent of Mrs. Felisa Cruz Vda. de Castro is not essential for the cancellation of the lease of defendant's one-half undivided share in the fishpond to plaintiff."

The appellate court's judgment is fully supported by the Civil Code provisions on the rights and prerogatives of co-owners, and specifically by Article 493 which expressly provides that

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 alloted to him in the division upon the termination of the co-ownership. *

ACCORDINGLY, the appealed judgment is hereby affirmed with costs against petitioners.

Makalintal, Actg. C.J., Zaldivar, Castro, Fernando, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

G.R. No. 159310 February 24, 2009

CAMILO F. BORROMEO, Petitioner, vs.ANTONIETTA O. DESCALLAR, Respondent.

D E C I S I O N

PUNO, C.J.:

What are the rights of an alien (and his successor-in-interest) who acquired real properties in the country as against his former Filipina girlfriend in whose sole name the properties were registered under the Torrens system?

The facts are as follows:

Wilhelm Jambrich, an Austrian, arrived in the Philippines in 1983 after he was assigned by his employer, Simmering-Graz Panker A.G., an Austrian company, to work at a project in Mindoro. In 1984, he transferred to Cebu and worked at the Naga II Project of the National Power Corporation. There, he met respondent Antonietta Opalla-Descallar, a separated mother of two boys who was working as a waitress at St. Moritz Hotel. Jambrich befriended respondent and asked her to tutor him in English. In dire need of additional income to support her children, respondent agreed. The tutorials were held in Antonietta’s residence at a squatters’ area in Gorordo Avenue.

Jambrich and respondent fell in love and decided to live together in a rented house in Hernan Cortes, Mandaue City. Later, they transferred to their own house and lots at Agro-Macro Subdivision, Cabancalan, Mandaue City. In the Contracts to Sell dated November 18, 19851 and March 10, 19862 covering the properties, Jambrich and respondent were referred to as the buyers. A Deed of Absolute Sale dated November 16, 19873 was likewise issued in their favor. However, when the Deed of Absolute Sale was presented for registration before the Register of Deeds, registration was refused on the ground that Jambrich was an alien and could not acquire alienable lands of the public domain. Consequently, Jambrich’s name was erased from the document. But it could be noted that his signature remained on the left hand margin of page 1, beside respondent’s signature as buyer on page 3, and at the bottom of page 4 which is the last page. Transfer Certificate of Title (TCT) Nos. 24790, 24791 and 24792 over the properties were issued in respondent’s name alone.

Jambrich also formally adopted respondent’s two sons in Sp. Proc. No. 39-MAN,4 and per Decision of the Regional Trial Court of Mandaue City dated May 5, 1988.5

However, the idyll lasted only until April 1991. By then, respondent found a new boyfriend while Jambrich began to live with another woman in Danao City. Jambrich supported respondent’s sons for only two months after the break up.

Jambrich met petitioner Camilo F. Borromeo sometime in 1986. Petitioner was engaged in the real estate business. He also built and repaired speedboats as a hobby. In 1989, Jambrich purchased an engine and some accessories for his boat from petitioner, for which he became indebted to the latter for about P150,000.00. To pay for his debt, he sold his rights and interests in the Agro-Macro properties to petitioner for P250,000, as evidenced by a "Deed of Absolute Sale/Assignment."6 On July 26, 1991, when petitioner sought to register the deed of assignment, he discovered that titles to the three lots have been transferred in the name of respondent, and that the subject property has already been mortgaged.

On August 2, 1991, petitioner filed a complaint against respondent for recovery of real property before the Regional Trial Court of Mandaue City. Petitioner alleged that the Contracts to Sell dated November 18, 1985 and March 10, 1986 and the Deed of Absolute Sale dated November 16, 1987 over the properties which identified both Jambrich and respondent as buyers do not reflect the true agreement of the parties since respondent did not pay a single centavo of the purchase price and was not in fact a buyer; that it was Jambrich alone who paid for the properties using his exclusive funds; that Jambrich was the real and absolute owner of the properties; and, that petitioner acquired absolute ownership by virtue of the Deed of Absolute Sale/Assignment dated July 11, 1991 which Jambrich executed in his favor.

In her Answer, respondent belied the allegation that she did not pay a single centavo of the purchase price. On the contrary, she claimed that she "solely and exclusively used her own personal funds to defray and pay for the purchase price of the subject lots in question," and that Jambrich, being an alien, was prohibited to acquire or own real property in the Philippines.

At the trial, respondent presented evidence showing her alleged financial capacity to buy the disputed property with money from a supposed copra business. Petitioner, in turn, presented Jambrich as his witness and documentary evidence showing the substantial salaries which Jambrich received while still employed by the Austrian company, Simmering-Graz Panker A.G.

