Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No.

132803 August 31, 1999

JESSIE V. PISUEA, petitioner, vs. HEIRS OF PETRA UNATING and AQUILINO VILLAR Represented by Salvador Upod and Dolores Bautista, respondents. PANGANIBAN, J.: Real property acquired during marriage is presumed to be conjugal. Such prima facie presumption, however, can be overturned by a cadastral courts' specific finding, which has long become final, that the lot in question was paraphernal in character. The title to the entire property shall pass by operation of law to the buyer once the seller acquires title over it by hereditary succession, even if at the time of the execution of the deed of sale, the seller owned only a portion of the property.

The Case
Before us is a Petition for Review on Certiorari seeking to set aside the February 26, 1997 Decision of the Court of Appeals1 (CA) in CA-GR CV No. 39955,2 as well as its February 12, 1998 Resolution denying reconsideration. The assailed Decision affirmed in toto the ruling3 of the Regional Trial Court (RTC) of Roxas City in Civil Case No. V-5462, which disposed as follows: IN VIEW OF THE FOREGOING CONSIDERATIONS, the court renders judgment: 1. Declaring the "Escritura de Venta Absoluta" by Felix Villar and Catalina Villar in favor of Agustin Navarra, defendant's predecessor-ininterest, as valid with respect to the one-half share of the whole Lot. No. 1201, Cadastral 228 of the Cadastral of Ivisan, Capiz, located at Barangay Cabugao, Municipality of Ivisan, Province of Capiz, which is registered in the name of Petra Unating married to Aquilino Villar under Original Certificate of Title No. RO-6316 (18422) while the other half belongs to the plaintiffs as Heirs of Aquilino Villar; 2. Dismissing the complaint for lack of merits; 3. Dismissing parties' claim for damages and attorney's fees. No costs.

The Facts
The present case is rooted in an action for recovery of (1) possession and ownership of a parcel of land, as well as (2) a sum of money and damages. Before the RTC of Roxas City on May 15, 1989, this case was originally filed against herein petitioner, Jessie Pisuea, by herein respondents, the heirs of Petra Unating and Aquilino Villar represented by Salvador Upod and Dolores Bautista.4 The CA adopted the trial court's summation of the facts as follows:5 The lot in dispute, known as Lot 1201, Cadastral 228 of the Cadastral of Ivisan, Capiz, located at Barangay Cabugao, Municipality of Ivisan, Province of Capiz, is a registered land in the name of Petra Unating married to Aquilino Villar under Original Certificate of Title No. 18422, containing an area of 83,536 square meters, more or less. Petra Unating died on October 1, 1948 while Aquilino Villar died on January 14, 1953. The spouses had two [legitimate] children, namely Felix Villar and Catalina Villar. Felix Villar died on October 24, 1962, while Catalina Villar died on February 21, 1967.1wphi1.nt For the purpose of this case, Felix Villar is represented by Dolores Villar Bautista, the eldest of his four children while Catalina Villar is represented by Salvador Villar Upod, the eldest of her three (3) children, all as plaintiffs [herein respondents]. Defendant [herein petitioner], Jessie Pisuea, is the son-in-law of Agustin Navarra who was once a [m]unicipal [m]ayor of the Municipality of Ivisan. Agustin Navarra died on October 30, 1958. The land in question was a subject of court litigations between Dolores Bautista and Salvador Upod on one hand, and defendant Jessie Pisuea on the other. Thus, when Salvador Upod filed a petition for reconstitution of its title in Reconstitution Case No. 1408 before Branch I, then Court of First Instance of Capiz, defendant Jessie Pisuea filed his opposition. Nevertheless, the title was reconstituted in the name of the registered owners pursuant to the resolution of the court dated August 6, 1980 and it now has a reconstituted title under OCT No. RO6316 (18422) in the name of the original registered owners.

Defendant Jessie Pisuea filed a petition for the surrender of withheld owner's duplicate certificate of title under Special Case No. 4610 against Salvador Upod, et. al. for [Quieting] of Title and Damages with Writ of Preliminary Prohibitory Injunction before this court then presided by Hon. Odon C. Yrad, Jr. who dismissed said complaint on August 27, 1984. Plaintiffs' evidence further show[s] that Salvador Upod and Dolores Bautista filed a complaint for ejectment with damages against defendant Jessie, Pisuea and Norberto Tugna before, the Municipal Court of Ivisan as Civil Case No. 94. xxx xxx xxx

Plaintiffs [respondents herein] contend that during the lifetime of the registered owners, Petra Unating and Aquilino Villar, they enjoyed the absolute ownership and possession of Lot No. 1201. However, sometime in 1950 (after the death of Petra Unating on October 1, 1948) Aquilino Villar entered into an oral partnership agreement for ten (10) years with Agustin Navarra involving the swampy portion of the lot in question consisting of around four (4) hectares. It was agreed that the area of around three (3) hectares shall further be developed into a fishpond while about one (1) hectare shall be converted into a fishpond with the investment capital of Agustin Navarra. Whatever excess there was in the capital so invested shall be used to make the fishpond productive. Parties agreed that the net income after deducting expenses shall be divided equally between Aquilino Villar and his co-heirs on one hand and Agustin Navarra on the other. The upland portion of the land was not included in the transaction, hence it remained in the possession of the plaintiffs. While alive, Agustin Navarra, who managed the partnership, religiously gave Aquilino Villar and his co-heirs their share. This arrangement continued until Aquilino Villar died on January 14, 1953. Thereafter, his share in the income of the partnership was delivered by Agustin Navarra to Felix Villar and Catalina Villar. Since Agustin Navarra died in 1958, Felix and Catalina Villar repossessed the land in question. They maintained their possession up to the time Felix and Catalina Villar died. Thereafter, the children of Felix and Catalina Villar continued the possession of their predecessor-in-interest until the defendant disturbed their possession sometime in 1974. However, in 1975, they regained physical possession of the disputed area. From 1975, there were intermittent disturbances and intrusions of their physical possession of the land in dispute by the defendant particularly the fishpond portion consisting of about four (4) hectares more or less which resulted [in] the filing of cases against one and the other as earlier stated. Sometime in 1982, the defendant in the company of several men including policemen, wrested physical possession from the plaintiffs which possession of the defendant continued up to the present. Hence, this complaint for its recovery particularly the fishpond portion. On the other hand, defendant counters that the whole land in dispute was sold by Felix Villar and Catalina Villar to Agustin Navarra on February 2, 1949. The contract in Spanish captioned "ESCRITURA DE VENTA ABSOLUTA" to evidence such sale was duly notarized by Jose Villagracia, Notary Public, and was entered in his Notarial Register as Document No. 517; Page 7; Book IV; Series of 1949. On December 31, 1968, which [was] more than ten (10) years after the death of Agustin Navarra on October 30, 1958, his heirs executed a Deed of Extra Judicial Partition and Deed of Sale of the land in question in favor of the Spouses Jessie Pisuea and Rosalie Navarra. The document was notarized by Jose P. Brotarly, Notary Public, and docketed in his notarial register as Document No. 409; Page 83; Book No. VI; Series of 1968. From the time of the sale up to the present, the fishpond portion was in the possession of the spouses Jessie Pisuea and Rosalie Navarra. However, the upland portion is in the possession of Salvador Upod and Dolores Bautista by mere tolerance of the defendant. The latter denies any partnership agreement o[n] the fishpond portion by Agustin Navarra, their predecessor-in-interest, and the plaintiffs. xxx xxx xxx

On June 24, 1992, the trial court ruled that since the disputed lot was the conjugal property of Spouses Petra Unating and Aquilino Villar, its purported sale by Felix and Catalina Villar to Agustin Navarra could be considered valid. The court, however, ruled that its validity pertained only to the share of the late Petra Unating, considering that at the time of the sale, Aquilino Villar was still alive. It likewise held that the respondents, as heirs of Aquilino Villar, were entitled to his one-half share in the disputed lot. Before the Court of Appeals, Dolores Bautista, and Salvador Upod assailed the trial court's ruling upholding the validity of the Escritura de Venta Absoluta. Jessie Pisuea, on the other hand, questioned the court's conclusion that the subject lot was conjugal. He claimed that it was paraphernal, and that the Deed of Sale transferred the whole lot to Agustin Navarra, his predecessor-in-interest.

Ruling of the Court of Appeals

The appellate court affirmed the trial court's ruling in toto, holding that the disputed lot belonged to the conjugal partnership of Petra Unating and Aquilino Villar, viz.: Anent the first issue, defendant argues that Lot. 1201 was a paraphernal property of Petra Unating. In support of his argument, he mentions the decision of the Court of First Instance of Capiz in Reconstitution Case No. 1408, where in the dispositive portion thereof, said court ordered the reconstitution of the Original and Owner's copy of the Original Certificate of Title covering Lot 1201 "in the name of Petra Unating, 40 years old, married to Aquilino Villar, Filipino and residents of Ivisan, Capiz, having inherited said lot from her mother Margarita Argamaso." He further argues that the mention of the name Aquilino Villar in the certificate of title is merely descriptive of the civil status of Petra Unating and the same could not convert the property into a conjugal one. We are not persuaded. The lower court rejected the statement of the Court of First Instance of Capiz in Reconstitution Case No. 1408 that Lot 1201 was inherited by Petra Unating from her mother. We agree with the lower court when it found the phrase "having inherited said lot from her mother Margarita Argamaso" as a mere obiter, a finding of fact which we find no justifiable reason to set aside. It must be considered

that the authority of the Court of First Instance of Capiz to declare Lot 1201 as having been inherited by Petra Unating from her mother is doubtful. We quote the pertinent ruling of the lower court, thus: Reconstitution of a certificate of title [denotes] restoration of the instrument which is supposed to have been lost or destroyed in its original form and condition. It is limited to the reconstitution of the certificate as it stood at the time of its loss or destruction and should not be stretched to include later changes which alter or affect the title of the registered owner. The original registered owner of Lot 1201 being Petra Unating married to Aquilino Villar. [That t]he title should be reconstituted in the same names and findings of said court as to the ownership of the land as paraphernal property of Petra Unating is an obiter. It therefore did not decide whether Lot 1201 is a paraphernal or a conjugal property of the registered owners. We further agree with the lower court when it held that "in the absence [o]f any evidence o[f] any system [o]f property relation between Petra Unating and Aquilino Villar, it is presumed that it is one of conjugal partnership." Besides, it appears that Lot 1201 was acquired during the marriage of the Spouses Petra Unating and Aquilino Villar, since the Original Certificate of Title indicates that Lot 1201 was registered in the name of Petra Unating, married to Aquilino Villar. Thus, the property is presumed conjugal. In resolving the question of presumption of conjugality, the Supreme Court had occasion to rule that: The presumption is a strong one. As stated in Camia de Reyes v. Reyes de Ilano (63 Phil. 629, 639), "it is sufficient to prove that the property was acquired during the marriage in order that the same may be deemed conjugal property." And in Laluan v. Malpaya (65 Phil 494, 504), we stated, "proof of acquisition of the property in dispute during the marriage suffices to render the statutory presumption operative." (Mendoza vs. Reyes, 124 SCRA 154; emphasis supplied). Additionally, defendant Pisuea, who brought up the question of Lot 1201 being the paraphernal property of Petra Unating failed to adduce convincing and concrete evidence that would rebut the presumption of conjugality of the subject lot. Moreover, it is settled that registration alone of the property in the name of one of the spouses does not destroy the conjugal nature of the property. (Mendoza vs. Reyes, supra and Bucoy vs. Paulino, 23 SCRA 248). The Court of Appeals also rejected Salvador Upod's attack on the Escritura de Venta Absoluta, reasoning that the Deed of Sale was duly notarized and that no evidence was presented to rebut its due execution, validity and admissibility as evidence. Furthermore, the appellate court noted that the respondents were aware of the nature and the content of the assailed Deed, and that they did not object to its translation given in the trial court. Likewise, the CA debunked Upod's contention that Pisuea's cause of action had prescribed. It ruled: On the fourth issue, plaintiff Salvador Upod contends that defendant Pisuea could no longer enforce his right since Article 1144 of the Civil Code provides that an action based upon a written contract must be brought within ten years from the time the right of action accrues. The contention is not meritorious. It is obvious that the above-mentioned article does not apply in the case at bench since defendant Pisueas [was] not the one who filed the complaint. Furthermore, defendant is in possession of the fishpond portion of the property in dispute. Assuming ex gratia argumenti that the aforementioned article is applicable, the claim of defendant Pisuea has not yet prescribed. Defendant Pisuea obtained his right over Lot 1201 by virtue of the Deed of Extrajudicial Partition and Deed of Sale dated December 31, 1968. In 1974, within the ten year prescriptive period, he filed his Answer to the complaint for ejectment filed by plaintiffs[,] (Exh. "G") raising therein his ownership over Lot 1201. Also, he filed his Opposition (Exh. "U") to the petition for reconstitution filed by plaintiff Salvador Upod. To our minds, this action and [the] leadings filed by defendant Pisuea interrupted the prescriptive period. Anent the fifth issue, plaintiff Salvador Upod posits that the trial court failed to consider the decision of this court dated January 31, 1985 in AC-UDK Sp. No. 2273 which passed upon the defendant-appellant's rights over the subject property. A perusal of this Court's decision in said case (Exh. "P") shows that, contrary to plaintiffs['] allegation, this Court thru Mr. Justice Purisima did not pass upon the rights of defendant Pisuea over Lot 1201. We take note that while the "petition for Review" of the defendant was dismissed by this Court, the dismissal was anchored on the ground that 1) Petition for Review was not the appropriate remedy; 2) the summary proceedings for the surrender of the owner's duplicate provided for under Section 107 of P.D. 1529 or Section 112 of Act 496 is unavailing as there [exist] serious conflicting claims of ownership; and 3) the ordinary civil action for quieting of title to Lot 1201 is not the proper remedy, since it is only the registered owner of the property affected who can sue as plaintiff. Clearly, the dismissal of said petition did not have any effect on the present case. xxx xxx xxx

However, we agree with the plaintiffs' statement that the law applicable is the Old Civil Code, considering that Petra Unating died in 1948 before the effectivity in 1950 of the New Civil Code. Suffice it to say that we agree with the lower court when it ruled citing Prades vs. Tecson (49 Phil 479) and Rodriguez v. Borromeo(43 Phil 479) that "when a spouse dies and the conjugal assets are not liquidated, a coownership over said assets may be formed among the surviving spouse and the heirs of the decedent." Absent any showing that there are debts and charges against the conjugal assets, we therefore declare Aquilino Villar, the surviving spouse of Petra Unating, as the owner of the undivided one-half of their conjugal property, while their children, Felix and Catalina Villar, are the owners of the other undivided half, pursuant to Article 1426 of the Old Civil Code. . . . In all, the CA agreed with the trial court that the disputed lot should be divided equally between the heirs of Petra Unating on the one hand, and Jessie Pisuea on the other.

Asserting full ownership over the disputed property and claiming that the CA erred in ruling that Felix and Catalina could have sold only their one-half share in the property, Petitioner Pisuea filed this Petition for Review.6

Issues
Petitioner ascribes to the Court of Appeals the following specific errors: I. The Honorable Court of Appeals erred in affirming the ruling of the lower court that the phrase "having inherited said lot from her mother Margarita Argamaso" [i]s a mere obiter. II. The Honorable Court of Appeals erred in ruling that Lot 1201 belongs to the conjugal [partnership] of Petra Unating and Aquilino Villar.

The Court's Ruling

The Petition is meritorious.

First Issue: Paraphernal or Conjugal?

