Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 139789 July 19, 2001

IN THE MATTER OF THE PETITION FOR HABEAS CORPUS OF POTENCIANO ILUSORIO, ERLINDA K. ILUSORIO, petitioner,vs.ERLINDA K. ILUSORIO-BILDNER, SYLVIA K. ILUSORIO-YAP, JOHN DOES and JANE DOES, respondents.x---------------------------------------------------------x

G.R. No. 139808 July 19, 2001

POTENCIANO ILUSORIO, MA. ERLINDA I. BILDNER and SYLVIA K. ILUSORIO, petitioners,vs.HON. COURT OF APPEALS and ERLINDA K. ILUSORIO, respondents.

R E S O L U T I O N

PARDO, J.:

Once again we see the sad tale of a prominent family shattered by conflicts on expectancy in fabled fortune.

On March 11, 1999, Erlinda K. Ilusorio, the matriarch who was so lovingly inseparable from her husband some years ago, filed a petition with the Court of Appeals1 for habeas corpus to have custody of her husband in consortium.

On April 5, 1999, the Court of Appeals promulgated its decision dismissing the petition for lack of unlawful restraint or detention of the subject, Potenciano Ilusorio.

Thus, on October 11, 1999, Erlinda K. Ilusorio filed with the Supreme Court an appeal via certiorari pursuing her desire to have custody of her husband Potenciano Ilusorio.2 This case was consolidated with another case3 filed by Potenciano Ilusorio and his children, Erlinda I. Bildner and Sylvia K. Ilusorio appealing from the order giving visitation rights to his wife, asserting that he never refused to see her.

On May 12, 2000, we dismissed the petition for habeas corpus4 for lack of merit, and granted the petition5 to nullify the Court of Appeals' ruling6 giving visitation rights to Erlinda K. Ilusorio.7

What is now before the Court is Erlinda's motion to reconsider the decision.8

On September 20, 2000, we set the case for preliminary conference on October 11, 2000, at 10:00 a. m., without requiring the mandatory presence of the parties.

In that conference, the Court laid down the issues to be resolved, to wit:

(a) To determine the propriety of a physical and medical examination of petitioner Potenciano Ilusorio;

(b) Whether the same is relevant; and

(c) If relevant, how the Court will conduct the same.9

The parties extensively discussed the issues. The Court, in its resolution, enjoined the parties and their lawyers to initiate steps towards an amicable settlement of the case through mediation and other means.

On November 29, 2000, the Court noted the manifestation and compliance of the parties with the resolution of October 11, 2000.10

On January 31, 2001, the Court denied Erlinda Ilusorio's manifestation and motion praying that Potenciano Ilusorio be produced before the Court and be medically examined by a team of medical experts appointed by the Court.11

On March 27, 2001, we denied with finality Erlinda's motion to reconsider the Court's order of January 31 , 2001.12

The issues raised by Erlinda K. Ilusorio in her motion for reconsideration are mere reiterations of her arguments that have been resolved in the decision.

Nevertheless, for emphasis, we shall discuss the issues thus:

First. Erlinda K. Ilusorio claimed that she was not compelling Potenciano to live with her in consortium and that Potenciano's mental state was not an issue. However, the very root cause of the entire petition is her desire to have her husband's custody.13 Clearly, Erlinda cannot now deny that she wanted Potenciano Ilusorio to live with her.

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Second. One reason why Erlinda K. Ilusorio sought custody of her husband was that respondents Lin and Sylvia were illegally restraining Potenciano Ilusorio to fraudulently deprive her of property rights out of pure greed.14 She claimed that her two children were using their sick and frail father to sign away Potenciano and Erlinda's property to companies controlled by Lin and Sylvia. She also argued that since Potenciano retired as director and officer of Baguio Country Club and Philippine Oversees Telecommunications, she would logically assume his position and control. Yet, Lin and Sylvia were the ones controlling the corporations.15

The fact of illegal restraint has not been proved during the hearing at the Court of Appeals on March 23, 1999.16 Potenciano himself declared that he was not prevented by his children from seeing anybody and that he had no objection to seeing his wife and other children whom he loved.

Erlinda highlighted that her husband suffered from various ailments. Thus, Potenciano Ilusorio did not have the mental capacity to decide for himself. Hence, Erlinda argued that Potenciano be brought before the Supreme Court so that we could determine his mental state.

We were not convinced that Potenciano Ilusorio was mentally incapacitated to choose whether to see his wife or not. Again, this is a question of fact that has been decided in the Court of Appeals.

As to whether the children were in fact taking control of the corporation, these are matters that may be threshed out in a separate proceeding, irrelevant in habeas corpus.

Third. Petitioner failed to sufficiently convince the Court why we should not rely on the facts found by the Court of Appeals. Erlinda claimed that the facts mentioned in the decision were erroneous and incomplete. We see no reason why the High Court of the land need go to such length. The hornbook doctrine states that findings of fact of the lower courts are conclusive on the Supreme Court.17 We emphasize, it is not for the Court to weigh evidence all over again.18 Although there are exceptions to the rule,19 Erlinda failed to show that this is an exceptional instance.

Fourth. Erlinda states that Article XII of the 1987 Constitution and Articles 68 and 69 of the Family Code support her position that as spouses, they (Potenciano and Erlinda) are duty bound to live together and care for each other. We agree.

The law provides that the husband and the wife are obliged to live together, observe mutual love, respect and fidelity.20 The sanction therefor is the

"spontaneous, mutual affection between husband and wife and not any legal mandate or court order" to enforce consortium.21

Obviously, there was absence of empathy between spouses Erlinda and Potenciano, having separated from bed and board since 1972. We defined empathy as a shared feeling between husband and wife experienced not only by having spontaneous sexual intimacy but a deep sense of spiritual communion. Marital union is a two-way process.

Marriage is definitely for two loving adults who view the relationship with "amor gignit amorem" respect, sacrifice and a continuing commitment to togetherness, conscious of its value as a sublime social institution.22

On June 28, 2001, Potenciano Ilusorio gave his soul to the Almighty, his Creator and Supreme Judge. Let his soul rest in peace and his survivors continue the much prolonged fracas ex aequo et bono.

IN VIEW WHEREOF, we DENY Erlinda's motion for reconsideration. At any rate, the case has been rendered moot by the death of subject.

SO ORDERED.

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Republic of the PhilippinesSupreme Court

Manila

SECOND DIVISION

BRIGIDO B. QUIAO,Petitioner,

- versus -

RITA C. QUIAO, KITCHIE C. QUIAO, LOTIS C. QUIAO, PETCHIE C. QUIAO, represented by their mother RITA QUIAO,Respondents.G.R. No 176556

Present:

CARPIO, J., Chairperson,BRION,PEREZ,SERENO, andREYES, JJ.

Promulgated:July 4, 2012

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

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

This case comes before us via Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court. The petitioner seeks that we vacate and set aside the Order[2] dated January 8, 2007 of the Regional Trial Court (RTC), Branch 1, Butuan City. In lieu of the said order, we are asked to issue a Resolution defining the net profits subject of the forfeiture as a result of the decree of legal separation in accordance with the provision of Article 102(4) of the Family Code, or alternatively, in accordance with the provisions of Article 176 of the Civil Code. Antecedent Facts On October 26, 2000, herein respondent Rita C. Quiao (Rita) filed a complaint for legal separation against herein petitioner Brigido B. Quiao (Brigido).[3] Subsequently, the RTC rendered a Decision[4] dated October 10, 2005, the dispositive portion of which provides: WHEREFORE, viewed from the foregoing considerations, judgment is hereby rendered declaring the legal separation of plaintiff Rita C. Quiao and defendant-respondent Brigido B. Quiao pursuant to Article 55. As such, the herein parties shall be entitled to live separately from each other, but the marriage bond shall not be severed. Except for Letecia C. Quiao who is of legal age, the three minor children, namely, Kitchie, Lotis and Petchie, all surnamed Quiao shall remain under the custody of the plaintiff who is the innocent spouse. Further, except for the personal and real properties already foreclosed by the RCBC, all the remaining properties, namely: 1. coffee mill in Balongagan, Las Nieves, Agusan del Norte;2. coffee mill in Durian, Las Nieves, Agusan del Norte;3. corn mill in Casiklan, Las Nieves, Agusan del Norte;4. coffee mill in Esperanza, Agusan del Sur;5. a parcel of land with an area of 1,200 square meters located in Tungao, Butuan City;6. a parcel of agricultural land with an area of 5 hectares located in Manila de Bugabos, Butuan City;7. a parcel of land with an area of 84 square meters located in Tungao, Butuan City;8. Bashier Bon Factory located in Tungao, Butuan City; shall be divided equally between herein [respondents] and [petitioner] subject to the respective legitimes of the children and the payment of the unpaid conjugal liabilities of [P]45,740.00.