In its decision, the court a quo found—

Evidence on hand clearly show that at the time of the purchase and acquisition of [the] properties under litigation that Wilhelm Jambrich was still working and earning much.

This fact of Jambrich earning much is not only supported by documentary evidence but also by the admission made by the defendant Antoniet[t]a Opalla. So that, Jambrich’s financial capacity to acquire and purchase the properties . . . is not disputed.7

x x x

On the other hand, evidence . . . clearly show that before defendant met Jambrich sometime in the latter part of 1984, she was only working as a waitress at the St. Moritz Hotel with an income of P1,000.00 a month and was . . . renting and living only in . . . [a] room at . . . [a] squatter area at Gorordo Ave., Cebu City; that Jambrich took pity of her and the situation of her children that he offered her a better life which she readily accepted. In fact, this miserable financial situation of hers and her two children . . . are all stated and reflected in the Child Study Report dated April 20, 1983 (Exhs. "G" and "G-1") which facts she supplied to the Social Worker who prepared the same when she was personally interviewed by her in connection with the adoption of her two children by Wilhelm Jambrich. So that, if such facts were not true because these are now denied by her . . . and if it was also true that during this time she was already earning as much as P8,000.00 to P9,000.00 as profit per month from her copra business, it would be highly unbelievable and impossible for her to be living only in such a miserable condition since it is the observation of this Court that she is not only an extravagant but also an expensive person and not thrifty as she wanted to impress this Court in order to have a big saving as clearly shown by her actuation when she was already cohabiting and living with Jambrich that according to her . . . the allowance given . . . by him in the amount of $500.00 a month is not enough to maintain the education and maintenance of her children.8

This being the case, it is highly improbable and impossible that she could acquire the properties under litigation or could contribute any amount for their acquisition which according to her is worth more than P700,000.00 when while she was working as [a] waitress at St. Moritz Hotel earning P1,000.00 a month as salary and tips of more or less P2,000.00 she could not even provide [for] the daily needs of her family so much so that it is safe to conclude that she was really in financial distress when she met and accepted the offer of Jambrich to come and live with him because that was a big financial opportunity for her and her children who were already abandoned by her husband.9

x x x

The only probable and possible reason why her name appeared and was included in [the contracts to sell dated November 18, 1985 and March 10, 1986 and finally, the deed of absolute sale dated November 16, 1987] as buyer is because as observed by the Court, she being a scheming and exploitive woman, she has taken advantage of the goodness of Jambrich who at that time was still bewitched by her beauty, sweetness, and good attitude shown by her to him since he could still very well provide for everything she needs, he being earning (sic) much yet at that time. In fact, as observed by this Court, the acquisition of these properties under litigation was at the time when their relationship was still going smoothly and harmoniously.10 [Emphasis supplied.]

The dispositive portion of the Decision states:

WHEREFORE, . . . Decision is hereby rendered in favor of the plaintiff and against the defendant Antoniet[t]a Opalla by:

1) Declaring plaintiff as the owner in fee simple over the residential house of strong materials and three parcels of land designated as Lot Nos. 1, 3 and 5 which are covered by TCT Nos. 24790, 24791 and 24792 issued by the Register of Deeds of Mandaue City;

2) Declaring as null and void TCT Nos. 24790, 24791 and 24792 issued in the name of defendant Antoniet[t]a Descallar by the Register of Deeds of Mandaue City;

3) Ordering the Register of Deeds of Mandaue City to cancel TCT Nos. 24790, 24791 and 24792 in the name of defendant Antoniet[t]a Descallar and to issue new ones in the name of plaintiff Camilo F. Borromeo;

4) Declaring the contracts now marked as Exhibits "I," "K" and "L" as avoided insofar as they appear to convey rights and interests over the properties in question to the defendant Antoniet[t]a Descallar;

5) Ordering the defendant to pay plaintiff attorney’s fees in the amount of P25,000.00 and litigation expenses in the amount of P10,000.00; and,

6) To pay the costs.11

Respondent appealed to the Court of Appeals. In a Decision dated April 10, 2002,12 the appellate court reversed the decision of the trial court. In ruling for the respondent, the Court of Appeals held:

We disagree with the lower court’s conclusion. The circumstances involved in the case cited by the lower court and similar cases decided on by the Supreme Court which upheld the validity of the title of the subsequent Filipino purchasers are absent in the case at bar. It should be noted that in said cases, the title to the subject property has been issued in the name of the alien transferee (Godinez et al., vs. Fong Pak Luen et al., 120 SCRA 223 citing Krivenko vs. Register of Deeds of Manila, 79 Phils. 461; United Church Board for World Ministries vs. Sebastian, 159 SCRA 446, citing the case of Sarsosa Vda. De Barsobia vs. Cuenco, 113 SCRA 547; Tejido vs. Zamacoma, 138 SCRA

78). In the case at bar, the title of the subject property is not in the name of Jambrich but in the name of defendant-appellant. Thus, Jambrich could not have transferred a property he has no title thereto.13

Petitioner’s motion for reconsideration was denied.

