Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 146683      November 22, 2001

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

MENDOZA, J.:

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

The facts are as follows:

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

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

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

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

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

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

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

Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except

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moderate gifts which the spouses may give each other on the occasion of any family rejoicing. The prohibition shall also apply to persons living together as husband and wife without a valid marriage.

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

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

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

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

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

SO ORDERED.25

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

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

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

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

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

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

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

2

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

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

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

Respondents having proven by a preponderance of evidence that Cirila and Francisco lived together as husband and wife without a valid marriage, the inescapable conclusion is that the donation made by Francisco in favor of Cirila is void under Art. 87 of the Family Code.1âwphi1.nêt

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

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 145222               April 24, 2009

SPOUSES ROBERTO BUADO and VENUS BUADO, Petitioners, vs.THE HONORABLE COURT OF APPEALS, Former Division, and ROMULO NICOL, Respondents.

D E C I S I O N

TINGA, J.:

Before this Court is a petition for certiorari assailing the Decision1 of the Court of Appeals in CA-G.R. CV No. 47029 and its Resolution denying the motion for reconsideration thereof.

The case stemmed from the following factual backdrop:

On 30 April 1984, Spouses Roberto and Venus Buado (petitioners) filed a complaint for damages against Erlinda Nicol (Erlinda) with Branch 19 of the Regional Trial Court (RTC) of Bacoor, Cavite, docketed as Civil Case No. 84-33. Said action originated from Erlinda Nicol’s civil liability arising from the criminal offense of slander filed against her by petitioners.

On 6 April 1987, the trial court rendered a decision ordering Erlinda to pay damages. The dispositive portion reads:

3

Wherefore, judgment is hereby rendered in favor of the plaintiff[s] and against defendant ordering the latter to pay the former the amount of thirty thousand (P30,000.00) pesos as moral damages, five thousand (P5,000.00) pesos as attorney’s fees and litigation expenses, another five thousand (P5,000.00) pesos as exemplary damages and the cost of suit.2

Said decision was affirmed, successively, by the Court of Appeals and this Court. It became final and executory on 5 March 1992.

On 14 October 1992, the trial court issued a writ of execution, a portion of which provides:

Now, therefore, you are commanded that of the goods and chattels of the defendant Erlinda Nicol, or from her estates or legal heirs, you cause the sum in the amount of forty thousand pesos (P40,000.00), Philippine Currency, representing the moral damages, attorney’s fees and litigation expenses and exemplary damages and the cost of suit of the plaintiff aside from your lawful fees on this execution and do likewise return this writ into court within sixty (60) days from date, with your proceedings endorsed hereon.

But if sufficient personal property cannot be found whereof to satisfy this execution and lawful fees thereon, then you are commanded that of the lands and buildings of said defendant you make the said sum of money in the manner required by the Rules of Court, and make return of your proceedings with this writ within sixty (60) days from date.3

Finding Erlinda Nicol’s personal properties insufficient to satisfy the judgment, the Deputy Sheriff issued a notice of levy on real property on execution addressed to the Register of Deeds of Cavite. The notice of levy was annotated on the Transfer Certificate of Title No. T-125322.

On 20 November 1992, a notice of sheriff’s sale was issued.

Two (2) days before the public auction sale on 28 January 1993, an affidavit of third-party claim from one Arnulfo F. Fulo was received by the deputy sheriff prompting petitioners to put up a sheriff’s indemnity bond. The auction sale proceeded with petitioners as the highest bidder.

On 4 February 1993, a certificate of sale was issued in favor of petitioners.

Almost a year later on 2 February 1994, Romulo Nicol (respondent), the husband of Erlinda Nicol, filed a complaint for annulment of certificate of sale and damages with preliminary injunction against petitioners and the deputy sheriff. Respondent, as plaintiff therein, alleged that the defendants, now petitioners, connived and directly levied upon and execute his real property without exhausting the personal properties of Erlinda Nicol. Respondent averred that there was no proper publication and posting of the notice of sale. Furthermore, respondent claimed that his property which was valued at P500,000.00 was only sold at a "very low price" of P51,685.00, whereas the judgment obligation of Erlinda Nicol was only P40,000.00. The case was assigned to Branch 21 of the RTC of Imus, Cavite.

In response, petitioners filed a motion to dismiss on the grounds of lack of jurisdiction and that they had acted on the basis of a valid writ of execution. Citing De Leon v. Salvador,4 petitioners claimed that respondent should have filed the case with Branch 19 where the judgment originated and which issued the order of execution, writ of execution, notice of levy and notice of sheriff’s sale.

In an Order5 dated 18 April 1994, the RTC dismissed respondent’s complaint and ruled that Branch 19 has jurisdiction over the case, thus:

As correctly pointed out by the defendants, any flaw in the implementation of the writ of execution by the implementing sheriff must be brought before the court issuing the writ of execution. Besides, there are two (2) remedies open to the plaintiff, if he feels that the property being levied on belongs to him and not to the judgment debtor. The first remedy is to file a third-party claim. If he fails to do this, a right is reserved to him to vindicate his claim over the property by any proper action. But certainly, this is not the proper action reserved to the plaintiff to vindicate his claim over the property in question to be ventilated before this court. As earlier stated, this case should have been addressed to Branch 19, RTC Bacoor as it was that court which issued the writ of execution.6

Respondent moved for reconsideration but it was denied on 26 July 1994.

On appeal, the Court of Appeals reversed the trial court and held that Branch 21 has jurisdiction to act on the complaint filed by appellant. The dispositive portion reads:

WHEREFORE, the Orders appealed from are hereby REVERSED and SET ASIDE. This case is REMANDED to the Regional Trial Court of Imus, Cavite, Branch 21 for further proceedings.

4

SO ORDERED.7

Petitioners’ motion for reconsideration was denied on 23 August 2000. Hence, the instant petition attributing grave abuse of discretion on the part of the Court of Appeals.

A petition for certiorari is an extraordinary remedy that is adopted to correct errors of jurisdiction committed by the lower court or quasi-judicial agency, or when there is grave abuse of discretion on the part of such court or agency amounting to lack or excess of jurisdiction. Where the error is not one of jurisdiction, but of law or fact which is a mistake of judgment, the proper remedy should be appeal. In addition, an independent action for certiorari may be availed of only when there is no appeal or any plain, speedy and adequate remedy in the ordinary course of law.8

Nowhere in the petition was it shown that the jurisdiction of the Court of Appeals was questioned. The issue devolves on whether the husband of the judgment debtor may file an independent action to protect the conjugal property subject to execution. The alleged error therefore is an error of judgment which is a proper subject of an appeal.

Nevertheless, even if we were to treat this petition as one for review, the case should still be dismissed on substantive grounds.

Petitioners maintain that Branch 19 retained jurisdiction over its judgment to the exclusion of all other co-ordinate courts for its execution and all incidents thereof, in line with De Leon v. Salvador. Petitioners insist that respondent, who is the husband of the judgment debtor, is not the "third party" contemplated in Section 17 (now Section 16), Rule 39 of the Rules of Court, hence a separate action need not be filed. Furthermore, petitioners assert that the obligation of the wife redounded to the benefit of the conjugal partnership and cited authorities to the effect that the husband is liable for the tort committed by his wife.

Respondent on the other hand merely avers that the decision of the Court of Appeals is supported by substantial evidence and in accord with law and jurisprudence.9

Verily, the question of jurisdiction could be resolved through a proper interpretation of Section 16, Rule 39 of the Rules of Court, which reads:

Sec. 16. Proceedings where property claimed by third person.

If the property levied on is claimed by any person other than the judgment obligor or his agent, and such person makes an affidavit of his title thereto or right to the possession thereof, stating the grounds of such right or title, and serves the same upon the officer making the levy and a copy thereof upon the judgment obligee, the officer shall not be bound to keep the property, unless such judgment obligee, on demand of the officer, files a bond approved by the court to indemnify the third-party claimant in a sum not less than the value of the property levied on. In case of disagreement as to such value, the same shall be determined by the court issuing the writ of execution. No claim for damages for the taking or keeping of the property may be enforced against the bond unless the action therefor is filed within one hundred twenty (120) days from the date of the filing of the bond.

The officer shall not be liable for damages for the taking or keeping of the property, to any third-party claimant if such bond is filed. Nothing herein contained shall prevent such claimant or any third person from vindicating his claim to the property in a separate action, or prevent the judgment obligee from claiming damages in the same or a separate action against a third-party claimant who filed a frivolous or plainly spurious claim.

When the writ of execution is issued in favor of the Republic of the Philippines, or any officer duly representing it, the filing of such bond shall not be required, and in case the sheriff or levying officer is sued for damages as a result of the levy, he shall be represented by the Solicitor General and if held liable therefor, the actual damages adjudged by the court shall be paid by the National Treasurer out of such funds as may be appropriated for the purpose. (Emphasis Supplied)

Apart from the remedy of terceria available to a third-party claimant or to a stranger to the foreclosure suit against the sheriff or officer effecting the writ by serving on him an affidavit of his title and a copy thereof upon the judgment creditor, a third-party claimant may also resort to an independent separate action, the object of which is the recovery of ownership or possession of the property seized by the sheriff, as well as damages arising from wrongful seizure and detention of the property. If a separate action is the recourse, the third-party claimant must institute in a forum of competent jurisdiction an action, distinct and separate from the action in which the judgment is being enforced, even before or without need of filing a claim in the court that issued the writ.101awphi1.zw+

A third-party claim must be filed a person other than the judgment debtor or his agent. In other words, only a stranger to the case may file a third-party claim.

5

This leads us to the question: Is the husband, who was not a party to the suit but whose conjugal property is being executed on account of the other spouse being the judgment obligor, considered a "stranger?"

In determining whether the husband is a stranger to the suit, the character of the property must be taken into account. In Mariano v. Court of Appeals,11 which was later adopted in Spouses Ching v. Court of Appeals,12 this Court held that the husband of the judgment debtor cannot be deemed a "stranger" to the case prosecuted and adjudged against his wife for an obligation that has redounded to the benefit of the conjugal partnership.13 On the other hand, in Naguit v. Court of Appeals14 and Sy v. Discaya,15 the Court stated that a spouse is deemed a stranger to the action wherein the writ of execution was issued and is therefore justified in bringing an independent action to vindicate her right of ownership over his exclusive or paraphernal property.lawphil.net

Pursuant to Mariano however, it must further be settled whether the obligation of the judgment debtor redounded to the benefit of the conjugal partnership or not.

Petitioners argue that the obligation of the wife arising from her criminal liability is chargeable to the conjugal partnership. We do not agree.

There is no dispute that contested property is conjugal in nature. Article 122 of the Family Code16 explicitly provides that payment of personal debts contracted by the husband or the wife before or during the marriage shall not be charged to the conjugal partnership except insofar as they redounded to the benefit of the family.

Unlike in the system of absolute community where liabilities incurred by either spouse by reason of a crime orquasi-delict is chargeable to the absolute community of property, in the absence or insufficiency of the exclusive property of the debtor-spouse, the same advantage is not accorded in the system of conjugal partnership of gains. The conjugal partnership of gains has no duty to make advance payments for the liability of the debtor-spouse.

Parenthetically, by no stretch of imagination can it be concluded that the civil obligation arising from the crime of slander committed by Erlinda redounded to the benefit of the conjugal partnership.

To reiterate, conjugal property cannot be held liable for the personal obligation contracted by one spouse, unless some advantage or benefit is shown to have accrued to the conjugal partnership.17

In Guadalupe v. Tronco,18 this Court held that the car which was claimed by the third party complainant to be conjugal property was being levied upon to enforce "a judgment for support" filed by a third person, the third-party claim of the wife is proper since the obligation which is personal to the husband is chargeable not on the conjugal property but on his separate property.

Hence, the filing of a separate action by respondent is proper and jurisdiction is thus vested on Branch 21. Petitioners failed to show that the Court of Appeals committed grave abuse of discretion in remanding the case toBranch 21 for further proceedings.

WHEREFORE, the petition is DISMISSED. The Decision of the Court of Appeals is AFFIRMED. Costs against petitioners.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 164401             June 25, 2008

LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners, vs.THE HONORABLE COURT OF APPEALS; THE HONORABLE PRESIDING JUDGE, Regional Trial Court, Branch 11, Sindangan, Zamboanga Del Norte; THE REGIONAL TRIAL COURT SHERIFF, Branch 11, Sindangan, Zamboanga Del Norte; THE CLERK OF COURT OF MANILA, as Ex-Officio Sheriff; and LAMBERTO T. CHUA, respondents.

D E C I S I O N

VELASCO, JR., J.:

6

The Case

Before us is a petition for review under Rule 45, seeking to nullify and set aside the Decision1 and Resolution dated November 6, 2003 and July 6, 2004, respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 75688. The impugned CA Decision and Resolution denied the petition for certiorari interposed by petitioners assailing the Resolutions2 dated November 6, 2002 and January 7, 2003, respectively, of the Regional Trial Court (RTC), Branch 11 in Sindangan, Zamboanga Del Norte in Civil Case No. S-494, a suit for winding up of partnership affairs, accounting, and recovery of shares commenced thereat by respondent Lamberto T. Chua.

The Facts

In 1977, Chua and Jacinto Sunga formed a partnership to engage in the marketing of liquefied petroleum gas. For convenience, the business, pursued under the name, Shellite Gas Appliance Center (Shellite), was registered as a sole proprietorship in the name of Jacinto, albeit the partnership arrangement called for equal sharing of the net profit.

After Jacinto’s death in 1989, his widow, petitioner Cecilia Sunga, and married daughter, petitioner Lilibeth Sunga-Chan, continued with the business without Chua’s consent. Chua’s subsequent repeated demands for accounting and winding up went unheeded, prompting him to file on June 22, 1992 a Complaint for Winding Up of a Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with Writ of Preliminary Attachment, docketed as Civil Case No. S-494 of the RTC in Sindangan, Zamboanga del Norte and raffled to Branch 11 of the court.

After trial, the RTC rendered, on October 7, 1997, judgment finding for Chua, as plaintiff a quo. The RTC’s decision would subsequently be upheld by the CA in CA-G.R. CV No. 58751 and by this Court per its Decision dated August 15, 2001 in G.R. No. 143340.3 The corresponding Entry of Judgment4 would later issue declaring the October 7, 1997 RTC decision final and executory as of December 20, 2001. The fallo of the RTC’s decision reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, as follows:

(1) DIRECTING them to render an accounting in acceptable form under accounting procedures and

standards of the properties, assets, income and profits of [Shellite] since the time of death of Jacinto L. Sunga, from whom they continued the business operations including all businesses derived from [Shellite]; submit an inventory, and appraisal of all these properties, assets, income, profits, etc. to the Court and to plaintiff for approval or disapproval;

(2) ORDERING them to return and restitute to the partnership any and all properties, assets, income and profits they misapplied and converted to their own use and advantage that legally pertain to the plaintiff and account for the properties mentioned in pars. A and B on pages 4-5 of this petition as basis;

(3) DIRECTING them to restitute and pay to the plaintiff ½ shares and interest of the plaintiff in the partnership of the listed properties, assets and good will in schedules A, B and C, on pages 4-5 of the petition;

(4) ORDERING them to pay the plaintiff earned but unreceived income and profits from the partnership from 1988 to May 30, 1992, when the plaintiff learned of the closure of the store the sum of P35,000.00 per month, with legal rate of interest until fully paid;

(5) ORDERING them to wind up the affairs of the partnership and terminate its business activities pursuant to law, after delivering to the plaintiff all the ½ interest, shares, participation and equity in the partnership, or the value thereof in money or money’s worth, if the properties are not physically divisible;

(6) FINDING them especially Lilibeth Sunga-Chan guilty of breach of trust and in bad faith and hold them liable to the plaintiff the sum of P50,000.00 as moral and exemplary damages; and,

(7) DIRECTING them to reimburse and pay the sum of P25,000.00 as attorney’s [fee] and P25,000.00 as litigation expenses.

7

NO special pronouncements as to COSTS.

SO ORDERED.5 (Emphasis supplied.)