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[Petitioners] share, however, of the net profits earned by the conjugal partnership is forfeited in favor of the common children. He is further ordered to reimburse [respondents] the sum of [P]19,000.00 as attorney's fees and litigation expenses of [P]5,000.00[.] SO ORDERED.[5] Neither party filed a motion for reconsideration and appeal within the period provided for under Section 17(a) and (b) of the Rule on Legal Separation.[6] On December 12, 2005, the respondents filed a motion for execution[7] which the trial court granted in its Order dated December 16, 2005, the dispositive portion of which reads: Wherefore, finding the motion to be well taken, the same is hereby granted. Let a writ of execution be issued for the immediate enforcement of the Judgment. SO ORDERED.[8] Subsequently, on February 10, 2006, the RTC issued a Writ of Execution[9] which reads as follows: NOW THEREFORE, that of the goods and chattels of the [petitioner] BRIGIDO B. QUIAO you cause to be made the sums stated in the afore-quoted DECISION [sic], together with your lawful fees in the service of this Writ, all in the Philippine Currency. But if sufficient personal property cannot be found whereof to satisfy this execution and your lawful fees, then we command you that of the lands and buildings of the said [petitioner], you make the said sums in the manner required by law. You are enjoined to strictly observed Section 9, Rule 39, Rule [sic] of the 1997 Rules of Civil Procedure. You are hereby ordered to make a return of the said proceedings immediately after the judgment has been satisfied in part or in full in consonance with Section 14, Rule 39 of the 1997 Rules of Civil Procedure, as amended.[10] On July 6, 2006, the writ was partially executed with the petitioner paying the respondents the amount of P46,870.00, representing the following payments: (a) P22,870.00 as petitioner's share of the payment of the conjugal share;(b) P19,000.00 as attorney's fees; and

(c) P5,000.00 as litigation expenses.[11] On July 7, 2006, or after more than nine months from the promulgation of the Decision, the petitioner filed before the RTC a Motion for Clarification,[12] asking the RTC to define the term Net Profits Earned. To resolve the petitioner's Motion for Clarification, the RTC issued an Order[13] dated August 31, 2006, which held that the phrase NET PROFIT EARNED denotes the remainder of the properties of the parties after deducting the separate properties of each [of the] spouse and the debts.[14] The Order further held that after determining the remainder of the properties, it shall be forfeited in favor of the common children because the offending spouse does not have any right to any share of the net profits earned, pursuant to Articles 63, No. (2) and 43, No. (2) of the Family Code.[15] The dispositive portion of the Order states: WHEREFORE, there is no blatant disparity when the sheriff intends to forfeit all the remaining properties after deducting the payments of the debts for only separate properties of the defendant-respondent shall be delivered to him which he has none. The Sheriff is herein directed to proceed with the execution of the Decision. IT IS SO ORDERED.[16] Not satisfied with the trial court's Order, the petitioner filed a Motion for Reconsideration[17] on September 8, 2006. Consequently, the RTC issued another Order[18] dated November 8, 2006, holding that although the Decision dated October 10, 2005 has become final and executory, it may still consider the Motion for Clarification because the petitioner simply wanted to clarify the meaning of net profit earned.[19] Furthermore, the same Order held: ALL TOLD, the Court Order dated August 31, 2006 is hereby ordered set aside. NET PROFIT EARNED, which is subject of forfeiture in favor of [the] parties' common children, is ordered to be computed in accordance [with] par. 4 of Article 102 of the Family Code.[20] On November 21, 2006, the respondents filed a Motion for Reconsideration,[21] praying for the correction and reversal of the Order dated November 8, 2006. Thereafter, on January 8, 2007,[22] the trial court had changed its ruling again and granted the respondents' Motion for Reconsideration whereby the Order dated November 8, 2006 was set aside to reinstate the Order dated August 31, 2006.

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Not satisfied with the trial court's Order, the petitioner filed on February 27, 2007 this instant Petition for Review under Rule 45 of the Rules of Court, raising the following: Issues I IS THE DISSOLUTION AND THE CONSEQUENT LIQUIDATION OF THE COMMON PROPERTIES OF THE HUSBAND AND WIFE BY VIRTUE OF THE DECREE OF LEGAL SEPARATION GOVERNED BY ARTICLE 125 (SIC) OF THE FAMILY CODE? II WHAT IS THE MEANING OF THE NET PROFITS EARNED BY THE CONJUGAL PARTNERSHIP FOR PURPOSES OF EFFECTING THE FORFEITURE AUTHORIZED UNDER ARTICLE 63 OF THE FAMILY CODE? III WHAT LAW GOVERNS THE PROPERTY RELATIONS BETWEEN THE HUSBAND AND WIFE WHO GOT MARRIED IN 1977? CAN THE FAMILY CODE OF THE PHILIPPINES BE GIVEN RETROACTIVE EFFECT FOR PURPOSES OF DETERMINING THE NET PROFITS SUBJECT OF FORFEITURE AS A RESULT OF THE DECREE OF LEGAL SEPARATION WITHOUT IMPAIRING VESTED RIGHTS ALREADY ACQUIRED UNDER THE CIVIL CODE? IV WHAT PROPERTIES SHALL BE INCLUDED IN THE FORFEITURE OF THE SHARE OF THE GUILTY SPOUSE IN THE NET CONJUGAL PARTNERSHIP AS A RESULT OF THE ISSUANCE OF THE DECREE OF LEGAL SEPARATION?[23] Our Ruling While the petitioner has raised a number of issues on the applicability of certain laws, we are well-aware that the respondents have called our attention to the fact that the Decision dated October 10, 2005 has attained finality when the Motion for Clarification was filed.[24] Thus, we are constrained to resolve first the issue of the finality of the Decision dated October 10, 2005 and subsequently discuss the matters that we can clarify.

The Decision dated October 10, 2005 has become final and executory at the time the Motion for Clarification was filed on July 7, 2006. Section 3, Rule 41 of the Rules of Court provides: Section 3. Period of ordinary appeal. - The appeal shall be taken within fifteen (15) days from notice of the judgment or final order appealed from. Where a record on appeal is required, the appellant shall file a notice of appeal and a record on appeal within thirty (30) days from notice of the judgment or final order.

The period of appeal shall be interrupted by a timely motion for new trial or reconsideration. No motion for extension of time to file a motion for new trial or reconsideration shall be allowed. In Neypes v. Court of Appeals,[25] we clarified that to standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to appeal their cases, we held that it would be practical to allow a fresh period of 15 days within which to file the notice of appeal in the RTC, counted from receipt of the order dismissing a motion for a new trial or motion for reconsideration.[26] In Neypes, we explained that the "fresh period rule" shall also apply to Rule 40 governing appeals from the Municipal Trial Courts to the RTCs; Rule 42 on petitions for review from the RTCs to the Court of Appeals (CA); Rule 43 on appeals from quasi-judicial agencies to the CA and Rule 45 governing appeals by certiorari to the Supreme Court. We also said, The new rule aims to regiment or make the appeal period uniform, to be counted from receipt of the order denying the motion for new trial, motion for reconsideration (whether full or partial) or any final order or resolution.[27] In other words, a party litigant may file his notice of appeal within a fresh 15-day period from his receipt of the trial court's decision or final order denying his motion for new trial or motion for reconsideration. Failure to avail of the fresh 15-day period from the denial of the motion for reconsideration makes the decision or final order in question final and executory. In the case at bar, the trial court rendered its Decision on October 10, 2005. The petitioner neither filed a motion for reconsideration nor a notice of appeal. On December 16, 2005, or after 67 days had lapsed, the trial court issued an order granting the respondent's motion for execution; and on February 10, 2006, or after 123 days had lapsed, the trial court issued a writ of execution. Finally, when the writ had already been partially executed, the petitioner, on July 7, 2006 or after 270 days had lapsed, filed his Motion for Clarification on the

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definition of the net profits earned. From the foregoing, the petitioner had clearly slept on his right to question the RTCs Decision dated October 10, 2005. For 270 days, the petitioner never raised a single issue until the decision had already been partially executed. Thus at the time the petitioner filed his motion for clarification, the trial courts decision has become final and executory. A judgment becomes final and executory when the reglementary period to appeal lapses and no appeal is perfected within such period. Consequently, no court, not even this Court, can arrogate unto itself appellate jurisdiction to review a case or modify a judgment that became final.[28] The petitioner argues that the decision he is questioning is a void judgment. Being such, the petitioner's thesis is that it can still be disturbed even after 270 days had lapsed from the issuance of the decision to the filing of the motion for clarification. He said that a void judgment is no judgment at all. It never attains finality and cannot be a source of any right nor any obligation.[29] But what precisely is a void judgment in our jurisdiction? When does a judgment becomes void? A judgment is null and void when the court which rendered it had no power to grant the relief or no jurisdiction over the subject matter or over the parties or both.[30] In other words, a court, which does not have the power to decide a case or that has no jurisdiction over the subject matter or the parties, will issue a void judgment or a coram non judice.[31] The questioned judgment does not fall within the purview of a void judgment. For sure, the trial court has jurisdiction over a case involving legal separation. Republic Act (R.A.) No. 8369 confers upon an RTC, designated as the Family Court of a city, the exclusive original jurisdiction to hear and decide, among others, complaints or petitions relating to marital status and property relations of the husband and wife or those living together.[32] The Rule on Legal Separation[33] provides that the petition [for legal separation] shall be filed in the Family Court of the province or city where the petitioner or the respondent has been residing for at least six months prior to the date of filing or in the case of a non-resident respondent, where he may be found in the Philippines, at the election of the petitioner.[34] In the instant case, herein respondent Rita is found to reside in Tungao, Butuan City for more than six months prior to the date of filing of the petition; thus, the RTC, clearly has jurisdiction over the respondent's petition below. Furthermore, the RTC also acquired jurisdiction over the persons of both parties, considering that summons and a copy of the complaint with its annexes were served upon the herein petitioner on December 14, 2000 and that the herein petitioner filed his Answer to the Complaint on January 9, 2001.[35] Thus, without doubt, the RTC, which has rendered the questioned judgment, has jurisdiction over the complaint and the persons of the parties.

