MOISES JOCSON, petitioner, vs. HON.

COURT OF APPEALS,
AGUSTINA JOCSON-VASQUEZ, ERNESTO VASQUEZ, respondents.
G.R. No. L-55322 | 1989-02-16

DECISION

MEDIALDEA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules

of Court of the decision of the Court of Appeals in CA-G.R. No. 63474,
promulgated on April 30, 1980, entitled "MOISES JOCSON, plaintiff-
appellee, versus AGUSTINA JOCSON-VASQUEZ and ERNESTO
VASQUEZ, defendant-appellants," upholding the validity of three (3)
documents questioned by Moises Jocson, in total reversal of the
decision of declared them as null and void; and of its resolution,
dated September 30, 1980, denying therein appellee's motion for
reconsideration.

Petitioner Moises Jocson and respondent Agustina Jocson-Vasquez

are the only surviving offsprings of the spouses Emilio Jocson and
Alejandra Poblete, while respondent Ernesto Vasquez is the
husband of Agustina, Alejandra Poblete predeceased her husband
without her intestate estate being settled. Subsequently, Emilio
Jocson also died intestate on April 1, 1972.

As adverted to above, the present controversy concerns the validity

of three (3) documents executed by Emilio Jocson during his
lifetime. These documents purportedly conveyed, by sale, to
Agustina Jocson-Vasquez what apparently covers almost all of his
properties, including his one-third (1/3) share in the estate of his
wife. Petitioner Moises Jocson assails these documents and prays
that they be declared null and void and the properties subject matter
therein be partitioned between him and Agustina as the only heirs
of their deceased parents.
The documents, which were presented as evidence not by Moises
Jocson, as the party assailing its validity, but rather by herein
respondents, are the following:
1) "Kasulatan ng Bilihan ng Lupa," marked as Exhibit 3 (pp. 12-13,
Records) for the defendant in the court a quo, dated July 27, 1968.
By this document Emilio Jocson sold to Agustina Jocson-Vasquez six
(6) parcels of land, all located at Naic, Cavite, for the sum of ten
thousand (10,000.00) pesos. On the same document Emilio Jocson
acknowledged receipt of the purchase price, thus:

"Na ngayon, alang-alang sa halagang SAMPUNG LIBONG PISO

(P10,000) salaping Pilipino na aking tinanggap ng buong kasiyahan
loob at ang pagkakatanggap ay aking hayagang inaamin sa
pamamagitan ng kasulatang ito, sa aking anak na si Agustina Jocson,
na may sapat na gulang, mamamayang Pilipino, asawa ni Ernesto
Vasquez, at naninirahan sa Poblacion, Naic, Cavite, ay aking
ipinagbile ng lubusan at kagyat at walang ano mang pasubali ang
nabanggit na anim na pirasong lupa na nasa unang dahon ng
dokumentong ito, sa nabanggit na Agustina Jocson, at sa kaniyang
tagapagmana o makakahalili at gayon din nais kong banggitin na
kahit na may kamurahan ang ginawa kong pagbibile ay dahilan sa
ang nakabile ay aking anak na mahal sa akin at mapaglingkod,
madamayin at ma-alalahanin, na tulad din ng isa ko pang anak na
lalaki. Ang kuartang tinanggap ko na P10,000.00, ay gagamitin ko sa
aking katandaan at mga huling araw at sa aking mga ibang
mahahalagang pangangailangan.

"Na nais ko ring banggitin na ang ginawa kong ito ay hindi labag sa
ano mang batas o kautusan, sapagkat ang aking pinagbile ay akin at
nasa aking pangalan. Ang mga lupang nasa pangalan ng aking
nasirang asawa ay hindi ko ginagalaw ni pinakikialaman at iyon ay
dapat na hatiin ng dalawa kong anak alinsunod sa umiiral na batas
(p. 13, Records.)"

2) "kasulatan ng Ganap na Bilihan," dated July 27, 1968, marked as

Exhibit 4 (p. 14, Records). On the face of this document, Emilio
Jocson purportedly sold to Agustina Jocson-Vasquez, for the sum of
FIVE THOUSAND (P5,000.00) PESOS, two rice mills and a camarin
(camalig) located at Naic, Cavite. As in the first document, Moises
Jocson acknowledged receipt of the purchase price:

"Na alang-alang sa halagang LIMANG LIBONG PISO (P5,000.00)

salaping pilipino na aking tinanggap ng buong kasiyahan loob sa
aking aking anak na Agustin Jocson . . . Na ang halagang ibinayad sa
akin ay may kamurahan ng kaunti ngunit dahil sa malaking pagtingin
ko sa kaniya . . . kaya at pinagbile ko sa kaniya ang mga nabanggit na
pagaari kahit na hindi malaking halaga . . . (p. 14, Records)"