Via an Order6 dated January 16, 2002, the RTC granted Chua’s motion for execution. Over a month later, the RTC, acting on another motion of Chua, issued an amended writ of execution.7

It seems, however, that the amended writ of execution could not be immediately implemented, for, in an omnibus motion of April 3, 2002, Chua, inter alia, asked the trial court to commission a certified public accountant (CPA) to undertake the accounting work and inventory of the partnership assets if petitioners refuse to do it within the time set by the court. Chua later moved to withdraw his motion and instead ask the admission of an accounting report prepared by CPA Cheryl A. Gahuman. In the report under the heading, Computation of Claims,8 Chua’s aggregate claim, arrived at using the compounding-of-interest method, amounted to PhP 14,277,344.94. Subsequently, the RTC admitted and approved the computation of claims in view of petitioners’ failure and refusal, despite notice, to appear and submit an accounting report on the winding up of the partnership on the scheduled hearings on April 29 and 30, 2002.9

After another lengthy proceedings, petitioners, on September 24, 2002, submitted their own CPA-certified valuation and accounting report. In it, petitioners limited Chua’s entitlement from the winding up of partnership affairs to an aggregate amount of PhP 3,154,736.65 only.10 Chua, on the other hand, submitted a new computation,11 this time applying simple interest on the various items covered by his claim. Under this methodology, Chua’s aggregate claim went down to PhP 8,733,644.75.

On November 6, 2002, the RTC issued a Resolution,12 rejecting the accounting report petitioners submitted, while approving the new computation of claims Chua submitted. The fallo of the resolution reads:

WHEREFORE, premises considered, this Court resolves, as it is hereby resolved, that the Computation of Claims submitted by the plaintiff dated October 15, 2002 amounting to P8,733,644.75 be APPROVED in all respects as the final computation and accounting of the defendants’ liabilities in favor of the plaintiff in the above-captioned case, DISAPPROVING for the purpose, in its entirety, the computation and accounting filed by the defendants.

SO RESOLVED.13

Petitioners sought reconsideration, but their motion was denied by the RTC per its Resolution of January 7, 2003.14

In due time, petitioners went to the CA on a petition for certiorari15 under Rule 65, assailing the November 6, 2002 and January 7, 2003 resolutions of the RTC, the recourse docketed as CA-G.R. SP No. 75688.

The Ruling of the CA

As stated at the outset, the CA, in the herein assailed Decision of November 6, 2003, denied the petition for certiorari, thus:

WHEREFORE, the foregoing considered, the Petition is hereby DENIED for lack of merit.

SO ORDERED.16

The CA predicated its denial action on the ensuing main premises:

1. Petitioners, by not appearing on the hearing dates, i.e., April 29 and 30, 2002, scheduled to consider Chua’s computation of claims, or rendering, as required, an accounting of the winding up of the partnership, are deemed to have waived their right to interpose any objection to the computation of claims thus submitted by Chua.

2. The 12% interest added on the amounts due is proper as the unwarranted keeping by petitioners of Chua’s money passes as an involuntary loan and forbearance of money.

3. The reiterative arguments set forth in petitioners’ pleadings below were part of their delaying tactics. Petitioners had come to the appellate court at least thrice and to this Court twice. Petitioners had more than enough time to question the award and it is now too late in the day to change what had become final and executory.

Petitioners’ motion for reconsideration was rejected by the appellate court through the assailed Resolution17dated July 6, 2004. Therein, the CA explained that the imposition of the 12% interest for forbearance of credit or money was proper pursuant to paragraph 1 of the October 7, 1997 RTC

8

decision, as the computation done by CPA Gahuman was made in "acceptable form under accounting procedures and standards of the properties, assets, income and profits of [Shellite]."18 Moreover, the CA ruled that the imposition of interest is not based on par. 3 of the October 7, 1997 RTC decision as the phrase "shares and interests" mentioned therein refers not to an imposition of interest for use of money in a loan or credit, but to a legal share or right. The appellate court also held that the imposition of interest on the partnership assets falls under par. 2 in relation to par. 1 of the final RTC decision as the restitution mentioned therein does not simply mean restoration but also reparation for the injury or damage committed against the rightful owner of the property.

Finally, the CA declared the partnership assets referred to in the final decision as "liquidated claim" since the claim of Chua is ascertainable by mathematical computation; therefore, interest is recoverable as an element of damage.

The Issues

Hence, the instant petition with petitioners raising the following issues for our consideration:

I.

Whether or not the Regional Trial Court can [impose] interest on a final judgment of unliquidated claims.

II.

Whether or not the Sheriff can enforce the whole divisible obligation under judgment only against one Defendant.

III.

Whether or not the absolute community of property of spouses Lilibeth Sunga Chan with her husband Norberto Chan can be lawfully made to answer for the liability of Lilibeth Chan under the judgment.19

Significant Intervening Events

In the meantime, pending resolution of the instant petition for review and even before the resolution by the CA of its CA-G.R. SP No. 75688, the following relevant events transpired:

1. Following the RTC’s approval of Chua’s computation of claims in the amount of PhP 8,733,644.75, the sheriff of Manila levied upon petitioner Sunga-Chan’s property located along Linao St., Paco, Manila, covered by Transfer Certificate of Title (TCT) No. 208782,20 over which a building leased to the Philippine National Bank (PNB) stood. In the auction sale of the levied lot, Chua, with a tender of PhP 8 million,21emerged as the winning bidder.

2. On January 21, 2005, Chua moved for the issuance of a final deed of sale and a writ of possession. He also asked the RTC to order the Registry of Deeds of Manila to cancel TCT No. 208782 and to issue a new certificate. Despite petitioners’ opposition on the ground of prematurity, a final deed of sale22 was issued on February 16, 2005.

3. On February 18, 2005, Chua moved for the confirmation of the sheriff’s final deed of sale and for the issuance of an order for the cancellation of TCT No. 208782. Petitioners again interposed an opposition in which they informed the RTC that this Court had already granted due course to their petition for review on January 31, 2005;

4. On April 11, 2005, the RTC, via a Resolution, confirmed the sheriff’s final deed of sale, ordered the Registry of Deeds of Manila to cancel TCT No. 208782, and granted a writ of possession23 in favor of Chua.

5. On May 3, 2005, petitioners filed before this Court a petition for the issuance of a temporary restraining order (TRO). On May 24, 2005, the sheriff of Manila issued a Notice to Vacate24 against petitioners, compelling petitioners to repair to this Court anew for the resolution of their petition for a TRO.

6. On May 31, 2005, the Court issued a TRO,25 enjoining the RTC and the sheriff from enforcing the April 11, 2005 writ of possession and the May 24, 2005 Notice to Vacate. Consequently, the RTC issued an Order26 on June 17, 2005, suspending the execution proceedings before it.

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7. Owing to the clashing ownership claims over the leased Paco property, coupled with the filing of an unlawful detainer suit before the Metropolitan Trial Court (MeTC) in Manila against PNB, the Court, upon the bank’s motion, allowed, by Resolution27 dated April 26, 2006, the consignation of the monthly rentals with the MeTC hearing the ejectment case.

The Court’s Ruling

The petition is partly meritorious.

First Issue: Interest Proper in Forbearance of Credit

Petitioners, citing Article 221328 of the Civil Code, fault the trial court for imposing, in the execution of its final judgment, interests on what they considered as unliquidated claims. Among these was the claim for goodwill upon which the RTC attached a monetary value of PhP 250,000. Petitioners also question the imposition of 12% interest on the claimed monthly profits of PhP 35,000, reckoned from 1988 to October 15, 1992. To petitioners, the imposable rate should only be 6% and computed from the finality of the RTC’s underlying decision, i.e., from December 20, 2001.

Third on the petitioners’ list of unliquidated claims is the yet-to-be established value of the one-half partnership share and interest adjudicated to Chua, which, they submit, must first be determined with reasonable certainty in a judicial proceeding. And in this regard, petitioners, citing Eastern Shipping Lines, Inc. v. Court of Appeals,29 would ascribe error on the RTC for adding a 12% per annum interest on the approved valuation of the one-half share of the assets, inclusive of goodwill, due Chua.

Petitioners are partly correct.

For clarity, we reproduce the summary valuations and accounting reports on the computation of claims certified to by the parties’ respective CPAs. Chua claimed the following:

A 50% share on assets (exclusive of goodwill) at fair market value (Schedule 1) P 1,613,550.00

B 50% share in the monetary value of goodwill (P500,000 x 50%) 250,000.00

C Legal interest on share of assets from June 1, 1992 to Oct. 15, 2002 at 12% interest per year (Schedule 2) 2,008,869.75

D Unreceived profits from 1988 to 1992 and its corresponding interest from Jan. 1, 1988 to Oct. 15, 2002 (Schedule 3) 4,761,225.00

E Damages 50,000.00

F Attorney’s fees 25,000.00

G Litigation fees 25,000.00

TOTAL AMOUNT P 8,733,644.75

On the other hand, petitioners acknowledged the following to be due to Chua:

Total Assets – Schedule 1 P2,431,956.35

50% due to Lamberto Chua P1,215,978.16

Total Alleged Profit, Net of Payments Made,May 1992-Sch. 2 1,613,758.49

50% share in the monetary value of goodwill(500,000 x 50%) 250,000.00

Moral and Exemplary Damages 50,000.00

Attorney’s Fee 25,000.00

Litigation Fee 25,000.00

TOTAL AMOUNT P3,154,736.65

As may be recalled, the trial court admitted and approved Chua’s computation of claims amounting to PhP 8,733,644.75, but rejected that of petitioners, who came up with the figure of only PhP 3,154,736.65. We highlight the substantial differences in the accounting reports on the following items, to wit: (1) the aggregate amount of the partnership assets bearing on the 50% share of Chua thereon; (2) interests added on Chua’s share of the assets; (3) amount of profits from 1988 through May 30, 1992, net of alleged payments made to Chua; and (4) interests added on the amount entered as profits.

From the foregoing submitted valuation reports, there can be no dispute about the goodwill earned thru the years by Shellite. In fact, the parties, by

10

their own judicial admissions, agreed on the monetary value, i.e., PhP 250,000, of this item. Clearly then, petitioners contradict themselves when they say that such amount of goodwill is without basis. Thus, the Court is loathed to disturb the trial court’s approval of the amount of PhP 250,000, representing the monetary value of the goodwill, to be paid to Chua.

Neither is the Court inclined to interfere with the CA’s conclusion as to the total amount of the partnership profit, that is, PhP 1,855,000, generated for the period January 1988 through May 30, 1992, and the total partnership assets of PhP 3,227,100, 50% of which, or PhP 1,613,550, pertains to Chua as his share. To be sure, petitioners have not adduced adequate evidence to belie the above CA’s factual determination, confirmatory of the trial court’s own. Needless to stress, it is not the duty of the Court, not being a trier of facts, to analyze or weigh all over again the evidence or premises supportive of such determination, absent, as here, the most compelling and cogent reasons.

This brings us to the question of the propriety of the imposition of interest and, if proper, the imposable rate of interest applicable.

In Reformina v. Tomol, Jr.,30 the Court held that the legal interest at 12% per annum under Central Bank (CB) Circular No. 416 shall be adjudged only in cases involving the loan or forbearance of money. And for transactions involving payment of indemnities in the concept of damages arising from default in the performance of obligations in general and/or for money judgment not involving a loan or forbearance of money, goods, or credit, the governing provision is Art. 2209 of the Civil Code prescribing a yearly 6% interest. Art. 2209 pertinently provides:

Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.

The term "forbearance," within the context of usury law, has been described as a contractual obligation of a lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to repay the loan or debt then due and payable.31

Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if proper, and the applicable rate, as follows: The 12% per annum rate under CB Circular No. 416 shall apply only to loans or forbearance of

money, goods, or credits, as well as to judgments involving such loan or forbearance of money, goods, or credit, while the 6% per annum under Art. 2209 of the Civil Code applies "when the transaction involves the payment of indemnities in the concept of damage arising from the breach or a delay in the performance of obligations in general,"32 with the application of both rates reckoned "from the time the complaint was filed until the [adjudged] amount is fully paid."33 In either instance, the reckoning period for the commencement of the running of the legal interest shall be subject to the condition "that the courts are vested with discretion, depending on the equities of each case, on the award of interest."34

Otherwise formulated, the norm to be followed in the future on the rates and application thereof is:

I. – When an obligation, regardless of its source, is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.

II. – With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation breached consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation not constituting loans or forbearance of money is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the

11

claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.35

Guided by the foregoing rules, the award to Chua of the amount representing earned but unremitted profits, i.e.. PhP 35,000 monthly, from January 1988 until May 30, 1992, must earn interest at 6% per annum reckoned from October 7, 1997, the rendition date of the RTC decision, until December 20, 2001, when the said decision became final and executory. Thereafter, the total of the monthly profits inclusive of the add on 6% interest shall earn 12% per annum reckoned from December 20, 2001 until fully paid, as the award for that item is considered to be, by then, equivalent to a forbearance of credit. Likewise, the PhP 250,000 award, representing the goodwill value of the business, the award of PhP 50,000 for moral and exemplary damages, PhP 25,000 attorney’s fee, and PhP 25,000 litigation fee shall earn 12% per annum from December 20, 2001 until fully paid.

Anent the impasse over the partnership assets, we are inclined to agree with petitioners’ assertion that Chua’s share and interest on such assets partake of an unliquidated claim which, until reasonably determined, shall not earn interest for him. As may be noted, the legal norm for interest to accrue is "reasonably determinable," not, as Chua suggested and the CA declared, determinable by mathematical computation.

The Court has certainly not lost sight of the fact that the October 7, 1997 RTC decision clearly directed petitioners to render an accounting, inventory, and appraisal of the partnership assets and then to wind up the partnership affairs by restituting and delivering to Chua his one-half share of the accounted partnership assets. The directive itself is a recognition that the exact share and interest of Chua over the partnership cannot be determined

with reasonable precision without going through with the inventory and accounting process. In fine, a liquidated claim cannot validly be asserted without accounting. In net effect, Chua’s interest and share over the partnership asset, exclusive of the goodwill, assumed the nature of a liquidated claim only after the trial court, through its November 6, 2002 resolution, approved the assets inventory and accounting report on such assets.

Considering that Chua’s computation of claim, as approved by the trial court, was submitted only on October 15, 2002, no interest in his favor can be added to his share of the partnership assets. Consequently, the computation of claims of Chua should be as follows:

(1) 50% share on assets (exclusive of goodwill)at fair market value PhP 1,613,550.00

(2) 50% share in the monetary value of goodwill(PhP 500,000 x 50%) 250,000.00

(3) 12% interest on share of goodwill from December 20, 2001 to October 15, 2000[PhP 250,000 x 0.12 x 299/365 days] 24,575.34

(4) Unreceived profits from 1988 to May 30, 1992 1,855,000.00

(5) 6% interest on unreceived profits from January 1, 1988 to December 20, 200136 1,360,362.50

(6) 12% interest on unreceived profits from December

20, 2001 to October 15, 2002[PhP 3,215,362.50 x 12% x 299/365 days] 316,074.54

(7) Moral and exemplary damages 50,000.00

(8) Attorney’s fee 25,000.00

(9) Litigation fee 25,000.00

(10) 12% interest on moral and exemplary damages,

attorney’s fee, and litigation fee from December 20, 2001 to October 15, 2002[PhP 100,000 x 12% x 299/365 days] 9,830.14

TOTAL AMOUNT PhP 5,529,392.52

Second Issue: Petitioners’ Obligation Solidary

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Petitioners, on the submission that their liability under the RTC decision is divisible, impugn the implementation of the amended writ of execution, particularly the levy on execution of the absolute community property of spouses petitioner Sunga-Chan and Norberto Chan. Joint, instead of solidary, liability for any and all claims of Chua is obviously petitioners’ thesis.

Under the circumstances surrounding the case, we hold that the obligation of petitioners is solidary for several reasons.

