Castillo vs Pasco Jr

9/10/2015 SUPREME COURT REPORTS ANNOTATED VOLUME 011

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102 SUPREME COURT REPORTS ANNOTATEDCastillo, Jr, vs. Pasco

No. L16857. May 29, 1964.

MARCELO CASTILLO, JR., FELICISIMO CASTILLO,ENCARNACION CASTILLO, AMELIA CASTILLO,JAIME CASTILLO, RONAL

__________

3 Art. 2206, New Civil Code.

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VOL. 11, MAY 29, 1964 103Castillo, Jr, vs. Pasco

DO CASTILLO, VICTORIA CASTILLO, LETICIA CINCO,LEVI CINCO and DANIEL CINCO, petitioners, vs.MACARIA PASCO, respondent.

Conjugal partnership; Rule under old Civil Code; Propertyacquired during marriage.—Under the Spanish Civil Code of1889, the law applicable to the case at bar, the property acquiredfor onerous consideration during the marriage was deemedconjugal or separate property depending on the source of thefunds employed for its acquisition, irrespective of in whose namethe property was acquired.

Same; Same; Same; Property acquired partly withparaphernal and partly with conjugal funds.—Property acquiredduring the effectivity of the old Civil Code partly withparaphernal funds of the wife and partly with conjugal funds isheld to belong to both patrimonies in common, in proportion to thecontributions of each to the total purchase price.



Same; Same; Same; Initial payment partly out of indebtednessto wife alone.—Where the initial payment for property acquiredduring coverture under the old Civil Code was made partly out ofindebtedness of third persons due to the wife alone, in the absenceof proof that the husband authorized her to use conjugal funds,such payment was considered made out of private funds of thewife.

Same; Same; Same; Money raised by loans guaranteed bymortgage on paraphernal property.—Money obtained duringcoverture by loans to the husband or to both spouses, even ifguaranteed by mortgage on the paraphernal property of the wife,was considered, under the old law, conjugal property repayable atmaturity with conjugal partnership funds.

Same; Same; Same; Same; Payment by widow of loan securedby paraphernal property does not increase her share.—Thepayment by the widow, af ter her husband's death, with herprivate funds of a loan to the conjugal partnership secured by herparaphernal property, the proceeds of which were used to acquireproperty during coverture under the old Civil Code, does notresult in increasing her share in said property but only in creatinga lien in her favor over the undivided share of the conjugalpartnership in the property so acquired for the repayment of theamount she had advanced.

REVIEW of a decision of the Court of Appeals,

The facts are stated in the opinion of the Court Tomas Yumul for petitioners. Mariano G. Bustos & Associates for respondent.

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104 SUPREME COURT REPORTS ANNOTATEDCastillo, Jr, vs. Pasco

REYES, J.B.L., J.:

The legitimate children and descendants of the lateMarcelo Castillo, Sr. pray for the review and reversal of thedecision of the Court of Appeals, in its Case CAG.R. No.19377R, that affirmed the decision of the Court of FirstInstance of Bulacan, declaring that the fishpond in SanRoque, Paombong, Bulacan (covered by TCT No. 9928 ofthe Registry of Deeds of said province), was the exclusive



paraphernal property of respondent, Macaria Pasco,surviving spouse of the deceased Marcelo Castillo, Sr., anddismissing the complaint for partition and accounting filedby petitioners in said Court of First Instance.

The Court of Appeals found, and the petitionersappellants do not dispute, that in October 1931 MarceloCastillo, Sr., being a widower, married Macaria Pasco, awidow who had survived two previous husbands.Petitioners were children and grandchildren (representingtheir deceased parents) of Marcelo Castillo,, Sr. by hisprevious marriage. On April 3, 1933, Marcelo Castillo, Sr.died, and his widow married her fourth husband, Luis SanJuan, on June 8, 1934.

On December 22, 1932, Gabriel and PurificacionGonzales, as coowners of the litigated fishpond, executed adeed of sale (Exh. I) conveying said property to the spousesMarcelo Castillo and Macaria Pasco for the sum ofP6,000.00 (although the deed recited a higher amount),payable in three installments: P1,000 upon execution of thedeed (Exh. I); P2,000 on January 25, 1933 without Interest;and P3,000 within one year thereafter, with 11% interestfrom February 1, 1933, but extendible for another year.

Against the contention of petitionersappellants that thefishpond thus bought should be considered conjugal for itshaving been acquired during coverture, the Court ofAppeals declared it to be paraphernal, because it waspurchased with exclusive funds of the wife, Macaria Pasco.She was admittedly a woman of means even before shemarried Marcelo Castillo, Sr and the latter's principalsource of income was only his P80 a month salary,

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VOL. 11, MAY 29, 1964 105Castillo, Jr. vs. Pasco

as provincial treasurer (as found by the Court of FirstInstance), besides two small residential lots and fishponds,which were encumbered and later transferred to his fivechildren by his first wife and whom he was then supportingin medical and high school. Actually, Marcelo Castillo, Sr.died without enough assets to pay his debts.