Both the CA and the RTC held that the disputed lot was conjugal and dismissed, as obiter, the phrase "having inherited said lot from her [Petra Unating's] mother, Margarita Argamaso" found in the dispositive portion of the Decision of the Court of First Insurance (CFI) of Capiz in Reconstitution Case No. 1408. They explained that the CFI had no authority to include the phrase, because the only objective of reconstitution was to "restore the certificate covering the property as it stood at the time of its loss or destruction, and should not be stretched to include later changes which alter of affect the title of the registered owner."7 We do not agree. It must be emphasized that the dispositive portion of the 1930 Decision, which was rendered by the same CFI of Capiz acting as a cadastral court, already contained the questioned phrase. Therefore, it cannot be said that the CFI in 1980 exceeded its authority when it ordered the reconstitution, in Petra Unating's name, of the original certificate of title covering the disputed lot or in stating therein that she had inherited it from her mother. After all, such disposition was copied from the same court's 1930 Decision, as evidenced by an authentic copy of it on file with the Bureau of Lands in Capiz. Cadastral proceedings are proceedings in rem; like ordinary registration proceedings, they are governed by the usual rules of practice, procedure and evidence.8 A cadastral decree and a certificate of title are issued only after the applicants prove that they are entitled to the claimed lots, all parties are heard, and evidence is considered. Thus, the finding of the cadastral court that Petra Unating inherited the lot in question from her mother cannot be dismissed as an obiter, which is "an observation by the court not necessary to the decision rendered."9 The conclusion of the cadastral court was found in the dispositive portion of its Decision, and it was material to the nature of Petra Unating's ownership of the lot. Furthermore, it was based on the evidence presented by the parties and considered by the said court. In any event, it must be pointed out that the Decision became final a long time ago, and a final judgment in a cadastral proceeding, or any other in rem proceeding for that matter, is binding and conclusive upon the whole world.10 Therefore, the lot in dispute can properly be considered as a paraphernal property of Petra Unating.11 Concededly, properties acquired during the marriage are presumed to be conjugal. However, this prima faciepresumption cannot prevail over the cadastral court's specific finding, reached in adversarial proceedings, that the lot was inherited by Petra Unating from her mother. Noteworthy is the fact that the parties do not assail the validity of the cadastral court's Decision. The 1980 reconstitution of the title to the lot in the name of "Petra Unating, 40 years old, married to Aquilino Villar, Filipino and resident of Ivisan, Capiz, having inherited said lot from her mother Margarita Argamaso . . ." was notice to the world, including her heirs and successors-in-interest, that it belonged to Petra as her paraphernal property. Thus, the words "married to" were merely descriptive of Petra Unating's status at the time the lot was awarded and registered in her name.12

Second Issue: Efficacy of the Escritura de Venta Absoluta

Petitioner Jessie Pisuea traces his claim over the disputed lot to his father-in-law, Agustin Navarra, who in turn acquired it on February 4, 1949 from Felix and Catalina Villar, Petra Unating's children. His claim is evidenced by a notarized Deed of Sale written in Spanish, captioned Escritura de Venta Absoluta. Private Respondent Salvador Upod, on the other hand, asserts that both the trial and the appellate courts erred in admitting the Deed, citing Section 33, Rule 132 of the Rules of Court, which provides: Documents written in an unofficial language shall not be admitted as evidence, unless accompanied with a translation into English or Filipino. To avoid interruption of the proceedings, parties or their attorneys are directed to have such translation prepared before trial. We do not agree. Instead, we uphold the Court of Appeals' disquisition, which we quote: The assertion is without merit. The aforementioned rule is not always taken literally so long as there was no prejudice caused to the opposing party (People v. Salison, G.R. No. 115690, February 20, 1996). The records show that there was no prejudice caused to the plaintiffs who

appear to be familiar with the contents or the nature of Exhibit "1". As proof thereof, they even questioned the defendant on the subject document. Importantly, when required by the court to comment on the English translation of Exhibit "1" (p. 316, records) plaintiffs did not bother to comment giving rise to the presumption that the translation submitted was correct (p. 340, records). Hence, the court a quo did not err in admitting the Escritura de Venta Absoluta.13 Furthermore, the respondents were not able to impugn the due execution and validity of the notarized Deed. Neither are we persuaded by Upod's argument that the petitioner's right has prescribed under Article 1144 of the Civil Code.14 It is undisputed that he was already in possession of the fishpond when the present case was filed.

Petitioner and His Wife Are Owners of the Disputed Lot

As already shown, the disputed lot was paraphernal. Since Petra Unating did not leave any other property, will or debt upon her demise in 1948, the property in question was thus inherited by her children, Felix and Catalina Villar; and her husband, Aquilino Villar.15 The two children were entitled to the two-thirds of their mother's estate,16 while the husband was entitled to the remaining one-third.17 By virtue of the Deed of Sale they executed, Felix and Catalina effectively transferred to Agustin Navarra on February 4, 1949, their title over their twothirds share in the disputed lot. However, they could not have disposed of their father's share in the same property at the time, as they were not yet its owners. At the most, being the only children, they had an inchoate interest in their father's share. When Aquilino Villar died in 1953 without disposing of his one-third share in the disputed property, Felix and Catalina's inchoate interest in it was actualized, because succession vested in them the title to their father's share and, consequently, to the entire lot. Thus, that title passed to Agustin Navarra, pursuant to Article 1434 of the present Civil Code, which was already in force at the time of Aquilino's death in 1953. This provision reads: When a person who is not the owner of the thing sells or alienates or delivers it, and later, the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or grantee. The aforequoted article was applied in Llacer v. Muoz,18 Estoque v. Pajimula,19 Bucton v. Gabar20 and Quijada v. Court of Appeal.21 In each of these cases, the Court upheld the validity of the sale by one who previously did not have, but who subsequently acquired, title to the property sold. Thus, although Felix and Catalina Villar were not yet the owners of the remaining one third of the disputed lot when they sold to Agustin Navarra on February 4, 1949, they became its owners upon their father's death on January 14, 1953. Pursuant to Article 1434, the title to the lot passed to Agustin Navarra.22 It must be noted that at the time Felix and Catalina executed the Deed of Sale covering the disputed lot, they intended to sell the entire lot, not just their interest therein, as can be gleaned from a pertinent portion of the Deed, the English translation of which reads: xxx xxx xxx

DESCRIPTION A piece of mangrove and coconut grove land (Lot. No. 1201 of Cadastre of Ivisan), and its improvements, situated in the Municipality of Ivisan, Capiz; that is bounded N to Dapdap Creek; E. to Lot No. 1196, Sunsunan Creek; and S to Lots Nos. 1239 and 1151; and W to Dapdap Creek YB B.M. No. 21; and containing an area of Eighty Three Thousand Five Hundred Thirty Six square meters (83,536 sq. mts.) more or less; declared under Tax No. 609 and valued/appraised at P490.00. xxx xxx xxx

And finally, we make known, that from/on this date we hand over the said property, its possession/holding and absolute dominion of the aforesaid piece of land to the buyer, namely Mr. Agustin Navarra, his heirs and assignees, free from liens and liabilities/obligations, and of such title we promise and assure to defend now and always against all possible just claims/demands and claimants or those that may present them. xxx xxx x x x23

Consequently, upon the death of Aquilino Villar, the ownership of the whole of Lot No. 1201 became vested in Jessie Pisuea and his wife. WHEREFORE, the Petition is hereby GRANTED and the assailed Decision is SET ASIDE. Petitioner Jessie Pisuea and his wife, Rosalie Navarra, are hereby declared the owners of Lot. No. 1201, Cadastral 228 of the Cadastral of Ivisan, Capiz. The Register of Deeds of Capiz is AUTHORIZED to cancel the Original Certificate of Title in the name of Petra Unating and to issue a new Transfer Certificate of Title in the name of Spouses Jessie Pisuea and Rosalie Navarra. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-31618 August 17, 1983 EFREN R. MENDOZA and INOCENCIA R. DE MENDOZA, petitioner, vs. PONCIANO S. REYES and THE COURT OF APPEALS, respondents. G.R. No. L-31625 August 17, 1983 JULIA R. DE REYES, petitioner, vs. PONCIANO S. REYES and COURT OF APPEALS, respondents.

Conrado B. Enriquez and Elpidio G. Navarro for petitioners. Pacifico M. Castro for respondents.
GUTIERREZ, JR., J.: Questioned in these consolidated petitions for review on certiorari is the decision of the Court of Appeals, now Intermediate Appellate Court, reversing the decision of the Court of First Instance of Rizal, Quezon City Branch. The dispositive portion of the appellate decision reads: WHEREFORE, (a) the judgment appealed from is hereby reversed; (b) the deed of sale executed by appellee Julia de Reyes on March 3, 1961 in favor of appellees Efren V. Mendoza and Inocencia R. Mendoza, covering lots 5 and 6, Block No. 132 of Subdivision Plan Psd. 14841, situated at Retiro Street, Quezon City, is hereby declared null and void with respect to one- half share of appellant therein; (c) the Register of Deeds of Quezon City is hereby directed to cancel TCT Nos. 5611 0 and 56111, now covering said lots, and to issue, in lieu thereof, certificates of title in favor of appellant Ponciano S. Reyes for one-half (1/2) proindiviso and the spouses Efren V. Mendoza and Inocencia Mendoza for one-half (1/2) also pro-indiviso; (d) the appellees Mendozas are hereby ordered to pay unto the appellant the accrued rentals of style properties in litigation due to the share corresponding to said appellant, at the rate of P350.00 a month from March 3, 1961 until the finality of this decision, with legal interest thereon; and (e) said appellees are likewise ordered to pay unto the appellant the amount of THREE THOUSAND (P3,000.00) PESOS as attorney's fees, plus the costs in both instances. This case originated with the filing of a complaint by Ponciano S. Reyes with the Court of First Instance of Rizal docketed as Civil Case No. Q-6905, for the annulment of a deed of sale of two parcels of land with their improvements, executed by his wife, Julia R. De Reyes as vendor and the spouses Efren V. Mendoza and Inocencia R. De Mendoza, as vendees. Ponciano S. Reyes averred that said properties were conjugal properties of himself and his wife and that she had sold them to petitioners "all by herself" and without his knowledge or consent. Petitioners Efren V. Mendoza and Inocencia R. De Mendoza alleged in their answer that the properties were paraphernal properties of Julia R. de Reyes and that they had purchased the same in good faith and for adequate consideration. In a separate answer, petitioner Julia R. De Reyes, supported the spouses Mendozas' contentions. In its decision, the Court of First Instance of Rizal dismissed the complaint and declared the properties in question exclusive and paraphernal properties of petitioner Julia R. De Reyes. It ruled that she could validly dispose of the same without the consent of her husband and that the Mendozas are innocent purchasers. As earlier stated, the Court of Appeals reversed the decision of the court a quo. The petitioners filed separate petitions for review on certiorari. Efren V. Mendoza and Inocencia R. De Mendoza raised the following assignments of errors: I THE COURT OF APPEALS ERRED NOT MERELY IN GIVING CREDENCE, BUT IN FACT IN CONSIDERING AT ALL, PROOF OF THE ALLEGED CONJUGAL CHARACTER OF THE PROPERTIES l-, QUESTION, AND IN NOT INVOKING THE DOCTRINE -E OF ESTOPPEL TO RULE OUT ANY AND ALL SUCH PROOF ALTOGETHER. THE COURT OF APPEALS ERRED IN FINDING PETITIONERS GUILTY OF BAD FAITH IN PURCHASING THE PROPERTIES LITIGATED FOR WITHOUT EVIDENCE OF SUCH FACT BEING PRESENTED AND, ON THE STRENGTH MERELY OF A SIMPLE PRESUMPTION UNWARRANTEDLY DRAWN FROM ONE OF ITS OWN OBSCURE AND HARDLY AUTHORITATIVE RULINGS, AND AGAINST ABUNDANT, POSITIVE AND UNCONTRADICTED PROOF OF GOOD FAITH. III

II

THE COURT OF APPEALS ERRED UPON EQUITABLE GROUNDS IN, IN EFFECT, GIVING JUDICIAL FLAT To THE UNJUST ENRICHMENT OR BENEFIT OF ONE PERSON AT THE EXPENSE OF ANOTHER OR OTHERS. On the other hand, Julia R. De Reyes made the following assignments of errors in her petition for review. THE COURT OF APPEALS ERRED IN DECLARING THAT THE PROPERTIES IN QUESTION ARE THE CONJUGAL PROPERTIES OF THE RESPONDENT PONCIANO S. REYES AND THE PETITIONER IN SPITE OF THE CATEGORICAL JUDICIAL DECLARATION AND ADMISSION BY SAID RESPONDENT THAT THE SAID PROPERTIES ARE THE EXCLUSIVE AND PARAPHERNAL PROPERTIES OF HIS WIFE, THE PETITIONER HEREIN. THE COURT OF APPEALS ERRED IN HAVING DECIDED THE CASE NOT IN ACCORDANCE WITH LAW AND THE APPLICABLE DECISIONS ON THE MATTER IN THE SENSE, PARTICULARLY, THAT THE ACT AND DECLARATION OF A PARTY AGAINST HIS INTERESTS CAN NOT BE CONTRADICTED BY HIM, AND IN SO DOING THE DECISION AMOUNTED TO SANCTIONING A PERJURED TESTIMONY. On the first issue regarding the alleged paraphernal character of the disputed properties, we find that the records sustain the findings of the Court of Appeals The fact are: xxx xxx xxx ... Ponciano Reyes and Julia de Reyes-to be herein referred to as Ponciano and Julia alone for brevity-were married in 1915. The properties in question consisting of Lots 5 and 6, Block No. 132, situated at Retiro Street, Quezon City-plus the buildings erected thereon, were bought from J. M. Tuason & Co., represented by Gregorio Araneta, Inc. to be herein mentioned as "Araneta"February, 1947 on installment basis. (Testimony of Julia, t.s.n., p. 74, February 15, 1963). The first installment on Lot No. 5 was P69.96 and on Lot No. 6 was P102.00 (Exh. 'H' and uncontradicted testimony of Ponciano, t.s.n., p. 4, July 20, 1964). The spouses were always in arrears in the payment of the installments to Araneta due to lack of money (t.s.n., pp. 5-7, July 20, 1964) so they had to borrow money from the Rehabilitation Finance Corporation-herein after referred to as RFC for short. Thus, on November 26, 1948, they jointly obtained a loan of P12,000.00 from the RFC for the following exclusive purposes only: 'to complete the construction of one-storey residential building on 9th Street, La Loma Quezon City; and to pay the balance of the price of the lot offered as security' which is Lot 5, (Deed of Mortgage, Exh. 'A') l'). Out of this loan, the amount of P5,292.00 was paid to Araneta as price of Lot 5. The corresponding deed of absolute sale thereof was executed by Araneta on November 27, 1948 (Exh. 'A'). On October 2, 1952, the spouses secured an additional loan of P8,000.00 from the RFC 'to pay the balance of the lot herein offered (Lot No. 6) as additional security, and to defray the expenses incurred in the repairs of the building' as the deed of mortgage so recites (Exh. 'B- l'). From the amount of this loan, the sum of P7,719.60, as price of Lot No. 6, was paid and the deed of absolute sale was forthwith executed by Araneta (Exh. 'B'). In the deed of sale, the vendee named is 'Julia de Reyes'. Her signatures appear over the caption vendee and those of Ponciano under the phrase: 'with my marital consent. As a result of these sales, Transfer Certificates of Title Nos. 8550 (Exh. 'F') and 19998 (Exh. 'G') were issued for Lots 5 and 6, respectively, by the Register of Deeds of Quezon City, in the name of "JULIA REYES married to PONCIANO REYES." The mortgage contracts (Exhs. 'A-1' and 'B-1') executed by the spouses in favor of the RFC were duly registered and annotated on the said transfer Certificates of Title (Exhs. 'F' and 'G'). As promised to the RFC, the spouses built a house and later a camarin on the two lots. The camarin was leased as a school building to the Quezon City Elementary School of La Loma for the period of two years (1950-51) at P500.00 a month. When the school was transferred to another place, the camarin was leased on December 10, 1952 to Mr. and Mrs. Mendoza, appellees, for ten years at P600.00 a month for the first year and P700.00 for the remaining nine years. The contract of lease was signed by Julia as lessor, with the marital consent of Ponciano. The camarin was converted into a movie house and used as such by the lessees. (Exh. 'G'). In spite of the good rentals they had been receiving for the building, the spouses failed to pay seasonably their obligations to the RFC so, as late as November 28, 1958, they had to ask for an extension of 5 years from the Development Bank of the Philippines or DBP, as successor of the RFC, for the payment of an outstanding balance of P7,876.13 (Exh. 'D'). On March 3, 1961, while Ponciano was absent attending his farm in Arayat, Pampanga, Julia sold absolutely the lots in question, together with their improvements to appellees Mendozas for the sum of P80,000.00 without the knowledge and consent of Ponciano (Exh. 'I'-Mendoza). At the same time the spouses were living separately and were not in speaking terms. By virtue of such sale, Transfer Certificates of Title Nos. 561 10 and 56111 were subsequently issued in the name of the Mendozas. The applicable provision of law is Article 153 of the Civil Code which provides: ART. 153. The following are conjugal partnership property: (1) That which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses; xxx xxx xxx