From the aforecited facts, the questioned October 10, 2005 judgment of the trial court is clearly not void ab initio, since it was rendered within the ambit of the court's jurisdiction. Being such, the same cannot anymore be disturbed, even if the modification is meant to correct what may be considered an erroneous conclusion of fact or law.[36] In fact, we have ruled that for [as] long as the public respondent acted with jurisdiction, any error committed by him or it in the exercise thereof will amount to nothing more than an error of judgment which may be reviewed or corrected only by appeal.[37] Granting without admitting that the RTC's judgment dated October 10, 2005 was erroneous, the petitioner's remedy should be an appeal filed within the reglementary period. Unfortunately, the petitioner failed to do this. He has already lost the chance to question the trial court's decision, which has become immutable and unalterable. What we can only do is to clarify the very question raised below and nothing more. For our convenience, the following matters cannot anymore be disturbed since the October 10, 2005 judgment has already become immutable and unalterable, to wit: (a) The finding that the petitioner is the offending spouse since he cohabited with a woman who is not his wife;[38] (b) The trial court's grant of the petition for legal separation of respondent Rita;[39] (c) The dissolution and liquidation of the conjugal partnership;[40] (d) The forfeiture of the petitioner's right to any share of the net profits earned by the conjugal partnership;[41] (e) The award to the innocent spouse of the minor children's custody;[42] (f) The disqualification of the offending spouse from inheriting from the innocent spouse by intestate succession;[43] (g) The revocation of provisions in favor of the offending spouse made in the will of the innocent spouse;[44] (h) The holding that the property relation of the parties is conjugal partnership of gains and pursuant to Article 116 of the Family Code, all properties acquired during the marriage, whether acquired by one or both spouses, is presumed to be conjugal unless the contrary is proved;[45] (i) The finding that the spouses acquired their real and personal properties while they were living together;[46]

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(j) The list of properties which Rizal Commercial Banking Corporation (RCBC) foreclosed;[47] (k) The list of the remaining properties of the couple which must be dissolved and liquidated and the fact that respondent Rita was the one who took charge of the administration of these properties;[48] (l) The holding that the conjugal partnership shall be liable to matters included under Article 121 of the Family Code and the conjugal liabilities totaling P503,862.10 shall be charged to the income generated by these properties;[49] (m) The fact that the trial court had no way of knowing whether the petitioner had separate properties which can satisfy his share for the support of the family;[50] (n) The holding that the applicable law in this case is Article 129(7);[51] (o) The ruling that the remaining properties not subject to any encumbrance shall therefore be divided equally between the petitioner and the respondent without prejudice to the children's legitime;[52] (p) The holding that the petitioner's share of the net profits earned by the conjugal partnership is forfeited in favor of the common children;[53] and (q) The order to the petitioner to reimburse the respondents the sum of P19,000.00 as attorney's fees and litigation expenses of P5,000.00.[54] After discussing lengthily the immutability of the Decision dated October 10, 2005, we will discuss the following issues for the enlightenment of the parties and the public at large. Article 129 of the Family Code applies to the present case since the parties' property relation is governed by the system of relative community or conjugal partnership of gains. The petitioner claims that the court a quo is wrong when it applied Article 129 of the Family Code, instead of Article 102. He confusingly argues that Article 102 applies because there is no other provision under the Family Code which defines net profits earned subject of forfeiture as a result of legal separation. Offhand, the trial court's Decision dated October 10, 2005 held that Article 129(7) of the Family Code applies in this case. We agree with the trial court's holding.

First, let us determine what governs the couple's property relation. From the record, we can deduce that the petitioner and the respondent tied the marital knot on January 6, 1977. Since at the time of the exchange of marital vows, the operative law was the Civil Code of the Philippines (R.A. No. 386) and since they did not agree on a marriage settlement, the property relations between the petitioner and the respondent is the system of relative community or conjugal partnership of gains.[55] Article 119 of the Civil Code provides: Art. 119. The future spouses may in the marriage settlements agree upon absolute or relative community of property, or upon complete separation of property, or upon any other regime. In the absence of marriage settlements, or when the same are void, the system of relative community or conjugal partnership of gains as established in this Code, shall govern the property relations between husband and wife. Thus, from the foregoing facts and law, it is clear that what governs the property relations of the petitioner and of the respondent is conjugal partnership of gains. And under this property relation, the husband and the wife place in a common fund the fruits of their separate property and the income from their work or industry.[56] The husband and wife also own in common all the property of the conjugal partnership of gains.[57] Second, since at the time of the dissolution of the petitioner and the respondent's marriage the operative law is already the Family Code, the same applies in the instant case and the applicable law in so far as the liquidation of the conjugal partnership assets and liabilities is concerned is Article 129 of the Family Code in relation to Article 63(2) of the Family Code. The latter provision is applicable because according to Article 256 of the Family Code [t]his Code shall have retroactive effect insofar as it does not prejudice or impair vested or acquired rights in accordance with the Civil Code or other law.[58] Now, the petitioner asks: Was his vested right over half of the common properties of the conjugal partnership violated when the trial court forfeited them in favor of his children pursuant to Articles 63(2) and 129 of the Family Code? We respond in the negative. Indeed, the petitioner claims that his vested rights have been impaired, arguing: As earlier adverted to, the petitioner acquired vested rights over half of the conjugal properties, the same being owned in common by the spouses. If the provisions of the Family Code are to be given retroactive application to the point of authorizing the forfeiture of the petitioner's share in the net remainder of the conjugal partnership properties, the same impairs his rights acquired prior to the effectivity of the Family Code.[59] In other words, the petitioner is saying that

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since the property relations between the spouses is governed by the regime of Conjugal Partnership of Gains under the Civil Code, the petitioner acquired vested rights over half of the properties of the Conjugal Partnership of Gains, pursuant to Article 143 of the Civil Code, which provides: All property of the conjugal partnership of gains is owned in common by the husband and wife.[60] Thus, since he is one of the owners of the properties covered by the conjugal partnership of gains, he has a vested right over half of the said properties, even after the promulgation of the Family Code; and he insisted that no provision under the Family Code may deprive him of this vested right by virtue of Article 256 of the Family Code which prohibits retroactive application of the Family Code when it will prejudice a person's vested right. However, the petitioner's claim of vested right is not one which is written on stone. In Go, Jr. v. Court of Appeals,[61] we define and explained vested right in the following manner: A vested right is one whose existence, effectivity and extent do not depend upon events foreign to the will of the holder, or to the exercise of which no obstacle exists, and which is immediate and perfect in itself and not dependent upon a contingency. The term vested right expresses the concept of present fixed interest which, in right reason and natural justice, should be protected against arbitrary State action, or an innately just and imperative right which enlightened free society, sensitive to inherent and irrefragable individual rights, cannot deny. To be vested, a right must have become a titlelegal or equitableto the present or future enjoyment of property.[62] (Citations omitted) In our en banc Resolution dated October 18, 2005 for ABAKADA Guro Party List Officer Samson S. Alcantara, et al. v. The Hon. Executive Secretary Eduardo R. Ermita,[63] we also explained: The concept of vested right is a consequence of the constitutional guaranty of due process that expresses a present fixed interest which in right reason and natural justice is protected against arbitrary state action; it includes not only legal or equitable title to the enforcement of a demand but also exemptions from new obligations created after the right has become vested. Rights are considered vested when the right to enjoyment is a present interest, absolute, unconditional, and perfect or fixed and irrefutable.[64] (Emphasis and underscoring supplied) From the foregoing, it is clear that while one may not be deprived of his vested right, he may lose the same if there is due process and such deprivation is founded in law and jurisprudence.

In the present case, the petitioner was accorded his right to due process. First, he was well-aware that the respondent prayed in her complaint that all of the conjugal properties be awarded to her.[65] In fact, in his Answer, the petitioner prayed that the trial court divide the community assets between the petitioner and the respondent as circumstances and evidence warrant after the accounting and inventory of all the community properties of the parties.[66] Second, when the Decision dated October 10, 2005 was promulgated, the petitioner never questioned the trial court's ruling forfeiting what the trial court termed as net profits, pursuant to Article 129(7) of the Family Code.[67] Thus, the petitioner cannot claim being deprived of his right to due process. Furthermore, we take note that the alleged deprivation of the petitioner's vested right is one founded, not only in the provisions of the Family Code, but in Article 176 of the Civil Code. This provision is like Articles 63 and 129 of the Family Code on the forfeiture of the guilty spouse's share in the conjugal partnership profits. The said provision says: Art. 176. In case of legal separation, the guilty spouse shall forfeit his or her share of the conjugal partnership profits, which shall be awarded to the children of both, and the children of the guilty spouse had by a prior marriage. However, if the conjugal partnership property came mostly or entirely from the work or industry, or from the wages and salaries, or from the fruits of the separate property of the guilty spouse, this forfeiture shall not apply. In case there are no children, the innocent spouse shall be entitled to all the net profits. From the foregoing, the petitioner's claim of a vested right has no basis considering that even under Article 176 of the Civil Code, his share of the conjugal partnership profits may be forfeited if he is the guilty party in a legal separation case. Thus, after trial and after the petitioner was given the chance to present his evidence, the petitioner's vested right claim may in fact be set aside under the Civil Code since the trial court found him the guilty party. More, in Abalos v. Dr. Macatangay, Jr.,[68] we reiterated our long-standing ruling that: [P]rior to the liquidation of the conjugal partnership, the interest of each spouse in the conjugal assets is inchoate, a mere expectancy, which constitutes neither a legal nor an equitable estate, and does not ripen into title until it appears that there are assets in the community as a result of the liquidation and settlement. The interest of each spouse is limited to the net remainder or remanente liquido (haber ganancial) resulting from the liquidation of the affairs of the partnership after its dissolution. Thus, the right of the husband or wife to one-half of the conjugal assets does not vest until the dissolution and liquidation of the conjugal