3) Lastly, the "Deed of Extrajudicial Partition and Adjudication with

Sale, "dated March 9, 1969, marked as Exhibit 2 (p. 10-11, Records),
whereby Emilio Jocson and Agustina Jocson-Vasquez, without the
participants and intervention of Moises Jocson, extrajudicially
partitioned the unsettled estate of Alejandra Poblete, dividing the
same into three parts, one-third (1/3) each for the heirs of Alejandra
Poblete, namely: Emilio Jocson, Agustina Jocson-Vasquez and
Moises Jocson. By the same instrument, Emilio sold his one-third
(1/3) share to Agustina for the sum of EIGHT THOUSAND (P8,000.00)
PESOS. As in the preceding documents, Emilio Jocson
acknowledged receipt of the purchase price:

"Now for and in consideration of the sum of only eight thousand

(P8,000.00) pesos, which I, the herein Emilio Jocson had received
from my daughter Agustina Jocson, do hereby sell, cede, convey and
transfer, unto the said Agustina Jocson, her heirs and assigns,
administrators and successors in interests, in the nature of absolute
and irrevocable sale, all my rights, interest, shares and participation,
which is equivalent to one third (1/3) share in the properties herein
mentioned and described, the one third being adjudicated unto
Agustina Jocson and the other third (1/3) portion being the share of
Moises Jocson. (p. 11, Records)."

These documents were executed before a notary public. Exhibits 3

and 4 were registered with the Office of the Register of Deeds of
Cavite on July 29, 1968 and the transfer certificates of title covering
the properties therein in the name of Emilio Jocson, married to
Alejandra Poblete," were cancelled and new certificates of title were
issued in the name of Agustina Jocson-Vasquez. Exhibit 2 was not
registered with the Office of the Register of Deeds.

Herein petitioner filed his original complaint (Record on Appeal, p.

27, Rollo) on June 20, 1973 with the then Court of First Instance of
Naic, Cavite (docketed as Civil Case No. TM-531), and which was
twice amended. In his Second Amended Complaint (pp. 47-58,
Record on Appeal), herein petitioner assailed the above documents,
as aforementioned, for being null and void.

It is necessary to partly quote the allegation of petitioner in his

complaint for the reason that the nature of his causes of action is at
issue, thus:
"8. [With regard the first document, that] the defendants, through
fraud, deceit, undue pressure and influence and other illegal
machinations, were able to induce, led, and procured in their father
. . . to sign [the] contract of sale . . ., for the simulated price of
P10,000.00, which is a consideration that is shocking to the
conscience of ordinary man and despite the fact that said
defendants have no work or livelihood of their own . . .; that the sale
is null and void, also, because it is fictitious, simulated and fabricated
contract . . . (pp. 52-53, Record on Appeal).

xxx xxx xxx

"12. [With regards the second and third document, that they] are null
and void because the consent of the father, Emilio Jocson, was
obtained with fraud, deceit, undue pressure, misrepresentation and
unlawful machinations and trickeries committed by the defendant
on him; and that the said contracts are simulated, fabricated and
fictitious, having been made deliberately to exclude the plaintiff
from participating and with the dishonest and selfish motive on the
part of the defendants to defraud him of his legitimate share on said
properties [subject matter thereof]; and that without any other
business or employment or any other source of income, defendants
who were just employed in the management and administration of
the business of their parents, would not have the sufficient and
ample means to purchase the said properties except by getting the
earnings of the business or by simulated consideration . . . (pp. 54-
55, Record on Appeal)."

Petitioner explained that there could be no real sale between a

father and daughter who are living under the same roof, especially
so when the father has no need of money as the properties
supposedly sold were all income-producing. Further, petitioner
claimed that the properties mentioned in Exhibits 3 and 4 are the
unliquidated conjugal properties of Emilio Jocson and Alejandra
Poblete which the former, therefore, cannot validly sell (pp. 53, 57,
Record on Appeal). As far as Exhibit 2 is concerned, petitioner
questions not the extrajudicial partition but only the sale by his
father to Agustina of the former's 1/3 share (p. 13, Rollo).

The trial court sustained the foregoing contentions of petitioner

(pp. 59-81, Record on Appeal). It declared that the considerations
mentioned in the documents were merely simulated and fictitious
because: 1) there was no showing that Agustina Jocson-Vasquez
paid for the properties; 2) the prices were grossly inadequate which
is tantamount to lack of consideration at all; and 3) the improbability
of the sale between Emilio Jocson and Agustina Jocson-Vasquez,
taking into consideration the circumstances obtaining between the
parties; and the real intention of the parties were donations
designed to exclude Moises Jocson from participating in the estate
of his parents. It further declared the properties mentioned in
Exhibits 3 and 4 as conjugal properties of Emilio Jocson and
Alejandra Poblete, because they were registered in the name of
"Emilio Jocson, married to Alejandra Poblete" and ordered that the
properties subject matter of all the documents be registered in the
name of herein petitioners and private respondents.