For one, the complaint of Chua for winding up of partnership affairs, accounting, appraisal, and recovery of shares and damages is clearly a suit to enforce a solidary or joint and several obligation on the part of petitioners. As it were, the continuance of the business and management of Shellite by petitioners against the will of Chua gave rise to a solidary obligation, the acts complained of not being severable in nature. Indeed, it is well-nigh impossible to draw the line between when the liability of one petitioner ends and the liability of the other starts. In this kind of situation, the law itself imposes solidary obligation. Art. 1207 of the Civil Code thus provides:

Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each of the latter is bound to render, entire compliance with the prestation. There is solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. (Emphasis ours.)

Any suggestion that the obligation to undertake an inventory, render an accounting of partnership assets, and to wind up the partnership affairs is divisible ought to be dismissed.

For the other, the duty of petitioners to remit to Chua his half interest and share of the total partnership assets proceeds from petitioners’ indivisible obligation to render an accounting and inventory of such assets. The need for the imposition of a solidary liability becomes all the more pronounced considering the impossibility of quantifying how much of the partnership assets or profits was misappropriated by each petitioner.

And for a third, petitioners’ obligation for the payment of damages and attorney’s and litigation fees ought to be solidary in nature, they having resisted in bad faith a legitimate claim and thus compelled Chua to litigate.

Third Issue: Community Property Liable

Primarily anchored as the last issue is the erroneous theory of divisibility of petitioners’ obligation and their joint liability therefor. The Court needs to dwell on it lengthily.

Given the solidary liability of petitioners to satisfy the judgment award, respondent sheriff cannot really be faulted for levying upon and then selling at public auction the property of petitioner Sunga-Chan to answer for the whole obligation of petitioners. The fact that the levied parcel of land is a conjugal or community property, as the case may be, of spouses Norberto and Sunga-Chan does not per se vitiate the levy and the consequent sale of the property. Verily, said property is not among those exempted from execution under Section 13,37 Rule 39 of the Rules of Court.

And it cannot be overemphasized that the TRO issued by the Court on May 31, 2005 came after the auction sale in question.

Parenthetically, the records show that spouses Sunga-Chan and Norberto were married on February 4, 1992, or after the effectivity of the Family Code on August 3, 1988. Withal, their absolute community property may be held liable for the obligations contracted by either spouse. Specifically, Art. 94 of said Code pertinently provides:

Art. 94. The absolute community of property shall be liable for:

(1) x x x x

(2) All debts and obligations contracted during the marriage by the designated administrator-spouse for the benefit of the community, or by both spouses, or by one spouse with the consent of the other.

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

Absent any indication otherwise, the use and appropriation by petitioner Sunga-Chan of the assets of Shellite even after the business was discontinued on May 30, 1992 may reasonably be considered to have been used for her and her husband’s benefit.

13

It may be stressed at this juncture that Chua’s legitimate claim against petitioners, as readjusted in this disposition, amounts to only PhP 5,529,392.52, whereas Sunga-Chan’s auctioned property which Chua acquired, as the highest bidder, fetched a price of PhP 8 million. In net effect, Chua owes petitioner Sunga-Chan the amount of PhP 2,470,607.48, representing the excess of the purchase price over his legitimate claims.

Following the auction, the corresponding certificate of sale dated January 15, 2004 was annotated on TCT No. 208782. On January 21, 2005, Chua moved for the issuance of a final deed of sale (1) to order the Registry of Deeds of Manila to cancel TCT No. 208782; (2) to issue a new TCT in his name; and (3) for the RTC to issue a writ of possession in his favor. And as earlier stated, the RTC granted Chua’s motion, albeit the Court restrained the enforcement of the RTC’s package of orders via a TRO issued on May 31, 2005.

Therefore, subject to the payment by Chua of PhP 2,470,607.48 to petitioner Sunga-Chan, we affirm the RTC’s April 11, 2005 resolution, confirming the sheriff’s final deed of sale of the levied property, ordering the Registry of Deeds of Manila to cancel TCT No. 208782, and issuing a writ of possession in favor of Chua.

WHEREFORE, this petition is PARTLY GRANTED. Accordingly, the assailed decision and resolution of the CA in CA-G.R. SP No. 75688 are hereby AFFIRMED with the following MODIFICATIONS:

(1) The Resolutions dated November 6, 2002 and January 7, 2003 of the RTC, Branch 11 in Sindangan, Zamboanga Del Norte in Civil Case No. S-494, as effectively upheld by the CA, are AFFIRMED with the modification that the approved claim of respondent Chua is hereby corrected and adjusted to cover only the aggregate amount of PhP 5,529,392.52;

(2) Subject to the payment by respondent Chua of PhP 2,470,607.48 to petitioner Sunga-Chan, the Resolution dated April 11, 2005 of the RTC, confirming the sheriff’s final deed of sale of the levied property, ordering the Registry of Deeds of Manila to cancel TCT No. 208782, and issuing a writ of possession in favor of respondent Chua, is AFFIRMED; and

The TRO issued by the Court on May 31, 2005 in the instant petition is LIFTED.

No pronouncement as to costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 144735           October 18, 2001

YU BUN GUAN, petitioner, vs.ELVIRA ONG, respondent.

PANGANIBAN, J.:

A simulated deed of sale has no legal effect, and the transfer certificate of title issued in consequence thereof should be cancelled. Pari delicto does not apply to simulated sales.

Statement of the Case

Before us is a Petition for Review under rule 45 of the Rules of Court, assailing the April 25, 2000 Decision1 and the August 31, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No. 61364. The decretal portion of the Decision reads as follows:

"We cannot see any justification for the setting aside of the contested Decision.

"THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED."4

The assailed Resolution denied petitioner's "Supplemental Motion for Reconsideration with Leave to Submit [Newly] Discovered Evidence."

The CA sustained the Decision of the Regional Trial Court (RTC) of Makati City (Branch 60), which had disposed as follows:5

"23. WHEREFORE, the Court hereby renders judgment as follows:

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23.1 The Deed of Sale dated July 24, 1992 (Exh. EE on Exh. 3) is declared VOID.

23.2 The plaintiff ELVIRA ONG is declared the OWNER of the property covered by Transfer Certificate of Title No. 217614, Registry of Deeds, Makati (Exh. DD).

23.3 The Register of Deeds, City of Makati is ordered to:

23.2.1. Cancel Transfer Certificate of Title No. 181033 (Exh. HH); and

23.2.2. Issue in lieu thereof, a transfer certificate of title in the name of ELVIRA A. ONG, of legal age, single, Filipino';

23.[4]. The defendant YU BUN GUAN is ordered to pay to the said plaintiff, the following:

23.[4].1. P48,631.00 – As reimbursement of the capital gains tax (Exh. FF);

23.[4].2. Six (6) percent of P48,631.00 – per annum from November 23, 1993, until the said P48,631.00 is paid – as damages;

23.[4].3. P100,000.00 – as moral damages;

23.[4].4. P50,000.00 as exemplary damages;

23.[4].5. P100,000.00 – as attorney's fees.

23.[5]. The COUNTERCLAIM is DISMISSED.

23.[6]. Cost is taxed against the defendant.

"24. In Chambers, City of Makati, June 23, 1998.

The Facts

The antecedents of the case are succinctly summarized by the Court of Appeals in this wise:

'[Herein respondent] said that she and [petitioner] are husband and wife, having been married according to Chinese rites on April 30, 1961. They lived together until she and her children were abandoned by [petitioner] on August 26, 1992, because of the latter's 'incurable promiscuity, volcanic temper and other vicious vices'; out of the reunion were born three (3) children, now living with her [respondent].

"She purchased on March 20, 1968, out of her personal funds, a parcel of land, then referred to as the Rizal property, from Aurora Seneris, and supported by Title No. 26795, then subsequently registered on April 17, 1968, in her name.1âwphi1.nêt

"Also during their marriage, they purchased, out of their conjugal funds, a house and lot, in 1983, thereafter, registered in their names, under Title No. 118884.

'Before their separation in 1992, she 'reluctantly agreed' to the [petitioner's] 'importunings' that she execute a Deed of Sale of the J.P. Rizal property in his favor, but on the promise that he would construct a commercial building for the benefit of the children. He suggested that the J.P. Rizal property should be in his name alone so that she would not be involved in any obligation. The consideration for the 'simulated sale' was that, after its execution in which he would represent himself as single, a Deed of Absolute Sale would be executed in favor of the three (3) children and that he would pay the Allied Bank, Inc. the loan he obtained.

"Because of the 'glib assurances' of [petitioner], [respondent] executed a Deed of Absolute Sale in 1992, but then he did not pay the consideration of P200,000.00, supposedly the 'ostensible' valuable consideration. On the contrary, she paid for the capital gains tax and all the other assessments even amounting to not less than P60,000.00, out of her personal funds.

"Because of the sale, a new title (TCT No. 181033) was issued in his name, but to 'insure' that he would comply with his commitment, she did not deliver the owner's copy of the title to him.

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"Because of the refusal of [petitioner] to perform his promise, and also because he insisted on delivering to him the owner's copy of the title [to] the JP Rizal property, in addition to threats and physical violence, she decided executing an Affidavit of Adverse Claim.

Also to avoid burdening the JP Rizal property with an additional loan amount, she wrote the Allied Bank, Inc. on August 25, 1992, withdrawing her authority for [petitioner] to apply for additional loans.

"To save their marriage, she even sought the help of relatives in an earnest effort [at] reconciliation, not to mention a letter to [petitioner] on November 3, 1992.

"[Petitioner], on the other hand, filed with the RTC, Makati, in 1993 (Case No. M-2905), a 'Petition for Replacement' of an owner's duplicate title.

"Attached to the Petition was the Affidavit of Loss dated March 26, 1993, in which he falsely made it appear that the owner's copy of the title was lost or misplaced, and that was granted by the court in an Order dated September 17, 1993, following which a new owner's copy of the title was issued to [petitioner].

"Upon discovery of the 'fraudulent steps' taken by the [petitioner], [respondent] immediately executed an Affidavit of Adverse Claim on November 29, 1993.

"She precisely asked the court that the sale of the JP Rizal property be declared as null and void; for the title to be cancelled; payment of actual, moral and exemplary damages; and attorney's fees.

"It was, on the other hand, the version of [petitioner] that sometime in 1968 or before he became a Filipino, 'through naturalization' the JP Rizal property was being offered to him for sale. Because he was not a Filipino, he utilized [respondent] as his 'dummy' and agreed to have the sale executed in the name of [respondent], although the consideration was his own and from his personal funds.

"When he finally acquired a Filipino citizenship in 1972, he purchased another property being referred to as the 'Juno lot' out of

his own funds. If only to reflect the true ownership of the JP Rizal property, a Deed of Sale was then executed in 1972. Believing in good faith that his owner's copy of the title was lost and not knowing that the same was surreptitiously 'concealed' by [respondent], he filed in 1993 a petition for replacement of the owner's copy of the title, in court.

"[Petitioner] added that [respondent] could not have purchased the property because she had no financial capacity to do so; on the other hand, he was financially capable although he was financially capable although he was disqualified to acquire the property by reason of his nationality. [Respondent] was in pari delicto being privy to the simulated sale.

"Before the court a quo, the issues were: who purchased the JP Rizal property? [W]as the Deed of Sale void? and damages.6

Ruling of the Trial Court

After examining the evidence adduced by both parties, the RTC found that the JP Rizal property was the paraphernal property of the respondent, because (1) the title had been issued in her name; (2) petitioner had categorically admitted that the property was in her name; (3) petitioner was estopped from claiming otherwise, since he had signed the Deed of Absolute Sale that stated that she was the "absolute and registered owner"; (4) she had paid the real property taxes thereon.7

The trial court further held that the in pari delicto rule found in Articles 1411 and 1412 of the Civil Code was not applicable to the present case, because it would apply only to existing contracts with an illegal cause or object, not to simulated or fictitious contracts or to those that were inexistent due to lack of an essential requisite such as cause or consideration.8 It likewise voided the Deed of Absolute Sale of the JP Rizal property for having been simulated and executed during the marriage of the parties.9

Ruling of the Court of Appeals

The Court of Appeals upheld the trial court's findings that the JP Rizal property had been acquired by respondent alone, out of her own personal funds. It ruled thus:

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"x x x [T]he JP Rizal property was purchased by the [respondent] alone; therefore it is a paraphernal property. As a matter of fact, the title was issued in her name, Exh. 'DD' This was even admitted by [petitioner] in the Answer that the sale was executed in her name alone. He also signed the sale mentioning [respondent] to be an absolute owner; therefore he should be estopped from claiming otherwise. She alone likewise did the payment of the taxes.10

The CA debunked the contention of petitioner that he had purchased the property out of his own funds and merely used respondent as his dummy.11 It also held that the latter was not in pari delicto with him, because the contract was simulated or fictitious due to the lack of consideration. The contract was deemed void for having been executed during the couple's marriage.12 The CA likewise affirmed the award of actual, moral and exemplary damages to respondent.13

Hence, this Petition.14

Issues

In his Memorandum, petitioner raises the following issues for the Court's consideration:

I

"Whether or not the Court of Appeals gravely erred in not applying [the] rules on co-ownership under Article 144 of the New Civil Code in determining the proprietary rights of the parties herein even as respondent herself expressly declared that the money with which she allegedly bought the property in question in 1968 came from her funds, salaries and savings at the time she and petitioner already lived as husband and wife.

II

"Whether or not the Court of Appeals likewise palpably erred in declaring the sale of the subject property to herein petitioner in 1992 to be fictitious, simulated and inexistent.

III

"Whether or not the Court of Appeals further erred in not applying the '[in] pari delicto' rule to the sale of the subject property in favor of the petitioner in 1992 contrary to the express declaration to that effect in the very same case it cited (Rodriguez v. Rodriguez; 20 SCRA 908) in the decision herein sought to be reviewed.

IV

"Whether or not the Court of Appeals gravely erred in annul[l]ing the title (TCT No. 181033) to the subject property in the name of herein petitioner in the absence of actual fraud."15 (Underscoring in the original.)

This Court's Ruling

The Petition is devoid of merit.

First Issue:

Nature of the Property

Petitioner contends that the JP Rizal property should be deemed as co-owned, considering that respondent testified during trial that the money she used in purchasing it had come from her income, salaries and savings, which are conjugal in nature.

On the other hand, respondent maintains that the finding of the two lower courts that the property was acquired using funds solely owned by her is binding and supported by evidence. She further argues that the two defenses of petitioner are contradictory to each other because, if the property is co-owned, he cannot claim to own it in its entirety.

We find no reason to disturb the findings of the RTC and the CA that the source of the money used to acquire the property was paraphernal. This issue is factual in nature. It is axiomatic that "factual findings of the trial court, especially when affirmed by the Court of Appeals, as in this case, are binding and conclusive on the Supreme Court. It is not the function of this Court to reexamine the lower courts' findings of fact. While there are exceptions to this rule, petitioner has not shown its entitlement to any of them."16

17

The testimony of petitioner as to the source of the money he had supposedly used to purchase the property was at best vague and unclear. At first he maintained that the money came from his own personal funds. Then he said that it came from his mother; and next, from his father. Time and time again, "we [have] held that the unnatural and contradictory testimony of a witness, x x x makes him unreliable x x x."17 His statement that the JP Rizal property was bought with his own money can hardly be believed, when he himself was unsure as to the source of those funds.

On the other hand, the capacity of respondent to purchase the subject property cannot be questioned. It was sufficiently established during trial that she had the means to do so. In fact, her testimony that she had purchased several other lots using her personal funds was not disputed.

Equally without merit is the contention of petitioner that, because he was a Chinese national at the time, respondent was merely used as a dummy in acquiring the property; thus, she could not have legally acquired title thereto. He testified that sometime during the last month of 1968, he had consulted a certain Atty. Flores, who advised him that the property be registered in the name of respondent. However, TCT No. 217614 had been issued earlier on April 17, 1968. Thus, it appears that the subject property had already been bought and registered in the name of respondent, long before Atty. Flores allegedly advised him to have the property registered in her name.