The presumption found in Article 160 of the Civil Code must also be overcome by one who contends that the disputed property is paraphernal Article 160 provides: ART. 160. All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife. The presumption is a strong one. As stated in Camia de Reyes v. Reyes de Ilano (63 Phil. 629, 639), "it is sufficient to prove that the property was acquired during the marriage in order that the same may be deemed conjugal property." And in Laluan v. Malpaya (65 SCRA 494, 504) we stated, "proof of acquisition of the property in dispute during the marriage suffices to render the statutory presumption operative." There is no question that the disputed property was acquired by onerous title during the marriage. But were the funds used to buy the lot and build the improvements at the expense of the common fund? The records show that the funds came from loans obtained by the spouses from the Rehabilitation Finance Corporation. Under Article 161 of the Civil Code, all debts and obligations contracted by the husband and the wife for the benefit of the conjugal partnership are liabilities of the partnership. As stated in Castillo, Jr. vs. Pasco (1 1 SCRA 102, 107): ... The position thus taken by appellants is meritorous, for the reason that the deeds show the loans to have been made by Dr. Nicanor Jacinto and by Gabriel and Purificacion Gonzales, to both spouses Marcelo Castillo and Macaria Pasco, as joint borrowers. The loans thus became obligations of the conjugal partnership of both debtor spouses and the money loaned is logically conjugal property. Citing Palanca v. Smith Bell & Co. (9 Phil. 13 1) interpreting Par. 3, Article 1401 of the old Civil Code, the Court inCastillo v. Pasco stated: If money borrowed by the husband alone on the security of his wife's property is conjugal in character, a fortiori should it be conjugal when borrowed by both spouses. The reason obviously is that the loan becomes an obligation of the conjugal partnership which is the one primarily bound for its repayment. To rebut the presumption and the evidence of the conjugal character of the property, the petitioners have only the testimony of Julia de Reyes to offer. Mrs. Reyes testified that she bought the two parcels of land on installment basis and that the first payment of a little less than P2,000.00 came from her personal funds: The receipt issued by Araneta, however, shows that the first installment on one lot was only P69.96 and on the other lot, P102.00. Mrs. Reyes also testified that she paid the entire purchase price and the construction of the buildings from her personal funds and money borrowed from the Philippine National Bank. The mortgage contracts, however, show that the properties were paid out of the loan from RFC. As a matter of fact, Mrs. Reyes' testimony about a loan from Mrs. Rosa Borja, the sale of a lot in Cabiao, Nueva Ecija given by her mother, and the loan from PNB only emphasize the conjugal nature of the disputed properties because she stated that these sums were also used to put up their gravel and sand business, a poultry farm, and a banana plantation plus a jeepney transportation line although according to her, every business venture handled by her husband failed. The two were establishing businesses and buying properties together as husband and wife, in happier times. The Court of Appeals ruled upon the testimony of Julia De Reyes as follows: Julia's testimony that she had sold her Cabiao property to Rosa Borja is not supported by the deed of sale (Exh. 'I') which shows that the property was sold to Encarnacion Goco and Mariano Robles. Again, her claim that said Cabiao property was donated to her by her mother is negated by the deeds of sale (Exhs. 'J' and 'K') which show that said property was donated to her and her two brothers, Pablo and Jose del Rosario, who afterwards sold their participation thereof to the spouses, Ponciano and Julia. Her claim of exclusive ownership is further belied by the Income Tax Returns (Exhs. 'N' to 'N'- 3') which she herself prepared and filed in behalf of the conjugal partnership wherein she made the statement that the rentals paid by her co-appellees were income of the conjugal partnership; and by the Income Tax Returns (Exhs. 'O' to '0-4') also filed by her for the conjugal partnership, were she made to appear the properties in question as capital assets of the conjugal partnership. It should be noted that Julia did not care to deny the truth of said statements. Neither did she endeavor to offer any explanation for such damaging averments. Petitioners also raised the issue of estoppel in their assignments of errors. They alleged: Even so, petitioners would have small legal cause to dispute the respondent Court's giving credence to the husband's pretensions did there not also exist in the record plain and indisputable evidence that he had on a former occasion both solemnly confirmed the paraphernal character of the very properties now in question and disclaimed the existence of any conjugal partnership funds or properties of himself and his wife. (Petitioner's Brief, L-31616, p. 7). It turns out that in 1948, Ponciano Reyes was sued in the then Municipal Court of Manila for ejectment from a leased hotel that he was then operating. Judgment was rendered against Reyes in favor of the lessors, the brothers named Gocheco Having failed in a bid to garnish the rentals of the disputed buildings because the municipal court stated that it had no jurisdiction to decide the paraphernal or conjugal nature of the properties, the Gocheco brothers filed Civil Case No. 24772 for revival of judgment with the Court of First Instance of Manila.

It was in this latter case where Mr. Reyes stated in his special defenses that he and his wife never had any kind of fund which could be called conjugal partnership funds, that they acted independently from one another whenever either one engaged in any business, andThat the herein plaintiff has not limited his action in the present case against defendant Ponciano S. Reyes as he did in the original case above-mentioned, that is, Civil Case No. 7524 of the Manila Municipal Court which the instant case derived from, but has included the defendant's wife Julia Reyes, with the only intended purpose and design of going over and against the paraphernal properties of said Julia Reyes. (par. 4, Special Defenses, Answer, Exh. II; Petitioner's Brief, L-31618, pp. 9-10). Article 1437 of the Civil Code on estoppel involving immovable property provides: Art. 1437. When in a contract between third persons concerning immovable property, one of them is misled by a person with respect to the ownership or real right over the real estate, the latter is precluded from asserting his legal title or interest therein, provided all these requisites are present: (1) There must be fraudulent representation or wrongful concealment of facts known to the party estopped; (2) The party precluded must intend that the other should act upon the facts as misrepresented; (3) The party misled must have been unaware of the true facts; and (4) The party defrauded must have acted in accordance with the representation. The principle of estoppel rests on the rule that whenever a party has, by his declaration, act or omission, intentionally and deliberately led the other to believe a particular thing true and to act, upon such belief he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it. (Sotto v. Teves, 86 SCRA 154.) Estoppel can only be invoked between the person making the misrepresentation and the person to whom it was addressed. It is essential that the latter shag have relied upon the misrepresentation and had been influenced and misled thereby. There is no showing that the respondent had intentionally and deliberately led the petitioners Mendozas to believe what was contained in the pleading, "Exh. 11", and to make them act upon it. As observed by the respondent, they were not even a party in the case where the said pleadin was filed. Neither is there any assertion by the Mendozas that the said pleading was shown to them or that they happened to see it or to have any knowledge about it before they purchased the properties in question. The alleged representation was never addressed to the petitioners, much less made with the intention that they would act upon it. Moreover, there is no specific and clear reference to the disputed lots as paraphernal in the cited answer. The petitioners cannot invoke estoppel in these petitions. May the Mendoza spouses be considered buyers in good faith? The proof that the petitioners in L-31618 are purchasers in good faith comes from the testimony of Mrs. Inocencia Mendoza herself. Mrs. Mendoza testified that Mrs. Julia R. De Reyes assured her that the properties were paraphernal that her lawyer verified the titles being in the name of Mrs. Julia R. De Reyes, and that she never dealt with Mr. Ponciano Reyes when she and her husband were still renting the properties they later purchased. On cross-examination, Mrs. Mendoza admitted that she learned of the RFC mortgage when the lots were about to be purchased. Property acquired during a marriage is presumed to be conjugal and the fact that the land is later registered in the name of only one of the spouses does not destroy its conjugal nature. (Bucoy v. Paulino, 23 SCRA 249). Section 46 of P.D. 1529, the Property Registration Decree, reiterates the proviso in Section 70 of the former Land Registration Act that registration cannot be construed to relieve registered land or the owners thereof from any rights incident to the relation of husband and wife. (See also: Marigsa v. Macabuntoc 17 Phil. 107, 109; Romero de Pratts v. Menzi & Co., Inc., 53 Phil. 51, 54; Padilla v. Padilla, 74 Phil. 377, 382-384; Vitug v. Montemayor, 91 Phil. 286, 290, 291, citing Guinguing v. Abuton, 48 Phil. 144; Sideco v. Aznar, 92 Phil. 952, 961-962, citing Flores v. Flores, 48 Phil. 288; Guinoo v. Court of Appeals, 97 Phil. 235, 238; Silos v. Ramos, 97 Phil. 263, 270, citingCommonwealth v. Sandiko 72 Phil. 258, 260; and Alvarez v. Espiritu, 14 SCRA 893). If the fact that property acquired during marriage was registered in the name of the husband alone does not affect its conjugal nature, neither does registration in the name of the wife. Any person who buys land registered in the married name of the wife is put on notice about its conjugal nature. The mortgage contracts (Exhs. "A-1 " and "B-1 ") executed by the spouses Ponciano S. Reyes and Julia Reyes in favor of RFC were duly registered in the Registry of Deeds of Quezon City and seasonably annotated on transfer certificates of title Nos. 8550 (Exh. "F") and 19998 (Exh. "G"), which were issued in the name of Julia Reyes "married to Ponciano Reyes". Their dates of inscription were November 29, 1948 and October 11, 1952, respectively. On December 10, 1952, the lots and the building were leased by Julia, with the marital consent of Ponciano to the petitioners Mendozas The contract of lease was registered in the Registry of Deeds and was annotated in the transfer certificates of title on May 5, 1952. At that time, the RFC mortgages were already noted at the back of the transfer certificates of title. The petitioners, therefore, are unquestionably charged with notice of the existence and contents of said mortgages, their joint execution by the spouses Ponciano Reyes and Julia Reyes and the application of the loans to the payment to Araneta of the purchase price of the lots in question. Furthermore, the consent of the Ponciano Reyes to the mere lease of the properties was demanded by the Mendozas allegedly for their own protection, yet when it came to the deed of sale which entailed a greater transfer of rights such consent was not required. The final argument refers to the alleged unjust enrichment by Ponciano Reyes if the deed of sale is nullified This petitioners admit that the benefit including that represented by one-half of the purchase price, accrued not to the respondent but to his wife. Since Mr. Reyes did not receive any part of the proceeds of the sale and his wife has been aligning herself with the Mendoza couple, there could be no unjust enrichment as alleged. The assignments of errors have no merit. WHEREFORE, the petitions for review on certiorari are hereby DENIED for lack of merit. The judgment of the Court of Appeals is affirmed. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-18032 November 23, 1922

ELISEO SANTOS, as administrator of Estanislao Santos, plaintiff-appellant, vs. PABLO BARTOLOME, as administrator of Marcela Tizon, defendant-appellee.

Ramon Diokno, M. Buyson Lampa, and Pedro de Leon for appellant. Francisco, Lualhati and Del Rosario for appellee.

STREET, J.: The questions involved in this appeal arise in connection with the liquidation of the community estate pertaining to the spouses Estanislao Santos and Marcela Tizon, both of whom are now deceased, and whose respective estates are now represented before the court by Eliseo Santos, as administrator of Estanislao Santos, and Pablo Bartolome, as administrator of Marcela Tizon. Briefly stated, the facts giving rise to the question here presented are these: Estanislao Santos and Marcela Tizon were united in marriage many years ago and lived together as man and wife in the Province of Pampanga until in the year 1914, when Estanislao Santos died. The widow, Da. Marcela Tizon, survived until December, 1917, when she also died. No children appear to have been born to the pair, and the persons now interested in their properties are the collateral heirs of the two spouse respectively. After the death of Estanislao Santos the community property pertaining to the two spouses came into the possession and under the control of his administrator, Eliseo Santos, with corresponding duty to collect assets, pay off the debts, and liquidate the estate according to law. In connection with the discharge of these duties, said administrator also came into the possession of certain property pertaining to the widow in her own right, which he managed to the same extent as the community property itself. In the course of the proceedings conducted as aforesaid for the settlement of the estate of Estanislao Santos, the Court of First Instance of Pampanga, by order of June 12, 1921, ordered Eliseo Santos, as administrator, to submit a project for a division of the property pertaining to the estate; and pursuant to this order the said Eliseo Santos presented such a project, accompanied by a general inventory. In Base II of this project were included seven items, lettered respectively (a), (b), (c), (d), (e), ( f ), and (g), representing certain sums which, it was submitted, constituted valid charges against Marcela Tizon in the liquidation of the ganancial property. A more detailed statement concerning these items will be necessary later. Suffice it at this point to say that opposition to the allowance of these charges against Marcela Tizon was made by Pablo Bartolome, as her administrator. At the same time said administrator submitted a counter-project of partition in which these items were eliminated. When the two opposing projects of division came under the consideration of the trial judge, his Honor admitted the property of items (a) and (b) in the project of partition submitted by Eliseo Santos, and he accordingly allowed those items as valid charges against Marcela Tizon, though it is erroneously supposed in the appellant's assignment of errors that he had disallowed those items. The other items, included in Base II of the same project and lettered respectively (c), (d), (e), ( f ), and (g), were disallowed. In thus rejecting the project of Eliseo Santos and adopting the counterproject of Pablo Bartolome to the extent stated, his Honor proceeded on the idea that, even assuming the facts regarding these items to be as claimed, they did not constitute legal charges against Marcela Tizon; and he accordingly disallowed the same without giving to the administrator of Estanislao Santos an opportunity to prove said claims in fact. From the action thus taken, Eliseo Santos, as administrator appealed, and in this appeal the heirs of Estanislao Santos have joined. In the form in which the case is thus brought before us it is apparent that, if we should arrive at the conclusion that any of the items ( c), (d), (e), ( f ), and (g) represent claims which as a matter of law could constitute valid charges against Marcela Tizon in the settlement of the ganancial estate, the order appealed from should be reversed as to such item or items and the cause remanded in order that proof may be submitted with respect thereto. Four legal questions are thus presented which must be considered in turn. The first relates to item (c), representing P1,292, said to have been paid by Estanislao Santos out of the community property to redeem certain lands belonging to his wife (Marcela Tizon), situated in Bacolor, Pampanga, which lands had been sold, prior to the marriage, under a contract of sale with pacto de retro. Assuming the facts as to this items to be as thus suggested, there can be no doubt that the amount thus paid out to effect the redemption of the property should be deducted from the community assets in liquidation, thereby in effect charging one-half thereof against the portion pertaining to Marcela Tizon. It is undeniable that when the property to which reference is here made was redeemed, it remained, as it had been before, the particular property of Marcela Tizon, for if the right of redemption pertained to her, so also must the property belong to her after redemption. (Civ. Code, arts. 1337-2; 1396-3.) And of course where community assets have been used to effect the redemption, the community estate becomes creditor to the extent of the amount thus expended. It follows that, in the liquidation of the community property, account should be taken of this obligation (arts. 1404, 1419, Civ. Code). As already stated, the item (c), now under consideration, is identical in character with items (a) and (b), which were allowed without question by the trial judge; and the only reason suggested for making any distinction between this and the items (a) and (b) is that the latter had been recognized by Judge Moir of the Court of First Instance of Pampanga in a prior litigation between the guardian of Marcela Tizon, then still living, and the

administrator of Estanislao Santos. Into the details of that proceeding it is unnecessary here to enter. It is enough to say that the validity of the claim constituting item (c) in the project of division now under consideration was in no wise brought in question in that litigation and the fact that it was not recognized in Judge Moir's decision is immaterial. It results that his Honor the trial judge, erred in the court below in holding that item (c) could not constitute a legal charge against the interest of Marcela Tizon in the proceedings for the liquidation of the ganancial estate of the spouses Estanislao Santos and Marcela Tizon.lawph!l.net The second point to be considered relates to item (d) representing the sum of P3,000, said to have been expended out of the community assets for the construction of an irrigation system upon the lands of Marcela Tizon, resulting in an appreciation of their value to the extent of 300 per centum. In respect to this item also, it is evident that the trial judge fell into error in holding the claim to be inadmissible against the estate of Marcela Tizon. An irrigation system beneficial to real property is a useful expenditure with the contemplation of article 1404 of the Civil Code and, if financed from the community assets, is chargeable against the party benefit when the time comes for the liquidation of the conjugal partnership. The third point to be considered relates to item (e), representing the sum of P7,140.97, expended by Eliseo Santos, as administrator of Estanislao Santos, for the support and maintenance of Marcela Tizon during the period that elapsed between the death of Estanislao Santos and that of Marcela Tizon herself. It is undeniable that the expense of the maintenance and support of Marcela Tizon, during widowhood, and while the conjugal partnership had not as yet been liquidated, was properly borne by the administrator of the deceased husband, but this expenditure was in the nature of a mere advancement and under article 1430 of the Civil Code is to be deducted from the share pertaining to the heirs of Marcela Tizon in so far as it exceeds what they may have been entitled to as fruits or income. It results that there was error in the disallowance of this item. We should add, however, that when this claims is again brought under the consideration of the trial judge, the administrator of Estanislao Santos should be required to show the source, or sources, from which the funds used for the maintenance and support of Marcela Tizon were derived; and if it should appear that any part thereof was derived from the net income of the proper property of Marcela Tizon, such amount should not be charged against her heirs, in conformity with the precept of the article above cited. The last point to be considered relates to items ( f ), and (g), representing expenditures of the sums of P1,034.95 and P209.85, respectively. The first of these represents the costs of purchase, transportation, and erection of a grave stone of Italian marble, placed to the memory of Marcela Tizon. The second represents the cost of a memorial crown on a porcelain frame, wit gold lettering, dedicated to the memory of Marcela Tizon. As we understand the record, these expenditures were incurred just after the death of Marcela Tizon and at the request of her own administrator, Pablo Bartolome, there being a verbal agreement between the two administrator to the effect that Eliseo Santos should advance the necessary sums for these expenditures, the same to be subsequently reimbursed by Pablo Bartolome, as administrator of Marcela Tizon. There can be no doubt whatever as to the property of allowing these items against the estate of Marcela Tizon in the liquidation of the partnership property; and his Honor, the trial judge, was mistaken in rejecting the same. From an observation contained in the appealed decision we infer that the action of the trial judge in rejecting the various claims to which reference has been made was based in part on the idea that said claims should have been submitted to the committed appointed to appraise the property and allow claims against the estate of Marcela Tizon in administration, in conformity with the requirements of section 695, and related provisions of the Code of Civil Procedure. This suggestion is in our opinion untenable as regards all of said items. Items ( f ) and (g) were not proper to be submitted to the committee because they relate to expenditures made after the death of Marcela Tizon; and as regard the other items the provisions of the Code of Civil Procedure requiring the presentation of claims to the committee are not pertinent to proceedings for the liquidation of the conjugal partnership. From what has been said it results that the judgment appealed from must be reversed, and the clause will be remanded for further proceedings in conformity with this opinion. It is so ordered, without express pronouncement as to costs.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-38052 December 23, 1933

CONCEPCION ABELLA DE DIAZ, plaintiff-appellee, vs. ERLANGER & GALINGER, INC., ET AL., defendants. ERLANGER & GALINGER, INC., appellant.