On appeal, the Court of Appeals in CA-G.R. No. 63474-R rendered a

decision (pp. 29-42, Rollo) and reversed that of the trial court's and
ruled that:
"1. That insofar as Exhibits 2 and 4 are concerned the appellee's
complaint for annulment, which is indisputably based on fraud, and
undue influence, is now barred by prescription, pursuant to the
settled rule that an action for annulment of a contract based on
fraud must be filed within four (4) years, from the discovery of the
fraud, . . . which in legal contemplation is deemed to be the date of
the registration of said document with the Register of Deeds . . . and
the records admittedly show that both Exhibits 3 and 4, were all
registered on July 29, 1968, while on the other hand, the appellee's
complaint was filed on June 20, 1973, clearly beyond the aforesaid
four-year prescriptive period provided by law;

"2. That the aforesaid contracts, Exhibits 2, 3, and 4, are decisively

not simulated or fictitious contracts, since Emilio Jocson actually and
really intended them to be effective and binding against him, as to
divest him of the full dominion and ownership over the properties
subject of said assailed contracts, as in fact all his titles over the same
were all cancelled and new ones issued to appellant Agustina Jocson
Vasquez . . .;

3. That in regard to Exhibit 2, the same is valid and subsisting, and

the partition with sale therein made by and between Emilio Jocson
and Agustin Jocson Vasquez, affecting the 2/3 portion of the subject
properties described therein have all been made in accordance with
Article 996 of the New Civil Code on intestate succession, and the
appellee's (herein petitioner) remaining 1/3 has not been prejudiced
(pp. 41-42, Rollo)."

In this petition for review, Moises Jocson raised the following

assignments of errors:
I. HAS THE RESPONDENT COURT OF APPEALS ERRED IN
CONCLUDING THAT THE SUIT FOR THE ANNULMENT OF
CONTRACTS FILED BY PETITIONERS WITH THE TRIAL COURT IS
"BASED ON FRAUD" AND NOT ON ITS INEXISTENCE AND NULLITY
BECAUSE OF ITS BEING SIMULATED OR FICTITIOUS OR WHOSE
CAUSE IS CONTRARY TO LAW, MORALS AND GOOD CUSTOMS?

II. HAS THE RESPONDENT COURT OF APPEALS ERRED IN

CONCLUDING THAT THE COMPLAINT FILED BY PETITIONER IN THE
TRIAL COURT IS BARRED BY PRESCRIPTION?

III. HAS THE RESPONDENT COURT OF APPEALS ERRED IN NOT

DECLARING AS INEXISTENT AND NULL AND VOID THE CONTRACTS
IN QUESTION AND IN REVERSING THE DECISION OF THE TRIAL
COURT? (p. 2, Rollo).

I
The first and second assignment of errors are related and shall be
jointly discussed.

According to the Court of Appeals, herein petitioner's causes of

action were based on fraud. Under Article 1330 of the Civil Code, a
contract tainted by vitiated consent, as when consent was obtained
through fraud, is voidable; and the action for annulment must be
brought within four years from the time of the discovery of the fraud
(Article 1391, par. 4, Civil Code), otherwise the contract may no
longer be contested. Under present jurisprudence, discovery of
fraud is deemed to have taken place at the time the convenant was
registered with the Register of Deeds (Gerona vs. De Guzman, No. L-
19060, May 29, 1964, 11 SCRA 153). Since Exhibits 3 and 4 were
registered on July 29, 1968 but Moises Jocson filed his complaint
only on June 20, 1973, the Court of Appeals ruled that insofar as
these documents were concerned, petitioner's "annulment suit"
had prescribed.

If fraud were the only ground relied upon by Moises Jocson in

assailing the questioned documents, We would have sustained the
above sustained the above pronouncement. But it is not so. As
pointed out by petitioner, he further assailed the deeds of
conveyance on the ground that they were without consideration
since the amounts appearing thereon as paid were in fact merely
simulated.