Hence, this petition for review.

Petitioner assigns the following errors:

I. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DISREGARDING RESPONDENT’S JUDICIAL ADMISSION AND OTHER OVERWHELMING EVIDENCE ESTABLISHING JAMBRICH’S PARTICIPATION, INTEREST AND OWNERSHIP OF THE PROPERTIES IN QUESTION AS FOUND BY THE HONORABLE TRIAL COURT.

II. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT JAMBRICH HAS NO TITLE TO THE PROPERTIES IN QUESTION AND MAY NOT THEREFORE TRANSFER AND ASSIGN ANY RIGHTS AND INTERESTS IN FAVOR OF PETITIONER.

III. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN REVERSING THE WELL-REASONED DECISION OF THE TRIAL COURT AND IN IMPOSING DOUBLE COSTS AGAINST HEREIN PETITIONER (THEN, PLAINTIFF-APPELLEE).14

First, who purchased the subject properties?

The evidence clearly shows, as pointed out by the trial court, who between respondent and Jambrich possesses the financial capacity to acquire the properties in dispute. At the time of the acquisition of the properties in 1985 to 1986, Jambrich was gainfully employed at Simmering-Graz Panker A.G., an Austrian company. He was earning an estimated monthly salary of P50,000.00. Then, Jambrich was assigned to Syria for almost one year where his monthly salary was approximately P90,000.00.

On the other hand, respondent was employed as a waitress from 1984 to 1985 with a monthly salary of not more than P1,000.00. In 1986, when the parcels of land were acquired, she was unemployed, as admitted by her during the pre-trial conference. Her allegations of income from a copra business were unsubstantiated. The supposed copra business was actually the business of her mother and their family, with ten siblings. She has no license to sell copra, and had not filed any income tax return. All the motorized bancas of her mother were lost to fire, and the last one left standing was already scrap. Further, the Child Study Report15 submitted by the Department of Social Welfare and Development (DSWD) in the adoption proceedings of respondent’s two sons by Jambrich disclosed that:

Antonietta tried all types of job to support the children until she was accepted as a waitress at St. Moritz Restaurant in 1984. At first she had no problem with money because most of the customers of St. Moritz are (sic) foreigners and they gave good tips but towards the end of 1984 there were no more foreigners coming because of the situation in the Philippines at that time. Her financial problem started then. She was even renting a small room in a squatters area in Gorordo Ave., Cebu City. It was during her time of great financial distress that she met Wilhelm Jambrich who later offered her a decent place for herself and her children.16

The DSWD Home Study Report17 further disclosed that:

[Jambrich] was then at the Restaurant of St. Moritz when he saw Antonietta Descallar, one of the waitresses of the said Restaurants. He made friends with the girl and asked her to tutor him in [the] English language. Antonietta accepted the offer because she was in need of additional income to support [her] 2 young children who were abandoned by their father. Their session was agreed to be scheduled every afternoon at the residence of Antonietta in the squatters area in Gorordo Avenue, Cebu City. The Austrian was observing the situation of the family particularly the children who were malnourished. After a few months sessions, Mr. Jambrich offered to transfer the family into a decent place. He told Antonietta that the place is not good for the children. Antonietta who was miserable and financially distressed at that time accepted the offer for the sake of the children.18

Further, the following additional pieces of evidence point to Jambrich as the source of fund used to purchase the three parcels of land, and to construct the house thereon:

(1) Respondent Descallar herself affirmed under oath, during her re-direct examination and during the proceedings for the adoption of her minor children, that Jambrich was the owner of the properties in question, but that his name was deleted in the Deed of Absolute Sale because of legal constraints. Nonetheless, his signature remained in the deed of sale, where he signed as buyer.

(2) The money used to pay the subject parcels of land in installments was in postdated checks issued by Jambrich. Respondent has never opened any account with any bank. Receipts of the installment payments were also in the name of Jambrich and respondent.

(3) In 1986-1987, respondent lived in Syria with Jambrich and her two children for ten months, where she was completely under the support of Jambrich.

(4) Jambrich executed a Last Will and Testament, where he, as owner, bequeathed the subject properties to respondent.

Thus, Jambrich has all authority to transfer all his rights, interests and participation over the subject properties to petitioner by virtue of the Deed of Assignment he executed on July 11, 1991.