Vicente Ribaya and J.A. Wolfson for appellant. Manly and Reyes and Norberto Romualdez for appellee.
HULL, J.: Erlanger & Galinger, Inc., secured a judgment in civil case No. 3722 of the Court of First Instance of Albay against Domingo Diaz, the husband of the plaintiff herein, and on an execution issued to enforce the above-mentioned judgment, the sheriff levied on certain properties. Plaintiff thereupon brought this action in the Court of First Instance of Camarines Sur alleging that the properties which had been levied upon were her own paraphernal property. The court issued a temporary injunction and after hearing, declared that the properties levied upon were paraphernal, that the obligation which was the basis of the judgment was a personal obligation of the husband, and that under article 1386 of the Civil Code, the fruits of the paraphernal property of the wife were exempt from execution in this case. The court held that all the property was unlawfully levied upon and made the preliminary injunction permanent. Defendant appeals, and the first question for consideration is whether buildings erected on paraphernal property of the wife with the private funds of the wife are exempt from execution for the debts contracted by the husband. Article 1404 of the Civil Code provides: ART. 1404. Any useful expenditures made for the benefit of the separate property or either one of the spouses by means of advances made by the partnership, or by the industry of the husband or wife, are partnership property. Buildings constructed during the marriage on land belonging to one of the spouses shall also belong to the partnership, but the value of the land shall be paid to the spouse owning the same. We shall not disturb the findings of fact of the trial court that a commercial building, the camarin, and the granary, the buildings in dispute, were build on the lands of appellee with the appellee's own personal money. At first view there is no limitation on the second paragraph of the abovequoted article, but Manresa in his Commentaries, volume 9, page 608, holds that if the building is constructed by the owner of the land with her private money, the building does not belong to the partnership but to the owner of the land, and no reason occurs to us why such holding is not a correct and just interpretation of this section. We therefore concur with the trial court that these buildings are not subject to levy and sale in this case. As to the items of palay and lumber, we are not convinced from the evidence that they belong exclusively to appellee, but on then contrary, we believe that they are part of the conjugal property (article 1407, Civil Code). Likewise, as to the Buick automobile. While it may be true that at the time of their marriage, the wife had an automobile, that automobile has long since passed out of existence, and the mere fact that each successive car was turned in as part of the purchase price of a new car, would not make every automobile in the future paraphernal, but on the contrary, it becomes conjugal and responsible for the debts of the partnership. As above stated, the trial court relied to a great extent in its judgment on article 1386 of the Civil Code which reads: ART. 1386. The fruits of the paraphernal property cannot be subject to the payment of personal obligations of the husband, unless it be proved that such obligations were productive of some benefit to the family. It will therefore be necessary to consider briefly the transaction out of which arose the judgment, the basis of the existing writ of execution. The husband, Domingo Diaz, while a member of the Legislature, secured the passage of Act. No. 2644 granting to his brother a franchise to construct and operate an electric light plant at Tabaco, Albay. Domingo Diaz purchased from Erlanger & Galinger, Inc., machinery and equipment for the construction and installation of the plant, and judgment was obtained by Erlanger & Galinger, Inc., against Diaz for the balance of the purchase price. Appellee contends that she was opposed to her husband's going into the electric light business and that therefore the business was a personal one of his and not an enterprise of the conjugal partnership. Such contention is fundamentally erroneous. The husband, as the manager of the partnership (article 1412, Civil Code), has the right to embark the partnership in an ordinary commercial enterprise for gain, and the fact that the wife may not approve of a venture does not make it a private and personal one of the husband. The obligation, not being a personal one of the husband, article 1386 has no application, and any property belonging to the conjugal partnership must be held liable to seizure. In the preliminary injunction which was made permanent by the trial court, appellant and the sheriff were forbidden to attempt to collect by legal process any of the rents or fruits of the paraphernal property. As the fruits of the paraphernal property belonged to the conjugal partnership, they are responsible for the debts of that partnership. The injunction is too broad and must be modified. The judgment of the Court of First Instance of Camarines Sur is affirmed so far as it relates to the ownership of the buildings. As to the other items, including the rents of the paraphernal property, it is reversed. The case will be remanded to the Court of First Instance of Camarines Sur for action in conformity with this opinion. No expression as to costs. So ordered.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 164584 June 22, 2009

PHILIP MATTHEWS, Petitioner, vs. BENJAMIN A. TAYLOR and JOSELYN C. TAYLOR, Respondents. DECISION 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 latters 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, Joselyns 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 (Benjamins) 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 Joselyns 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 attorneys fees and other incidental expenses. SO ORDERED.15

The RTC considered the Boracay property as community property of Benjamin and Joselyn; thus, the consent of the spouses was necessary to validate any contract involving the property. Benjamins right over the Boracay property was bolstered by the courts 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.19The primary purpose of this constitutional provision is the conservation of the national patrimony.20 Our fundamental law cannot be any clearer. The right to acquire lands of the public domain is reserved only to Filipino citizens or corporations at least sixty percent of the capital of which is owned by Filipinos.21 In Krivenko v. Register of Deeds,22 cited in Muller v. Muller,23 we had the occasion to explain the constitutional prohibition: Under Section 1 of Article XIII of the Constitution, "natural resources, with the exception of public agricultural land, shall not be alienated," and with respect to public agricultural lands, their alienation is limited to Filipino citizens. But this constitutional purpose conserving agricultural resources in the hands of Filipino citizens may easily be defeated by the Filipino citizens themselves who may alienate their agricultural lands in favor of aliens. It is partly to prevent this result that Section 5 is included in Article XIII, and it reads as follows:

"Section 5. Save in cases of hereditary succession, no private agricultural land will be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines." This constitutional provision closes the only remaining avenue through which agricultural resources may leak into aliens hands. It would certainly be futile to prohibit the alienation of public agricultural lands to aliens if, after all, they may be freely so alienated upon their becoming private agricultural lands in the hands of Filipino citizens. x x x xxxx If the term "private agricultural lands" is to be construed as not including residential lots or lands not strictly agricultural, the result would be that "aliens may freely acquire and possess not only residential lots and houses for themselves but entire subdivisions, and whole towns and cities," and that "they may validly buy and hold in their names lands of any area for building homes, factories, industrial plants, fisheries, hatcheries, schools, health and vacation resorts, markets, golf courses, playgrounds, airfields, and a host of other uses and purposes that are not, in appellants words, strictly agricultural." (Solicitor Generals 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 fathers estate;26 that they be reimbursed the funds used in purchasing a property titled in the name of another;27that an implied trust be declared in their (aliens) favor;28 and that a contract of sale be nullified for their lack of consent.29 In Ting Ho, Jr. v. Teng Gui,30 Felix Ting Ho, a Chinese citizen, acquired a parcel of land, together with the improvements thereon. Upon his death, his heirs (the petitioners therein) claimed the properties as part of the estate of their deceased father, and sought the partition of said properties among themselves. We, however, excluded the land and improvements thereon from the estate of Felix Ting Ho, precisely because he never became the owner thereof in light of the above-mentioned constitutional prohibition. In Muller v. Muller,31 petitioner Elena Buenaventura Muller and respondent Helmut Muller were married in Germany. During the subsistence of their marriage, respondent purchased a parcel of land in Antipolo City and constructed a house thereon. The Antipolo property was registered in the name of the petitioner. They eventually separated, prompting the respondent to file a petition for separation of property. Specifically, respondent prayed for reimbursement of the funds he paid for the acquisition of said property. In deciding the case in favor of the petitioner, the Court held that respondent was aware that as an alien, he was prohibited from owning a parcel of land situated in the Philippines. He had, in fact, declared that when the spouses acquired the Antipolo property, he had it titled in the name of the petitioner because of said prohibition. Hence, we denied his attempt at subsequently asserting a right to the said property in the form of a claim for reimbursement. Neither did the Court declare that an implied trust was created by operation of law in view of petitioners 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, respondents name appeared as the vendee in the deeds of sale. When their relationship turned sour, petitioner filed an action for the recovery of the real properties registered in the name of respondent, claiming that he was the real owner. Again, as in the other cases, the Court refused to declare petitioner as the owner mainly because of the constitutional prohibition. The Court added that being a party to an illegal contract, he could not come to court and ask to have his illegal objective carried out. One who loses his money or property by knowingly engaging in an illegal contract may not maintain an action for his losses. Finally, in Cheesman v. Intermediate Appellate Court,33 petitioner (an American citizen) and Criselda Cheesman acquired a parcel of land that was later registered in the latters 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 (petitioners) 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 Benjamins 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 Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 73733 December 16, 1986 EPIFANIA MAGALLON, petitioner, vs. HON. ROSALINA L. MONTEJO, in her Official Capacity as Presiding Judge of Regional Trial Court of Davao del Sur, Branch XXI, CONCEPCION LACERNA, ELECERIA LACERNA and PURITA LACERNA,respondents.

Latasa, Cagas and Aranune Law & Surveying Office for petitioner. Alberto Lumakang for private respondents.

NARVASA, J.: The petition before this Court sinks the annulment of a writ of execution issued by the respondent Judge in Civil Case No. 727 of her court (RTC Davao del Sur). Said case was instituted by the plaintiffs (private respondents herein) against Martin Lacerna to compel partition of parcel of land located in Barrio Kasuga Municipality of Magsaysay, Davao del Sur, to which said defendant had perfected a claim by homestead. The plaintiffs, claiming to be the common children of Martin Lacerna and his wife, Eustaquia Pichan, who died in 1953, asserted a right to one-half of the land as their mother's share in her conjugal partnership with Martin. While said defendant denied having contracted marriage with Eustaquia Pichan although he admitted living with her without benefit of marriage until she allegedly abandoned him as well as paternity of two of the plaintiffs who, he claimed, were fathered by other men, the Trial Court gave his denials no credence. Said Court, on the basis of the evidence presented to it, found that Martin had in fact been married to Eustaquia, and that the plaintiffs were his children with her. The Trial Court further found that Martin had begun working the homestead, and his right to a patent to the land accrued, during his coverture with Eustaquia. On the basis of these findings, the plaintiffs were declared entitled to the half of the land claimed by them. 1 Martin Lacerna appealed to the Intermediate Appellate Court AC-G.R. No. 59900-R). That Court affirmed, in a Decision promulgated on August 31, 1984 which has since become final. 2 It appears that at the time the case was brought, and while it was being heard in the Trial Court, no certificate of title to the land had yet been issued to Martin Lacerna, although he had already complied with all the conditions necessary to a grant thereof. Original Certificate of Title No. P-11 568 (issued on the basis of Homestead Patent No. 148869) was issued only on November 22, 1978, while Lacerna's appeal was pending in the Intermediate Appellate Court. While it is not disputed that said certificate of title refers to the same land homesteaded by Lacerna during his coverture with Eustaquia Pichan, for reasons to which the record before the Court offers no clear clue, it states on its face that it is issued in the name of " ... MARTIN LACERNA, Filipino, of legal age, married to Epifania Magallon ... ," the latter being the present petitioner. 3 It appears further that on November 26, 1985, after the confirmative Decision of the Intermediate Appellate Court had become final and executory, the respondent Judge, on motion of the plaintiffs issued an alias writ of execution commanding the Provincial Sheriff:: ... to order the defendant Martin Lacerna to divide and partition the property located at Casuga, Magsaysay, Davao del Sur, consisting of 10 hectares designated as Lot No. 5098 Cad. No. 275 covered by H.A. No. 20-13378 (E-20-12748), of which is the share of Eustaquia Pichan in the conjugal property, and plaintiffs being Pichan's children are also entitled thereto; and deliver portion of 5 hectares of the aforedescribed lot to the plaintiffs as their share to satisfy the said judgment and your fees thereon. 4 Apparently, said writ was served on both Martin Lacerna and petitioner herein, for on December 17, 1985, the latter filed with the Trial Court a "Motion for Intervention and to Stay Execution" alleging that the land subject of the writ was conjugal property of herself and Martin Lacerna under a certificate of title (OCT No. P-11568) ... issued way back 1978 (sic) without legal impediments, and ... now incontestable," as well as ... valid, binding and legal unless declared otherwise in an independent proceedings, ... and praying that ... the property of herein intervenor be excluded from the enforcement of the writ of execution." 5 Said motion was denied, as also was a motion for reconsideration of the order of denial. Hence, the present petition. The facts found by the lower courts which, in view of the finality of the latter's decisions, are binding upon this Court and can no longer be controverted, as wen as the pertinent allegations of the petition, leave no doubt that the land in question, which rightfully pertained to the conjugal partnership of Martin Lacerna and Eustaquia Pichan, the plaintiff's mother, and should have been titled in the names of said spouses, was, through fraud or mistaken, registered in the names of Martin Lacerna and petitioner herein, Epifania Magallon In such a situation, the property should be regarded as impressed with an implied, or a constructive, trust for the party rightfully entitled thereto. The Civil Code provides that: If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. 6 The provision restates one of the principles upon which the general law of trust is founded, expressed in equity jurisprudence thus:

A constructive trust is a creature of equity, defined supra (sec. 15) as a remedial device by which the holder of legal title is held to be a trustee for the benefit of another who in good conscience is entitled to the beneficial interest. So. the doctrine of constructive trust is an instrument of equity for the maintenance of justice, good faith, and good conscience, resting on a sound public policy requiring that the law should not become the instrument of designing persons to be used for the purpose of fraud. In this respect constructive trusts have been said to arise through the application of the doctrine of equitable estoppel or under the broad doctrine that equity regards and treats as done what in good conscience ought to be done. Where, through a mistake of fact, title to, and apparent ownership of, property rightfully belonging to one person is obtained by another, a constructive trust ordinarily arises in favor of the rightful owner of such property It is a general principle that one who acquires land or other property by fraud, misrepresentation, imposition, or concealment, or under any such other circumstances as to render it inequitable for him to retain the property, is in equity to be regarded as a trustee ex maleficio thereof for a person who suffers by reason of the fraud or other wrong, and is equitably entitled to the property, even though such beneficiary may never have any legal estate therein. It is to be observed, however, that in the absence of equitable considerations or a fiduciary relationship, fraud alone, either actual or constructive, will not give rise to a trust, since, as has been pointed out, if it were otherwise all persons claiming property under defective titles would be trustee for the 'true' owners. 7 Under proper circumstances, mistake, although unconnected with fraud, will warrant relief under the Code providing that one who gains a thing by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act is, unless he has come better title thereto, an involuntary trustee of the thing gained for the benefit of the person who would otherwise have had it. 8 As stated by Justice Cardozo, a constructive trust is the formula through which the conscience of equity finds expression and when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest; equity converts him into a trustee. 9 In an early case in this jurisdiction, land of the plaintiff had, by mistake, been included in the title of an adjoining owner who was afterwards sued by his creditors, the latter obtaining writs of execution and procuring their annotation on said title. In an action by the plaintiff to enjoin the sale of his property, annul the levies thereon and secure a new title without those encumbrances, this Court affirmed judgment of the lower court in the plaintiff's favor, despite the fact that he had done nothing to protect his interests in the land during a period of almost six years following the issuance of the decree of registration in favor of the adjoining owner. The Court, noting that the titular (ostensible) owner had never laid claim to the property mistakenly registered in his name and that he had in fact acquiesced to judgment in a separate action declaring the plaintiff the real owner of the property, refused to apply the one-year limitation period for disputing the title and held that in the circumstances, the former merely held title to the property in trust for the plaintiff. 10 In Bueno vs. Reyes, 11 where property belonging to an ancestor of whom plaintiffs' parents were the intestate heirs was, though mistake or in bad faith, registered in cadastral proceedings in the name of other parties who had no right thereto, this Court reaffirmed the principles already cited, holding that: If any trust can be deduced at all from the foregoing facts it was an implied one, arising by operation of law not from any presumed intention of the parties but to satisfy the demands of justice and equity and as a protection against unfair dealing or downright fraud. Indeed, in this kind of implied trust, commonly denominated constructive, as distinguished from resulting, trust, there exists a certain antagonism between the cestui que trust and the trustee. Thus, for instance, under Article 1456 of the Civil Code, 'if property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.' In a number of cases this Court has held that registration of property by one person in his name, whether by mistake or fraud, the real owner being another per- son, impresses upon the title so acquired the character of a constructive trust for the real owner, which would justify an action for reconveyance. 12 Clearly, therefore, the petitioner herein, as the trustee of a constructive trust, has an obligation to convey to the private respondents that part of the land in question to which she now claims an ostensible title, said portion rightfully pertaining to the respondents' deceased mother as her share in the conjugal partnership with Martin Lacerna. The question is whether that obligation may be enforced by execution in the action at bar, which was brought and prosecuted to judgment against Martin Lacerna only, without impleading the petitioner. 13 Stated otherwise, is petitioner bound by final judgment rendered in an action to which she was not made a party? There are no clear precedents on the matter in our law. Reference to American law for any persuasive ruling shows that even there the question seems to be an open one. "The authorities are in conflict as to whether a wife, not a party to an action is bound by a judgment therein for or against her husband with respect to community or homestead property or property held as an estate in entirety. Community property. It has been held that a judgment against the husband in an action involving community property, is conclusive on the wife even if she is not a party, but it has also been held that a judgment against either husband or wife with respect to community property in an action to which the other spouse is not a party does not prevent the other spouse from subsequently having his or her day in court, although, of course, a judgment against both husband and wife is binding on both.

Estate by entirety. It has been both affirmed and denied that a wife is in such privity with her husband in respect of property held by them as an estate
in entirety that a judgment for or against him respecting such property in a suit to which she is not a party is binding on her.

Homestead. A judgment affecting a homestead is, according to some authorities, not binding on a spouse who is not a party to the action in which it is
rendered, unless the homestead is community property or the homestead claim or interest would not defeat the action; but, according to other authorities, where the husband sets up and litigates a claim for the homestead, an adjudication for or against him is binding on the wife. 14

As to her community interest in real property, a wife is in privity with her husband and is represented by him in an action as fully as though she had expressly been made a party thereto. Cutting vs. Bryan, 274 P. 326, 206 Cal. 254, certiorari denied 50 S. Ct. 16, 280 U.S. 556,74 L.Ed 611. 15 In the particular circumstances obtaining here, the Court can as it does in good conscience and without doing violence to doctrine, adopt the affirmative view and hold the petitioner bound by the judgment against Martin Lacerna, despite her not having in fact been impleaded in the action against the latter. This ruling presumes that petitioner is, as she claims, the legal wife of Lacerna though, as observed by the Intermediate Appellate Court, no marriage contract was presented by Lacerna to prove his marriage to the petitioner either before or after the death of Eustaquia Pichan. Indeed, it is clear that the petitioner cannot assert any claim to the land other than by virtue of her supposed marriage to Lacerna. As a mere mistress, she cannot pretend to any right thereto. But whether the petitioner is a lawful wife or a mere "live-in" partner, the Court simply cannot believe that she never became aware of the litigation concerning the land until presented with the writ of execution. What is far more probable and credible is that she has known of the lawsuit since 1956 when Martin Lacerna "married" her. 16Her silence and inaction since then and until barely a year ago bespeak more than anything else, a confession that she had and has no right to the land and no defense to offer to the action, either on her part or on the part of Martin Lacerna. Had she even the semblance of a right, there is no doubt she would have lost no time asserting it. From the averments of the petition, it is evident that the petitioner relies mainly, if not solely, on the fact that the certificate of title to the land carries her name as the "wife" of the owner named therein, Martin Lacerna. As already observed, such entry on the certificate of title has been established by evidence no longer disputable as resulting from a mistake if, indeed, it was not procured through fraud. Moreover, on the authority of Litam vs. Rivera 17 and Stuart vs. Yatco, 18 the phrase "married to Epifania Magallon written after the name of Martin Lacerna in said certificate of title is merely descriptive of the civil status of Martin Lacerna, the registered owner, and does not necessarily prove that the land is "conjugal" property of Lacerna and petitioner hereyn. Neither can petitioner invoke the presumption established in Article 160 of the Civil Code that property acquired during the marriage belongs to the conjugal partnership, there being no proof of her alleged marriage to Martin Lacerna except that which arises by implication from the aforestated entry in the certificate of title and for the far more compelling reason that the homestead claim on the land was shown to have been perfected during Martin Lacerna's marriage to Eustaquia Pichan, mother of the private respondents. The ruling in Maramba vs. Lozano 19that the presumption does not operate where there is no showing as to when property alleged to be conjugal was acquired applies with even greater force here. The writ of execution, however, must be set aside, though not for the reasons urged in the petition. The judgment of the respondent Trial Court which was affirmed by the Intermediate Appellate Court merely declared the private respondents entitled to one-half of the land in question, without specifically ordering partition and delivery to them of said half portion. A writ of execution cannot vary the terms of the judgment it is issued to satisfy, or afford relief different from, or not clearly included in, what is awarded by said judgment. Even if the judgment in question is construable as authorizing or directing a partition of the land, the mechanics of an actual partition should follow the procedure laid down in Rule 69 of the Rules of Court which does not contemplate or provide for the intervention of the sheriff in the manner prescribed in the writ complained of. Both the Trial Court, in rendering the judgment in question, and the Intermediate Appellate Court, in affirming the same, appear to have overlooked the fact that the surviving spouse is the legal and compulsory heir of the deceased husband or wife; otherwise, consistent with the finding that the half portion of the land sued for pertained to the late Eustaquia Pichan as her share in the conjugal partnership with Martin Lacerna, they should have ruled that Martin Lacerna concurred with the three private respondents in the succession to said portion, each of them taking an equal share. 20 Unfortunately, said error is beyond review because Martin Lacerna allowed the judgment to become final and executory without raising that point of law, even on appeal. WHEREFORE, the writ of execution complained of is set aside and annulled. Instead of enforcing said writ, the respondent Trial Court is ordered to effect the partition of the land in question in accordance with the terms of its now final and executory decision and the provisions of Rule 69 of the Rules of Court. No pronouncement as to costs in this instance. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 75410 August 17, 1987 CESAR SARMIENTO, petitioner, vs. THE INTERMEDIATE APPELLATE COURT, HON. RICARDO D. DIAZ as the Presiding Judge of Branch XXVII of the Regional Trial Court of Manila, PHILIPPINE NATIONAL BANK and NORMA DIAZ SARMIENTO,respondents. No. 75409 August 17, 1987 CESAR SARMIENTO, petitioner, vs. THE INTERMEDIATE APPELLATE COURT, HON. REGINA G. ORDOEZ-BENITEZ, as the Presiding Judge of Branch XXVII of the Regional Trial Court of Manila, PHILIPPINE NATIONAL BANK, NORMA SARMIENTO, LORNA SARMIENTO and LERMA SARMIENTO, respondents.

PARAS., J.: This is a petition to review and reverse the decision * dated June 13, 1986 of respondent Intermediate Appellate Court (now Court of Appeals) in ACG.R. SP Nos. 09159 and 09160 denying the petition for certiorari and prohibition for lack of merit and correspondingly dismissing these cases. The facts of the aforecited cases will be presented separately since they involve different proceedings heard before different branches of the Regional Trial Court of Manila.

G.R. No. 75409

The Court of Appeals narrates the facts thus: It appears that on May 10, 1977, the private respondent Norma Sarmiento sued her husband, the petitioner Cesar Sarmiento, for support. The case was filed with the Juvenile and Domestic Relations Court and later assigned to Regional Trial Court, Branch XLVII, presided over by Judge Regina Ordoez-Benitez, after the reorganization of the Judiciary in 1983. On March 1, 1984, Judge Ordoez-Benitez rendered a decision, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered ordering the defendant, Cesar Sarmiento, to pay his plaintiff-wife, Norma Sarmiento, the sum of Five Hundred Pesos (P500.00)monthly as support commencing on May 10, 1977 up to March, 1984, which shall be paid thirty (30) days after the Decision shall have become final and executory and the monthly support, starting April 1984, shall be deposited with the Cashier of the Regional Trial Courts, City Hall, Manila within the first five (6) days of April 1984 and every month thereafter from which plaintiff-wife or her duly authorized representative may withdraw the same. Support; shall be Immediately payable, notwithstanding any appeal which may be interposed by defendant. Let a copy of this Decision be furnished the Cashier of the Regional Trial Courts of City Hall, Manila, for his information and guidance. On April 9,1984 the private respondent moved for execution of the judgment pending appeal The petitioner actually filed a notice of appeal four days later on April 13. On May 3, 1984, Judge Ordoez-Benitez issued the following order: Acting on the "Motion for Execution of Decision Pending Appeal dated April 9, 1984, and the Notice of Appeal filed by the defendant on April 13, 1984, the Philippine National Bank is hereby directed that no amount due the defendant be released without authority from this Court and until final disposition of said case. Let a copy of this Order be directed to the Philippine National Bank for its guidance and information. On May 29, 1985 the private respondent filed a motion to require the Philippine National Bank to deliver to the private respondent the accrued support out of the retirement benefits due to the Petitioner as a former employee of the PNB. The petitioner prays

That a restraining order and/or writ of pre injunction forthwith issue, ENJOINING AND PROHIBITING the respondent JUDGE REGINA G. ORDOEZ-BENITEZ and all the respondents in Civil-Case No. E-02184, their agents and employees, and all persons acting for them or on their behalf, from enforcing, executing or otherwise giving force and effect to the Decision (Annex "A " hereof, and the Order Annex "B hereof). " On June 13, 1966, the Court of Appeals found petitioner's appeal unmeritorious and thus dismissed the same. Petitioner moved for reconsideration but the motion was denied. Hence this petition.

G.R. No. 75410

The Court of Appeals sums up the facts as follows: It appears that, on August 1, 1984, the private respondent brought another action against the petitioner for a declaration that the retirement benefits due the petitioner from the PNB were conjugal and that 50% thereof belonged to the private respondent as her share. The case was assigned to Branch XXVII of the RTC of Manila, presided over by Judge Ricardo Diaz. The petitioner filed an answer in which he contended that the complaint did not state a cause of action' that there was another action peding between him and the plaintiff and that the plaintiff did not exhaust administrative remedies before bringing the suit. However, the trial court refused to dismiss the complaint because the grounds cited were not indubitable. The case was therefore set for pre-trial conference. For failure of the petitioner to appear at the pretrial conference on December 19, 1985, the trial court declared him as in default. Thereafter, on February 20, 1986, judgment was rendered as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, ordering defendant Philippine National Bank to desist and refrain from releasing to defendant Cesar Sarmiento all monetary benefits and emoluments which may be due him by reason of his retirement from service, but instead, to deliver one-half (1/2) thereof to the herein plaintiff; and if in the event that all such monetary benefits and emoluments, for one reason or another, had already been paid to defendant Cesar Sarmiento, said defendant is hereby ordered to pay plaintiff one-half (1/2) of whatever monetary benefits, emoluments and pivileges he received from defendant Philippine National Bank by reason of his retirement. Likewise, defendant Cesar Sarmiento is hereby ordered the costs of suit.' On April 21, 1986, the private respondent moved for the immediate execution of the judgment in her favor, on the ground that any appeal that the petitioner might take would merely be dilatory in the light of the admission in his answer. The petitioner filed an opposition to the motion wherein he manifested that he was not going to appeal the decision of the trial court but that he would instead filed a petition for certiorari and prohibition against the trial coourt. Petitioner appealed the February 20, 1986 decision of respondent Judge Diaz to the Court of Appeals on a petition for certiorari and prohibition. The assailed decision denied the above petition. Hence, this joint petition. Petitioner's averments can be narrowed down to the following: 1. The order of May 3, 1984 of respondent Judge Ordonez-Benitez, prohibiting the Philippine National Bank to release any amount of the retirement gratuity due the petitioner without the trial court's approval is contrary to law, because retirement benefits are exempt from execution. 2. Since the trial court had refused to give the course to his appeal, he was justified in resorting to the extra-ordinary legal remedies of certiorari and prohibition. 3. The default judgment dated February 20, 1986 of respondent Judge Diaz also ordering the PNB to desist from releasing to petitioner any portion of his retirement benefits and to deliver one-half thereof to herein private respondent is contrary to law. From the foregoing, it can be gauged that what petitioner principally questions or protests against is respondent appellate court's failure (actually refusal to resolve the issue on whether or not the retirement benefits due the petitioner from the PNB are subject to attachment, execution or other legal process). Private respondent, however, claims that the issues raised by petitioner before respondent Court of Appeals were issues relating to the merits of the cases then pending with respondents Judge Ordonez-Benitez and Judge Diaz and hence the said issues were proper subject of an appeal, which remedy was already availed of by petitioner in both cases. She likewise submits that since no question of jurisdiciton or abuse of discretion had been raised and substantiated in the petitions before the respondent Court of Appeals, said appellate court was legally justified in dismissing the petition. Just as We have dealt with the facts of these two cases, We now intend to resolve their issues and questions also separately.

G.R. No. 75409

We do not find merit in petitioner's contention that simply because the trial court had refused to give due course to his appeal, he was already justified in resorting to the extraordinary legal remedies of certiorari and prohibition. What the respondent Court of Appeals found in this regard need not be further elaborated upon. Said appellate court ruled: Under BP 129, sec. 39, no record on appeal is required to take an appeal. Nor is an appeal bond required. (Interim Rules, sec. 18) A notice of appeal is sufficient. Unlike before, where approval of the record on appeal and the appeal bond was required before the appeal was perfected, under the present rule, the appeal is perfected upon the expiration of the last day to appeal by a party by the mere filing of a notitce of appeal (Interim Rules, sec. 23). The approval of the court is not required. This means that within 30 days after the perfection of the appeal, the original record should be transmitted to the Intermediate Appellate Court. If the clerk neglects the performance of this duty, the appellant should ask the court to order the clerk. It does not seem that the petitioner has done this, and it may even be that he is liable for failure to prosecute his appeal. (Rule 46, sec. 3; Rule 50, sec. 1 [c]. On the allegation of petitioner that it is not the appellant but the appellee's duty to make the clerk of court of the trial court transmit the record on appeal to the appellate court, respondent Court of Appeals aptly points to the rullings under Rule 46, sec. 3 of the Revised Rules of Court. It has been held that, while it is the duty of the clerk of the Court of First Instance to immediately transmit to the clerk of the Supreme Court a certified copy of the bill of exceptions, (now, record on appeal) it is also the duty of the appellant to cause the same to be presented to the clerk of the Supreme Court within thirty days after its approval. He cannot simply fold his arms and say that it is the duty of the Clerk of Court First Instance under the provisions of section 11, Rule 41 of the Rules of Court to transmit the record of appeal to the appellate court. It is appellant's duty to make the clerk act and, if necessary, procure a court order to compel him to act. He cannot idly sit by and wait till this is done. He cannot afterwards wash his hands and say that delay in the transmittal of the record on appeal was not his fault. For, indeed, this duty imposed upon him was precisely to spur on the slothful. (2 Moran, Comments on the Rules of Court 480 [1979])." Evidently, petitioner had no valid excuse to resort to the extraordinary writ of certiorari and prohibition when appeal had been available to him and which he, in fact, already initiated but did not pursue. Petitioner, in questioning the Order of May 3, 1984 of respondent Judge Ordoez-Benitez, claims that such order contravenes the law exempting retirement gratuity from legal process and liens. We find merit in petitioner's stand in the light of the explicit provisions of Sec. 26 of CA 186, as amended, which read as follows: Sec. 26. Exemption from legal process and liens. No policy of life insurance issued under this Act, or the proceeds thereof, when paid to any member thereunder, nor any other benefit granted under this Act, shall be liable to attachment, garnishment, or other process, or to be seized, taken, appropriated,or applied by any legal or equitable process or operation of law to pay any debt or liability of such member, of his beneficiary, or any other person who may have a right thereunder, either before or after payment; nor shall the proceeds thereof; when not made payable to a named beneficiary, constitute a part of the estate of the member for payment of his debt; Provided, however, That this section shall not apply when obligation, associated or bank or other financial instituted, which is hereby authorized. The aforecited freeze order of respondent Judge Benitez (directing PNB not to release any portion of the retirement benefits due the petitioner) falls squarely within the restrictive provisions of the aforequoted section. Notably, said section speaks of "any other benefit granted under this Act," or "other process" and "applied by any legal or equitable process or operation of law." This assailed order clearly violates the aforestated provision and is, therefore, illegal and improper.