We therefore agree with the CA's affirmation of the RTC's findings that the property had been acquired using respondent's paraphernal property. The CA rule thus:

"The fact however, is that Yu never refuted Elvira's testimony that: (a) the money with which she acquired the JP Rizal property came from": (1) her income as a cashier in the Hong Kiat Hardware: a (2) income from her paraphernal property – a lot in Guadalupe; (3) her savings from the money which her parents gave her while she was still a student; and (4) the money which her sister gave her for helping her run the beauty parlor; (b) her parents were well off – they had stores, apartments and beauty parlors from which they derived income; (c) before her marriage she bought lots in different places (p. 8, TSN, Jan. 26, 1998; pp. 22-23, TSN March 10, 1998)."18

Second Issue:

Fictitious, Simulated and Inexistent Sale

Next, petitioner argues that there was a valid sale between the parties, and that the consideration consisted of his promise to construct a commercial building for the benefit of their three children and to pay the loan he had obtained from Allied Bank.

We disagree. In Rongavilla v. Court of Appeals,19 the Court declared that a deed of sale, in which the stated consideration had not in fact been paid, is null and void:

"The 'problem' before the Court is whether a deed which states a consideration that in fact did not exist, is a contract, without consideration, and therefore void ab initio, or a contract with a false consideration, and therefore, at least under the Old Civil Code, voidable. x x x."

"In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, 40 Phil. 921[,] is squarely applicable herein. In that case we ruled that a contract of purchase and sale is null and null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to vendor."20

In the present case, it is clear from the factual findings of both lower courts that the Deed of Sale was completely simulated and, hence, void and without effect. No portion of the P200,000 consideration stated in the Deed was ever paid. And, from the facts of the case, it is clear that neither party had any intention whatsoever to pay that amount.

Instead, the Deed of Sale was executed merely to facilitate the transfer of the property to petitioner pursuant to an agreement between the parties to enable him to construct a commercial building and to sell the Juno property to their children. Being merely a subterfuge, that agreement cannot be taken as the consideration for the sale.

Third Issue:

Inapplicability of the   in Pari Delicto   Principle

The principle of in pari delicto provides that when two parties are equally at fault, the law leaves them as they are and denies recovery by either one of

18

them. However, this principle does not apply with respect to inexistent and void contracts. Said this Court in Modina v. Court of Appeals:21

"The principle of in pari delicto non oritur actio denies all recovery to the guilty parties inter se. It applies to cases where the nullity arises from the illegality of the consideration or the purpose of the contract. When two persons are equally at fault, the law does not relieve them. The exception to this general rule is when the principle is invoked with respect to inexistent contracts."22

Fourth Issue:

Cancellation of TCT

Finally, based on the foregoing disquisition, it is quite obvious that the Court of Appeals did not err in ordering the cancellation of TCT No. 181033, because the Deed of Absolute Sale transferring ownership to petitioner was completely simulated, void and without effect. In fact, there was no legal basis for the issuance of the certificate itself.1âwphi1.nêt

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

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 164584               June 22, 2009

PHILIP MATTHEWS, Petitioner, vs.BENJAMIN A. TAYLOR and JOSELYN C. TAYLOR, Respondents.

D E C I S I O N

NACHURA, J.:

Assailed in this petition for review on certiorari are the Court of Appeals (CA) December 19, 2003 Decision1 and July 14, 2004 Resolution2 in CA-G.R. CV No. 59573. The assailed decision affirmed and upheld the June 30, 1997 Decision3 of the Regional Trial Court (RTC), Branch 8, Kalibo, Aklan in Civil Case No. 4632 for Declaration of Nullity of Agreement of Lease with Damages.

On June 30, 1988, respondent Benjamin A. Taylor (Benjamin), a British subject, married Joselyn C. Taylor (Joselyn), a 17-year old Filipina.4 On June 9, 1989, while their marriage was subsisting, Joselyn bought from Diosa M. Martin a 1,294 square-meter lot (Boracay property) situated at Manoc-Manoc, Boracay Island, Malay, Aklan, for and in consideration of P129,000.00.5 The sale was allegedly financed by Benjamin.6 Joselyn and Benjamin, also using the latter’s funds, constructed improvements thereon and eventually converted the property to a vacation and tourist resort known as the Admiral Ben Bow Inn.7 All required permits and licenses for the operation of the resort were obtained in the name of Ginna Celestino, Joselyn’s sister.8

However, Benjamin and Joselyn had a falling out, and Joselyn ran away with Kim Philippsen. On June 8, 1992, Joselyn executed a Special Power of Attorney (SPA) in favor of Benjamin, authorizing the latter to maintain, sell, lease, and sub-lease and otherwise enter into contract with third parties with respect to their Boracay property.9

On July 20, 1992, Joselyn as lessor and petitioner Philip Matthews as lessee, entered into an Agreement of Lease10 (Agreement) involving the Boracay property for a period of 25 years, with an annual rental of P12,000.00. The agreement was signed by the parties and executed before a Notary Public. Petitioner thereafter took possession of the property and renamed the resort as Music Garden Resort.1avvphi1

Claiming that the Agreement was null and void since it was entered into by Joselyn without his (Benjamin’s) consent, Benjamin instituted an action for Declaration of Nullity of Agreement of Lease with Damages11 against Joselyn and the petitioner. Benjamin claimed that his funds were used in the acquisition and improvement of the Boracay property, and coupled with the fact that he was Joselyn’s husband, any transaction involving said property required his consent.

No Answer was filed, hence, the RTC declared Joselyn and the petitioner in defeault. On March 14, 1994, the RTC rendered judgment by default declaring the Agreement null and void.12 The decision was, however, set

19

aside by the CA in CA-G.R. SP No. 34054.13 The CA also ordered the RTC to allow the petitioner to file his Answer, and to conduct further proceedings.

In his Answer,14 petitioner claimed good faith in transacting with Joselyn. Since Joselyn appeared to be the owner of the Boracay property, he found it unnecessary to obtain the consent of Benjamin. Moreover, as appearing in the Agreement, Benjamin signed as a witness to the contract, indicating his knowledge of the transaction and, impliedly, his conformity to the agreement entered into by his wife. Benjamin was, therefore, estopped from questioning the validity of the Agreement.

There being no amicable settlement during the pre-trial, trial on the merits ensued.

On June 30, 1997, the RTC disposed of the case in this manner:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants as follows:

1. The Agreement of Lease dated July 20, 1992 consisting of eight (8) pages (Exhibits "T", "T-1", "T-2", "T-3", "T-4", "T-5", "T-6" and "T-7") entered into by and between Joselyn C. Taylor and Philip Matthews before Notary Public Lenito T. Serrano under Doc. No. 390, Page 79, Book I, Series of 1992 is hereby declared NULL and VOID;

2. Defendants are hereby ordered, jointly and severally, to pay plaintiff the sum of SIXTEEN THOUSAND (P16,000.00) PESOS as damages representing unrealized income for the residential building and cottages computed monthly from July 1992 up to the time the property in question is restored to plaintiff; and

3. Defendants are hereby ordered, jointly and severally, to pay plaintiff the sum of TWENTY THOUSAND (P20,000.00) PESOS, Philippine Currency, for attorney’s fees and other incidental expenses.

SO ORDERED.15

The RTC considered the Boracay property as community property of Benjamin and Joselyn; thus, the consent of the spouses was necessary to validate any contract involving the property. Benjamin’s right over the

Boracay property was bolstered by the court’s findings that the property was purchased and improved through funds provided by Benjamin. Although the Agreement was evidenced by a public document, the trial court refused to consider the alleged participation of Benjamin in the questioned transaction primarily because his signature appeared only on the last page of the document and not on every page thereof.

On appeal to the CA, petitioner still failed to obtain a favorable decision. In its December 19, 2003 Decision,16 the CA affirmed the conclusions made by the RTC. The appellate court was of the view that if, indeed, Benjamin was a willing participant in the questioned transaction, the parties to the Agreement should have used the phrase "with my consent" instead of "signed in the presence of." The CA noted that Joselyn already prepared an SPA in favor of Benjamin involving the Boracay property; it was therefore unnecessary for Joselyn to participate in the execution of the Agreement. Taken together, these circumstances yielded the inevitable conclusion that the contract was null and void having been entered into by Joselyn without the consent of Benjamin.

Aggrieved, petitioner now comes before this Court in this petition for review on certiorari based on the following grounds:

4.1. THE MARITAL CONSENT OF RESPONDENT BENJAMIN TAYLOR IS NOT REQUIRED IN THE AGREEMENT OF LEASE DATED 20 JULY 1992. GRANTING ARGUENDO THAT HIS CONSENT IS REQUIRED, BENJAMIN TAYLOR IS DEEMED TO HAVE GIVEN HIS CONSENT WHEN HE AFFIXED HIS SIGNATURE IN THE AGREEMENT OF LEASE AS WITNESS IN THE LIGHT OF THE RULING OF THE SUPREME COURT IN THE CASE OF SPOUSES PELAYO VS. MELKI PEREZ, G.R. NO. 141323, JUNE 8, 2005.

4.2. THE PARCEL OF LAND SUBJECT OF THE AGREEMENT OF LEASE IS THE EXCLUSIVE PROPERTY OF JOCELYN C. TAYLOR, A FILIPINO CITIZEN, IN THE LIGHT OF CHEESMAN VS. IAC, G.R. NO. 74833, JANUARY 21, 1991.

4.3. THE COURTS A QUO ERRONEOUSLY APPLIED ARTICLE 96 OF THE FAMILY CODE OF THE PHILIPPINES WHICH IS A PROVISION REFERRING TO THE ABSOLUTE COMMUNITY OF PROPERTY. THE PROPERTY REGIME GOVERNING THE PROPERTY RELATIONS OF BENJAMIN TAYLOR AND JOSELYN TAYLOR IS THE CONJUGAL PARTNERSHIP OF GAINS

20

BECAUSE THEY WERE MARRIED ON 30 JUNE 1988 WHICH IS PRIOR TO THE EFFECTIVITY OF THE FAMILY CODE. ARTICLE 96 OF THE FAMILY CODE OF THE PHILIPPINES FINDS NO APPLICATION IN THIS CASE.

4.4. THE HONORABLE COURT OF APPEALS IGNORED THE PRESUMPTION OF REGULARITY IN THE EXECUTION OF NOTARIAL DOCUMENTS.

4.5. THE HONORABLE COURT OF APPEALS FAILED TO PASS UPON THE COUNTERCLAIM OF PETITIONER DESPITE THE FACT THAT IT WAS NOT CONTESTED AND DESPITE THE PRESENTATION OF EVIDENCE ESTABLISHING SAID CLAIM.17

The petition is impressed with merit.

In fine, we are called upon to determine the validity of an Agreement of Lease of a parcel of land entered into by a Filipino wife without the consent of her British husband. In addressing the matter before us, we are confronted not only with civil law or conflicts of law issues, but more importantly, with a constitutional question.

It is undisputed that Joselyn acquired the Boracay property in 1989. Said acquisition was evidenced by a Deed of Sale with Joselyn as the vendee. The property was also declared for taxation purposes under her name. When Joselyn leased the property to petitioner, Benjamin sought the nullification of the contract on two grounds: first, that he was the actual owner of the property since he provided the funds used in purchasing the same; and second, that Joselyn could not enter into a valid contract involving the subject property without his consent.

The trial and appellate courts both focused on the property relations of petitioner and respondent in light of the Civil Code and Family Code provisions. They, however, failed to observe the applicable constitutional principles, which, in fact, are the more decisive.

Section 7, Article XII of the 1987 Constitution states:18

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.1avvphi1

Aliens, whether individuals or corporations, have been disqualified from acquiring lands of the public domain. Hence, by virtue of the aforecited constitutional provision, they are also disqualified from acquiring private lands.19The primary purpose of this constitutional provision is the conservation of the national patrimony.20 Our fundamental law cannot be any clearer. The right to acquire lands of the public domain is reserved only to Filipino citizens or corporations at least sixty percent of the capital of which is owned by Filipinos.21

In Krivenko v. Register of Deeds,22 cited in Muller v. Muller,23 we had the occasion to explain the constitutional prohibition:

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:

"Section 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 alien’s 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

21

agricultural." (Solicitor General’s Brief, p. 6) That this is obnoxious to the conservative spirit of the Constitution is beyond question.24

The rule is clear and inflexible: aliens are absolutely not allowed to acquire public or private lands in the Philippines, save only in constitutionally recognized exceptions.25 There is no rule more settled than this constitutional prohibition, as more and more aliens attempt to circumvent the provision by trying to own lands through another. In a long line of cases, we have settled issues that directly or indirectly involve the above constitutional provision. We had cases where aliens wanted that a particular property be declared as part of their father’s estate;26 that they be reimbursed the funds used in purchasing a property titled in the name of another;27that an implied trust be declared in their (aliens’) favor;28 and that a contract of sale be nullified for their lack of consent.29

In Ting Ho, Jr. v. Teng Gui,30 Felix Ting Ho, a Chinese citizen, acquired a parcel of land, together with the improvements thereon. Upon his death, his heirs (the petitioners therein) claimed the properties as part of the estate of their deceased father, and sought the partition of said properties among themselves. We, however, excluded the land and improvements thereon from the estate of Felix Ting Ho, precisely because he never became the owner thereof in light of the above-mentioned constitutional prohibition.

In Muller v. Muller,31 petitioner Elena Buenaventura Muller and respondent Helmut Muller were married in Germany. During the subsistence of their marriage, respondent purchased a parcel of land in Antipolo City and constructed a house thereon. The Antipolo property was registered in the name of the petitioner. They eventually separated, prompting the respondent to file a petition for separation of property. Specifically, respondent prayed for reimbursement of the funds he paid for the acquisition of said property. In deciding the case in favor of the petitioner, the Court held that respondent was aware that as an alien, he was prohibited from owning a parcel of land situated in the Philippines. He had, in fact, declared that when the spouses acquired the Antipolo property, he had it titled in the name of the petitioner because of said prohibition. Hence, we denied his attempt at subsequently asserting a right to the said property in the form of a claim for reimbursement. Neither did the Court declare that an implied trust was created by operation of law in view of petitioner’s marriage to respondent. We said that to rule otherwise would permit circumvention of the constitutional prohibition.

In Frenzel v. Catito,32 petitioner, an Australian citizen, was married to Teresita Santos; while respondent, a Filipina, was married to Klaus Muller.

Petitioner and respondent met and later cohabited in a common-law relationship, during which petitioner acquired real properties; and since he was disqualified from owning lands in the Philippines, respondent’s name appeared as the vendee in the deeds of sale. When their relationship turned sour, petitioner filed an action for the recovery of the real properties registered in the name of respondent, claiming that he was the real owner. Again, as in the other cases, the Court refused to declare petitioner as the owner mainly because of the constitutional prohibition. The Court added that being a party to an illegal contract, he could not come to court and ask to have his illegal objective carried out. One who loses his money or property by knowingly engaging in an illegal contract may not maintain an action for his losses.

Finally, in Cheesman v. Intermediate Appellate Court,33 petitioner (an American citizen) and Criselda Cheesman acquired a parcel of land that was later registered in the latter’s name. Criselda subsequently sold the land to a third person without the knowledge of the petitioner. The petitioner then sought the nullification of the sale as he did not give his consent thereto. The Court held that assuming that it was his (petitioner’s) 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; thus, the sale as to him was null and void.

In light of the foregoing jurisprudence, we find and so hold that Benjamin has no right to nullify the Agreement of Lease between Joselyn and petitioner. Benjamin, being an alien, is absolutely prohibited from acquiring private and public lands in the Philippines. Considering that Joselyn appeared to be the designated "vendee" in the Deed of Sale of said property, she acquired sole ownership thereto. This is true even if we sustain Benjamin’s claim that he provided the funds for such acquisition. By entering into such contract knowing that it was illegal, no implied trust was created in his favor; no reimbursement for his expenses can be allowed; and no declaration can be made that the subject property was part of the conjugal/community property of the spouses. In any event, he had and has no capacity or personality to question the subsequent lease of the Boracay property by his wife on the theory that in so doing, he was merely exercising the prerogative of a husband in respect of conjugal property. To sustain such a theory would countenance indirect controversion of the constitutional prohibition. If the property were to be declared conjugal, this would accord the alien husband a substantial interest and right over the 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.34

22

In fine, the Agreement of Lease entered into between Joselyn and petitioner cannot be nullified on the grounds advanced by Benjamin. Thus, we uphold its validity.