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partnership, or after dissolution of the marriage, when it is finally determined that, after settlement of conjugal obligations, there are net assets left which can be divided between the spouses or their respective heirs.[69] (Citations omitted) Finally, as earlier discussed, the trial court has already decided in its Decision dated October 10, 2005 that the applicable law in this case is Article 129(7) of the Family Code.[70] The petitioner did not file a motion for reconsideration nor a notice of appeal. Thus, the petitioner is now precluded from questioning the trial court's decision since it has become final and executory. The doctrine of immutability and unalterability of a final judgment prevents us from disturbing the Decision dated October 10, 2005 because final and executory decisions can no longer be reviewed nor reversed by this Court.[71] From the above discussions, Article 129 of the Family Code clearly applies to the present case since the parties' property relation is governed by the system of relative community or conjugal partnership of gains and since the trial court's Decision has attained finality and immutability. The net profits of the conjugal partnership of gains are all the fruits of the separate properties of the spouses and the products of their labor and industry. The petitioner inquires from us the meaning of net profits earned by the conjugal partnership for purposes of effecting the forfeiture authorized under Article 63 of the Family Code. He insists that since there is no other provision under the Family Code, which defines net profits earned subject of forfeiture as a result of legal separation, then Article 102 of the Family Code applies. What does Article 102 of the Family Code say? Is the computation of net profits earned in the conjugal partnership of gains the same with the computation of net profits earned in the absolute community? Now, we clarify. First and foremost, we must distinguish between the applicable law as to the property relations between the parties and the applicable law as to the definition of net profits. As earlier discussed, Article 129 of the Family Code applies as to the property relations of the parties. In other words, the computation and the succession of events will follow the provisions under Article 129 of the said Code. Moreover, as to the definition of net profits, we cannot but refer to Article 102(4) of the Family Code, since it expressly provides that for purposes of computing the net profits subject to forfeiture under Article 43, No. (2) and Article 63, No. (2), Article 102(4) applies. In this provision, net profits shall be the increase in value between the market value of the community property at the time of the celebration of the marriage and the market value at the time of its

dissolution.[72] Thus, without any iota of doubt, Article 102(4) applies to both the dissolution of the absolute community regime under Article 102 of the Family Code, and to the dissolution of the conjugal partnership regime under Article 129 of the Family Code. Where lies the difference? As earlier shown, the difference lies in the processes used under the dissolution of the absolute community regime under Article 102 of the Family Code, and in the processes used under the dissolution of the conjugal partnership regime under Article 129 of the Family Code. Let us now discuss the difference in the processes between the absolute community regime and the conjugal partnership regime. On Absolute Community Regime: When a couple enters into a regime of absolute community, the husband and the wife becomes joint owners of all the properties of the marriage. Whatever property each spouse brings into the marriage, and those acquired during the marriage (except those excluded under Article 92 of the Family Code) form the common mass of the couple's properties. And when the couple's marriage or community is dissolved, that common mass is divided between the spouses, or their respective heirs, equally or in the proportion the parties have established, irrespective of the value each one may have originally owned.[73] Under Article 102 of the Family Code, upon dissolution of marriage, an inventory is prepared, listing separately all the properties of the absolute community and the exclusive properties of each; then the debts and obligations of the absolute community are paid out of the absolute community's assets and if the community's properties are insufficient, the separate properties of each of the couple will be solidarily liable for the unpaid balance. Whatever is left of the separate properties will be delivered to each of them. The net remainder of the absolute community is its net assets, which shall be divided between the husband and the wife; and for purposes of computing the net profits subject to forfeiture, said profits shall be the increase in value between the market value of the community property at the time of the celebration of the marriage and the market value at the time of its dissolution.[74] Applying Article 102 of the Family Code, the net profits requires that we first find the market value of the properties at the time of the community's dissolution. From the totality of the market value of all the properties, we subtract the debts and obligations of the absolute community and this result to the net assets or net remainder of the properties of the absolute community, from which we deduct the market value of the properties at the time of marriage, which then results to the net profits.[75]

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Granting without admitting that Article 102 applies to the instant case, let us see what will happen if we apply Article 102: (a) According to the trial court's finding of facts, both husband and wife have no separate properties, thus, the remaining properties in the list above are all part of the absolute community. And its market value at the time of the dissolution of the absolute community constitutes the market value at dissolution. (b) Thus, when the petitioner and the respondent finally were legally separated, all the properties which remained will be liable for the debts and obligations of the community. Such debts and obligations will be subtracted from the market value at dissolution. (c) What remains after the debts and obligations have been paid from the total assets of the absolute community constitutes the net remainder or net asset. And from such net asset/remainder of the petitioner and respondent's remaining properties, the market value at the time of marriage will be subtracted and the resulting totality constitutes the net profits. (d) Since both husband and wife have no separate properties, and nothing would be returned to each of them, what will be divided equally between them is simply the net profits. However, in the Decision dated October 10, 2005, the trial court forfeited the half-share of the petitioner in favor of his children. Thus, if we use Article 102 in the instant case (which should not be the case), nothing is left to the petitioner since both parties entered into their marriage without bringing with them any property. On Conjugal Partnership Regime: Before we go into our disquisition on the Conjugal Partnership Regime, we make it clear that Article 102(4) of the Family Code applies in the instant case for purposes only of defining net profit. As earlier explained, the definition of net profits in Article 102(4) of the Family Code applies to both the absolute community regime and conjugal partnership regime as provided for under Article 63, No. (2) of the Family Code, relative to the provisions on Legal Separation. Now, when a couple enters into a regime of conjugal partnership of gains under Article 142 of the Civil Code, the husband and the wife place in common fund the fruits of their separate property and income from their work or industry, and divide equally, upon the dissolution of the marriage or of the partnership, the net gains or benefits obtained indiscriminately by either spouse during the marriage.[76] From the foregoing provision, each of the couple has his and her own property and debts. The law does not intend to effect a mixture or merger of

those debts or properties between the spouses. Rather, it establishes a complete separation of capitals.[77] Considering that the couple's marriage has been dissolved under the Family Code, Article 129 of the same Code applies in the liquidation of the couple's properties in the event that the conjugal partnership of gains is dissolved, to wit: Art. 129. Upon the dissolution of the conjugal partnership regime, the following procedure shall apply: (1) An inventory shall be prepared, listing separately all the properties of the conjugal partnership and the exclusive properties of each spouse. (2) Amounts advanced by the conjugal partnership in payment of personal debts and obligations of either spouse shall be credited to the conjugal partnership as an asset thereof. (3) Each spouse shall be reimbursed for the use of his or her exclusive funds in the acquisition of property or for the value of his or her exclusive property, the ownership of which has been vested by law in the conjugal partnership. (4) The debts and obligations of the conjugal partnership shall be paid out of the conjugal assets. In case of insufficiency of said assets, the spouses shall be solidarily liable for the unpaid balance with their separate properties, in accordance with the provisions of paragraph (2) of Article 121.(5) Whatever remains of the exclusive properties of the spouses shall thereafter be delivered to each of them. (6) Unless the owner had been indemnified from whatever source, the loss or deterioration of movables used for the benefit of the family, belonging to either spouse, even due to fortuitous event, shall be paid to said spouse from the conjugal funds, if any. (7) The net remainder of the conjugal partnership properties shall constitute the profits, which shall be divided equally between husband and wife, unless a different proportion or division was agreed upon in the marriage settlements or unless there has been a voluntary waiver or forfeiture of such share as provided in this Code. (8) The presumptive legitimes of the common children shall be delivered upon the partition in accordance with Article 51. (9) In the partition of the properties, the conjugal dwelling and the lot on which it is situated shall, unless otherwise agreed upon by the parties, be adjudicated to the spouse with whom the majority of the common children choose to remain.