According to Article 1352 of the Civil Code, contracts without cause

produce no effect whatsoever. A contract of sale with a simulated
price is void (Article 1471; also Article 1409 [3]), and an action for the
declaration of its nullity does not prescribe (Article 1410, Civil Code;
See also, Castillo v. Galvan, No. L-27841, October 20, 1978, 85 SCRA
526). Moises Jocson's action, therefore, being for the judicial
declaration of nullity of Exhibits 3 and 4 on the ground of simulated
price, is imprescriptible.
II
For petitioner, however, the above discussion may be purely
academic. The burden of proof in showing that contracts lack
consideration rests on he who alleged it. The degree of proof
becomes more stringent where the documents themselves show
that the vendor acknowledged receipt of the price, and more so
where the documents were notarized, as in the case at bar. Upon
consideration of the records of his case, We are of the opinion that
petitioner has not sufficiently proven that the questioned
documents are without consideration.

Firstly, Moises Jocson's claim that Agustina Jocson-Vasquez had no

other source of income other than what she derives from helping in
the management of the family business (ricefields and ricemills), and
which was insufficient to pay for the purchase price, was
contradicted by his own witness, Isaac Bagnas, who testified that
Agustina and her husband were engaged in the buy and sell of palay
and rice (p. 10, t.s.n., January 14, 1975). Amazingly, petitioner himself
and his wife testified that they did not know whether or not
Agustina was involved in some other business (p. 40, t.s.n., July 30,
1974; p. 36, t.s.n., May 24, 1974).

On the other hand, Agustina testified that she was engaged in the
business of buying and selling palay and rice even before her
marriage to Ernesto Vasquez sometime in 1948 and continued doing
so thereafter (p. 4, t.s.n., March 15, 1976). Considering the foregoing
and the presumption that a contract is with a consideration (Article
1354, Civil Code), it is clear that petitioner miserably failed to prove
his allegation.

Secondly, neither may the contract be declared void because of

alleged inadequacy of price. To begin with, there was no showing
that the prices were grossly inadequate. In fact, the total purchase
price paid by Agustina Jocson-Vasquez is above the total assessed
value of the properties alleged by petitioner. In his Second Amended
Complaint, petitioner alleged that the total assessed value of the
properties mentioned in Exhibit 3 was P8,920; Exhibit 4, P3,500; and
Exhibit 2, P24,840, while the purchase price paid was P10,000,
P5,000, and P8,000, respectively, the latter for the 1/3 share of Emilio
Jocson from the paraphernal properties of his wife, Alejandra
Poblete. And any difference between the market value and the
purchase price, which as admitted by Emilio Jocson was only slight,
may not be so shocking considering that the sales were affected by
a father to her daughter in which case filial love must be taken into
consideration (Alsua-Betts vs. Court of Appeals, No. L-46430-31,
April 30, 1979, 92 SCRA 332).

Further, gross inadequacy of price alone does not affect a contract

of sale, except that it may indicate a defect in the consent, or that
the parties really intended a donation or some other act or contract
(Article 1470, Civil Code) and there is nothing in the records at all to
indicate any defect in Emilio Jocson's consent.

Thirdly, any discussion as to the improbability of a sale between a

father a his daughter is purely speculative which has no relevance to
a contract where all the essential requisites of consent, object and
cause are clearly present.

There is another ground relied upon by petitioner in assailing

Exhibits 3 and 4, that the properties subject matter therein are
conjugal properties of Emilio Jocson and Alejandra Poblete. It is the
position of petitioner that since the properties sold to Agustina
Jocson-Vasquez under Exhibit 3 were registered in the name of
"Emilio Jocson, married to Alejandra Poblete," the certificate of title
he presented as evidence (Exhibits "E", to "J", pp. 4-9, Records)
were enough proof to show that the properties covered therein
were acquired during the marriage of their parents, and, therefore,
under Article 160 of the Civil Code, presumed to be conjugal
properties.

Article 160 of the Civil Code provides that:

"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."

In Cobb-Perez vs. Hon. Gregorio Lantin, No. L-22320, May 22, 1968,
23, SCRA 637, 644, We held that:
"Anent their claim that the shares in question are conjugal assets,
the spouses Perez adduced not a modicum of evidence, although
they repeatedly invoked article 160 of the New Civil Code which
provides that . . . As interpreted by this Court, the party who invokes
this presumption must first prove that the property in controversy
was acquired during the marriage, In other words, proof of
acquisition during the coverture is a condition sine qua non for the
operation of the presumption in favor of conjugal ownership. Thus
in Camia de Reyes vs. Reyes de Ilano [62 Phil. 629, 639], it was held
that 'according to law and jurisprudence, it is sufficient to prove that
the property was acquired during the marriage in order that the
same may be deemed conjugal property.' In the recent case of
Maramba vs. Lozano, et. al. [L-21533, June 29, 1967, 20 SCRA 474],
this Court, thru Mr. Justice Makalintal, reiterated that 'the
presumption under Article 160 of the Civil Code refers to property
acquired during the marriage,' and then concluded that since 'there
is no showing as to when the property in question was acquired . . .
the fact that the title is in the wife's name alone is determinative.'
Similarly, in the case at bar, since there is no evidence as to when the
shares of stock were acquired, the fact that they are registered in
the name of the husband alone is an indication that the shares
belong exclusively to said spouse."
This pronouncement was reiterated in the case of Ponce de Leon vs.
Rehabilitation Finance Corporation, No. L-24571, December 18, 1970,
36 SCRA 289, and later in Torela vs. Torela, No. L-27843, October 11,
1979, 93 SCRA 391.