G.R. No 75410
Re the petition for certiorari and prohibition, the appellate court in dismissing the same, said: But in this case, the petitioner could have appealed from the decision of Judge Diaz. Instead, he announced he was not going to appeal. He was going to file a petition for certiorari and prohibition as he in fact did in this case. This certainly cannot be done, even under the most liberal view of practice and procedure. Especially can this not be done when the questions raised do not relate either to errors of jurisdiction or to grave abuse of discretion but, if at all, to errors of judgment. The default judgment dated February 20, 1986 of respondent Judge Diaz which ordered then defendant PNB to desist and refrain from releasing to petitioner all monetary benefits and emoluments due him as retirement benefits and to deliver one-half thereof to private respondent also comes within the prohibition imposed by Sec. 26, as amended, of the GSIS Charter. This, in effect, is also a freeze order. The directive to deliver one-half (1/2) of the retirement benefits to private respondent makes the default judgment doubly illegal because retirement benefits have been adjudged as gratuities or reward for lengthy and faithful service of the recipient and should be treated as separate property of the retiree-spouse. Thus, if the monetary benefits are given gratis by the government because of previous work (like the retirement pay of a provincial auditor in Mendoza vs. Dizon, L-387, October 25, 1956) or that of a Justice of the Peace (Elcar vs. Eclar, CA-40 O.G. 12th Supp. No. 18, p. 86), this is a gratuity and should be considered separate property (Art. 148, Civil Code). In view of the foregoing, the petitions are hereby GRANTED. Let the records be remanded to the trial courts of origin for further proceedings.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 70082 August 19, 1991 SPOUSES RICKY WONG and ANITA CHAN, LEONARDO JOSON, JUANITO SANTOS, EMERITO SICAT and CONRADO LAGMAN, petitioners, vs. HON. INTERMEDIATE APPELLATE COURT and ROMARICO HENSON, respondents.

Feliciano C. Tumale for petitioners. Benjamin Dadios and Bausa, Ampil, Suarez, Paredes & Bausa for private respondent.

FERNAN, C.J.:p Submitted for adjudication in the instant petition for review on certiorari is the issue of whether or not the execution of a decision in an action for collection of a sum of money may be nullified on the ground that the real properties levied upon and sold at public auction are the alleged exclusive properties of a husband who did not participate in his wife's business transaction from which said action stemmed. Private respondent Romarico Henson married Katrina Pineda on January 6, 1964. 1 They have three children but even during the early years of their marriage, Romarico and Katrina had been most of the time living separately. The former stayed in Angeles City while the latter lived in Manila. During the marriage or on January 6, 1971, Romarico bought a 1,787 square-meter parcel of land in Angeles City for P11,492 from his father, Dr. Celestino L. Henson 2 with money borrowed from an officemate. His father need the amount for investments in Angeles City and Palawan. 3 Meanwhile, in Hongkong sometime in June 1972, Katrina entered into an agreement with Anita Chan whereby the latter consigned to Katrina pieces of jewelry for sale valued at 199,895 Hongkong dollars or P321,830.95. 4 When Katrina failed to return the pieces of jewelry within the 20-day period agreed upon, Anita Chan demanded payment of their value. On September 18, 1972, Katrina issued in favor of Anita Chan a check for P55,000 which, however, was dishonored for lack of funds. Hence, Katrina was charged with estafa before the then Court of First Instance of Pampanga and Angeles City, Branch IV. 5 After trial, the lower court rendered a decision dismissing the case on the ground that Katrina's liability was not criminal but civil in nature as no estafa was committed by the issuance of the check in payment of a pre-existing obligation. 6 In view of said decision, Anita Chan and her husband Ricky Wong filed against Katrina and her husband Romarico Henson, an action for collection of a sum of money also in the same branch of the aforesaid court. 7 The records of the case show that Atty. Gregorio Albino, Jr. filed an answer with counterclaim but only in behalf of Katrina. When the case was called for pre-trial, Atty. Albino once again appeared as counsel for Katrina only. While it is true that during subsequent hearings, Atty. Expedite Yumul, who collaborated with Atty. Albino, appeared for the defendants, it is not shown on record that said counsel also represented Romarico. In fact, a power of attorney which Atty. Albino produced during the trial, showed that the same was executed solely by Katrina. 8 After trial, the court promulgated a decisions 9 in favor of the Wongs. It ordered Katrina and Romarico Henson to pay the Wongs HK$199,895.00 or P321,830.95 with legal interest from May 27, 1975, the date of filing of the complaint, until fully paid; P20,000 as expenses for litigation; P15,000 as attorney's fees, and the costs of the suit. A writ of execution was thereafter issued. Levied upon were four lots in Angeles City covered by Transfer Certificates of Title Nos. 30950, 30951, 30952 and 30953 all in the name of Romarico Henson ... married to Katrina Henson. 10 The public auction sale was first set for October 30, 1977 but since said date was declared a public holiday, Deputy Sheriff Emerito Sicat reset the sale to November 11, 1977. On said date, the following properties registered in the name of Romarico Henson "married to Katrina Henson" were sold at public auction: (a) two parcels of land covered by Transfer Certificates of Title Nos. 30950 and 30951 with respective areas of 293 and 289 square meters at P145,000 each to Juanito L. Santos, 11 and (b) two parcels of land covered by Transfer Certificates of Title Nos. 30952 and 30953 with respective areas of 289 and 916 square meters in the amount of P119,000.00 to Leonardo B. Joson. 12 After the inscription on Transfer Certificate of Title No. 30951 of the levy on execution of the judgment in Civil Case No. 2224, the property covered by said title was extrajudicially foreclosed by the Rural Bank of Porac, Pampanga on account of the mortgage loan of P8,000 which Romarico and Katrina had obtained from said bank. The property was sold by the sheriff to the highest bidder for P57,000 on September 9, 1977. On September 14, 1978, Juanito Santos, who had earlier bought the same property at public auction on November 11, 1977, redeemed it by paying the sum of P57,000 plus the legal interest of P6,840.00 or a total amount of P63,840.00. 13

About a month before such redemption or on August 8, 1 978, Romarico filed an action for the annulment of the decision in Civil Case No. 2224 as well as the writ of execution, levy on execution and the auction sale therein in the same Court of First Instance. 14 Romarico alleged that he was "not given his day in court" because he was not represented by counsel as Attys. Albino and Yumul appeared solely for Katrina; that although he did not file an answer to the complaint, he was not declared in default in the case; that while Atty. Albino received a copy of the decision, he and his wife were never personally served a copy thereof; that he had nothing to do with the business transactions of Katrina as he did not authorize her to enter into such transactions; and that the properties levied on execution and sold at public auction by the sheriff were his capital properties and therefore, as to him, all the proceedings had in the case were null and void. On November 10, 1978, the lower court issued an order restraining the Register of Deeds of Angeles City from issuing the final bill of sale of Transfer Certificates of Title Nos. 30950 and 30951 in favor of Juanito Santos and Transfer Certificates of Title Nos. 30952 and 30953 in favor of Leonardo Joson until further orders of the court. 15On January 22, 1979, upon motion of Romarico, the court issued a writ of preliminary injunction enjoining the sheriff from approving the final bill of sale of the land covered by the aforementioned certificates of title and the Register of Deeds of Angeles City from registering said certificates of title in the names of Santos and Joson until the final outcome of the case subject to Romarico's posting of a bond in the amount of P321,831.00. 16 After trial on the merits, the lower court 17 rendered a decision holding that Romarico was indeed not given his day in court as he was not represented by counsel nor was he notified of the hearings therein although he was never declared in default. Noting that the complaint in Civil Case No. 2224 as well as the testimonial and documentary evidence adduced at the trial in said case do not show that Romarico had anything to do with the transactions between Katrina and Anita Chan, the court ruled that the judgment in Civil Case No. 2224 "is devoid of legal or factual basis which is not even supported by a finding of fact or ratio decidendi in the body of the decision, and may be declared null and void ... pursuant to a doctrine laid down by the Supreme Court to the effect that the Court of First Instance or a branch thereof, has authority and jurisdiction to try and decide an action for annulment of a final and executory judgment or order rendered by another court of first instance or of a branch thereof (Gianan vs. Imperial, 55 SCRA 755)." 18 On whether or not the properties lenied upon and sold at public auction may be reconveyed to Romarico, the court, finding that there was no basis for holding the conjugal partnership liable for the personal indebtedness of Katrina, ruled in favor of reconveyance in view of the jurisprudence that the interest of the wife in the conjugal partnership property being inchoate and therefore merely an expectancy, the same may not be sold or disposed of for value until after the liquidation and settlement of the community assets. The dispositive portion of the decision reads: WHEREFORE, and in view of the foregoing, judgment is hereby rendered in favor of the plaintiff and against all the defendants, as follows: (a) The Decision of the Court of First Instance of Pampanga and Angeles City, Branch IV, rendered in Civil Case No. 2224, entitled "RICKY WONG, ET AL. vs. KATRINA PINEDA HENSON and ROMARICO HENSON", is hereby declared null and void, only as far as it affects plaintiff herein Romarico Henson; (b) The Writ of Execution, levy in execution and auction sale of the conjugal property of the spouses Romarico Henson and Katrina Pineda Henson which were sold at public auction on November 11, 1977, without notice to plaintiff herein, by Deputy Sheriff Emerito Sicat, are likewise declared null and void and of no force and effect; (c) Defendants Emerito Sicat and Conrado Lagman, in their official capacity as Sheriff and Register of Deeds, respectively, are enjoined permanently from issuing and/or registering the corresponding deeds of sale affecting the property; (d) The aforementioned buyers are directed to reconvey the property they have thus purchased at public auction to plaintiff Romarico Henson; (e) As far as the claim for reimbursement filed by Juanito Santos concerning the redemption of the property covered by Transfer Certificate of Title No. 30951 from the Rural Bank of Porac, which foreclosed the same extrajudicially, is concerned, plaintiff Romarico Henson may redeem the same within the period and in the manner prescribed by law, after the corresponding deed of redemption shall have been registered in the Office of the Registry of Deeds for Angeles City; (f) Defendants Spouses Ricky Wong and Anita Chan are, with the exception of the defendants Juanito Santos, Leonardo Joson, Sheriff and Register of Deeds, are ordered jointly and severally, to pay the plaintiff Romarico Henson the sum of P10,000.00, corresponding to the expenses of litigation, with legal interest thereon from the time this suit was filed up to the time the same shall have been paid, plus P5,000.00 for and as attorney's fees, and the costs of suit; and (g) The counterclaims respectively filed on behalf of all the defendants in the above-entitled case are hereby DISMISSED. SO ORDERED. The defendants appealed to the then Intermediate Appellate Court. In its decision of January 22, 1985 19 the said court affirmed in toto the decision of the lower court. It added that as to Romarico, the judgment in Civil Case No. 2224 had not attained finality as the decision therein was not served on him and that he was not represented by counsel. Therefore, estoppel may not be applied against him as, not having been served with the decision, Romarico did not know anything about it. Corollarily, there can be no valid writ of execution inasmuch as the decision had not become final as far as Romarico is concerned. On whether the properties may be levied upon as conjugal properties, the appellate court ruled in the negative. It noted that the properties are Romarico' s exclusive capital having been bought by him with his own funds. But granting that the properties are conjugal, they cannot answer for

Katrina's obligations as the latter were exclusively hers because they were incurred without the consent of her husband, they were not for the daily expenses of the family and they did not redound to the benefit of the family. The court underscored the fact that no evidence has been submitted that the administration of the conjugal partnership had been transferred to Katrina either by Romarico or by the court before said obligations were incurred. The appellants filed a motion for reconsideration of the decision of the appellate court but the same was denied for lack of merit on February 6, 1985.
20

Hence, the instant petition for review on certiorari. Petitioners contend that, inasmuch as the Henson spouses were duly represented by Atty. Albino as shown by their affidavit of August 25, 1977 wherein they admitted that they were represented by said counsel until Atty. Yumul took over the actual management and conduct of the case and that Atty. Albino had not withdrawn as their counsel, the lower court "did not commit an error" in serving a copy of the decision in Civil Case No. 2224 only on Atty. Albino. Moreover, during the 2-year period between the filing of the complaint in Civil Case No. 2224 and the public auction sale on November 11, 1977, Romarico remained silent thereby making him in estoppel and guilty of laches. Petitioners further aver that there being sufficient evidence that the auction sale was conducted in accordance with law, the acts of the sheriffs concerned are presumed to be regular and valid. But granting that an irregularity consisting of the non-notification of Romarico attended the conduct of the auction sale, the rights of Santos and Joson who were "mere strangers who participated as the highest bidders" therein, may not be prejudiced. Santos and Joson bought the properties sincerely believing that the sheriff was regularly performing his duties and no evidence was presented to the effect that they acted with fraud or that they connived with the sheriff. However, should the auction sale be nullified, petitioners assert that Romarico should not be unduly enriched at the expense of Santos and Joson. The petitioners' theory is that Romarico Henson was guilty of laches and may not now belatedly assert his rights over the properties because he and Katrina were represented by counsel in Civil Case No. 2224. Said theory is allegedly founded on the perception that the Hensons were like any other ordinary couple wherein a spouse knows or should know the transactions of the other spouse which necessarily must be in interest of the family. The factual background of this case, however, takes it out of said ideal situation. Romarico and Katrina had in fact been separated when Katrina entered into a business deal with Anita Wong. Thus, when that business transaction eventually resulted in the filing of Civil Case No. 2224, Romarico acted, or, as charged by petitioners, failed to act, in the belief that he was not involved in the personal dealings of his estranged wife. That belief was buttressed by the fact that the complaint itself did not mention or implicate him other than as the husband of Katrina. On whether Romarico was also represented by Atty. Albino, Katrina's counsel, the courts below found that: ... Atty. Albino filed an Answer with Counterclaims dated July 25, 1975 solely on behalf of defendant Katrina Henson. The salutary statement in that Answer categorically reads: ... COMES NOW THE DEFENDANT KATRINA HENSON by and through undersigned counsel, in answer to plaintiffs' complaint respectfully alleges: ... . That Answer was signed by GREGORIO ALBINO, JR., over the phrase COUNSEL FOR DEFENDANT KATRINA HENSON. Again, when Civil Case No. 2224 was called for pre-trial on November 27, 1975, before then Presiding Judge Bienvenido Ejercito, it is clearly stated on page 2 of the day's stenographic notes, under "APPEARANCES that Atty. Albino, Jr. appeared as COUNSEL FOR DEFENDANT KATRINA HENSON". And when the case was called, Atty. Jose Baltazar, Sr. appeared for the plaintiffs while Atty. Albino categorically appeared "FOR DEFENDANT KATRINA HENSON". It might be true that in subsequent hearings, Atty. Expedito Yumul 'appeared as counsel for the defendants,' but the whole trouble is that he never expressly manifested to the Court that he was likewise actually representing defendant "ROMARICO HENSON", for it cannot be disputed that Atty. Yumul only entered his appearance in collaboration with Atty. Albino (see p. 2 tsn, January 26, 1976, Espinosa), who in turn entered his initial appearance during the pre- trial, and through the filing of an Answer, for defendant KATRINA HENSON. As a matter of fact, the Power of Attorney which Atty. Albino produced during the pre-trial was executed solely by defendant KATRINA HENSON. Accordingly, as collaborating counsel, Atty. Yumul cannot, by any stretch of the imagination, be considered as duly authorized to formally appear likewise on behalf of defendant ROMARICO HENSON for whom principal counsel of record Atty. Gregorio Albino, Jr. never made any formal appearance. On this score, it is not amiss to state that "A spring cannot rise higher than its source:. Now, what about that statement in the aforementioned joint affidavit of the spouses KATRINA HENSON and ROMARICO HENSON, to the effect that our first lawyer in said case was Atty. Gregorio Albino, Jr., and sometime later Atty. Expedito B. Yumul took over ... That statement which plaintiff ROMARICO HENSON was made to sign by Atty. Yumul on August 25,1977, after the filing of this case, allegedly for the purpose of dissolving the writ of execution, as claimed in paragraph XIV of the complaint herein, and is satisfactorily explained by both plaintiff herein and his wife, while on cross-examination by Atty. Baltazar, Sr., and We quote: Q So, the summons directed your filing of your Answer for both of you, your wife and your good self? A Yes, sir but may I add, I received the summons but I did not file an answer because my wife took a lawyer and that lawyer I think will protect her interest and my interest being so I did not have nothing to do in the transaction which is attached to the complaint.' (TSN, Jan. 14, 1980, pp. 52-53). That plaintiff never appeared in Civil Case No. 2224, nor was he therein represented by counsel was impliedly admitted by defendants' counsel of records thru a question he propounded on cross, and the answer given by Katrina Pineda, to wit:

Q How about your husband, do you remember if he physically appeared in that Civil Case No. 2224, will you tell us if he was represented by counsel as a party defendant? A No, sir, he did not appear. Q You are husband and wife, please tell us the reason why you have your own counsel in that case whereas Romarico Henson did not appear nor a counsel did not appear in that proceedings (TSN, Feb. 25,1980, pp. 67). xxx xxx xxx A Because that case is my exclusive and personal case, he has nothing to do with that, sir. (TSN, Feb. 25, 1980, p. 9). (Rollo, pp. 17-20) Hence, laches may not be charged against Romarico because, aside from the fact that he had no knowledge of the transactions of his estranged wife, he was also not afforded an opportunity to defend himself in Civil Case No. 2224. 21 There is no laches or even finality of decision to speak of with respect to Romarico since the decision in Civil Case No. 2224 is null and void for having been rendered without jurisdiction for failure to observe the notice requirements prescribed by law. 22 Failure to notify Romarico may not be attributed to the fact that the plaintiffs in Civil Case No. 2224 acted on the presumption that the Hensons were still happily married because the complaint itself shows that they did not consider Romarico as a party to the transaction which Katrina undertook with Anita Wong. In all likelihood, the plaintiffs merely impleaded Romarico as a nominal party in the case pursuant to the provisions of Rule 3, Section 4 of the Rules of Court. Consequently, the writ of execution cannot be issued against Romarico as he has not yet had his day in court 23and, necessarily, the public auction sale is null and void. 24 Moreover, the power of the court in the execution of judgments extends only over properties unquestionably belonging to the judgment debtor. 25 On the matter of ownership of the properties involved, however, the Court disagrees with the appellate court that the said properties are exclusively owned by Romarico. Having been acquired during the marriage, they are still presumed to belong to the conjugal partnership 26 even though Romarico and Katrina had been living separately. 27 The presumption of the conjugal nature of the properties subsists in the absence of clear, satisfactory and convincing evidence to overcome said presumption or to prove that the properties are exclusively owned by Romarico. 28 While there is proof that Romarico acquired the properties with money he had borrowed from an officemate, it is unclear where he obtained the money to repay the loan. If he paid it out of his salaries, then the money is part of the conjugal assets 29 and not exclusively his. Proof on this matter is of paramount importance considering that in the determination of the nature of a property acquired by a person during covertrue, the controlling factor is the source of the money utilized in the purchase. The conjugal nature of the properties notwithstanding, Katrina's indebtedness may not be paid for with them her obligation not having been shown by the petitioners to be one of the charges against the conjugal partnership. 30In addition to the fact that her rights over the properties are merely inchoate prior to the liquidation of the conjugal partnership, the consent of her husband and her authority to incur such indebtedness had not been alleged in the complaint and proven at the trial. 31 Furthermore, under the Civil Code (before the effectivity of the Family Code on August 3, 1988), a wife may bind the conjugal partnership only when she purchases things necessary for the support of the family or when she borrows money for the purpose of purchasing things necessary for the support of the family if the husband fails to deliver the proper sum; 32 when the administration of the conjugal partnership is transferred to the wife by the courts 33 or by the husband 34 and when the wife gives moderate donations for charity. 35 Having failed to establish that any of these circumstances occurred, the Wongs may not bind the conjugal assets to answer for Katrina's personal obligation to them. Petitioners' contention that the rights of Santos and Joson as innocent buyers at the public auction sale may not be prejudiced, is, to a certain extent, valid. After all, in the absence of proof that irregularities attended the sale, the same must be presumed to have been conducted in accordance with law. There is, however, a peculiar factual circumstance that goes against the grain of that general presumption the properties levied upon and sold at the public auction do not exclusively belong to the judgment debtor. Thus, the guiding jurisprudence is as follows: The rule in execution sales is that an execution creditor acquires no higher or better right than what the execution debtor has in the property levied upon. The purchaser of property on sale under execution and levy takes as assignee, only as the judicial seller possesses no title other than that which would pass by an assignment by the owner. "An execution purchaser generally acquires such estate or interest as was vested in the execution debtor at the time of the seizure on execution, and only such interest, taking merely a quit-claim of the execution debtor's title, without warranty on the part of either the execution officer or of the parties, whether the property is realty or personalty. This rule prevails even if a larger interest in the property was intended to be sold. Accordingly, if the judgment debtor had no interest in the property, the execution purchaser acquires no interest therein." (Pacheco vs. Court of Appeals, L-48689, August 31, 1987, 153 SCRA 382, 388-389 quoting Laureano vs. Stevenson, 45 Phil. 252; Cabuhat vs. Ansery, 42 Phil. 170; Fore v. Manove, 18 Cal. 436 and 21 Am. Jur., 140-141. Emphasis supplied.) Applying this jurisprudence, execution purchasers Santos and Joson possess no rights which may rise above judgment debtor Katrina's inchoate proprietary rights over the properties sold at public auction. After all, a person can sell only what he owns or is authorized to sell and the buyer can, as a consequence, acquire no more that what the seller can legally transfer. 36 But, inasmuch as the decision in Civil Case No. 2224 is void only as far as Romarico and the conjugal properties are concerned, the same may still be executed by the Spouses Wong against Katrina Henson personally and exclusively. The Spouses Wong must return to Juanito Santos and Leonardo Joson the purchase prices of P145,000 and P119,000 respectively, received by said spouse from the public auction sale. The redemption made by Santos in the foreclosure proceeding against Romarico and Katrina Henson filed by the Rural Bank of Porac, should, however, be respected unless Romarico exercises his right of redemption over the property covered by Transfer Certificate of Title No. 30951 in accordance with law. WHEREFORE, the decisions of the appellate court and the lower court in Civil Case No. 28-09 are hereby AFFIRMED subject to the modifications above stated. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-9374 February 16, 1915

FRANCISCO DEL VAL, ET AL., plaintiffs-appellants, vs. ANDRES DEL VAL, defendant-appellee.

Ledesma, Lim and Irureta Goyena for appellants. O'Brien and DeWitt for appellee.
MORELAND, J.: This is an appeal from a judgment of the Court of First Instance of the city of Manila dismissing the complaint with costs. The pleadings set forth that the plaintiffs and defendant are brother and sisters; that they are the only heirs at law and next of kin of Gregorio Nacianceno del Val, who died in Manila on August 4, 1910, intestate; that an administrator was appointed for the estate of the deceased, and, after a partial administration, it was closed and the administrator discharged by order of the Court of First Instance dated December 9, 1911; that during the lifetime of the deceased he took out insurance on his life for the sum of P40,000 and made it payable to the defendant as sole beneficiary; that after his death the defendant collected the face of the policy; that of said policy he paid the sum of P18,365.20 to redeem certain real estate which the decedent had sold to third persons with a right to repurchase; that the redemption of said premises was made by the attorney of the defendant in the name of the plaintiff and the defendant as heirs of the deceased vendor; that the redemption of said premises they have had the use and benefit thereof; that during that time the plaintiffs paid no taxes and made no repairs. It further appears from the pleadings that the defendant, on the death of the deceased, took possession of most of his personal property, which he still has in his possession, and that he has also the balance on said insurance policy amounting to P21,634.80. Plaintiffs contend that the amount of the insurance policy belonged to the estate of the deceased and not to the defendant personally; that, therefore, they are entitled to a partition not only of the real and personal property, but also of the P40,000 life insurance. The complaint prays a partition of all the property, both real and personal, left by the deceased; that the defendant account for P21,634.80, and that that sum be divided equally among the plaintiffs and defendant along with the other property of deceased. The defendant denies the material allegations of the complaint and sets up as special defense and counterclaim that the redemption of the real estate sold by his father was made in the name of the plaintiffs and himself instead of in his name alone without his knowledge or consent; and that it was not his intention to use the proceeds of the insurance policy for the benefit of any person but himself, he alleging that he was and is the sole owner thereof and that it is his individual property. He, therefore, asks that he be declared the owner of the real estate redeemed by the payment of the P18,365.20, the owner of the remaining P21,634.80, the balance of the insurance policy, and that the plaintiff's account for the use and occupation of the premises so redeemed since the date of the redemption. The learned trial court refused to give relief to either party and dismissed the action. It says in its opinion: "This purports to be an action for partition, brought against an heir by his coheirs. The complaint, however, fails to comply with Code Civ., Pro. sec. 183, in that it does not 'contain an adequate description of the real property of which partition is demanded.' Because of this defect (which has not been called to our attention and was discovered only after the cause was submitted) it is more than doubtful whether any relief can be awarded under the complaint, except by agreement of all the parties." This alleged defect of the complaint was made one of the two bases for the dismissal of the action. We do not regard this as sufficient reason for dismissing the action. It is the doctrine of this court, set down in several decisions, Lizarraga Hermanos vs. Yap Tico, 24 Phil. Rep., 504, that, even though the complaint is defective to the extent of failing in allegations necessary to constitute a cause of action, if, on the trial of the cause, evidence is offered which establishes the cause of action which the complaint intended to allege, and such evidence is received without objection, the defect is thereby cured and cannot be made the ground of a subsequent objection. If, therefore, evidence was introduced on the trial in this case definitely and clearly describing the real estate sought to be partitioned, the defect in the complaint was cured in that regard and should not have been used to dismiss the action. We do not stop to inquire whether such evidence was or was not introduced on the trial, inasmuch as this case must be turned for a new trial with opportunity to both parties to present such evidence as is necessary to establish their respective claims. The court in its decision further says: "It will be noticed that the provision above quoted refers exclusively to real estate. . . . It is, in other words, an exclusive real property action, and the institution thereof gives the court no jurisdiction over chattels. . . . But no relief could possibly be granted in this action as to any property except the last (real estate), for the law contemplated that all the personal property of an estate be distributed before the administration is closed. Indeed, it is only in exceptional cases that the partition of the real estate is provided for, and this too is evidently intended to be effected as a part of the administration, but here the complaint alleges that the estate was finally closed on December 9, 1911, and we find upon referring to the record in that case that subsequent motion to reopen the same were denied; so that the matter of the personal property at least must be considered res judicata (for the final judgment in the administration proceedings must be treated as concluding not merely what was adjudicated, but what might have been). So far, therefore, as the personal property at least is concerned, plaintiffs' only remedy was an appeal from said order." We do not believe that the law is correctly laid down in this quotation. The courts of the Islands have jurisdiction to divide personal property between the common owners thereof and that power is as full and complete as is the power to partition real property. If an actual partition of personal property cannot be made it will be sold under the direction of the court and the proceeds divided among the owners after the necessary expenses have been deducted. The administration of the estate of the decedent consisted simply, so far as the record shows, in the payment of the debts. No division of the property, either real or personal, seems to have been made. On the contrary, the property appears, from the record, to have been turned over to the heirs in bulk. The failure to partition the real property may have been due either to the lack of request to the court by one or more of the heirs to do so, as the court has no authority to make a partition of the real estate without such request; or it may have been due to the fact that all the real property

of decedent had been sold under pacto de retro and that, therefore, he was not the owner of any real estate at the time of his death. As to the personal property, it does not appear that it was disposed of in the manner provided by law. (Sec. 753, Code of Civil Procedure.) So far as this action is concerned, however, it is sufficient for us to know that none of the property was actually divided among the heirs in the administration proceeding and that they remain coowners and tenants-in- common thereof at the present time. To maintain an action to partition real or personal property it is necessary to show only that it is owned in common. The order finally closing the administration and discharging the administrator, referred to in the opinion of the trial court, has nothing to do with the division of either the real or the personal property. The heirs have the right to ask the probate court to turn over to them both the real and personal property without division; and where that request is unanimous it is the duty of the court to comply with it, and there is nothing in section 753 of the Code of Civil Procedure which prohibits it. In such case an order finally settling the estate and discharging the administrator would not bar a subsequent action to require a division of either the real or personal property. If, on the other hand, an order had been made in the administration proceedings dividing the personal or the real property, or both, among the heirs, then it is quite possible that, to a subsequent action brought by one of the heirs for a partition of the real or personal property, or both, there could have been interposed a plea of res judicata based on such order. As the matter now stands, however, there is no ground on which to base such a plea. Moreover, no such plea has been made and no evidence offered to support it. With the finding of the trial court that the proceeds of the life-insurance policy belong exclusively to the defendant as his individual and separate property, we agree. That the proceeds of an insurance policy belong exclusively to the beneficiary and not to the estate of the person whose life was insured, and that such proceeds are the separate and individual property of the beneficiary, and not of the heirs of the person whose life was insured, is the doctrine in America. We believe that the same doctrine obtains in these Islands by virtue of section 428 of the Code of Commerce, which reads: The amount which the underwriter must deliver to the person insured, in fulfillment of the contract, shall be the property of the latter, even against the claims of the legitimate heirs or creditors of any kind whatsoever of the person who effected the insurance in favor of the former. It is claimed by the attorney for the plaintiffs that the section just quoted is subordinate to the provisions of the Civil Code as found in article 1035. This article reads: An heir by force of law surviving with others of the same character to a succession must bring into the hereditary estate the property or securities he may have received from the deceased during the life of the same, by way of dowry, gift, or for any good consideration, in order to compute it in fixing the legal portions and in the account of the division. Counsel also claim that the proceeds of the insurance policy were a donation or gift made by the father during his lifetime to the defendant and that, as such, its ultimate destination is determined by those provisions of the Civil Code which relate to donations, especially article 819. This article provides that "gifts made to children which are not betterments shall be considered as part of their legal portion." We cannot agree with these contentions. The contract of life insurance is a special contract and the destination of the proceeds thereof is determined by special laws which deal exclusively with that subject. The Civil Code has no provisions which relate directly and specifically to lifeinsurance contracts or to the destination of life insurance proceeds. That subject is regulated exclusively by the Code of Commerce which provides for the terms of the contract, the relations of the parties and the destination of the proceeds of the policy. The proceeds of the life-insurance policy being the exclusive property of the defendant and he having used a portion thereof in the repurchase of the real estate sold by the decedent prior to his death with right to repurchase, and such repurchase having been made and the conveyance taken in the names of all of the heirs instead of the defendant alone, plaintiffs claim that the property belongs to the heirs in common and not to the defendant alone. We are not inclined to agree with this contention unless the fact appear or be shown that the defendant acted as he did with the intention that the other heirs should enjoy with him the ownership of the estate in other words, that he proposed, in effect, to make a gift of the real estate to the other heirs. If it is established by the evidence that that was his intention and that the real estate was delivered to the plaintiffs with that understanding, then it is probable that their contention is correct and that they are entitled to share equally with the defendant therein. If, however, it appears from the evidence in the case that the conveyances were taken in the name of the plaintiffs without his knowledge or consent, or that it was not his intention to make a gift to them of the real estate, then it belongs to him. If that facts are as stated, he has two remedies. The one is to compel the plaintiffs to reconvey to him and the other is to let the title stand with them and to recover from them the sum he paid on their behalf. For the complete and proper determination of the questions at issue in this case, we are of the opinion that the cause should be returned to the trial court with instructions to permit the parties to frame such issues as will permit the settlement of all the questions involved and to introduce such evidence as may be necessary for the full determination of the issues framed. Upon such issues and evidence taken thereunder the court will decide the questions involved according to the evidence, subordinating his conclusions of law to the rules laid down in this opinion. We do not wish to be understood as having decided in this opinion any question of fact which will arise on the trial and be there in controversy. The trial court is left free to find the facts as the evidence requires. To the facts as so found he will apply the law as herein laid down. The judgment appealed from is set aside and the cause returned to the Court of First Instance whence it came for the purpose hereinabove stated. So ordered. Arellano, C.J., and Carson, J., concur. Torres, J., concurs in the result. Separate Opinions ARAULLO, J., concurring: I concur in the result and with the reasoning of the foregoing decision, only in so far as concerns the return of the record to the lower court in order that it fully and correctly decide all the issues raised therein, allow the parties to raise such questions as may help to decide all those involved in the case, and to present such evidence as they may deem requisite for a complete resolution of all the issues in discussion, because it is my opinion that it is inopportune to make, and there should not be made in the said majority decision the findings therein set forth in connection with articles 428 of the Code of Commerce and 1035 of the Civil Code, in order to arrive at the conclusion that the amount of the insurance policy referred to belongs exclusively to the defendant, inasmuch a this is one of the questions which, according to the decision itself, should be decided by the lower court after an examination of the evidence introduced by the parties; it is the lower court that should make those findings, which ought afterwards to be submitted to this court, if any appeal be taken from the judgment rendered in the case by the trial court in compliance with the foregoing decision.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 156125 August 25, 2010