With the foregoing disquisition, we find it unnecessary to address the other issues raised by the petitioner.

WHEREFORE, premises considered, the December 19, 2003 Decision and July 14, 2004 Resolution of the Court of Appeals in CA-G.R. CV No. 59573, are REVERSED and SET ASIDE and a new one is entered DISMISSING the complaint against petitioner Philip Matthews.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 169548               March 15, 2010

TITAN CONSTRUCTION CORPORATION, Petitioner, vs.MANUEL A. DAVID, SR. and MARTHA S. DAVID, Respondents.

D E C I S I O N

DEL CASTILLO, J.:

The review of factual matters is not the province of this Court.1 The Supreme Court is not a trier of facts, and is not the proper forum for the ventilation and substantiation of factual issues.2

This Petition for Review assails the July 20, 2004 Decision3 of the Court of Appeals (CA) in CA-G.R. CV No. 67090 which affirmed with modification the March 7, 2000 Decision4 of the Regional Trial Court (RTC) of Quezon City, Branch 80. Also assailed is the August 31, 2005 Resolution5 of the CA denying the motion for reconsideration.

Factual Antecedents

Manuel A. David, Sr. (Manuel) and Martha S. David (Martha) were married on March 25, 1957. In 1970, the spouses acquired a 602 square meter lot located at White Plains, Quezon City, which was registered in the name of "MARTHA S. DAVID, of legal age, Filipino, married to Manuel A. David" and covered by Transfer Certificate of Title (TCT) No. 156043 issued by the Register of Deeds of Quezon City.6 In 1976, the spouses separated de facto, and no longer communicated with each other.7

Sometime in March 1995, Manuel discovered that Martha had previously sold the property to Titan Construction Corporation (Titan) for P1,500,000.00 through a Deed of Sale8 dated April 24, 1995, and that TCT No. 156043 had been cancelled and replaced by TCT No. 130129 in the name of Titan.

Thus, on March 13, 1996, Manuel filed a Complaint9 for Annulment of Contract and Recovenyance against Titan before the RTC of Quezon City. Manuel alleged that the sale executed by Martha in favor of Titan was without his knowledge and consent, and therefore void. He prayed that the Deed of Sale and TCT No. 130129 be invalidated, that the property be reconveyed to the spouses, and that a new title be issued in their names.

In its Answer with Counterclaim,10 Titan claimed that it was a buyer in

good faith and for value because it relied on a Special Power of Attorney (SPA) 11 dated January 4, 1995 signed by Manuel which authorized Martha to dispose of the property on behalf of the spouses. Titan thus prayed for the dismissal of the complaint.

In his unverified Reply,12 Manuel claimed that the SPA was spurious, and that the signature purporting to be his was a forgery; hence, Martha was wholly without authority to sell the property.

Subsequently, Manuel filed a Motion for Leave to File Amended Complaint13 which was granted by the trial court. Thus, on October 15, 1996, Manuel filed an Amended Complaint14 impleading Martha as a co-defendant in the proceedings. However, despite personal service of summons15 upon Martha, she failed to file an Answer. Thus, she was declared in default.16 Trial then ensued.

Ruling of the Regional Trial Court

23

On March 7, 2000, the RTC issued a Decision which (i) invalidated both the Deed of Sale and TCT No. 130129; (ii) ordered Titan to reconvey the property to Martha and Manuel; (iii) directed the Register of Deeds of Quezon City to issue a new title in the names of Manuel and Martha; and (iv) ordered Titan to pay P200,000.00 plusP1,000.00 per appearance as attorney’s fees, and P50,000.00 as costs of suit.

The RTC found that:

1) The property was conjugal in character since it was purchased by Manuel

and Martha with conjugal funds during their marriage. The fact that TCT No. 156043 was registered in the name of "MARTHA S. DAVID x x x married to Manuel A. David" did not negate the property’s conjugal nature.

2) The SPA professing to authorize Martha to sell the property on behalf of the spouses was spurious, and did not bear Manuel’s genuine signature. This was the subject of expert testimony, which Titan failed to rebut. In addition, despite the fact that the SPA was notarized, the genuineness and due execution of the SPA was placed in doubt since it did not contain Manuel’s residence certificate, and was not presented for registration with the Quezon City Register of Deeds, in violation of Section 64 of Presidential Decree No. 1529.17

3) The circumstances surrounding the transaction with Martha should have put Titan on notice of the SPA’s dubious veracity. The RTC noted that aside from Martha’s failure to register the SPA with the Register of Deeds, it was doubtful that an SPA would have even been necessary, since the SPA itself indicated that Martha and Manuel lived on the same street in Navotas.

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

Wherefore, judgment is hereby rendered:

1.) Declaring the Deed of Sale dated April 24, 1995 as void ab initio and without force and effect.

2.) Declaring null and void TCT No. 130129 issued by the Register of Deeds of Quezon City in the name of defendant Titan Construction Corporation.

3.) Ordering defendant Titan Construction Corporation to reconvey the subject property to plaintiff and his spouse.

4.) Ordering the Register of Deeds of Quezon City to make and issue a new title in the name of plaintiff Manuel David and his Spouse, Martha David.

5.) Ordering defendant to pay P200,000.00 plus P1,000.00 per appearance as attorney’s fees andP50,000.00 as costs of suit.

SO ORDERED.18

Ruling of the Court of Appeals

In its Decision dated July 20, 2004, the CA affirmed the Decision of the trial court but deleted the award of attorney’s fees and the amount of P50,000.00 as costs.

The dispositive portion of the Decision reads:

WHEREFORE, with the MODIFICATION by deleting the award of attorney’s fees in favor of plaintiff-appellee Manuel A. David, Sr. and the amount of P50,000.00 as costs, the Decision appealed from is AFFIRMED in all other respects, with costs against defendant-appellant Titan Construction Corporation.19

Titan moved for reconsideration but the motion was denied on August 31, 2005.

Hence, this petition.

Issues

Titan raises the following assignment of errors:

24

A. THE COURT OF APPEALS PATENTLY ERRED IN DECLARING THE SUBJECT DEED OF SALE NULL AND VOID AND FAILED TO APPLY TO THIS CASE THE PERTINENT LAW AND JURISPRUDENCE ON THE TORRENS SYSTEM OF LAND REGISTRATION.

B. THE COURT OF APPEALS PATENTLY ERRED IN RULING THAT TITAN WAS NOT A BUYER IN GOOD FAITH CONTRARY TO THE STANDARDS APPLIED BY THIS HONORABLE COURT IN CASES INVOLVING SIMILAR FACTS.

C. THE COURT OF APPEALS PATENTLY ERRED BY DISCARDING THE NATURE OF A NOTARIZED SPECIAL POWER OF ATTORNEY CONTRARY TO JURISPRUDENCE AND BY GIVING UNDUE WEIGHT TO THE ALLEGED EXPERT TESTIMONY VIS-À-VIS THE CONTESTED SIGNATURES AS THEY APPEAR TO THE NAKED EYE CONTRARY TO JURISPRUDENCE.

D. THE COURT OF APPEALS PATENTLY ERRED BY FAILING TO DETECT BADGES OF CONNIVANCE BETWEEN RESPONDENTS.

E. THE COURT OF APPEALS PATENTLY ERRED BY NOT RULING THAT ASSUMING THE SPA WAS NULL AND VOID, THE SAME IS IMMATERIAL SINCE THE RESPONDENTS SHOULD BE CONSIDERED ESTOPPED FROM DENYING THAT THE SUBJECT PROPERTY WAS SOLELY THAT OF RESPONDENT MARTHA S. DAVID.

F. THE COURT OF APPEALS PATENTLY ERRED BY NOT RULING THAT ASSUMING THE SALE WAS VOID, ON GROUNDS OF EQUITY MARTHA S. DAVID SHOULD REIMBURSE PETITIONER OF HIS PAYMENT WITH LEGAL INTEREST.20

Petitioner’s Arguments

Titan is claiming that it was a buyer in good faith and for value, that the property was Martha’s paraphernal property, that it properly relied on the SPA presented by Martha, and that the RTC erred in giving weight to the alleged expert testimony to the effect that Manuel’s signature on the SPA was spurious. Titan also argues, for the first time, that the CA should have ordered Martha to reimburse the purchase price paid by Titan.

Our Ruling

The petition is without merit.

The property is part of the spouses’ conjugal partnership.

The Civil Code of the Philippines,21 the law in force at the time of the celebration of the marriage between Martha and Manuel in 1957, provides:

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

Article 153 of the Civil Code also provides:

Article 153. The following are conjugal partnership property:

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

x x x x

These provisions were carried over to the Family Code. In particular, Article 117 thereof provides:

Art. 117. The following are conjugal partnership properties:

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

x x x x

Article 116 of the Family Code is even more unequivocal in that "[a]ll 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."

We are not persuaded by Titan’s arguments that the property was Martha’s exclusive property because Manuel failed to present before the RTC any proof of his income in 1970, hence he could not have had the financial

25

capacity to contribute to the purchase of the property in 1970; and that Manuel admitted that it was Martha who concluded the original purchase of the property. In consonance with our ruling in Spouses Castro v. Miat,22Manuel was not required to prove that the property was acquired with funds of the partnership. Rather, the presumption applies even when the manner in which the property was acquired does not appear.23 Here, we find that Titan failed to overturn the presumption that the property, purchased during the spouses’ marriage, was part of the conjugal partnership.

In the absence of Manuel’s consent, the Deed of Sale is void.

Since the property was undoubtedly part of the conjugal partnership, the sale to Titan required the consent of both spouses. Article 165 of the Civil Code expressly provides that "the husband is the administrator of the conjugal partnership". Likewise, Article 172 of the Civil Code ordains that "(t)he wife cannot bind the conjugal partnership without the husband’s consent, except in cases provided by law".

Similarly, Article 124 of the Family Code requires that any disposition or encumbrance of conjugal property must have the written consent of the other spouse, otherwise, such disposition is void. Thus:

Art. 124. The administration and enjoyment of the conjugal partnership 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 disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.

The Special Power of Attorney purportedly signed by Manuel is spurious and void.

The RTC found that the signature of Manuel appearing on the SPA was not his genuine signature.

As to the issue of the validity or invalidity of the subject Special Power of Attorney x x x the Court rules that the same is invalid. As aptly demonstrated by plaintiff’s evidence particularly the testimony of expert witness Atty. Desiderio Pagui, which the defense failed to rebut and impeach, the subject Special Power of Attorney does not bear the genuine signature of plaintiff Manuel David thus rendering the same as without legal effect.

Moreover, the genuineness and the due execution of the Special Power of Attorney was placed in more serious doubt as the same does not contain the Residence Certificate of the plaintiff and most importantly, was not presented for registration with the Quezon City Register of Deeds which is a clear violation of Sec. 64 of P.D. No. 1529.

As regards defendant Titan Construction Corporation’s assertion that plaintiff’s failure to verify his Reply (wherein the validity of the Special Power of Attorney is put into question) is an implied admission of its genuineness and due execution, [this] appears at first blush a logical conclusion. However, the Court could not yield to such an argument considering that a rigid application of the pertinent provisions of the Rules of Court will not be given premium when it would obstruct rather than serve the broader interest of justice.24

Titan claims that the RTC gave undue weight to the testimony of Manuel’s witness, and that expert testimony on handwriting is not conclusive.

The contention lacks merit. The RTC’s ruling was based not only on the testimony of Manuel’s expert witness finding that there were significant differences between the standard handwriting of Manuel and the signature found on the SPA, but also on Manuel’s categorical denial that he ever signed any document authorizing or ratifying the Deed of Sale to Titan.25

We also note that on October 12, 2004, Titan filed before the CA a Manifestation with Motion for Re-Examination of Another Document/ Handwriting Expert26 alleging that there is "an extreme necessity"27 for a conduct of another examination of the SPA by a handwriting expert "as it will materially affect and alter the final outcome"28 of the case. Interestingly, however, Titan filed on January 6, 2005 a Manifestation/Motion to Withdraw Earlier Motion for Re-Examination of PNP Laboratory Expert29 this time praying that its motion for re-examination be withdrawn. Titan claimed that "after a circumspect evaluation, deemed it wise not to pursue anymore said

26

request (re-examination) as there is a great possibility that the x x x [PNP and the NBI] might come out with two conflicting opinions and conclusions x x x that might cause some confusion to the minds of the Honorable Justices in resolving the issues x x x as well as the waste of material time and resources said motion may result".30

In any event, we reiterate the well-entrenched rule that the factual findings of trial courts, when adopted and confirmed by the CA, are binding and conclusive and will generally not be reviewed on appeal.31 We are mandated to accord great weight to the findings of the RTC, particularly as regards its assessment of the credibility of witnesses32 since it is the trial court judge who is in a position to observe and examine the witnesses first hand.33 Even after a careful and independent scrutiny of the records, we find no cogent reason to depart from the rulings of the courts below.34

Furthermore, settled is the rule that only errors of law and not of fact are reviewable by this Court in a petition for review on certiorari under Rule 45 of the Rules of Court. This applies with even greater force here, since the factual findings by the CA are in full agreement with those of the trial court.35

Indeed, we cannot help but wonder why Martha was never subpoenaed by Titan as a witness to testify on the character of the property, or the circumstances surrounding the transaction with Titan. Petitioner’s claim that she could not be found is belied by the RTC records, which show that she personally received and signed for the summons at her address in Greenhills, San Juan. Titan neither filed a cross claim nor made any adverse allegation against Martha.

On the Failure to Deny the Genuineness and Due Execution of the SPA

Titan claimed that because Manuel failed to specifically deny the genuineness and due execution of the SPA in his Reply, he is deemed to have admitted the veracity of said document, in accordance with Rule 8, Sections 7 and 8,36 of the Rules of Court.

On this point, we fully concur with the findings of the CA that:

It is true that the reply filed by Manuel alleging that the special power of attorney is a forgery was not made under oath. However, the complaint, which was verified by Manuel under oath, alleged that the sale of the subject property executed by his wife, Martha, in favor of Titan was without his knowledge, consent, and approval, express or implied; and that there is

nothing on the face of the deed of sale that would show that he gave his consent thereto. In Toribio v. Bidin, it was held that where the verified complaint alleged that the plaintiff never sold, transferred or disposed their share in the inheritance left by their mother to others, the defendants were placed on adequate notice that they would be called upon during trial to prove the genuineness or due execution of the disputed deed of sale. While Section 8, Rule 8 is mandatory, it is a discovery procedure and must be reasonably construed to attain its purpose, and in a way as not to effect a denial of substantial justice. The interpretation should be one which assists the parties in obtaining a speedy, inexpensive, and most important, a just determination of the disputed issues.1avvphi1

Moreover, during the pre-trial, Titan requested for stipulation that the special power of attorney was signed by Manuel authorizing his wife to sell the subject property, but Manuel refused to admit the genuineness of said special power of attorney and stated that he is presenting an expert witness to prove that his signature in the special power of attorney is a forgery. However, Titan did not register any objection x x x. Furthermore, Titan did not object to the presentation of Atty. Desiderio Pagui, who testified as an expert witness, on his Report finding that the signature on the special power of attorney was not affixed by Manuel based on his analysis of the questioned and standard signatures of the latter, and even cross-examined said witness. Neither did Titan object to the admission of said Report when it was offered in evidence by Manuel on the ground that he is barred from denying his signature on the special power of attorney. In fact, Titan admitted the existence of said Report and objected only to the purpose for which it was offered. In Central Surety & Insurance Company v. C.N. Hodges, it was held that where a party acted in complete disregard of or wholly overlooked Section 8, Rule 8 and did not object to the introduction and admission of evidence questioning the genuineness and due execution of a document, he must be deemed to have waived the benefits of said Rule. Consequently, Titan is deemed to have waived the mantle of protection given [it] by Section 8, Rule 8.37

It is true that a notarial document is considered evidence of the facts expressed therein.38 A notarized document enjoys a prima facie presumption of authenticity and due execution39 and only clear and convincing evidence will overcome such legal presumption.40 However, such clear and convincing evidence is present here.1avvph!1 While it is true that the SPA was notarized, it is no less true that there were defects in the notarization which mitigate against a finding that the SPA was either genuine or duly executed. Curiously, the details of Manuel’s Community Tax Certificate are conspicuously absent, yet Martha’s are complete. The absence of Manuel’s data supports his claim that he did not execute the same and that his

27

signature thereon is a forgery. Moreover, we have Manuel’s positive testimony that he never signed the SPA, in addition to the expert testimony that the signature appearing on the SPA was not Manuel’s true signature.