It is thus clear before Moises Jocson may validly invoke the

presumption under Article 160 he must first present proof that the
disputed properties were acquired during the marriage of Emilio
Jocson and Alejandra Poblete. The certificates of title, however,
upon which petitioner rests his claim is insufficient. The fact that the
properties were registered in the name of "Emilio Jocson, married
to Alejandra Poblete" is no proof that the properties were acquired
during the spouses' coverture. Acquisition of title and registration
thereof are two different acts. It is well settled that registration does
not confer title but merely confirms one already existing (See Torela
vs. Torela, supra). It may be that the properties under dispute were
acquired by Emilio Jocson when he was still a bachelor but were
registered only after his marriage to Alejandra Poblete, which
explains why he was described in the certificates of title as married
to the latter.

Contrary to petitioner's position, the certificates of title show, on

their face, that the properties were exclusively Emilio Jocson's, the
registered owner. This is so because the words "married to"
preceding "Alejandra Poblete" are merely descriptive of the civil
status of Emilio Jocson (Litam v. Rivera, 100 Phil. 354; Stuart v. Yatco,
No. L-16467, April 27, 1962, 4 SCRA 1143; Magallon v. Montejo, G.R.
No. L-73733, December 16, 1986, 146 SCRA 282). In other words, the
import from the certificates of title is that Emilio Jocson is the owner
of the properties, the same having been registered in his name
alone, and that he is married to Alejandra Poblete.

We are not unmindful that in numerous cases We consistently held

that registration of the property in the name of only one spouse
does not negate the possibility of it being conjugal (See Bucoy vs.
Paulino, No. L-25775, April 26, 1968, 23, SCRA 248). But this ruling is
not inconsistent with the above pronouncement for in those cases
there was proof that the properties, though registered in the name
of only one spouse, were indeed conjugal properties, or that they
have been acquired during the marriage of the spouses, and
therefore, presumed conjugal, without the adverse party having
presented proof to rebut the presumption (See Mendoza vs. Reyes,
No. L-31618, August 17, 1983, 124 SCRA 154).

In the instant case, had petitioner, Moises Jocson, presented

sufficient proof to show that the disputed properties were acquired
during his parents' converture. We would have ruled that
properties, though registered in the name of Emilio Jocson alone,
are conjugal properties in view of the presumption under Article 160.
There being no such proof, the condition sine qua non for the
application of the presumption does not exist. Necessarily, We rule
that the properties under Exhibit 3 are the exclusive properties of
Emilio Jocson.

There being no showing also that the camarin and the two ricemills,
which are the subject of Exhibit 4, were conjugal properties of the
spouses Emilio Jocson and Alejandra Poblete, they should be
considered, likewise, as the exclusive properties of Emilio Jocson,
the burden of proof being on petitioner.

ACCORDINGLY, the petition is DISMISSED and the decision of the

Court of Appeals if AFFIRMED.

SO ORDERED.
Jocson vs. Court of Appeals and Jocson-Vasquez (1989)
G.R. No. L-55322 | 1989-02-16

Subject:
Discovery of fraud is deemed to have taken place at the time the
convenant was registered with the Register of Deeds; Contracts
Without Cause Produce No Effect (Action Imprescriptible);
Petitioner Failed to Prove that the Transactions were Without
Consideration; Transaction Cannot be Decalred Void Because of
Alleged Inadequacy of Price; Property Should be Proven to have
been Acquired During Marriage for Presumption of Conjugality to
Arise; No Proof that the Properties were Acquired During Marriage

Facts:
Emilio Jocson and Alejandra Jocson were husband and wife. The
wife died first intestate without her estate being settle. Thereafter,
on April 1, 1972, the husband also died intestate. Petitioner Moises
Jocson and respondent Agustina Jocson-Vasquez were their
children. Ernesto Vasquesz was the husband of Agustina.