FRANCISCO MUOZ, JR., Petitioner, vs. ERLINDA RAMIREZ and ELISEO CARLOS, Respondents. DECISION BRION, J.: We resolve the present petition for review on certiorari1 filed by petitioner Francisco Muoz, Jr. (petitioner) to challenge the decision2 and the resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 57126.4 The CA decision set aside the decision5 of the Regional Trial Court (RTC), Branch 166, Pasig City, in Civil Case No. 63665. The CA resolution denied the petitioners subsequent motion for reconsideration. FACTUAL BACKGROUND The facts of the case, gathered from the records, are briefly summarized below. Subject of the present case is a seventy-seven (77)-square meter residential house and lot located at 170 A. Bonifacio Street, Mandaluyong City (subject property), covered by Transfer Certificate of Title (TCT) No. 7650 of the Registry of Deeds of Mandaluyong City in the name of the petitioner.6 The residential lot in the subject property was previously covered by TCT No. 1427, in the name of Erlinda Ramirez, married to Eliseo Carlos (respondents).7 On April 6, 1989, Eliseo, a Bureau of Internal Revenue employee, mortgaged TCT No. 1427, with Erlindas consent, to the Government Service Insurance System (GSIS) to secure a P136,500.00 housing loan, payable within twenty (20) years, through monthly salary deductions of P1,687.66.8 The respondents then constructed a thirty-six (36)-square meter, two-story residential house on the lot. On July 14, 1993, the title to the subject property was transferred to the petitioner by virtue of a Deed of Absolute Sale, dated April 30, 1992, executed by Erlinda, for herself and as attorney-in-fact of Eliseo, for a stated consideration of P602,000.00.9 On September 24, 1993, the respondents filed a complaint with the RTC for the nullification of the deed of absolute sale, claiming that there was no sale but only a mortgage transaction, and the documents transferring the title to the petitioners name were falsified. The respondents alleged that in April 1992, the petitioner granted them a P600,000.00 loan, to be secured by a first mortgage on TCT No. 1427; the petitioner gave Erlinda a P200,000.0010 advance to cancel the GSIS mortgage, and made her sign a document purporting to be the mortgage contract; the petitioner promised to give the P402,000.00 balance when Erlinda surrenders TCT No. 1427 with the GSIS mortgage cancelled, and submits an affidavit signed by Eliseo stating that he waives all his rights to the subject property; with the P200,000.00 advance, Erlinda paid GSIS P176,445.2711 to cancel the GSIS mortgage on TCT No. 1427;12 in May 1992, Erlinda surrendered to the petitioner the clean TCT No. 1427, but returned Eliseos affidavit, unsigned; since Eliseos affidavit was unsigned, the petitioner refused to give the P402,000.00 balance and to cancel the mortgage, and demanded that Erlinda return the P200,000.00 advance; since Erlinda could not return theP200,000.00 advance because it had been used to pay the GSIS loan, the petitioner kept the title; and in 1993, they discovered that TCT No. 7650 had been issued in the petitioners name, cancelling TCT No.1427 in their name. The petitioner countered that there was a valid contract of sale. He alleged that the respondents sold the subject property to him after he refused their offer to mortgage the subject property because they lacked paying capacity and were unwilling to pay the incidental charges; the sale was with the implied promise to repurchase within one year,13 during which period (from May 1, 1992 to April 30, 1993), the respondents would lease the subject property for a monthly rental of P500.00;14 when the respondents failed to repurchase the subject property within the one-year period despite notice, he caused the transfer of title in his name on July 14, 1993;15 when the respondents failed to pay the monthly rentals despite demand, he filed an ejectment case16 against them with the Metropolitan Trial Court (MeTC), Branch 60, Mandaluyong City, on September 8, 1993, or sixteen days before the filing of the RTC case for annulment of the deed of absolute sale. During the pendency of the RTC case, or on March 29, 1995, the MeTC decided the ejectment case. It ordered Erlinda and her family to vacate the subject property, to surrender its possession to the petitioner, and to pay the overdue rentals.17 In the RTC, the respondents presented the results of the scientific examination18 conducted by the National Bureau of Investigation of Eliseos purported signatures in the Special Power of Attorney19 dated April 29, 1992 and the Affidavit of waiver of rights dated April 29, 1992,20 showing that they were forgeries.

The petitioner, on the other hand, introduced evidence on the paraphernal nature of the subject property since it was registered in Erlindas name; the residential lot was part of a large parcel of land owned by Pedro Ramirez and Fructuosa Urcla, Erlindas parents; it was the subject of Civil Case No. 50141, a complaint for annulment of sale, before the RTC, Branch 158, Pasig City, filed by the surviving heirs of Pedro against another heir, Amado Ramirez, Erlindas brother; and, as a result of a compromise agreement, Amado agreed to transfer to the other compulsory heirs of Pedro, including Erlinda, their rightful shares of the land.21 THE RTC RULING In a Decision dated January 23, 1997, the RTC dismissed the complaint. It found that the subject property was Erlindas exclusive paraphernal property that was inherited from her father. It also upheld the sale to the petitioner, even without Eliseos consent as the deed of absolute sale bore the genuine signatures of Erlinda and the petitioner as vendor and vendee, respectively. It concluded that the NBI finding that Eliseos signatures in the special power of attorney and in the affidavit were forgeries was immaterial because Eliseos consent to the sale was not necessary.22 The respondents elevated the case to the CA via an ordinary appeal under Rule 41 of the Revised Rules of Court. THE CA RULING The CA decided the appeal on June 25, 2002. Applying the second paragraph of Article 15823 of the Civil Code and Calimlim-Canullas v. Hon. Fortun,24 the CA held that the subject property, originally Erlindas exclusive paraphernal property, became conjugal property when it was used as collateral for a housing loan that was paid through conjugal funds Eliseos monthly salary deductions; the subject property, therefore, cannot be validly sold or mortgaged without Eliseos consent, pursuant to Article 12425 of the Family Code. Thus, the CA declared void the deed of absolute sale, and set aside the RTC decision. When the CA denied26 the subsequent motion for reconsideration,27 the petitioner filed the present petition for review on certiorari under Rule 45 of the Revised Rules of Court. THE PETITION The petitioner argues that the CA misapplied the second paragraph of Article 158 of the Civil Code and Calimlim-Canullas28 because the respondents admitted in the complaint that it was the petitioner who gave the money used to cancel the GSIS mortgage on TCT No. 1427; Article 12029 of the Family Code is the applicable rule, and since the value of the house is less than the value of the lot, then Erlinda retained ownership of the subject property. He also argues that the contract between the parties was a sale, not a mortgage, because (a) Erlinda did not deny her signature in the document;30 (b) Erlinda agreed to sign a contract of lease over the subject property;31 and, (c) Erlinda executed a letter, dated April 30, 1992, confirming the conversion of the loan application to a deed of sale.32 THE CASE FOR THE RESPONDENTS The respondents submit that it is unnecessary to compare the respective values of the house and of the lot to determine ownership of the subject property; it was acquired during their marriage and, therefore, considered conjugal property. They also submit that the transaction between the parties was not a sale, but an equitable mortgage because (a) they remained in possession of the subject property even after the execution of the deed of absolute sale, (b) they paid the 1993 real property taxes due on the subject property, and (c) they receivedP200,000.00 only of the total stated price of P602,000.00. THE ISSUE The issues in the present case boil down to (1) whether the subject property is paraphernal or conjugal; and, (2) whether the contract between the parties was a sale or an equitable mortgage. OUR RULING We deny the present Petition but for reasons other than those advanced by the CA. This Court is not a trier of facts. However, if the inference, drawn by the CA, from the facts is manifestly mistaken, as in the present case, we can review the evidence to allow us to arrive at the correct factual conclusions based on the record.33 First Issue: Paraphernal or Conjugal? As a general rule, all property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved.34 In the present case, clear evidence that Erlinda inherited the residential lot from her father has sufficiently rebutted this presumption of conjugal ownership.35 Pursuant to Articles 9236 and 10937 of the Family Code, properties acquired by gratuitous title by either spouse, during the marriage, shall be excluded from the community property and be the exclusive property of each spouse.38 The residential lot, therefore, is Erlindas exclusive paraphernal property.

The CA, however, held that the residential lot became conjugal when the house was built thereon through conjugal funds, applying the second paragraph of Article 158 of the Civil Code and Calimlim-Canullas.39 Under the second paragraph of Article 158 of the Civil Code, a land that originally belonged to one spouse becomes conjugal upon the construction of improvements thereon at the expense of the partnership. We applied this provision in Calimlim-Canullas,40 where we held that when the conjugal house is constructed on land belonging exclusively to the husband, the land ipso facto becomes conjugal, but the husband is entitled to reimbursement of the value of the land at the liquidation of the conjugal partnership. The CA misapplied Article 158 of the Civil Code and Calimlim-Canullas We cannot subscribe to the CAs misplaced reliance on Article 158 of the Civil Code and Calimlim-Canullas. As the respondents were married during the effectivity of the Civil Code, its provisions on conjugal partnership of gains (Articles 142 to 189) should have governed their property relations. However, with the enactment of the Family Code on August 3, 1989, the Civil Code provisions on conjugal partnership of gains, including Article 158, have been superseded by those found in the Family Code (Articles 105 to 133). Article 105 of the Family Code states: xxxx The provisions of this Chapter [on the Conjugal Partnership of Gains] shall also apply to conjugal partnerships of gains already established between spouses before the effectivity of this Code, without prejudice to vested rights already acquired in accordance with the Civil Code or other laws, as provided in Article 256. Thus, in determining the nature of the subject property, we refer to the provisions of the Family Code, and not the Civil Code, except with respect to rights then already vested. Article 120 of the Family Code, which supersedes Article 158 of the Civil Code, provides the solution in determining the ownership of the improvements that are made on the separate property of the spouses, at the expense of the partnership or through the acts or efforts of either or both spouses. Under this provision, when the cost of the improvement and any resulting increase in value are more than the value of the property at the time of the improvement, the entire property of one of the spouses shall belong to the conjugal partnership, subject to reimbursement of the value of the property of the owner-spouse at the time of the improvement; otherwise, said property shall be retained in ownership by the owner-spouse, likewise subject to reimbursement of the cost of the improvement.41 In the present case, we find that Eliseo paid a portion only of the GSIS loan through monthly salary deductions. From April 6, 198942 to April 30, 1992,43 Eliseo paid about P60,755.76,44 not the entire amount of the GSIS housing loan plus interest, since the petitioner advanced the P176,445.2745 paid by Erlinda to cancel the mortgage in 1992. Considering the P136,500.00 amount of the GSIS housing loan, it is fairly reasonable to assume that the value of the residential lot is considerably more than the P60,755.76 amount paid by Eliseo through monthly salary deductions. Thus, the subject property remained the exclusive paraphernal property of Erlinda at the time she contracted with the petitioner; the written consent of Eliseo to the transaction was not necessary. The NBI finding that Eliseos signatures in the special power of attorney and affidavit were forgeries was immaterial. Nonetheless, the RTC and the CA apparently failed to consider the real nature of the contract between the parties. Second Issue: Sale or Equitable Mortgage? Jurisprudence has defined an equitable mortgage "as one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, there being no impossibility nor anything contrary to law in this intent."46 Article 1602 of the Civil Code enumerates the instances when a contract, regardless of its nomenclature, may be presumed to be an equitable mortgage: (a) when the price of a sale with right to repurchase is unusually inadequate; (b) when the vendor remains in possession as lessee or otherwise; (c) when upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (d) when the purchaser retains for himself a part of the purchase price; (e) when the vendor binds himself to pay the taxes on the thing sold; and, (f) in any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. These instances apply to a contract purporting to be an absolute sale.47 For the presumption of an equitable mortgage to arise under Article 1602 of the Civil Code, two (2) requisites must concur: (a) that the parties entered into a contract denominated as a contract of sale; and, (b) that their intention was to secure an existing debt by way of a mortgage. Any of the circumstances laid out in Article 1602 of the Civil Code, not the concurrence nor an overwhelming number of the enumerated circumstances, is sufficient to support the conclusion that a contract of sale is in fact an equitable mortgage.48 Contract is an equitable mortgage In the present case, there are four (4) telling circumstances pointing to the existence of an equitable mortgage.

First, the respondents remained in possession as lessees of the subject property; the parties, in fact, executed a one-year contract of lease, effective May 1, 1992 to April 30, 1993.49 Second, the petitioner retained part of the "purchase price," the petitioner gave a P200,000.00 advance to settle the GSIS housing loan, but refused to give the P402,000.00 balance when Erlinda failed to submit Eliseos signed affidavit of waiver of rights. Third, respondents paid the real property taxes on July 8, 1993, despite the alleged sale on April 30, 1992;50payment of real property taxes is a usual burden attaching to ownership and when, as here, such payment is coupled with continuous possession of the property, it constitutes evidence of great weight that the person under whose name the realty taxes were declared has a valid and rightful claim over the land.51 Fourth, Erlinda secured the payment of the principal debt owed to the petitioner with the subject property. The records show that the petitioner, in fact, sent Erlinda a Statement of Account showing that as of February 20, 1993, she owed P384,660.00, and the daily interest, starting February 21, 1993, was P641.10.52 Thus, the parties clearly intended an equitable mortgage and not a contract of sale. That the petitioner advanced the sum of P200,000.00 to Erlinda is undisputed. This advance, in fact, prompted the latter to transfer the subject property to the petitioner. Thus, before the respondents can recover the subject property, they must first return the amount of P200,000.00 to the petitioner, plus legal interest of 12% per annum, computed from April 30, 1992. We cannot sustain the ballooned obligation of P384,660.00, claimed in the Statement of Account sent by the petitioner,53 sans any evidence of how this amount was arrived at. Additionally, a daily interest of P641.10 orP19,233.00 per month for a P200,000.00 loan is patently unconscionable. While parties are free to stipulate on the interest to be imposed on monetary obligations, we can step in to temper the interest rates if they are unconscionable.54 In Lustan v. CA,55 where we established the reciprocal obligations of the parties under an equitable mortgage, we ordered the reconveyance of the property to the rightful owner therein upon the payment of the loan within ninety (90) days from the finality of the decision.56 WHEREFORE, in light of all the foregoing, we hereby DENY the present petition. The assailed decision and resolution of the Court of Appeals in CAG.R. CV No. 57126 are AFFIRMED with the following MODIFICATIONS: 1. The Deed of Absolute Sale dated April 30, 1992 is hereby declared an equitable mortgage; and 2. The petitioner is obligated to RECONVEY to the respondents the property covered by Transfer Certificate of Title No. 7650 of the Register of Deeds of Mandaluyong City, UPON THE PAYMENT OF P200,000.00, with 12% legal interest from April 30, 1992, by respondents within NINETY DAYS FROM THE FINALITY OF THIS DECISION. Costs against the petitioner. SO ORDERED.