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Children below the age of seven years are deemed to have chosen the mother, unless the court has decided otherwise. In case there is no such majority, the court shall decide, taking into consideration the best interests of said children. In the normal course of events, the following are the steps in the liquidation of the properties of the spouses: (a) An inventory of all the actual properties shall be made, separately listing the couple's conjugal properties and their separate properties.[78] In the instant case, the trial court found that the couple has no separate properties when they married.[79] Rather, the trial court identified the following conjugal properties, to wit: 1. coffee mill in Balongagan, Las Nieves, Agusan del Norte; 2. coffee mill in Durian, Las Nieves, Agusan del Norte; 3. corn mill in Casiklan, Las Nieves, Agusan del Norte; 4. coffee mill in Esperanza, Agusan del Sur; 5. a parcel of land with an area of 1,200 square meters located in Tungao, Butuan City; 6. a parcel of agricultural land with an area of 5 hectares located in Manila de Bugabos, Butuan City; 7. a parcel of land with an area of 84 square meters located in Tungao, Butuan City; 8. Bashier Bon Factory located in Tungao, Butuan City.[80] (b) Ordinarily, the benefit received by a spouse from the conjugal partnership during the marriage is returned in equal amount to the assets of the conjugal partnership;[81] and if the community is enriched at the expense of the separate properties of either spouse, a restitution of the value of such properties to their respective owners shall be made.[82] (c) Subsequently, the couple's conjugal partnership shall pay the debts of the conjugal partnership; while the debts and obligation of each of the spouses shall be paid from their respective separate properties. But if the conjugal partnership is not sufficient to pay all its debts and obligations, the spouses with their separate properties shall be solidarily liable.[83]

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

In the discussions above, we have seen that in both instances, the petitioner is not entitled to any property at all. Thus, we cannot but uphold the Decision dated October 10, 2005 of the trial court. However, we must clarify, as we already did above, the Order dated January 8, 2007. WHEREFORE, the Decision dated October 10, 2005 of the Regional Trial Court, Branch 1 of Butuan City is AFFIRMED. Acting on the Motion for Clarification dated July 7, 2006 in the Regional Trial Court, the Order dated January 8, 2007 of the Regional Trial Court is hereby CLARIFIED in accordance with the above discussions.SO ORDERED.

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Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 163744 February 29, 2008

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

D E C I S I O N

VELASCO, JR., J.:

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

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

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

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

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

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

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

The RTC Declared the REM Invalid

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

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

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

1. PhP100,000.00 by way of moral damages;

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

3. The costs.

SO ORDERED.5

Even as it declared the invalidity of the mortgage, the trial court found the said lot to be conjugal, the same having been acquired during the existence of the marriage of Nicholson and Florencia. In so ruling, the RTC invoked Art. 116 of the Family Code, providing that "all property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in

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the name of one or both spouses, is presumed to be conjugal unless the contrary is proved." To the trial court, Metrobank had not overcome the presumptive conjugal nature of the lot. And being conjugal, the RTC concluded that the disputed property may not be validly encumbered by Florencia without Nicholson’s consent.

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

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

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

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

The CA Affirmed with Modification the RTC’s Decision

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

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

SO ORDERED.6

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

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husband’s decision shall prevail, subject to recourse to the court by the wife for proper remedy x x x.

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

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

Metrobank moved but was denied reconsideration by the CA.

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

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

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

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

Our Ruling

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

The Disputed Property is Conjugal

It is Metrobank’s threshold posture that Art. 160 of the Civil Code providing that "[a]ll property of the marriage is presumed to belong to the conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife,"

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applies. To Metrobank, Art. 116 of the Family Code could not be of governing application inasmuch as Nicholson and Florencia contracted marriage before the effectivity of the Family Code on August 3, 1988. Citing Manongsong v. Estimo,8 Metrobank asserts that the presumption of conjugal ownership under Art. 160 of the Civil Code applies when there is proof that the property was acquired during the marriage. Metrobank adds, however, that for the presumption of conjugal ownership to operate, evidence must be adduced to prove that not only was the property acquired during the marriage but that conjugal funds were used for the acquisition, a burden Nicholson allegedly failed to discharge.

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

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

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

We find for Nicholson.

First, while Metrobank is correct in saying that Art. 160 of the Civil Code, not Art. 116 of the Family Code, is the applicable legal provision since the property was acquired prior to the enactment of the Family Code, it errs in its theory that, before conjugal ownership could be legally presumed, there must be a showing that the property was acquired during marriage using conjugal funds. Contrary to Metrobank’s submission, the Court did not, in Manongsong,14 add the matter

of the use of conjugal funds as an essential requirement for the presumption of conjugal ownership to arise. Nicholson is correct in pointing out that only proof of acquisition during the marriage is needed to raise the presumption that the property is conjugal. Indeed, if proof on the use of conjugal is still required as a necessary condition before the presumption can arise, then the legal presumption set forth in the law would veritably be a superfluity. As we stressed in Castro v. Miat:

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

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

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

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

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

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

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

x x x x

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

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

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

We again find for Nicholson.

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

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

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

Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect

to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership. (Emphasis supplied.)

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

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

Upon the foregoing perspective, Metrobank’s right, as mortgagee and as the successful bidder at the auction of the lot, is confined only to the 1/2 undivided portion thereof heretofore pertaining in ownership to Florencia. The other undivided half belongs to Nicholson. As owner pro indiviso of a portion of the lot in question, Metrobank may ask for the partition of the lot and its property rights "shall be limited to the portion which may be allotted to [the bank] in the division upon the termination of the co-ownership."18 This disposition is in line with the well-established principle that the binding force of a contract must be recognized as far as it is legally possible to do so––quando res non valet ut ago, valeat quantum valere potest.19

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

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But as found by the CA, however, Metrobank’s failure to comply with the due diligence requirement was not the result of a dishonest purpose, some moral obliquity or breach of a known duty for some interest or ill-will that partakes of fraud that would justify damages.

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

As modified, the Decision of the RTC shall read:

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

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

No pronouncement as to costs.

SO ORDERED.

FIRST DIVISION[G.R. No. 122749. July 31, 1996]

ANTONIO A. S. VALDES, petitioner, vs. REGIONAL TRIAL COURT, BRANCH 102, QUEZON CITY, and CONSUELO M. GOMEZ-VALDES, respondents.D E C I S I O NVITUG, J.:

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

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

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

"WHEREFORE, judgment is hereby rendered as follows:

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

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

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

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

"(3) The petitioner and respondent are directed to start proceedings on the liquidation of their common properties as defined by Article 147 of the Family

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Code, and to comply with the provisions of Articles 50, 51 and 52 of the same code, within thirty (30) days from notice of this decision.

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

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

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

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

"In the liquidation and partition of the properties owned in common by the plaintiff and defendant, the provisions on co-ownership found in the Civil Code shall apply."[3] (Italics supplied)

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

"Considering that this Court has already declared the marriage between petitioner and respondent as null and void ab initio, pursuant to Art. 147, the property regime of petitioner and respondent shall be governed by the rules on co-ownership.

"The provisions of Articles 102 and 129 of the Family Code finds no application since Article 102 refers to the procedure for the liquidation of the conjugal partnership property and Article 129 refers to the procedure for the liquidation of the absolute community of property."[4]

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

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

"I

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

"II

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

"III

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

"IV

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

The trial court correctly applied the law. In a void marriage, regardless of the cause thereof, the property relations of the parties during the period of cohabitation is governed by the provisions of Article 147 or Article 148, such as the case may be, of the Family Code. Article 147 is a remake of Article 144 of the Civil Code as interpreted and so applied in previous cases;[6] it provides:

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

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

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

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

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

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

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

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

(b) In the case of a void marriage, any party in bad faith shall forfeit his or her share in the co-ownership in favor of their common children; in default thereof or waiver by any or all of the common children, each vacant share shall belong to the respective surviving descendants, or still in default thereof, to the innocent party. The forfeiture shall take place upon the termination of the cohabitation[9] or declaration of nullity of the marriage.[10]

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

In deciding to take further cognizance of the issue on the settlement of the parties' common property, the trial court acted neither imprudently nor precipitately; a court which has jurisdiction to declare the marriage a nullity must be deemed likewise clothed with authority to resolve incidental and consequential matters. Nor did it commit a reversible error in ruling that petitioner and private respondent own the "family home" and all their common property in equal shares, as well as in concluding that, in the liquidation and partition of the property owned in common by them, the provisions on co-ownership under the Civil Code, not Articles 50, 51 and 52, in relation to Articles 102 and 129,[12] of the Family Code, should aptly prevail. The rules set up to govern the liquidation of either the absolute community or the conjugal partnership of gains, the property regimes recognized for valid and voidable marriages (in the latter case until the contract is annulled ),are irrelevant to the liquidation of the co-ownership that exists between common-law spouses. The first paragraph of Article 50 of the Family Code, applying paragraphs (2 ),(3 ),(4) and (5) of Article 43,[13] relates only, by its explicit terms, to voidable marriages and, exceptionally, to void marriages under Article 40[14] of the Code, i.e., the declaration of nullity of a subsequent marriage contracted by a spouse of a prior void marriage before the latter is judicially declared void. The latter is a special rule that somehow recognizes the philosophy and an old doctrine that void marriages are inexistent from the very beginning and no judicial decree is necessary to establish their nullity. In now requiring for purposes of remarriage, the declaration of nullity by final judgment of the previously contracted void marriage, the present law aims to do away with any continuing uncertainty on the status of the second marriage. It is not then illogical for the provisions of Article 43, in relation to Articles 41[15] and 42,[16] of the Family Code, on the effects of the termination of a subsequent marriage contracted during the subsistence of a previous marriage to be made applicable pro hac vice. In all other cases, it is not to be assumed that the law has also meant to have coincident property relations, on the one hand, between spouses in valid and voidable marriages (before annulment) and, on the other, between common-law spouses or spouses of void marriages, leaving to ordain, in the latter case, the ordinary rules on co-ownership subject to the provision of Article 147 and Article 148 of the Family Code. It must be stressed, nevertheless, even as it may

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merely state the obvious, that the provisions of the Family Code on the "family home," i.e., the provisions found in Title V, Chapter 2, of the Family Code, remain in force and effect regardless of the property regime of the spouses.