The present controversy concerned the validity of three (3)

documents executed by Emilio Jocson during his lifetime. These
documents purportedly conveyed, by sale, to Agustina Jocson-
Vasquez what apparently covered almost all of his properties,
including his one-third (1/3) share in the estate of his wife. The
documents were a deed of sale, deed of absolute sale and a deed of
extrajudicial partition and adjudication and sale. By virtue of these
documents, certificates of title were issued in the name of Agustina.

Petitioner Moises Jocson assailed these documents and prayed

that they be declared null and void and the properties subject matter
therein be partitioned between him and Agustina as the only heirs
of their deceased parents. Petitioner claimed that the properties
mentioned in the deeds of sale and absolute sale were the
unliquidated conjugal properties of Emilio and Alejandra, which the
former, therefore, cannot validly sell. He argued that the properties
were conjugal because they were registered in the name of “Emilio
Jocson, married to Alejandra Poblete”.

The trial court sustained the contentions of petitioner. It

declared that the considerations mentioned in the documents were
merely simulated and fictitious. The appellate court reversed the
decision of the trial court and held that the contracts were not
simulated or fictitious contracts, since Emilio actually and really
intended them to be effective and binding against him.

Held:
Discovery of fraud is deemed to have taken place at the time the
convenant was registered with the Register of Deeds
1. Under Article 1330 of the Civil Code, a contract tainted by vitiated
consent, as when consent was obtained through fraud, is voidable;
and the action for annulment must be brought within four years
from the time of the discovery of the fraud (Article 1391, par. 4, Civil
Code), otherwise the contract may no longer be contested.

2. Under present jurisprudence, discovery of fraud is deemed to

have taken place at the time the convenant was registered with the
Register of Deeds.

3. Since the transactions were registered on July 29, 1968 but Moises
Jocson filed his complaint only on June 20, 1973, the Court of
Appeals ruled that insofar as these documents were concerned,
petitioner's "annulment suit" had prescribed.

Contracts Without Cause Produce No Effect (Action

Imprescriptible)
4. According to Article 1352 of the Civil Code, contracts without
cause produce no effect whatsoever. A contract of sale with a
simulated price is void (Article 1471; also Article 1409 [3]), and an
action for the declaration of its nullity does not prescribe.

5. Moises Jocson's action, therefore, being for the judicial

declaration of nullity of the transactions involved on the ground of
simulated price, is imprescriptible.

Petitioner Failed to Prove that the Transactions were Without

Consideration
6. The burden of proof in showing that contracts lack consideration
rests on he who alleged it. The degree of proof becomes more
stringent where the documents themselves show that the vendor
acknowledged receipt of the price, and more so where the
documents were notarized, as in the case at bar.

7. Upon consideration of the records of his case, the Supreme Court

ruled that petitioner has not sufficiently proven that the questioned
documents are without consideration.

Transaction Cannot be Decalred Void Because of Alleged

Inadequacy of Price
8. The contract cannot be declared void because of alleged
inadequacy of price. To begin with, there was no showing that the
prices were grossly inadequate. In fact, the total purchase price paid
by Agustina Jocson-Vasquez is above the total assessed value of the
properties alleged by petitioner.

9. Any difference between the market value and the purchase price,
as admitted to be only slight, may not be so shocking considering
that the sales were affected by a father to her daughter in which
case filial love must be taken into consideration.

10. Gross inadequacy of price alone does not affect a contract of

sale, except that it may indicate a defect in the consent, or that the
parties really intended a donation or some other act or
contract (Article 1470, Civil Code). There was nothing in the records
at all to indicate any defect in Emilio Jocson's consent.

Property Should be Proven to have been Acquired During Marriage

for Presumption of Conjugality to Arise
11. It is the position of petitioner that since the properties sold to
Agustina were registered in the name of "Emilio Jocson, married to
Alejandra Poblete," the certificate of title he presented as evidence
were enough proof to show that the properties covered therein
were acquired during the marriage of their parents, and, therefore,
under Article 160 of the Civil Code, presumed to be conjugal
properties.

12. All property of the marriage is presumed to belong to the

conjugal partnership, unless it be proved that it pertains exclusively
to the husband or to the wife. (Article 160, Civil Code)
13. The party who invokes this presumption must first prove that the
property in controversy was acquired during the marriage, In other
words, proof of acquisition during the coverture is a condition sine
qua non for the operation of the presumption in favor of conjugal
ownership.