Moreover, there were circumstances which mitigate against a finding that Titan was a buyer in good faith.

First, TCT No. 156043 was registered in the name of "MARTHA S. DAVID, of legal age, Filipino, married to Manuel A. David" but the Deed of Sale failed to include Martha’s civil status, and only described the vendor as "MARTHA S. DAVID, of legal age, Filipino citizen, with postal address at 247 Governor Pascual, Navotas, Rizal." And it is quite peculiar that an SPA would have even been necessary, considering that the SPA itself indicated that Martha and Manuel lived on the same street (379 and 247 Governor Pascual Street, respectively).

Second, Titan’s witness Valeriano Hernandez, the real estate agent who brokered the sale between Martha and Titan, testified that Jerry Yao (Yao), Titan’s Vice President for Operations (and Titan’s signatory to the Deed of Sale), specifically inquired why the name of Manuel did not appear on the Deed of Sale.41 This indicates that Titan was aware that Manuel’s consent may be necessary. In addition, Titan purportedly sent their representative to the Register of Deeds of Quezon City to verify TCT No. 156043, so Titan would have been aware that the SPA was never registered before the Register of Deeds.

Third, Valeriano Hernandez also testified that during the first meeting between Martha and Yao, Martha informed Yao that the property was mortgaged to a casino for P500,000.00. Without even seeing the property, the original title, or the SPA, and without securing an acknowledgment receipt from Martha, Titan (through Yao) gave MarthaP500,000.00 so she could redeem the property from the casino.42 These are certainly not actions typical of a prudent buyer.

Titan cannot belatedly claim that the RTC should have ordered Martha to reimburse the purchase price.

Titan argues that the CA erred in not ruling that, even assuming the sale was void, on grounds of equity, Martha should reimburse petitioner its payment with legal interest. We note that this equity argument was raised for the first time before the CA, which disposed of it in this manner:

Anent defendant-appellant’s claim that the court a quo and this Court never considered the substantial amount of money paid by it to Martha David as consideration for the sale of the subject property, suffice it to say that said matter is being raised for the first time in the instant motion for reconsideration. If well-recognized jurisprudence precludes raising an issue only for the first time on appeal proper, with more reason should such issue be disallowed or disregarded when initially raised only in a motion for reconsideration of the decision of the appellate court.

Nonetheless, record shows that only defendant-appellant was initially sued by plaintiff-appellee in his complaint for annulment of contract and reconveyance upon the allegation that the sale executed by his wife, Martha David, of their conjugal property in favor of defendant-appellant was without his knowledge and consent and, therefore, null and void. In its answer, defendant-appellant claimed that it bought the property in good faith and for value from Martha David and prayed for the dismissal of the complaint and the payment of his counterclaim for attorney’s fees, moral and exemplary damages. Subsequently, plaintiff-appellee filed a motion for leave to file amended complaint by impleading Martha David as a defendant, attaching the amended complaint thereto, copies of which were furnished defendant-appellant, through counsel. The amended complaint was admitted by the court a quo in an Order dated October 23, 1996. Martha David was declared in default for failure to file an answer. The record does not show [that] a cross-claim was filed by defendant-appellant against Martha David for the return of the amount of PhP1,500,000.00 it paid to the latter as consideration for the sale of the subject property. x x x Thus, to hold Martha David liable to defendant-appellant for the return of the consideration for the sale of the subject property, without any claim therefore being filed against her by the latter, would violate her right to due process.The essence of due process is to be found in the reasonable opportunity to be heard and submit any evidence one may have in support of his defense. It is elementary that before a person can be deprived of his property, he should be first informed of the claim against him and the theory on which such claim is premised.43 (Emphasis supplied)

While it is true that litigation is not a game of technicalities,44 it is equally true that elementary considerations of due process require that a party be duly apprised of a claim against him before judgment may be rendered. Thus, we cannot, in these proceedings, order the return of the amounts paid by Titan to Martha. However, Titan is not precluded by this Decision from instituting the appropriate action against Martha before the proper court.

WHEREFORE, the petition is DENIED. The July 20, 2004 Decision of the Court of Appeals in CA-G.R. CV No. 67090 which affirmed with

28

modifications the March 7, 2000 Decision of the Regional Trial Court of Quezon City, Branch 80, and its August 31, 2005 Resolution denying the motion for reconsideration, are AFFIRMED, without prejudice to the recovery by petitioner Titan Construction Corporation of the amounts it paid to Martha S. David in the appropriate action before the proper court.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 185063               July 23, 2009

SPS. LITA DE LEON and FELIX RIO TARROSA, Petitioners, vs.ANITA B. DE LEON, DANILO B. DE LEON, and VILMA B. DE LEON, Respondents.

D E C I S I O N

VELASCO, JR., J.:

The Case

Before us is a Petition for Review on Certiorari under Rule 45 assailing and seeking to set aside the Decision1 and Resolution2 dated August 27, 2008 and October 20, 2008, respectively, of the Court of Appeals (CA) in CA-G.R. CV No. 88571. The CA affirmed with modification the October 4, 2006 Decision3 in Civil Case No. Q04-51595 of the Regional Trial Court (RTC), Branch 22 in Quezon City.

The Facts

On July 20, 1965, Bonifacio O. De Leon, then single, and the People’s Homesite and Housing Corporation (PHHC) entered into a Conditional Contract to Sell for the purchase on installment of a 191.30 square-meter lot situated in Fairview, Quezon City. Subsequently, on April 24, 1968,

Bonifacio married Anita de Leon in a civil rite officiated by the Municipal Mayor of Zaragosa, Nueva Ecija. To this union were born Danilo and Vilma.

Following the full payment of the cost price for the lot thus purchased, PHHC executed, on June 22, 1970, a Final Deed of Sale in favor of Bonifacio. Accordingly, Transfer Certificate of Title (TCT) No. 173677 was issued on February 24, 1972 in the name of Bonifacio, "single."

Subsequently, Bonifacio, for PhP 19,000, sold the subject lot to her sister, Lita, and husband Felix Rio Tarrosa (Tarrosas), petitioners herein. The conveying Deed of Sale dated January 12, 1974 (Deed of Sale) did not bear the written consent and signature of Anita.

Thereafter, or on May 23, 1977, Bonifacio and Anita renewed their vows in a church wedding at St. John the Baptist Parish in San Juan, Manila.

On February 29, 1996, Bonifacio died.

Three months later, the Tarrosas registered the Deed of Sale and had TCT No. 173677 canceled. They secured the issuance in their names of TCT No. N-173911 from the Quezon City Register of Deeds.

Getting wind of the cancellation of their father’s title and the issuance of TCT No. N-173911, Danilo and Vilma filed on May 19, 2003 a Notice of Adverse Claim before the Register of Deeds of Quezon City to protect their rights over the subject property. Very much later, Anita, Danilo, and Vilma filed a reconveyance suit before the RTC in Quezon City. In their complaint, Anita and her children alleged, among other things, that fraud attended the execution of the Deed of Sale and that subsequent acts of Bonifacio would show that he was still the owner of the parcel of land. In support of their case, they presented, inter alia, the following documents:

a. A Real Estate Mortgage execution by Bonifacio in favor of spouses Cesar Diankinay and Filomena Almero on July 22, 1977.

b. A Civil Complaint filed by Bonifacio against spouses Cesar Diankinay and Filomena Almero on November 27, 1979 for nullification of the Real Estate Mortgage.

c. The Decision issued by the Court of First Instance of Rizal, Quezon City, promulgated on July 30, 1982, nullifying the Real Estate Mortgage.4

29

The Tarrosas, in their Answer with Compulsory Counterclaim, averred that the lot Bonifacio sold to them was his exclusive property inasmuch as he was still single when he acquired it from PHHC. As further alleged, they were not aware of the supposed marriage between Bonifacio and Anita at the time of the execution of the Deed of Sale.

After several scheduled hearings, both parties, assisted by their respective counsels, submitted a Joint Stipulation of Facts with Motion, to wit:

1. The parties have agreed to admit the following facts:

a. Bonifacio O. De Leon, while still single x x x, purchased from the [PHHC] through a Conditional Contract to Sell on July 20, 1965 a parcel of land with an area of 191.30 square meters situated in Fairview, Quezon City for P841.72;

b. On April 24, 1968, Bonifacio O. De Leon married plaintiff Anita B. De Leon before the Municipal Mayor of Zaragosa, Nueva Ecija. Both parties stipulate that said marriage is valid and binding under the laws of the Philippines;

c. On June 22, 1970, Bonifacio O. De Leon paid [PHHC] the total amount of P1,023.74 x x x. The right of ownership over the subject parcel of land was transferred to the late Bonifacio O. De Leon on June 22, 1970, upon the full payment of the total [price] of P1,023.74 and upon execution of the Final Deed of Sale;

d. After full payment, Bonifacio O. De Leon was issued [TCT] No. 173677 on February 24, 1972;

e. On January 12, 1974, Bonifacio O. De Leon executed a Deed of Sale in favor of defendants-spouses Felix Rio Tarrosa and Lita O. De Leon disposing the parcel of land under TCT No. 173677 for valuable consideration amount of P19,000.00 and subscribed before Atty. Salvador R. Aguinaldo who was commissioned to [notarize] documents on said date. The parties stipulate that the Deed of Sale is valid and genuine. However, plaintiff Anita De Leon was not a signatory to the Deed of Sale executed on January 12, 1974;

f. That plaintiff Anita B. De Leon and the late Bonifacio O. De Leon were married in church rites on May 23, 1977 x x x;

g. The late Bonifacio O. De Leon died on February 29, 1996 at the UST Hospital, España, Manila;

h. The said "Deed of Sale" executed on January 12, 1974 was registered on May 8, 1996 before the Office of the Register of Deeds of Quezon City and [TCT] No. N-173911 was issued to Lita O. De Leon and Felix Rio Tarrosa.5

The Ruling of the Trial Court

On October 4, 2006, the RTC, on the finding that the lot in question was the conjugal property of Bonifacio and Anita, rendered judgment in favor of Anita and her children. The dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against defendants in the following manner:

(1) Declaring the Deed of Sale dated January 12, 1974 executed by the late Bonifacio O. De Leon in favor of defendants-spouses Lita De Leon and Felix Rio Tarrosa void ab initio;

(2) Directing the Register of Deed of Quezon City to cancel Transfer Certificate of Title No. N-173911 in the name of "Lita O. De Leon, married to Felix Rio Tarrosa" and restore Transfer Certificate of Title No. 173667 in the name of "Bonifacio O. De Leon";

(3) Ordering the defendants-spouses to pay plaintiffs the following sums:

(a) P25,000.00 as moral damages;

(b) P20,000.00 as exemplary damages;

(c) P50,000.00 as attorney’s fees plus appearance fee of P2,500.00 per court appearance;

(d) Costs of this suit.

SO ORDERED.

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Aggrieved, the Tarrosas appealed to the CA. As they would submit, the RTC erred:

(1) in finding for the plaintiffs-appellees by declaring that the land subject matter of the case is conjugal property;

(2) in not declaring the land as the exclusive property of Bonifacio O. De Leon when sold to defendant-appellants;

(3) in ruling that defendant-appellants did not adduce any proof that the property was acquired solely by the efforts of Bonifacio O. De Leon;

(4) in declaring that one-half of the conjugal assets does not vest to Bonifacio O. De Leon because of the absence of liquidation;

(5) in cancelling TCT No. N-173911 and restored TCT No. [173677] in the name of Bonifacio O. De Leon;

(6) in awarding moral and exemplary damages and attorney’s fees to the plaintiffs-appellees.6

The Ruling of the Appellate Court

On August 27, 2008, the CA rendered a decision affirmatory of that of the RTC, save for the award of damages, attorney’s fees, and costs of suit which the appellate court ordered deleted. The fallo of the CA decision reads:

WHEREFORE, in view of the foregoing, the assailed decision dated October 4, 2006, of the Regional Trial Court, Branch 22, Quezon City in Civil Case No. Q-04-51595 is hereby AFFIRMED with MODIFICATION, in that the award of moral and exemplary damages as well as attorney’s fees, appearance fee and costs of suit are hereby DELETED.

SO ORDERED.

Just like the RTC, the CA held that the Tarrosas failed to overthrow the legal presumption that the parcel of land in dispute was conjugal. The appellate court held further that the cases they cited were inapplicable.

As to the deletion of the grant of moral and exemplary damages, the CA, in gist, held that no evidence was adduced to justify the award. Based on the same reason, it also deleted the award of attorney’s fees and costs of suit.

The Tarrosas moved but was denied reconsideration by the CA in its equally assailed resolution of October 20, 2008.

Hence, they filed this petition.

The Issues

I

Whether the [CA] gravely erred in concluding that the land purchased on installment by Bonifacio O. De Leon before marriage although some installments were paid during the marriage is conjugal and not his exclusive property.

II

Whether the [CA] gravely erred in ruling that the Lorenzo, et al. vs. Nicolas, et al., and Alvarez vs. Espiritu cases do not apply in the case at bar because in the latter the land involved is not a friar land unlike in the former.

III

Whether the [CA] gravely erred in affirming the decision of the trial court a quo which ruled that petitioners did not adduce any proof that the land was acquired solely by the efforts of Bonifacio O. De Leon.

IV

Whether the court of appeals gravely erred in affirming the decision of the trial court which ruled that one-half (1/2) of the conjugal assets do not vest to Bonifacio O. De Leon because of the absence of liquidation.

Our Ruling

The petition lacks merit.

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The Subject Property is theConjugal Property of Bonifacio and Anita

The first three issues thus raised can be summed up to the question of whether or not the subject property is conjugal.

Petitioners assert that, since Bonifacio purchased the lot from PHHC on installment before he married Anita, the land was Bonifacio’s exclusive property and not conjugal, even though some installments were paid and the title was issued to Bonifacio during the marriage. In support of their position, petitioners cite Lorenzo v. Nicolas7 and Alvarez v. Espiritu.8

We disagree.

Article 160 of the 1950 Civil Code, the governing provision in effect at the time Bonifacio and Anita contracted marriage, provides that all property of the marriage is presumed to belong to the conjugal partnership unless it is proved that it pertains exclusively to the husband or the wife. For the presumption to arise, it is not, as Tan v. Court of Appeals9 teaches, even necessary to prove that the property was acquired with funds of the partnership. Only proof of acquisition during the marriage is needed to raise the presumption that the property is conjugal. In fact, even when the manner in which the properties were acquired does not appear, the presumption will still apply, and the properties will still be considered conjugal.10

In the case at bar, ownership over what was once a PHHC lot and covered by the PHHC-Bonifacio Conditional Contract to Sell was only transferred during the marriage of Bonifacio and Anita. It is well settled that a conditional sale is akin, if not equivalent, to a contract to sell. In both types of contract, the efficacy or obligatory force of the vendor’s obligation to transfer title is subordinated to the happening of a future and uncertain event, usually the full payment of the purchase price, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.11 In other words, in a contract to sell ownership is retained by the seller and is not passed to the buyer until full payment of the price, unlike in a contract of sale where title passes upon delivery of the thing sold.12

Such is the situation obtaining in the instant case. The conditional contract to sell executed by and between Bonifacio and PHHC on July 20, 1965 provided that ownership over and title to the property will vest on Bonifacio only upon execution of the final deed of sale which, in turn, will be effected upon payment of the full purchase price, to wit:

14. Titles to the property subject of this contract remains with the CORPORATION and shall pass to, and be transferred in the name of the APPLICANT only upon the execution of the final Deed of Sale provided for in the next succeeding paragraph.