In point of facts the Court of Appeals found that theinitial payment of P1,000 for the fishpond now in litigationwas made up of P600, that one of the vendors (Gabriel



1.2.3.4.

Gonzales) owed to appellee Pasco, and P400 in cash, whichthe latter paid out of the proceeds of the sale of one of hernipa lands. The second installment of P2,000 appears tohave been paid, with the proceeds of the loan from Dr.Nicanor Jacinto, to whom the fishpond was mortgaged byboth spouses. Dr. Jacinto later assigned his interest to Dr.Antonio Pasco. The last payment of P3,000 was derivedfrom a loan secured by a mortgage (Exh. 2) on 2 parcels ofland assessed in the name of Macaria Pasco, and one ofwhich she had inherited from a former husband, Justo S.Pascual, while the other lot encumbered was assessed inher exclusive name.

It was also found by the Court of Appeals that upon thedeath of Marcelo Castillo, Sr., the loan and mortgage infavor of Dr. Jacinto (later assigned by him to Dr. AntonioPasco) was still outstanding. Unable to collect the loan, Dr.Pasco foreclosed the mortgaged, and the encumberedfishpond was sold to him; but the sale was subsequentlyannulled. Later, on September 7, 1949, respondent MacariaPasco judicially consigned P12,300 on account of themortgage debt and its interest, and com pleted payment bya second consignation of P752.43 made on April 24, 1950,As the estate of Castillo had no assets adequate to pay offthe claims against it, the Court of Appeals concluded thatthe amounts consigned belonged to the widow MacariaPasco, respondent herein.

It is not gainsaid that under the Spanish Civil Code of1889, that was the applicable law in 1932, the propertyacquired for onerous consideration during the marriagewas deemed conjugal or separate property depending on

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106 SUPREME COURT REPORTS ANNOTATEDCastillo, Jr. vs. Pasco

the source of the funds employed for its acquisition, Thus,Article 1396 of said Code provided:

"ART. 1396. The following is separate property of either spouse:

x x x.x x x.x x x.That bought with money belonging exclusively to the wife



or to the husband."

On the other hand, Article 1401 prescribed that:

"ART. 1401, To the conjugal property belong:1, Property acquired for valuable consideration during the

marriage at the expense of the common f und, whether theacquisition is made for the partnership or for one of ,the spousesonly."

The last clause in Article 1401 (par. 1) indicates that thecircumstance of the sale of the fishpond in question beingmade by the original owners in f avor of both spouses.Marcelo Castillo, Sr. and Macaria Pasco, is indifferent forthe determination of whether the property should bedeemed paraphernal or conjugal. As remarked by Manresain his Commentaries to the Civil Code, Vol. IX (5th Ed.), p.549, "la ley atiende, no a la persona en cuyo nombre o afavor del cual se realiza la compra, sino a la procedencia deldinero".

As abovenoted, the Court of Appeals determined thatthe initial payment of P1,000 for the fishpond now disputedwas made out of private funds of Macaria Pasco.Appellants, however, argue that since there is no expressfinding that the P600 debt owed by Gabriel Gonzales cameexclusively from private funds of Pasco, they should bepresumed conjugal funds, in accordance with Article 1407of the Civil Code of 1889. The argument is untenable. Sincethe wife, under Article 1416, can not bind the conjugalpartnership without the consent of the husband, herprivate transactions are presumed to be for her ownaccount, and not for the account of the partnership. Thefinding of the Court of Appeals is that Gabriel Gonzalesowed this particular indebtedness to Macaria Pasco alone,and in the absence of proof that the husband authorizedher to use community funds therefor, the appellate Court'sfinding can not be disturbed by us.

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VOL. 11, MAY 29, 1964 107Castillo, Jr. vs. Pasco

Whether the evidence adverted to should be credited or notis for the Court of Appeals to decide.



Appellants next assail the conclusion of the Court ofAppeals that the other two installments of the purchaseprice should be, like the first one, deemed to have been paidwith exclusive funds of the wife, because the money wasraised by loans, guaranteed by mortgage on paraphernalproperty of the wife. The position thus taken by appellantsis meritorious, for the reason that the deeds show the loansto have been made by Dr. Nicanor Jacinto, and by Gabrieland Purificacion Gonzales, to both spouses Marcelo Castilloand Macaria Pasco, as joint borrowers. The loans thusbecame obligations of the conjugal partnership of bothdebtor spouses, and the money loaned is logically conjugalproperty. While the securing mortgage is on the wife'sparaphernal the mortgage is a purely accessory obligationthat the lenders could waive if they so chose, withoutaffecting the principal debt which was owned by theconjugal partnership, and which the creditors could enforceexclusively against the latter if they so desired.