No Proof that the Properties were Acquired During Marriage

14. The certificates of title, however, upon which petitioner rests his
claim is insufficient. The fact that the properties were registered in
the name of "Emilio Jocson, married to Alejandra Poblete" is no
proof that the properties were acquired during the spouses'
coverture. Acquisition of title and registration thereof are two
different acts. It is well settled that registration does not confer title
but merely confirms one already existing (Torela vs. Torela)

15. The import from the certificates of title is that Emilio Jocson is
the owner of the properties, the same having been registered in his
name alone, and that he is married to Alejandra Poblete.
CRISANTO L. FRANCISCO, petitioners, vs. THE COURT OF APPEALS and
REGINO B. RELOVA, JR., respondents. G.R. No. 130768 | 2002-03-21
D E C I S I O N YNARES-SANTIAGO, J.:

Before us is a petition for review of the decision[1] dated June 11, 1997 of
the Court of Appeals in CA-G.R. CV No. 50104, affirming the decision[2]
dated January 25, 1995 of the Regional Trial Court of Antipolo, Rizal,
Branch 73, in Land Registration Case No. 91-1016, LRA Record No. N-62367.

On October 2, 1991, respondent Regino G. Relova filed a petition[3] with

the trial court for the registration of two parcels of land described as Lots
Nos. 1834 and 1832, Cad-688-D of the Cainta-Taytay Cadastre, situated in
Barangay San Juan, Taytay, Rizal. He alleged that he has been in open,
continuous, exclusive and notorious possession of the said parcels of land
since 1958 and, therefore, has acquired the same by prescription.

The Republic of the Philippines, through the Office of the Solicitor General,
registered its written opposition to the petition.[4]

At the initial hearing of the petition on February 28, 1992, nobody

appeared to oppose the petition. After respondent Relova presented
evidence to establish the jurisdictional facts, the trial court ordered that a
general default be entered against the whole world except the Republic
of the Philippines. The trial court designated a hearing commissioner to
receive evidence ex-parte in support of the petition.[5]

During the course of the proceedings, the Land Registration Authority

(LRA) submitted its report[6] stating that discrepancies were found after
plotting the plans pertaining to the land applied for. Thus, the LRA
recommended that the appropriate government agencies be ordered to
submit their reports to determine whether the land or any portion thereof
are covered by land patents are within the forest zone.

After the reception of evidence before the trial commissioner, and based
on its report,[7] the trial court rendered its decision, the dispositive
portion of which reads:

WHEREFORE, premises considered, the Court hereby confirms the title of

herein petitioner Regino B. Relova, Jr. to the parcels Lot No. 1834 Cad-688-
D covered by Plan Ap-04-006273 and Lot No. 1832 Cad-688-D covered by
Plan Ap-006183 situated in Barangay San Juan, Municipality of Taytay,
Province of Rizal containing an area of three hundred thirty nine (339)
square meters and seventeen thousand four hundred nine (17,409) square
meters respectively and orders their registration in the name of herein
applicant Regino B. Relova, Jr. who is married to Lourdes S. Guino with all
the rights and privileges appertaining thereto.

Let an order for issuance of a Decree be issued upon finality of this

decision and payment of taxes and fees due on the subject parcels of land.

SO ORDERED.[8]

Subsequently, the LRA filed with the trial court a Supplementary Report,
submitting the corrected technical boundaries of the technical
descriptions for Lots 1832 and 1834. The report further states:

WHEREFORE, the foregoing report is respectfully submitted to the

Honorable Court for its information and guidance with the
recommendation that (a) the corrected technical description of lot 1832,
Cad 688-D, Cainta-Taytay Cadastre (Annex J) be approved and (b) the
applicant be ordered to publish in the Official Gazette the corrected
technical description of Lot 1834, Cad 688-D, Cainta-Taytay Cadastre
(Annex K), and thereafter, an order be issued approving the said technical
description to be utilized in the issuance of the corresponding decree of
registration pursuant to the decision dated January 25, 1993 and Order for
the issuance of the Decree dated April 1, 1993.[9]

On October 28, 1993, the trial court issued the following Order:

Considering the Report of the Land Registration Authority (LRA) dated

September 20, 1993 as well as the "Urgent Ex-Parte Motion" of the
applicant through counsel, the court hereby approves the corrected
technical description of Lot 1832, Cad-688-D, Cainta Taytay Cadastre.
Moreover, the recommendation that the corrected technical description
of lot 1834, Cad-688-D Cainta-Taytay Cadastre be published in the Official
Gazette is hereby DENIED for the reason that the correction (amendment)
does not appear to be substantial inasmuch as the boundaries affected
are both owned by the applicant in the above-entitled case.

SO ORDERED.[10]
Upon motion of respondent Relova, the trial court ordered the issuance
of a writ of possession on December 7, 1993.[11]

On January 14, 1994, petitioner Crisanto L. Francisco entered his

appearance as oppositor and filed a Motion to Quash Writ of
Possession.[12] He alleged that he has been in actual possession of Lot
1832; that no notice of the motion for writ of possession was furnished to
him; and that the land registration court has no authority to issue a writ of
possession.