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

SO ORDERED.

SECOND DIVISION

ALAIN M. DIO , G.R. No. 178044

Petitioner,

Present:

CARPIO, J., Chairperson,

- versus - NACHURA,

PERALTA,

ABAD, and

MENDOZA, JJ.

MA. CARIDAD L. DIO, Promulgated:

Respondent. January 19, 2011

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - xD E C I S I O N

CARPIO, J.:

The Case

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

The Antecedent Facts

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

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On 30 May 2001, petitioner filed an action for Declaration of Nullity of Marriage against respondent, citing psychological incapacity under Article 36 of the Family Code. Petitioner alleged that respondent failed in her marital obligation to give love and support to him, and had abandoned her responsibility to the family, choosing instead to go on shopping sprees and gallivanting with her friends that depleted the family assets. Petitioner further alleged that respondent was not faithful, and would at times become violent and hurt him.

Extrajudicial service of summons was effected upon respondent who, at the time of the filing of the petition, was already living in the United States of America. Despite receipt of the summons, respondent did not file an answer to the petition within the reglementary period. Petitioner later learned that respondent filed a petition for divorce/dissolution of her marriage with petitioner, which was granted by the Superior Court of California on 25 May 2001. Petitioner also learned that on 5 October 2001, respondent married a certain Manuel V. Alcantara.

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

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

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

The Decision of the Trial Court

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

The dispositive portion of the trial courts decision reads:

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

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

2. Dissolving the regime of absolute community of property.

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

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

SO ORDERED.4

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

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

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

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

2) Dissolving the regime of absolute community of property.

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

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

Hence, the petition before this Court.

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The Issue

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

The Ruling of this Court

The petition has merit.

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

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

Article 147 of the Family Code provides:

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

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

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

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

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

1. The man and the woman must be capacitated to marry each other;2. They live exclusively with each other as husband and wife; and3. Their union is without the benefit of marriage, or their marriage is void.

All these elements are present in this case and there is no question that Article 147 of the Family Code applies to the property relations between petitioner and respondent. We agree with petitioner that the trial court erred in ordering that a decree of absolute nullity of marriage shall be issued only after liquidation, partition and distribution of the parties properties under Article 147 of the Family Code. The ruling has no basis because Section 19(1) of the Rule does not apply to cases governed under Articles 147 and 148 of the Family Code. Section 19(1) of the Rule provides:

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

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

Article 50. The effects provided for in paragraphs (2), (3), (4) and (5) of Article 43 and in Article 44 shall also apply in proper cases to marriages which are declared void ab initio or annulled by final judgment under Articles 40 and 45.

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The final judgment in such cases shall provide for the liquidation, partition and distribution of the properties of the spouses, the custody and support of the common children, and the delivery of their presumptive legitimes, unless such matters had been adjudicated in previous judicial proceedings.

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

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

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

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

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

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

Article 40 of the Family Code contemplates a situation where a second or bigamous marriage was contracted. Under Article 40, [t]he absolute nullity of a previous marriage may be invoked for purposes of remarriage on the basis solely of a final judgment declaring such previous marriage void. Thus we ruled:

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

Article 45 of the Family Code, on the other hand, refers to voidable marriages, meaning, marriages which are valid until they are set aside by final judgment of a competent court in an action for annulment.12 In both instances under Articles

40 and 45, the marriages are governed either by absolute community of property13 or conjugal partnership of gains14 unless the parties agree to a complete separation of property in a marriage settlement entered into before the marriage. Since the property relations of the parties is governed by absolute community of property or conjugal partnership of gains, there is a need to liquidate, partition and distribute the properties before a decree of annulment could be issued. That is not the case for annulment of marriage under Article 36 of the Family Code because the marriage is governed by the ordinary rules on co-ownership.

In this case, petitioners marriage to respondent was declared void under Article 3615 of the Family Code and not under Article 40 or 45. Thus, what governs the liquidation of properties owned in common by petitioner and respondent are the rules on co-ownership. In Valdes, the Court ruled that the property relations of parties in a void marriage during the period of cohabitation is governed either by Article 147 or Article 148 of the Family Code.16 The rules on co-ownership apply and the properties of the spouses should be liquidated in accordance with the Civil Code provisions on co-ownership. Under Article 496 of the Civil Code, [p]artition may be made by agreement between the parties or by judicial proceedings. x x x. It is not necessary to liquidate the properties of the spouses in the same proceeding for declaration of nullity of marriage. WHEREFORE, we AFFIRM the Decision of the trial court with the MODIFICATION that the decree of absolute nullity of the marriage shall be issued upon finality of the trial courts decision without waiting for the liquidation, partition, and distribution of the parties properties under Article 147 of the Family Code.

SO ORDERED.

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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 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.

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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 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.19 The primary purpose of this constitutional provision is the conservation of the national patrimony.20 Our fundamental law cannot be any clearer. The

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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 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;27 that 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.

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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

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

THIRD DIVISION

G.R. No. 164201 December 10, 2012

EFREN PANA, Petitioner, vs.HEIRS OF JOSE JUANITE, SR. and JOSE JUANITE, JR., Respondents.

D E C I S I O N

ABAD, J.:

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

The Facts and the Case

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

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

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

Upon motion for execution by the heirs of the deceased, on March 12, 2002 the RTC ordered the issuance of the writ,5 resulting in the levy of real properties

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registered in the names of Efren and Melecia.6 Subsequently, a notice of levy7 and a notice of sale on execution8 were issued.

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

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

The Issue Presented

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

Ruling of the Court

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

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

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

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

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

The RTC applied the same reasoning as above.16 Efren and Melecia’s property relation was admittedly conjugal under the Civil Code but, since the transitory provision of the Family Code gave its provisions retroactive effect if no vested or acquired rights are impaired, that property relation between the couple was changed when the Family Code took effect in 1988. The latter code now prescribes in Article 75 absolute community of property for all marriages unless the parties entered into a prenuptial agreement. As it happens, Efren and Melecia had no prenuptial agreement. The CA agreed with this position.17

Both the RTC and the CA are in error on this point. While it is true that the personal stakes of each spouse in their conjugal assets are inchoate or unclear prior to the liquidation of the conjugal partnership of gains and, therefore, none of them can be said to have acquired vested rights in specific assets, it is evident that Article 256 of the Family Code does not intend to reach back and automatically convert into absolute community of property relation all conjugal partnerships of gains that existed before 1988 excepting only those with prenuptial agreements.

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

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

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

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

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

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

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

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

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

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

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

"x x x x

The provisions of this Chapter [on the Conjugal Partnership of Gains] shall also apply to conjugal partnerships of gains already established between spouses before the effectivity of this Code, without prejudice to vested rights already

acquired in accordance with the Civil Code or other laws, as provided in Article 256."23

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

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

Neither shall the fines and pecuniary indemnities imposed upon them be charged to the partnership.

However, the payment of personal debts contracted by either spouse before the marriage, that of fines and indemnities imposed upon them, as well as the support of illegitimate children of either spouse, may be enforced against the partnership assets after the responsibilities enumerated in the preceding Article have been covered, if the spouse who is bound should have no exclusive property or if it should be insufficient; but at the time of the liquidation of the partnership, such spouse shall be charged for what has been paid for the purpose above-mentioned.

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

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

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

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

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

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

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

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

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

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

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

If the conjugal partnership is insufficient to cover the foregoing liabilities, the spouses shall be solidarily liable for the unpaid balance with their separate properties.1âwphi1

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

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

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-68873 March 31, 1989

LUCILDA DAEL, EVERGISTO DAEL, DOMINGO DAEL, JR., CONRADO DAEL, FEDERICO DURANA, JR., FREDISVINDA DURANA, FLEURDELIZADA DURANA, FABIAN DURANA and FE PATRICIO DURANA, petitioners, vs.INTERMEDIATE APPELLATE COURT, CARMENCITA CABUTIHAN, NONILON CABUTIHAN, ROMULO CABUTIHAN, LERMO CABUTIHAN, and BIENVENIDO CABUTIHAN, respondents.

Ismael T. Porles for petitioners.

Primo L. Marquez for respondents.

Bienvenido C. Vera Cruz collaborating counsel for respondents.

Roman R. Ulendioro for respondent Administratrix Carmencita Cabutihan.

REGALADO, J.:

The reversal of the decision of the then Intermediate Appellate Court promulgated on February 29, 1984 in AC-G.R. CV No. 69711, 1 which affirmed in toto the decision, dated December 3, 1980, of the quondam Court of First Instance of Quezon, Branch II, in Special Proceeding No. 4374 thereof, 2 as well as the former's resolution of September 14, 1984 denying the motion for reconsideration of the oppositors-appellants therein, are the twin objectives of the present appeal by certiorari.

The assailed decision of the court a quo sets out the revelant background facts and the dramatis personae in this controversy, thus:

It is not disputed that Victorina Durana died intestate on August 1, 1977 in Manila; she was the wife of the deceased Cesario Cabutihan who died earlier on June 9, 1972; Cesario Cabutihan was first married to Bienvenida Durana in February, 1942; the latter died on May 2, 1957; it was less than a year

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thereafter or particularly on April 6, 1958 that Cesario Cabutihan married Victorina Durana, sister of his first wife, Bienvenida Durana.