Well-settled is the rule that this Court is not a trier of facts. The findings of fact of the trial court are accorded great weight and respect, if not finality by this Court, subject to a number of exceptions. In the instant case, we find no reason to disturb the factual findings of the trial court. Even the appellate court did not controvert the factual findings of the trial court. They differed only in their conclusions of law.

Further, the fact that the disputed properties were acquired during the couple’s cohabitation also does not help respondent. The rule that co-ownership applies to a man and a woman living exclusively with each other as husband and wife without the benefit of marriage, but are otherwise capacitated to marry each other, does not apply.19 In the instant case, respondent was still legally married to another when she and Jambrich lived together. In such an adulterous relationship, no co-ownership exists between the parties. 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.20

Second, we dispose of the issue of registration of the properties in the name of respondent alone. Having found that the true buyer of the disputed house and lots was the Austrian Wilhelm Jambrich, what now is the effect of registration of the properties in the name of respondent?

It is settled that registration is not a mode of acquiring ownership.21 It is only a means of confirming the fact of its existence with notice to the world at large.22 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,23 and that it is perfect, absolute and indefeasible.24 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.25 This is the situation in the instant case. Respondent did not contribute a single centavo in the acquisition of the properties. She had no income of her own at that time, nor did she have any savings. She and her two sons were then fully supported by Jambrich.

Respondent argued that aliens are prohibited from acquiring private land. This is embodied in Section 7, Article XII of the 1987 Constitution,26 which is basically a reproduction of Section 5, Article XIII of the 1935 Constitution,27 and Section 14, Article XIV of the 1973 Constitution.28 The capacity to acquire private land is dependent on the capacity "to acquire or hold lands of the public domain." Private land may be transferred only to individuals or entities "qualified to acquire or hold lands of the public domain." Only Filipino citizens or corporations at least 60% of the capital of which is owned by Filipinos are qualified to acquire or hold lands of the public domain. Thus, as the rule now stands, the fundamental law explicitly prohibits non-Filipinos from acquiring or holding title to private lands, except only by way of legal succession or if the acquisition was made by a former natural-born citizen.29

Therefore, in the instant case, the transfer of land from Agro-Macro Development Corporation to Jambrich, who is an Austrian, would have been declared invalid if challenged, had not Jambrich conveyed the properties to petitioner who is a Filipino citizen. In United Church Board for World Ministries v. Sebastian,30 the Court reiterated the consistent ruling in a number of cases31 that if land is invalidly transferred to an alien who subsequently becomes a Filipino citizen or transfers it to a Filipino, the flaw in the original transaction is considered cured and the title of the transferee is rendered valid. Applying United Church Board for World Ministries, the trial court ruled in favor of petitioner, viz.:

[W]hile the acquisition and the purchase of (sic) Wilhelm Jambrich of the properties under litigation [were] void ab initio since [they were] contrary to the Constitution of the Philippines, he being a foreigner, yet, the acquisition of these properties by plaintiff who is a Filipino citizen from him, has cured the flaw in the original transaction and the title of the transferee is valid.

The trial court upheld the sale by Jambrich in favor of petitioner and ordered the cancellation of the TCTs in the name of respondent. It declared petitioner as owner in fee simple of the residential house of strong materials and three parcels of land designated as Lot Nos. 1, 3 and 5, and ordered the Register of Deeds of Mandaue City to issue new certificates of title in his name. The trial court likewise ordered respondent to pay petitioner P25,000 as attorney’s fees and P10,000 as litigation expenses, as well as the costs of suit.

We affirm the Regional Trial Court.

The rationale behind the Court’s ruling in United Church Board for World Ministries, as reiterated in subsequent cases,32 is this – since the ban on aliens is intended to preserve the nation’s land for future generations of Filipinos, that aim is achieved by

making lawful the acquisition of real estate by aliens who became Filipino citizens by naturalization or those transfers made by aliens to Filipino citizens. As the property in dispute is already in the hands of a qualified person, a Filipino citizen, there would be no more public policy to be protected. The objective of the constitutional provision to keep our lands in Filipino hands has been achieved.

IN VIEW WHEREOF, the petition is GRANTED. The Decision of the Court of Appeals in C.A. G.R. CV No. 42929 dated April 10, 2002 and its Resolution dated July 8, 2003 are REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Mandaue City in Civil Case No. MAN-1148 is REINSTATED.

SO ORDERED.

REYNATO S. PUNOChief Justice

WE CONCUR:

ANTONIO T. CARPIOAssociate Justice

RENATO C. CORONAAssociate Justice TERESITA J. LEONARDO-DE CASTROAssociate JusticeARTURO D. BRIONAssociate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNOChief Justice