15. Upon the full payment by the APPLICANT of the price of the lot above referred to together with all the interest due thereon, taxes and other charges, and upon his faithful compliance with all the conditions of this contract the CORPORATION agrees to execute in favor of the APPLICANT a final deed of sale of the aforesaid land, and the APPLICANT agrees to accept said deed, as full performance by the CORPORATION of its covenants and undertakings hereunder.13 x x x

Evidently, title to the property in question only passed to Bonifacio after he had fully paid the purchase price on June 22, 1970. This full payment, to stress, was made more than two (2) years after his marriage to Anita on April 24, 1968. In net effect, the property was acquired during the existence of the marriage; as such, ownership to the property is, by law, presumed to belong to the conjugal partnership.

Such presumption is rebuttable only with strong, clear, categorical, and convincing evidence.14 There must be clear evidence of the exclusive ownership of one of the spouses,15 and the burden of proof rests upon the party asserting it.16

Petitioners’ argument that the disputed lot was Bonifacio’s exclusive property, since it was registered solely in his name, is untenable. The mere registration of a property in the name of one spouse does not destroy its conjugal nature.17 What is material is the time when the property was acquired.

Thus, the question of whether petitioners were able to adduce proof to overthrow the presumption is a factual issue best addressed by the trial court. As a matter of long and sound practice, factual determinations of the trial courts,18 especially when confirmed by the appellate court, are accorded great weight by the Court and, as rule, will not be disturbed on appeal, except for the most compelling reasons.19 Petitioners have not, as they really cannot, rebut the presumptive conjugal nature of the lot in question. In this regard, the Court notes and quotes with approval the following excerpts from the trial court’s disposition:

The defendants, however, did not adduce any proof that the property in question was acquired solely by the efforts of [Bonifacio]. The established

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jurisprudence on the matter leads this Court to the conclusion that the property involved in this dispute is indeed the conjugal property of the deceased [Bonifacio] De Leon.

In fact, defendant even admitted that [Bonifacio] brought into his marriage with plaintiff Anita the said land, albeit in the concept of a possessor only as it was not yet registered in his name. The property was registered only in 1972 during the existence of the marriage. However, the absence of evidence on the source of funding has called for the application of the presumption under Article 160 in favor of the plaintiffs.20

The cases petitioners cited are without governing applicability to this case simply because they involved a law specifically enacted to govern the disposition of and ownership of friar lands. In Lorenzo, the Court held that the pervading legislative intent of Act No. 1120 is "to sell the friar lands acquired by the Government to actual settlers and occupants of the same."21 The Court went on further to say in Alvarez that "under the Friar Lands Act of 1120, the equitable and beneficial title to the land passes to the purchaser the moment the first installment is paid and a certificate of sale is issued."22 Plainly, the said cases are not applicable here considering that the disputed property is not friar land.1awph!1

There can be no quibbling that Anita’s conformity to the sale of the disputed lot to petitioners was never obtained or at least not formally expressed in the conveying deed. The parties admitted as much in their Joint Stipulation of Facts with Motion earlier reproduced. Not lost on the Court of course is the fact that petitioners went to the process of registering the deed after Bonifacio’s death in 1996, some 22 years after its execution. In the interim, petitioners could have had work—but did not—towards securing Anita’s marital consent to the sale.

It cannot be over-emphasized that the 1950 Civil Code is very explicit on the consequence of the husband alienating or encumbering any real property of the conjugal partnership without the wife’s consent.23 To a specific point, the sale of a conjugal piece of land by the husband, as administrator, must, as a rule, be with the wife’s consent. Else, the sale is not valid. So it is that in several cases we ruled that the sale by the husband of property belonging to the conjugal partnership without the consent of the wife is void ab initio, absent any showing that the latter is incapacitated, under civil interdiction, or like causes. The nullity, as we have explained, proceeds from the fact that sale is in contravention of the mandatory requirements of Art. 166 of the Code.24 Since Art. 166 of the Code requires the consent of the wife before the husband may alienate or encumber any real property of the conjugal

partnership, it follows that the acts or transactions executed against this mandatory provision are void except when the law itself authorized their validity.25

Accordingly, the Deed of Sale executed on January 12, 1974 between Bonifacio and the Tarrosas covering the PHHC lot is void.

Interest in the Conjugal Partnership IsMerely Inchoate until Liquidation

As a final consideration, the Court agrees with the CA that the sale of one-half of the conjugal property without liquidation of the partnership is void. Prior to the liquidation of the conjugal partnership, the interest of each spouse in the conjugal assets is inchoate, a mere expectancy, which constitutes neither a legal nor an equitable estate, and does not ripen into a title until it appears that there are assets in the community as a result of the liquidation and settlement.26 The interest of each spouse is limited to the net remainder or "remanente liquido" (haber ganancial) resulting from the liquidation of the affairs of the partnership after its dissolution.27 Thus, the right of the husband or wife to one-half of the conjugal assets does not vest until the dissolution and liquidation of the conjugal partnership, or after dissolution of the marriage, when it is finally determined that, after settlement of conjugal obligations, there are net assets left which can be divided between the spouses or their respective heirs.28

Therefore, even on the supposition that Bonifacio only sold his portion of the conjugal partnership, the sale is still theoretically void, for, as previously stated, the right of the husband or the wife to one-half of the conjugal assets does not vest until the liquidation of the conjugal partnership.

Nevertheless, this Court is mindful of the fact that the Tarrosas paid a valuable consideration in the amount of PhP 19,000 for the property in question. Thus, as a matter of fairness and equity, the share of Bonifacio after the liquidation of the partnership should be liable to reimburse the amount paid by the Tarrosas. It is a well-settled principle that no person should unjustly enrich himself at the expense of another.29

WHEREFORE, the petition is DENIED. The CA Decision in CA-G.R. CV No. 88571 is AFFIRMED. Costs against petitioners.

SO ORDERED.

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Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 159889             June 5, 2008

WALTER VILLANUEVA AND AURORA VILLANUEVA, petitioners, vs.FLORENTINO CHIONG AND ELISERA CHIONG, respondents.

D E C I S I O N

QUISUMBING, J.:

This petition for review on certiorari seeks the modification of the Decision1 dated December 17, 2002 of the Court of Appeals in CA-G.R. CV. No. 68383, which had affirmed the Joint Decision2 dated July 19, 2000 of the Regional Trial Court (RTC) of Dipolog City, Branch 6, in Civil Case No. 4460. The RTC annulled the sale made by respondent Florentino Chiong in favor of petitioners Walter and Aurora Villanueva conveying a portion of a parcel of land which respondents acquired during their marriage.

The pertinent facts are as follows:

Respondents Florentino and Elisera Chiong were married sometime in January 1960 but have been separated in fact since 1975. During their marriage, they acquired Lot No. 997-D-1 situated at Poblacion, Dipolog City and covered by Transfer Certificate of Title (TCT) No. (T-19393)-2325,3 issued by the Registry of Deeds of Zamboanga del Norte. Sometime in 1985, Florentino sold the one-half western portion of the lot to petitioners forP8,000, payable in installments. Thereafter, Florentino allowed petitioners to occupy4 the lot and build a store, a shop, and a house thereon. Shortly after their last installment payment on December 13, 1986,5 petitioners demanded from respondents the execution of a deed of sale in their favor. Elisera, however, refused to sign a deed of sale.

On July 5, 1991, Elisera filed with the RTC a Complaint6 for Quieting of Title with Damages, docketed as Civil Case No. 4383. On February 12, 1992, petitioners filed with the RTC a Complaint7 for Specific Performance with

Damages, docketed as Civil Case No. 4460. Upon proper motion, the RTC consolidated these two cases.8

On May 13, 1992, Florentino executed the questioned Deed of Absolute Sale9 in favor of petitioners.

On July 19, 2000, the RTC, in its Joint Decision, annulled the deed of absolute sale dated May 13, 1992, and ordered petitioners to vacate the lot and remove all improvements therein. The RTC likewise dismissed Civil Case No. 4460, but ordered Florentino to return to petitioners the consideration of the sale with interest from May 13, 1992.10 The fallo of the decision reads:

WHEREFORE, by preponderance of evidence, judgment is hereby rendered as follows:

For Civil Case No. 4383, (a) annulling the Deed of Sale executed by Florentino Chiong in favor of Walter Villanueva, dated May 13, 1992 (Exhibit "2"); ordering defendant Walter Villanueva to vacate the entire land in question and to remove all buildings therein, subject to [i]ndemnity of whatever damages he may incur by virtue of the removal of such buildings, within a period of 60 days from the finality of this decision; award of damages is hereby denied for lack of proof.

In Civil Case No. 4460, complaint is hereby dismissed, but defendant Florentino Chiong, having received the amount of P8,000.00 as consideration of the sale of the land subject of the controversy, the sale being annulled by this Court, is ordered to return the said amount to [the] spouses Villanueva, with interest to be computed from the date of the annulled deed of sale, until the same is fully paid, within the period of 60 days from finality of this judgment. Until such amount is returned, together with the interest, [the] spouses Villanueva may continue to occupy the premises in question.

No pronouncement as to costs.

IT IS SO ORDERED.11

The Court of Appeals affirmed the RTC's decision:

34

WHEREFORE, premises considered, the appealed decision dated July 19, 2000 of the Regional Trial Court, Branch 6, Dipolog City is hereby AFFIRMED.

SO ORDERED.12

Petitioners sought reconsideration, but to no avail. Hence, this petition.

Petitioners assign the following errors as issues for our resolution:

I.

THAT THE COURT A QUO AS WELL AS THE HONORABLE COURT OF APPEALS ... GRAVELY ERRED IN NOT HOLDING THAT THE LAND IN QUESTION BELONGED SOLELY TO RESPONDENT FLORENTINO CHIONG AND ULTIMATELY TO THE HEREIN PETITIONERS.

II.

THAT THE LOWER COURT AS WELL AS THE HONORABLE COURT OF APPEALS … LIKEWISE ERRED IN DECLARING AS NULL AND VOID THE DEED OF SALE EXECUTED BY RESPONDENT FLORENTINO CHIONG IN FAVOR OF THE HEREIN PETITIONERS.13

Simply put, the basic issues are: (1) Is the subject lot an exclusive property of Florentino or a conjugal property of respondents? (2) Was its sale by Florentino without Elisera's consent valid?

Petitioners contend that the Court of Appeals erred when it held that the lot is conjugal property. They claim that the lot belongs exclusively to Florentino because respondents were already separated in fact at the time of sale and that the share of Elisera, which pertains to the eastern part of Lot No. 997-D-1, had previously been sold to Spouses Jesus Y. Castro and Aida Cuenca. They also aver that while there was no formal liquidation of respondents' properties, their separation in fact resulted in its actual liquidation. Further, assuming arguendo that the lot is still conjugal, the transaction should not be entirely voided as Florentino had one-half share over it.

Elisera, for her part, counters that the sale of the lot to petitioners without her knowledge, consent or authority, was void because the lot is conjugal property. She adds that the sale was neither authorized by any competent court nor did it redound to her or their children's benefit. As proof of the lot's conjugal nature, she presented a transfer certificate of title, a real property tax declaration, and a Memorandum of Agreement14 dated November 19, 1979 which she and her husband had executed for the administration of their conjugal properties.15

Anent the first issue, petitioners' contention that the lot belongs exclusively to Florentino because of his separation in fact from his wife, Elisera, at the time of sale dissolved their property relations, is bereft of merit. Respondents' separation in fact neither affected the conjugal nature of the lot nor prejudiced Elisera's interest over it. Under Article 17816 of the Civil Code, the separation in fact between husband and wife without judicial approval shall not affect the conjugal partnership. The lot retains its conjugal nature.

Likewise, under Article 16017 of the Civil Code, all property acquired by the spouses during the marriage is presumed to belong to the conjugal partnership of gains, unless it is proved that it pertains exclusively to the husband or to the wife. Petitioners' mere insistence as to the lot's supposed exclusive nature is insufficient to overcome such presumption when taken against all the evidence for respondents.

On the basis alone of the certificate of title, it cannot be presumed that the lot was acquired during the marriage and that it is conjugal property since it was registered "in the name of Florentino Chiong, Filipino, of legal age, married to Elisera Chiong… ."18 But Elisera also presented a real property tax declaration acknowledging her and Florentino as owners of the lot. In addition, Florentino and Elisera categorically declared in the Memorandum of Agreement they executed that the lot is a conjugal property.19 Moreover, the conjugal nature of the lot was admitted by Florentino in the Deed of Absolute Sale dated May 13, 1992, where he declared his capacity to sell as a co-owner of the subject lot.20

Anent the second issue, the sale by Florentino without Elisera's consent is not, however, void ab initio. In Vda. de Ramones v. Agbayani,21 citing Villaranda v. Villaranda,22 we held that without the wife's consent, the husband's alienation or encumbrance of conjugal property prior to the effectivity of the Family Code on August 3, 1988 is not void, but merely voidable. Articles 166 and 173 of the Civil Code 23 provide:

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ART. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership without the wife's consent…

This article shall not apply to property acquired by the conjugal partnership before the effective date of this Code.

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. (Emphasis supplied.)

Applying Article 166, the consent of both Elisera and Florentino is necessary for the sale of a conjugal property to be valid. In this case, the requisite consent of Elisera was not obtained when Florentino verbally sold the lot in 1985 and executed the Deed of Absolute Sale on May 13, 1992. Accordingly, the contract entered by Florentino is annullable at Elisera's instance, during the marriage and within ten years from the transaction questioned, conformably with Article 173. Fortunately, Elisera timely questioned the sale when she filed Civil Case No. 4383 on July 5, 1991, perfectly within ten years from the date of sale and execution of the deed.

Petitioners finally contend that, assuming arguendo the property is still conjugal, the transaction should not be entirely voided as Florentino had one-half share over the lot. Petitioners' stance lacks merit. In Heirs of Ignacia Aguilar-Reyes v. Mijares 24 citing Bucoy v. Paulino, et al.,25 a case involving the annulment of sale executed by the husband without the consent of the wife, it was held that the alienation must be annulled in its entirety and not only insofar as the share of the wife in the conjugal property is concerned. Although the transaction in the said case was declared void and not merely voidable, the rationale for the annulment of the whole transaction is the same. Thus:

The plain meaning attached to the plain language of the law is that the contract, in its entirety, executed by the husband without the wife's consent, may be annulled by the wife. Had Congress

intended to limit such annulment in so far as the contract shall "prejudice" the wife, such limitation should have been spelled out in the statute. It is not the legitimate concern of this Court to recast the law. As Mr. Justice Jose B. L. Reyes of this Court and Judge Ricardo C. Puno of the Court of First Instance correctly stated, "[t]he rule (in the first sentence of Article 173) revokes Baello vs. Villanueva, 54 Phil. 213 and Coque vs. Navas Sioca, 45 Phil. 430," in which cases annulment was held to refer only to the extent of the one-half interest of the wife… .26

Now, if a voidable contract is annulled, the restoration of what has been given is proper.27 Article 1398 of the Civil Code provides:

An obligation having been annulled, the contracting parties shall restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with its interest, except in cases provided by law.

In obligations to render service, the value thereof shall be the basis for damages.

The effect of annulment of the contract is to wipe it out of existence, and to restore the parties, insofar as legally and equitably possible, to their original situation before the contract was entered into.28

Strictly applying Article 1398 to the instant case, petitioners should return to respondents the land with its fruits29and respondent Florentino should return to petitioners the sum of P8,000, which he received as the price of the land, together with interest thereon.

On the matter of fruits and interests, we take into consideration that petitioners have been using the land and have derived benefit from it just as respondent Florentino has used the price of the land in the sum of P8,000. Hence, if, as ordered by the lower court, Florentino is to pay a reasonable amount or legal interest for the use of the money then petitioners should also be required to pay a reasonable amount for the use of the land.30 Under the particular circumstances of this case, however, it would be equitable to consider the two amounts as offsetting each other. Hence, the award of the trial court for the payment of interest should be deleted.

WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision dated December 17, 2002 of the Court of Appeals in CA-G.R. CV.