The first marriage of Cesario Cabutihan produced the following legitimate children: Nonilon Carmencita, Romulo, Lermo and Bienvenido all surnamed Cabutihan and who are the intervenors in this case although Carmencita Cabutihan instituted the case as petitioner; the second marriage of Cesario Cabutihan with Victorina Durana did not produce any issue; however, the latter's heirs are the children of her two sisters and a brother namely: Bienvenida Durana, Soledad Durana and Federico Durana Sr.; the latter is the father of the oppositors, Federico, Jr., Flordelizada (sic), Fredizvinda, Fabian and Fe Patricio, all surnamed Durana; while Soledad Durana is the mother of the other oppsitors, Evaristo, Domingo Jr., Lucilda and Conrado, all surnamed Dael; the other heirs of Vitorina Durana are the petitioner herself and the intervenors who are all the children of Bienvenida Durana.

It is claimed by all the oppositors that they are entitled to 213 portion of the estate of Victorina Durana considering that their predecessors-in-interest are the brother and sister of Victorina Durana; while the remaining 1/3 portion should devolve to the petitioner and the intervenors who represent their mother Bienvenida Durana and the other sister of Victorina Durana.

There is, therefore, no dispute concerning the relationship of the petitioner, oppositors and the intervenors to the decedent Victorina Durana; there is neither any question concerning the right of all the parties in this case to inherit from the deceased Victorina Durana; 3

Likewise established is the fact that during the second marriage of Cesario and Victorina, they were engaged in a copra business and a public transportation business, with Victorina managing the former. After the demise of Cesario, Victorina and the private respondents entered into a extra-judicial settlement of his estate on December 30, 1973. Part of the properties adjudicated to Victorina include the copra business abovementioned, as well as some of the vehicles used in the transportation business. 4 Subsequently, however, the vehicles were transferred to the private respondents by virtue of a "deed of sale" dated July 24, 1978. 5

This case was commenced in the aforementioned Court of First Instance of Quezon by Carmencita Cabutihan, one of the private respondents herein, who filed a petition for the settlement of the intestate estate of Victorina Durana, wherein she also prayed for her appointment as administratrix. 6 Petitioners herein filed an opposition, asking that the letters of administration be issued instead to herein petitioner Lucilda Dael. 7 The other private respondents, on their motion, intervened in the case. 8

On December 22, 1977, Honesto Cabutihan, Democrito Cabutihan and David Cabutihan filed their claim against the estate for the payment of the harvest of their property which had been entrusted to Victorina Durana for purposes of her copra business but which obligation she failed to pay due to her untimely death. 9 Said claim, in the amount of P70,350.82, was approved by the probate court on December 2, 1980. 10

Meanwhile, the court below appointed Amado Zoleta as special administrator of the estate of the late Victorina Durana on May 24, 1978. 11 Said special administrator, upon order of the probate court, submitted an inventory of the properties of the estate on August 30, 1978, consisting of twenty (20) parcels of land valued at P69,340.00, cash in bank amounting to P140,079.41, cattle and livestock valued at P7,200.00, furniture valued at P5,120.00, fixtures in the amount of P1,300.00, equipment worth P11,863.00, and other miscellaneous items valued at P3,038.00. The total value of the properties included in this inventory is P237,940.41. 12

On January 16, 1979, a "Supplementary Inventory" was filed by the special administrator covering other real properties of the estate of Victorina, consisting of the undivided shares in the inheritance of Cesario Cabutihan from his parents, Bartolome Cabutihan and Natividad Daelo. The total value of the properties listed in the supplementary inventory is P4,700.82. 13 It may be mentioned that the properties that were adjudicated to Victorina in the extrajudicial settlement of the estate of Cesario were included in the inventory submitted by the special administrator. 14

Private respondents moved for the disapproval of said inventories claiming that the properties listed therein were either acquired during the first marriage of Cesario Cabutihan or were merely the products or fruits of the properties of said first union or otherwise acquired through the funds thereof. 15

In due course, the trial court rendered a decision holding that Victorina Durana had no paraphernal properties brought or contributed to her marriage with Cesario Cabutihan; that the copra business was formed in 1949 during the first marriage; that Victorina used the same facilities, credit and capital in managing the business; and that the main source of income not only of Cesario Cabutihan and also of Victorina during their respective lifetimes was the copra business. 16

On such factual findings, the lower court came up with the following conclusions:

Not having any personal property which she brought to her marriage with Cesario Cabutihan and the copra business not being her own or of her conjugal partnership with her husband, the conclusion is inescapable; that all the

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properties listed in the inventories in her name or jointly with Cesario Cabutihan do not belong to her exclusively; these properties in Exhibits 'A- SPA' and 'B-SPA' are either the assets of Bienvenida Durana as her paraphernal property or as the conjugal partnership assets of spouses Cesario Cabutihan (sic) or the latter's capital inasmuch as the properties in the name of Victorina a Durana or those jointly with her husband were acquired or purchased out of the fruits or produce of the properties of Bienvenida Durana and/or Cesario Cabutihan or out of the income of the copra business of the first marriage which was merely managed and administered by Victorina Durana after the owners' deaths.

xxx xxx xxx

To determine, therefore, the extent of the estate of Victorina Durana from the list of properties, real and personal, enumerated in the Inventories (Exhibits 'A-SPA' and B-SPA') which erroneously include even the Estate of the First Marriage, the conjugal estate of Cesario Cabutihan and Bienvenida Durana must be settled or liquidated first; one-half of the conjugal estate shall be inherited by Cesario Cabutihan and his five (5) children, namely: Nonilon Carmencita, Romulo, Lermo and Bienvenido, all surnamed CABUTIHAN, share and share alike; the inheritance of Cesario Cabutihan in the Estate of Bienvenida Durana in addition to the other one (1/2) half which is his share in the conjugal partnership with his wife Bienvenida shall constitute Cesario's estate which shall be inherited by his heirs, namely: Victorina Durana, his second wife, and his legitimate children by his first wife, namely: Nonilon Carmencita, Romulo, Lermo and Bienvenido, all surnamed CABUTIHAN, share and share alike.

xxx xxx xxx

Hence, the extent of the Estate of Victorina Durana shall consist only of her share in the inheritance of the Estate of Cesario Cabutihan.

Unless any of the properties listed in Exhibits 'A-SPA' and B-SPA' exclusively belong to Bienvenida Durana, all of said properties shall be presumed to be the conjugal (sic) and/or the fruits and income of said partnership or of the copra business of said partnership; therefore, the properties in said inventories shall be computed, divided and partitioned as follows: five (5/12) twelve over the one (1/2) half thereof to be adjudicated to Nonilon Carmencita, Romulo, Lermo and Bienvenido, all surnamed CABUTIHAN as their shares in the inheritance of their mother; the one (1/6) sixth portion out of the one (1/2) half of said properties shall pertain to Cesario Cabutihan as his share in the inheritance of his first wife; this share and the remaining one (1/2) half of the properties in the Inventories which comprise his estate shall be inherited by his second wife Victorina Durana with (whom he had no child) and his five children by his first marriage, Nonilon Carmencita, Romulo, Lermo and Bienvenido, all surnamed CABUTIHAN, at the proportion of one (1/6) sixth each of the said properties

over the seven (7/12) twelfth thereof; therefore, one (1/6) sixth out of the said seven (7/12) twelfth of the said properties (Estate of Cesario) shall be the extent of the Estate of Victorina Durana which she inherited from her husband; this (1/6 of 7/12) portion shall be inherited by Durana's heirs; one (1/3) third thereof to be adjudicated to petitioner and the Intervenors and the remaining two (2/3) thirds thereof to the oppositors. 17

The probate court thereby disapproved both inventories and annulled the extrajudicial settlement and deed of sale (Exhibit 1 Dael and Exhibit 3-Dael) mentioned earlier. The latter two were annulled for being simulated or fictitious and for involving conjugal properties of the first marriage, including properties of Bienvenida, to which Victorina is not an heir. 18

As a consequence, petitioners appealed to the former Intermediate Appellate Court on December 8, 1980. 19 On the same day, respondent Carmencita Cabutihan filed a "motion for authority to withdraw funds" from the estate, in the amount of P90,000.00 to be partitioned among the heirs in accordance with the proportion provided for in the aforesaid decision of the probate court. 20 On December 11, 1980, this motion was granted, 21 despite opposition thereto. 22

Thereafter, on December 12, 1980, petitioners herein filed a motion asking the lower court to order the return of the amount of P70,350.82 allegedly paid to the claimants Democrito Honesto and David Cabutihan, submitting as proof a receipt allegedly signed on December 30, 1980 by Democrito Cabutihan in behalf of all said claimants and assisted by their counsel, Euclides A. Abcede.

On February 9, 1984, respondent court promulgated its decision which, as already stated, affirmed the decision of the lower court, hence this petition assigning four errors which we will resolve seriatim.

1. Petitioners submit that both the respondent and lower courts erred in concluding that the copra business, as well as the properties listed in the inventories as acquired during the second marriage, are assets of the conjugal partnership of the first marriage between Cesario and Bienvenida. They argued that to so hold would, in effect, maintain the theory that the marital community of proprietary interest continued to exist even after the Cesario-Bienvenida conjugal partnership had been dissolved by the death of Bienvenida.