In Palanca vs. Smith Bell & Co., 9 Phil. 131, this Courtruled as follows (cas. cit. at p. 133):

"This P14,000, borrowed by said Emiliano Boncan upon the creditof the property of his wife, became conjugal property (par. 3, Art.1401, Civil Code) and when the same was reinvested in theconstruction of a house, the house became conjugal property andwas liable for the payment of the debts of the husband (Art. 1408,Civ. Code)."

If money borrowed by the husband alone 011 the security ofhis wife's property is conjugal in character, a fortiori shouldit be conjugal when borrowed by both spouses. The reasonobviously is that the loan becomes an obligation of theconjugal partnership which is the one primarily bound forits repayment.

The case of Lim Queco vs. Cartagena, 71 Phil. 162, isclearly distinguishable from the Palanca case in that in theLim Queco case the wife alone borrowed the money from"El Ahorro Insular" although she guaranteed repaymentwith a mortgage on her parapherna executed

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108 SUPREME COURT REPORTS ANNOTATEDCastillo, Jr. vs. Pasco



with her husband's consent. Since the wife does not havethe management or representation of the conjugalpartnership where the husband is qualified therefor, theloan to her constituted a transaction that did not involvethe community, and the creditor could seek repaymentexclusively from her properties. Logically, as this Courtthen held, the money loaned to the wife, as well as theproperty acquired thereby, should be deemed to be thewife's exclusive property.

The analogy between the case now before us and thePalanca vs. Smith Bell case is undeniable, and the Palancaruling applies. We, therefore, find that the twoinstallments, totalling P5,000, of the price of the fishpondwere paid with conjugal funds, unlike the first installmentof P1,000 that was paid exclusively with money belongingto the wife Macaria Pasco, appellee herein.

As the litigated fishpond was purchased partly withparaphernal funds and partly with money of the conjugalpartnership, justice requires that the property be held tobelong to both patrimonies in common, in proportion to thecontributions of each to the total purchase price of P6,000.An undivided onesixth (1/6) should be deemedparaphernal, and the remaining fivesixths (6/6) heldproperty of the conjugal partnership of spouses MarceloCastillo and Macaria Pasco (9 Manresa, Com. al CodigoCivil [5th Ed.], p. 549).

"Puesto que la ley atiende, no a la persona en cuyo nombre ó afavor del cual se realiza la compra, sino a la procedencia deldinero, considerando el hecho como una verdadera sustitución 6conversión del dinero en otros objetos, debemos deducir quecuando una finca, por ejemplo, se compra con dinero del marido yde la mujer, 6 de la mujer y de la Sociedad, pertenece a aquellosde quienes procede el precio, y en la proporcion entregada porcada cual. Si pues marido y mujer compran una casa, entregandoel primero de su capital propio 10,000 pesetas, y !a segunda 5,000,la casa pertenecerá a los dos cónyuges pro indiviso, en laproporción de los terceras partes a! marido y una tercera a lamujer." (Manresa, op. cit)

The payment by the widow, after her husband's death, ofthe mortgage debt due to Dr. Pasco, the assignee of theoriginal mortgagee, Dr. Nicanor Jacinto, does not result inincreasing her share in the property in question

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VOL. 11, MAY 29, 1964 109Beduya vs. Republic

in creating a lien in her favor over the undivided share ofthe conjugal partnership, for the repayment of the amountshe has advanced, should it be ultimately shown that themoney thus delivered to the creditor was exclusively ownedby her.

It follows from the foregoing that, as the fishpond wasundivided property of the widow and the conjugalpartnership with her late husband, the heirs of the latter,appellants herein, were entitled to ask for partition thereofand liquidation of its proceeds. The ultimate interest ofeach party must be resolved after due hearing, taking intoaccount (a) the widow's onesixth direct share; (b) her halfof the community property; (c) her successional rights to apart of the husband's share pursuant to the governing lawof succession when the husband died; and (d) the widow'sright to reimbursement for any amounts advanced by herin paying the mortgage debt as aforesaid. All these detailsmust be settled, after proper trial.

WHEREFORE, the dismissal of the original complaint ishereby revoked and set aside, and the records are orderedremanded to the court of origin for further proceedingsconformable to this opinion.

Bengzon, C.J., Bautista Angelo, Concepcion, Barrera,Paredes, Regala and Makalintal, JJ., concur.

Padilla, Labrador and Dizon, JJ., took no part.

Dismissal of original complaint revoked and set asideand records remanded to court of origin for furtherproceedings.

——oOo——

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Castillo vs Pasco Jr

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