36

No. 68383 affirming the Joint Decision dated July 19, 2000 of the Regional Trial Court of Dipolog City, Branch 6, in Civil Case No. 4460 is hereby AFFIRMED with MODIFICATION. The order for the payment of interest is DELETED.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 169900               March 18, 2010

MARIO SIOCHI, Petitioner, vs.ALFREDO GOZON, WINIFRED GOZON, GIL TABIJE, INTER-DIMENSIONAL REALTY, INC., and ELVIRA GOZON, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 169977

INTER-DIMENSIONAL REALTY, INC., Petitioner, vs.MARIO SIOCHI, ELVIRA GOZON, ALFREDO GOZON, and WINIFRED GOZON, Respondents.

R E S O L U T I O N

CARPIO, J.:

This is a consolidation of two separate petitions for review,1 assailing the 7 July 2005 Decision2 and the 30 September 2005 Resolution3 of the Court of Appeals in CA-G.R. CV No. 74447.

This case involves a 30,000 sq.m. parcel of land (property) covered by TCT No. 5357.4 The property is situated in Malabon, Metro Manila and is

registered in the name of "Alfredo Gozon (Alfredo), married to Elvira Gozon (Elvira)."

On 23 December 1991, Elvira filed with the Cavite City Regional Trial Court (Cavite RTC) a petition for legal separation against her husband Alfredo. On 2 January 1992, Elvira filed a notice of lis pendens, which was then annotated on TCT No. 5357.

On 31 August 1993, while the legal separation case was still pending, Alfredo and Mario Siochi (Mario) entered into an Agreement to Buy and Sell5 (Agreement) involving the property for the price of P18 million. Among the stipulations in the Agreement were that Alfredo would: (1) secure an Affidavit from Elvira that the property is Alfredo’s exclusive property and to annotate the Agreement at the back of TCT No. 5357; (2) secure the approval of the Cavite RTC to exclude the property from the legal separation case; and (3) secure the removal of the notice of lis pendens pertaining to the said case and annotated on TCT No. 5357. However, despite repeated demands from Mario, Alfredo failed to comply with these stipulations. After paying the P5 million earnest money as partial payment of the purchase price, Mario took possession of the property in September 1993. On 6 September 1993, the Agreement was annotated on TCT No. 5357.

Meanwhile, on 29 June 1994, the Cavite RTC rendered a decision6 in the legal separation case, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered decreeing the legal separation between petitioner and respondent. Accordingly, petitioner Elvira Robles Gozon is entitled to live separately from respondent Alfredo Gozon without dissolution of their marriage bond. The conjugal partnership of gains of the spouses is hereby declared DISSOLVED and LIQUIDATED. Being the offending spouse, respondent is deprived of his share in the net profits and the same is awarded to their child Winifred R. Gozon whose custody is awarded to petitioner.

Furthermore, said parties are required to mutually support their child Winifred R. Gozon as her needs arises.

SO ORDERED.7

As regards the property, the Cavite RTC held that it is deemed conjugal property.

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On 22 August 1994, Alfredo executed a Deed of Donation over the property in favor of their daughter, Winifred Gozon (Winifred). The Register of Deeds of Malabon, Gil Tabije, cancelled TCT No. 5357 and issued TCT No. M-105088 in the name of Winifred, without annotating the Agreement and the notice of lis pendens on TCT No. M-10508.

On 26 October 1994, Alfredo, by virtue of a Special Power of Attorney9 executed in his favor by Winifred, sold the property to Inter-Dimensional Realty, Inc. (IDRI) for P18 million.10 IDRI paid Alfredo P18 million, representing full payment for the property.11 Subsequently, the Register of Deeds of Malabon cancelled TCT No. M-10508 and issued TCT No. M-1097612 to IDRI.

Mario then filed with the Malabon Regional Trial Court (Malabon RTC) a complaint for Specific Performance and Damages, Annulment of Donation and Sale, with Preliminary Mandatory and Prohibitory Injunction and/or Temporary Restraining Order.

On 3 April 2001, the Malabon RTC rendered a decision,13 the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

01. On the preliminary mandatory and prohibitory injunction:

1.1 The same is hereby made permanent by:

1.1.1 Enjoining defendants Alfredo Gozon, Winifred Gozon, Inter-Dimensional Realty, Inc. and Gil Tabije, their agents, representatives and all persons acting in their behalf from any attempt of commission or continuance of their wrongful acts of further alienating or disposing of the subject property;

1.1.2. Enjoining defendant Inter-Dimensional Realty, Inc. from entering and fencing the property;

1.1.3. Enjoining defendants Alfredo Gozon, Winifred Gozon, Inter-Dimensional Realty, Inc. to respect plaintiff’s possession of the property.

02. The Agreement to Buy and Sell dated 31 August 1993, between plaintiff and defendant Alfredo Gozon is hereby approved, excluding the property and rights of defendant Elvira Robles-Gozon to the undivided one-half share in the conjugal property subject of this case.

03. The Deed of Donation dated 22 August 1994, entered into by and between defendants Alfredo Gozon and Winifred Gozon is hereby nullified and voided.

04. The Deed of Absolute Sale dated 26 October 1994, executed by defendant Winifred Gozon, through defendant Alfredo Gozon, in favor of defendant Inter-Dimensional Realty, Inc. is hereby nullified and voided.

05. Defendant Inter-Dimensional Realty, Inc. is hereby ordered to deliver its Transfer Certificate of Title No. M-10976 to the Register of Deeds of Malabon, Metro Manila.

06. The Register of Deeds of Malabon, Metro Manila is hereby ordered to cancel Certificate of Title Nos. 10508 "in the name of Winifred Gozon" and M-10976 "in the name of Inter-Dimensional Realty, Inc.," and to restore Transfer Certificate of Title No. 5357 "in the name of Alfredo Gozon, married to Elvira Robles" with the Agreement to Buy and Sell dated 31 August 1993 fully annotated therein is hereby ordered.

07. Defendant Alfredo Gozon is hereby ordered to deliver a Deed of Absolute Sale in favor of plaintiff over his one-half undivided share in the subject property and to comply with all the requirements for registering such deed.

08. Ordering defendant Elvira Robles-Gozon to sit with plaintiff to agree on the selling price of her undivided one-half share in the subject property, thereafter, to execute and deliver a Deed of Absolute Sale over the same in favor of the plaintiff and to comply with all the requirements for registering such deed, within fifteen (15) days from the receipt of this DECISION.

38

09. Thereafter, plaintiff is hereby ordered to pay defendant Alfredo Gozon the balance of Four Million Pesos (P4,000,000.00) in his one-half undivided share in the property to be set off by the award of damages in plaintiff’s favor.

10. Plaintiff is hereby ordered to pay the defendant Elvira Robles-Gozon the price they had agreed upon for the sale of her one-half undivided share in the subject property.

11. Defendants Alfredo Gozon, Winifred Gozon and Gil Tabije are hereby ordered to pay the plaintiff, jointly and severally, the following:

11.1 Two Million Pesos (P2,000,000.00) as actual and compensatory damages;

11.2 One Million Pesos (P1,000,000.00) as moral damages;

11.3 Five Hundred Thousand Pesos (P500,000.00) as exemplary damages;

11.4 Four Hundred Thousand Pesos (P400,000.00) as attorney’s fees; and

11.5 One Hundred Thousand Pesos (P100,000.00) as litigation expenses.

11.6 The above awards are subject to set off of plaintiff’s obligation in paragraph 9 hereof.

12. Defendants Alfredo Gozon and Winifred Gozon are hereby ordered to pay Inter-Dimensional Realty, Inc. jointly and severally the following:

12.1 Eighteen Million Pesos (P18,000,000.00) which constitute the amount the former received from the latter pursuant to their Deed of Absolute Sale dated 26 October 1994, with legal interest therefrom;

12.2 One Million Pesos (P1,000,000.00) as moral damages;

12.3 Five Hundred Thousand Pesos (P500,000.00) as exemplary damages; and

12.4 One Hundred Thousand Pesos (P100,000.00) as attorney’s fees.

13. Defendants Alfredo Gozon and Winifred Gozon are hereby ordered to pay costs of suit.

SO ORDERED.14

On appeal, the Court of Appeals affirmed the Malabon RTC’s decision with modification. The dispositive portion of the Court of Appeals’ Decision dated 7 July 2005 reads:

WHEREFORE, premises considered, the assailed decision dated April 3, 2001 of the RTC, Branch 74, Malabon is hereby AFFIRMED with MODIFICATIONS, as follows:

1. The sale of the subject land by defendant Alfredo Gozon to plaintiff-appellant Siochi is declared null and void for the following reasons:

a) The conveyance was done without the consent of defendant-appellee Elvira Gozon;

b) Defendant Alfredo Gozon’s one-half (½) undivided share has been forfeited in favor of his daughter, defendant Winifred Gozon, by virtue of the decision in the legal separation case rendered by the RTC, Branch 16, Cavite;

2. Defendant Alfredo Gozon shall return/deliver to plaintiff-appellant Siochi the amount of P5 Million which the latter paid as earnest money in consideration for the sale of the subject land;

39

3. Defendants Alfredo Gozon, Winifred Gozon and Gil Tabije are hereby ordered to pay plaintiff-appellant Siochi jointly and severally, the following:

a) P100,000.00 as moral damages;

b) P100,000.00 as exemplary damages;

c) P50,000.00 as attorney’s fees;

d) P20,000.00 as litigation expenses; and

e) The awards of actual and compensatory damages are hereby ordered deleted for lack of basis.

4. Defendants Alfredo Gozon and Winifred Gozon are hereby ordered to pay defendant-appellant IDRI jointly and severally the following:

a) P100,000.00 as moral damages;

b) P100,000.00 as exemplary damages; and

c) P50,000.00 as attorney’s fees.

Defendant Winifred Gozon, whom the undivided one-half share of defendant Alfredo Gozon was awarded, is hereby given the option whether or not to dispose of her undivided share in the subject land.

The rest of the decision not inconsistent with this ruling stands.

SO ORDERED.15

Only Mario and IDRI appealed the decision of the Court of Appeals. In his petition, Mario alleges that the Agreement should be treated as a continuing offer which may be perfected by the acceptance of the other spouse before the offer is withdrawn. Since Elvira’s conduct signified her acquiescence to the sale, Mario prays for the Court to direct Alfredo and Elvira to execute a Deed of Absolute Sale over the property upon his payment of P9 million to Elvira.

On the other hand, IDRI alleges that it is a buyer in good faith and for value. Thus, IDRI prays that the Court should uphold the validity of IDRI’s TCT No. M-10976 over the property.

We find the petitions without merit.

This case involves the conjugal property of Alfredo and Elvira. Since the disposition of the property occurred after the effectivity of the Family Code, the applicable law is the Family Code. 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 the 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. (Emphasis supplied)

In this case, Alfredo was the sole administrator of the property because Elvira, with whom Alfredo was separated in fact, was unable to participate in the administration of the conjugal property. However, as sole administrator of the property, Alfredo still cannot sell the property without the written consent of Elvira or the authority of the court. Without such consent or authority, the sale is void.16 The absence of the consent of one of the spouse renders the entire sale void, including the portion of the conjugal property pertaining to the spouse who contracted the sale.17 Even if the other spouse actively participated in negotiating for the sale of the property, that other spouse’s written consent to the sale is still required by law for its validity.18 The Agreement entered into by Alfredo and Mario was without the written consent of Elvira. Thus, the Agreement is entirely void. As regards Mario’s contention that the Agreement is a continuing offer which may be perfected by Elvira’s acceptance before the offer is withdrawn, the fact that

40

the property was subsequently donated by Alfredo to Winifred and then sold to IDRI clearly indicates that the offer was already withdrawn.

However, we disagree with the finding of the Court of Appeals that the one-half undivided share of Alfredo in the property was already forfeited in favor of his daughter Winifred, based on the ruling of the Cavite RTC in the legal separation case. The Court of Appeals misconstrued the ruling of the Cavite RTC that Alfredo, being the offending spouse, is deprived of his share in the net profits and the same is awarded to Winifred.

The Cavite RTC ruling finds support in the following provisions of the Family Code:

Art. 63. The decree of legal separation shall have the following effects:

(1) The spouses shall be entitled to live separately from each other, but the marriage bonds shall not be severed;

(2) The absolute community or the conjugal partnership shall be dissolved and liquidated but the offending spouse shall have no right to any share of the net profits earned by the absolute community or the conjugal partnership, which shall be forfeited in accordance with the provisions of Article 43(2);

(3) The custody of the minor children shall be awarded to the innocent spouse, subject to the provisions of Article 213 of this Code; and

The offending spouse shall be disqualified from inheriting from the innocent spouse by intestate succession. Moreover, provisions in favor of the offending spouse made in the will of the innocent spouse shall be revoked by operation of law.

Art. 43. The termination of the subsequent marriage referred to in the preceding Article shall produce the following effects:

x x x

(2) The absolute community of property or the conjugal partnership, as the case may be, shall be dissolved and liquidated, but if either spouse contracted said marriage in bad faith, his or her share of the net profits of the

community property or conjugal partnership property shall be forfeited in favor of the common children or, if there are none, the children of the guilty spouse by a previous marriage or, in default of children, the innocent spouse; (Emphasis supplied)

Thus, among the effects of the decree of legal separation is that the conjugal partnership is dissolved and liquidated and the offending spouse would have no right to any share of the net profits earned by the conjugal partnership. It is only Alfredo’s share in the net profits which is forfeited in favor of Winifred. Article 102(4) of the Family Code provides that "[f]or purposes of computing the net profits subject to forfeiture in accordance with Article 43, No. (2) and 63, No. (2), the said profits shall be the increase in value between the market value of the community property at the time of the celebration of the marriage and the market value at the time of its dissolution." Clearly, what is forfeited in favor of Winifred is not Alfredo’s share in the conjugal partnership property but merely in the net profits of the conjugal partnership property.

With regard to IDRI, we agree with the Court of Appeals in holding that IDRI is not a buyer in good faith. As found by the RTC Malabon and the Court of Appeals, IDRI had actual knowledge of facts and circumstances which should impel a reasonably cautious person to make further inquiries about the vendor’s title to the property. The representative of IDRI testified that he knew about the existence of the notice of lis pendens on TCT No. 5357 and the legal separation case filed before the Cavite RTC. Thus, IDRI could not feign ignorance of the Cavite RTC decision declaring the property as conjugal.

Furthermore, if IDRI made further inquiries, it would have known that the cancellation of the notice of lis pendens was highly irregular. Under Section 77 of Presidential Decree No. 1529,19 the notice of lis pendens may be cancelled (a) upon order of the court, or (b) by the Register of Deeds upon verified petition of the party who caused the registration of the lis pendens. In this case, the lis pendens was cancelled by the Register of Deeds upon the request of Alfredo. There was no court order for the cancellation of the lis pendens. Neither did Elvira, the party who caused the registration of the lis pendens, file a verified petition for its cancellation.

Besides, had IDRI been more prudent before buying the property, it would have discovered that Alfredo’s donation of the property to Winifred was without the consent of Elvira. Under Article 12520 of the Family Code, a conjugal property cannot be donated by one spouse without the consent of the other spouse. Clearly, IDRI was not a buyer in good faith.1avvphi1

41

Nevertheless, we find it proper to reinstate the order of the Malabon RTC for the reimbursement of the P18 million paid by IDRI for the property, which was inadvertently omitted in the dispositive portion of the Court of Appeals’ decision.

WHEREFORE, we DENY the petitions. We AFFIRM the 7 July 2005 Decision of the Court of Appeals in CA-G.R. CV No. 74447 with the following MODIFICATIONS:

(1) We DELETE the portions regarding the forfeiture of Alfredo Gozon’s one-half undivided share in favor of Winifred Gozon and the grant of option to Winifred Gozon whether or not to dispose of her undivided share in the property; and

(2) We ORDER Alfredo Gozon and Winifred Gozon to pay Inter-Dimensional Realty, Inc. jointly and severally the Eighteen Million Pesos (P18,000,000) which was the amount paid by Inter-Dimensional Realty, Inc. for the property, with legal interest computed from the finality of this Decision.

SO ORDERED.

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