It may be conceded that the factual findings of the trial court were based on substantial documentary and testimonial evidence and are entitled to the corresponding weight and respect.

Such established facts notwithstanding, We are not as equally disposed to yield assent to the conclusions drawn by both the court a quo and the respondent

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court which Would so simplistically adjudicate and consider the properties involved as belonging in their entirety to the first marriage.

When Bienvenida Durana died on May 2, 1957, the first conjugal partnership was automatically dissolved. 23 That conjugal partnership was then converted into an implied ordinary co-ownership. 24 It was also at this point in time that the inheritance was transmitted to the heirs of Bienvenida. 25 Thus, her heirs, Cesario, Nonilon Carmencita Romulo, Lermo and Bienvenido, acquired respective and definite rights over one-half (1/2) of the conjugal partnership property which pertained to Bienvinida. Consequently, whatever fruits or income may thereafter be derived from the properties, including the copra business, would no longer be conjugal but would belong in part to the heirs in proportion to their respective shares. The fruits and income of the other half of the property of the conjugal partnership would exclusively belong to Cesario.

The marriage of Cesario and Victorina on April 6, 1952 also produced the corresponding legal consequences. From that moment on, the fruits or income of the separate properties of the spouses would be conjugal, including those acquired through their industry. 26 Hence, the fruits and income of Cesario's share in the inheritance from Bienvenida and of his conjugal share in the property of the first conjugal partnership would form part of the conjugal partnership properties of the second marriage. The fruits and income derived or acquired through these last-mentioned properties would likewise be conjugal in nature.

It would have been ideal had there been a liquidation of the conjugal partnership properties of the first marriage between Cesario and Bienvenida. Unfortunately, We cannot determine from the records the amount of such properties at the time of Bienvenida's demise. There is a dearth of proof on this matter. What appears evident, however, is that, considering the continuity in the operation of the two businesses during the marital coverture between Cesario and Victorina which spanned a period of fourteen (14) years, and the fact that after Cesario's death Victorina still actively engaged in the same business until her own death five (5) years later, the properties enumerated in the aforesaid inventories submitted to the probate court could not all have been properties of the first marriage.

Inevitably, the problem is how to apportion the properties involved between the two conjugal partnerships. On this score, guidance should be sought from the provisions of the Civil Code to the effect that whenever the liquidation of the partnership of two or more marriages contracted by the same person should be carried out at the same time and there is no evidence to show the capital or the conjugal property belonging to each of the partnerships to be liquidated, the total mass of the partnership property shall be divided between the different

partnerships in proportion to the duration of each and to the property belonging to the respective spouses. 27

The first marriage existed for approximately fifteen (15) years (1942 to 1957), while the second marriage lasted for about fourteen (14) years (1958 to 1972). Applying the aforestated rule, the first conjugal partnership will be prorated a share of fifteen twenty-ninths (15/29) of the properties included in the inventory submitted on August 30, 1978, while the second conjugal partnership will get fourteen twenty-ninths (14/29) thereof. Not to be included, however, are the real properties listed in the supplementary inventory filed on January 16, 1979, because they definitely belong to the estate of Cesario as the latter's inheritance from his parents, Bartolome Cabutihan and Natividad Daelo.

One-half (1/2) of the properties that pertain to the first conjugal partnership belong to Cesario as his conjugal share therein, while the other half shall be considered as inherited by him and his five children as the heirs of Bienvenida.

The properties pertaining to the second partnership shall also be equally divided, one-half (1/2) to belong to Cesario and the other to Victorina as their respective shares in their conjugal partnership properties. The share of Cesario should then be divided among his heirs, namely, Victorina and his five (5) children.

To recapitulate, the estate of Victorina for distribution to her heirs shall consist of her one-half (1/2) share in the conjugal properties of the aforesaid second marriage and her one-sixth (1/6) share in the estate of Cesario as an heir.

2. Petitioners also question the approval of the claims of Democrito Honesto and David Cabutihan. Petitioners' effete opposition is anchored on their allegation that said claim "was approved primarily on the basis of the testimony of claimant Democrito Cabutihan" which, according to them, is inadmissible under the Dead Man's Statute or the survivorship disqualification rule. 28 While petitioners' arguments may have a juris tantum plausibility if considered alone, We see no reason to dwell on this issue. It would be pointless since, as correctly observed by the trial court, "even assuming the applicability of the dead man's rule concerning the testimony of Democrito Cabutihan, the testimony of Urbano Prado and Tirso Linosa are more than sufficient to establish the claim and to bolster the documentary evidence in support thereof as indicated on Exhibits 'B', 'B-1', to 'B-82-claim', 'C' and 'C-1' inclusive." 29

3. Also challenged by petitioners is the order of the court below, dated December 11, 1980, allowing the withdrawal of funds for distribution to the heirs as advance inheritance. Said order is, however, within the contemplation and authority of Rule 109, Section 2 whereof provides that "(n)otwithstanding a pending controversy or appeal in proceedings to settle the estate of a decedent,

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the court may, in its discretion and upon such terms as it may deem proper and just, permit that such part of the estate as may not be affected by the controversy or appeal be distributed among the heirs or legatees, upon compliance with the conditions set forth in Rule 90 of these rules'. Said Rule 90, on the other hand, provides in part that "(n)o distribution shall be allowed until the payment of the obligations above mentioned has been made or provided for, unless the distributees or any of them, give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs."

It is true that "partial distribution of the decedent's estate pending the final termination of the testate or intestate proceedings should as much as possible be discouraged by the courts and, unless in extreme cases, such form of advances of inheritance should not be countenanced. The reason for this strict rule is obvious courts should guard with utmost zeal and jealousy the estate of the decedent to the end that the creditors thereof be adequately protected and all the rightful heirs assured of their shares in the inheritance." 30

Nevertheless, after duly considering the foregoing rules, We sustain the validity of the questioned order. The respondent court correctly held than "(i)f oppositors would stand to share more in the inheritance than what was fixed for them in the appealed judgment, We believe the estate has sufficient assets to ensure an equitable distribution of the inheritance in accordance with law and final judgment in the proceedings." 31 Also, it does not appear that there are unpaid obligations, as contemplated in Rule 90, for which provisions should have been made or a bond required. It is clear that the provisions of the Rules of Court, as well as the jurisprudence thereon, were followed in this particular incident.

4. With respect to the propriety of the alleged payment of the claims of the Cabutihan brothers before the decision is this case became final and executory, We are not in a position to rule on such issue because this Court is not a trier of facts. Such issue requires the prior resolution of basic factual questions, that is, whether or not such payment had actually been made to the claimants and the circumstances under which the same was effected.

The probate court had not yet ruled on petitioners' "Motion to Order the Return of the Amount Paid for Claim", when the instant petition was filed. Based on the records of this appeal, the last action taken in the lower court was its order that the private respondents comment on said motion, but no response thereto or any subsequent development on this matter is reflected or reported. If the petitioners have sufficient basis to complain on this matter, the same should consequently be pursued and threshed out in the court below.

WHEREFORE, the decision of respondent court, which affirmed and adopted in toto the decision of the court a quo, is MODIFIED and judgment is hereby rendered as follows:

1. So much of the judgments of both lower courts as declare that all the properties listed in the two inventories, marked as Exhibits "A-SPA"and "B-SPA" in Special Proceeding No. 4374 of the court of origin, are conjugal partnership assets of the deceased spouses Cesario Cabutihan and Bienvenida Durana are hereby SET ASIDE;

2. The properties therein enumerated shall be divided in the following manner: (a) Seven-twelfths (7/12) of fifteen twenty-ninths (15/29), and one-half (1/2) of fourteen twenty-ninths (14/29), of the properties listed in the inventory dated August 30, 1978, as well as all the properties listed in the supplementary inventory dated January 16, 1979, shall constitute the estate of Cesario Cabutihan. This estate shall be divided equally among his six (6) heirs, namely, his second wife, Victorina, and his five (5) children, Nonilon Carmencita, Romulo, Lermo and Bienvenido, all surnamed Cabutihan; and (b) The remaining five-twelfths (5/12) of fifteen twenty-ninths (15/29) of the properties in said inventory of August 30, 1978 shall belong to the said five (5) children, share and share alike, as their respective participations in their mother's inheritance;

3. The estate of Victorina Durana, which shall be the subject of settlement and distribution in said Special Proceeding No. 4374, shall consist of one-half (1/2) of the other portion constituting fourteen twenty-ninths (14/29) of the properties in the inventory of August 30, 1978, which represents her share in the conjugal properties of the second marriage, and one-sixth (1/6) of the estate of Cesario Cabutihan as fixed herein, and said properties shall be divided among her heirs enumerated and in the proportion allotted by the probate court as qouted at the outset of this decision;

4. The other pronouncements in the dispositive portion of the appealed judgment of the court below and adopted by the respondent court, insofar as the are not inconsistent with the foregoing dispositions; the order of the said lower court, dated December 2, 1980, approving the claims of Honesto, Democrito and David Cabutihan; and its order of December 11, 1980 allowing the withdrawal of funds for distribution among the heirs are AFFIRMED; and

5. All other incidents not otherwise disposed of herein shall be pursued by the parties in and shall be resolved by the court a quo in accordance with the terms of this judgment.

SO ORDERED.

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