Subsequently, petitioner filed a Petition for Reopening and Review[13] of

the decree of registration pursuant to Article 32 of P.D. 1529 and a
Supplemental Petition and Reply.[14] He reiterated the grounds alleged in
his motion to quash the writ of possession and further alleged that
respondent failed to republish the notice of initial hearing containing the
corrections in the technical description of Lot 1832 made by the Bureau of
Land Management; that respondent falsely and fraudulently testified that
the disputed lot was part of the land purchased by his predecessor,
Francisco Santana, from Maximo Cruz; that it is not true that respondent's
possession was undisturbed; that respondent declared the land for
taxation purposes only in March 1991; that petitioner's claim of ownership
over the disputed land was annotated on the said tax declaration; and that
even respondent's predecessor-in-interest and other adjacent lot owners
recognized petitioner as the owner of the dispute land.

In its order dated February 27, 1995, the trial court ruled as follows:

It appears that the Decree of Registration in the above-entitled case with

No. N-205474 was issued on February 28, 1994 while oppositor's "Petition
for Reopening and Review" and "Supplemental Petition" were filed on
March 2, 1994 and on August 9, 1994, respectively. It appears also, that the
applicant has not yet transferred the subject land to an innocent
purchaser for value, hence the court is of the considered view that the
oppositor may avail himself of the remedy provided under article 32 of PD
1529 otherwise known as the Property Registration Decree which grants
to "any person, including the government and the branches thereof,
deprived of land or of any estate or interest therein by such adjudication
or confirmation of title obtained by actual fraud, to file in the proper
Regional Trial Court a petition for reopening and review of the decree of
registration not later than one year from and after the date of entry of
such decree of registration, but in no case shall such petition be
entertained by the court where an innocent purchaser for value has
acquired the land or an interest thereon, whose rights may be
prejudiced..."

The allegations of the oppositor as to the actual fraud allegedly

committed by the applicant in the latter's application for registration of
title of lot 1832 necessarily requires proof which can only be adduced in a
proper hearing or trial. Corollary, thereto, is the requirement of the law
for the oppositor, to prove his real or dominical right over the lot in
question.

In view thereof, the Motion for Leave to File and Admission of

Supplemental Petition is hereby GRANTED.

The above-entitled case is therefore, re-opened insofar as Lot 1832 is

concerned.

In the meantime, the execution of the writ of possession issued in the

above-entitled case is hereby held in abeyance insofar as lot 1832 is
concerned, pending resolution of the petition for review of herein
oppositor.

Let this case be set for reception of evidence for oppositor Crisanto
Francisco on April 6, 1995 at 9:00 A.M.

SO ORDERED.[15]

Upon a motion for reconsideration of respondent,[16] the trial court

reversed its previous order, to wit:

Wherefore, premises considered, the court therefore reconsiders its order

of February 27, 1995 and hereby reiterates its decision in this case for the
registration of lots applied for by the applicants.

The court also approves the motion for issuance of the writ of possession
as prayed for by the applicants and hereby orders the issuance of said
writ.
SO ORDERED.[17]

Petitioner filed a motion for reconsideration,[18] arguing that he was

denied due process of law when he was deprived the opportunity to prove
the allegation of fraud committed by the applicant in securing a decree of
registration on the land in dispute. The motion for reconsideration was,
however, denied.[19]

Petitioner appealed to the Court of Appeals, where the same was

docketed as CA-G.R. CV No. 50104. On June 11, 1997, the Court of Appeals
affirmed the order of the trial court denying the petition for reopening and
review of the decree of registration.[20] Petitioner's motion for
reconsideration was denied on September 16, 1997.[21]

Hence, this petition raising the following issues:

Whether a court can refuse to receive evidence on allegations of fraud, in

a petition for review of an application for registration, committed by the
applicant in his application and in the proceedings, legally sufficient to
nullify and set aside such decision approving registration and the decree
and certificate of title subsequently issued, and then reiterate its original
decision and decree without trying and resolving if the alleged frauds
were committed or not?

Whether such refusal to hear and receive evidence on the petition for
review is a denial of due process that renders the court's orders, decisions
and proceedings void and annullable for lack, excess, or abuse of
jurisdiction?

Whether an appellate court that affirms such void decision and orders of
the trial court and refuse to remand below the appealed case for trial on
the merits, equally commits a violation of due process and acts without, in
excess or with abuse of jurisdiction?

Whether lack of jurisdiction on the part of the trial court for applicant's
failure to prove jurisdictional requirement of publication in a newspaper
of general circulation of the application and date of initial hearing, because
the evidence or affidavit of publication presented as proof thereof is a
falsified one and, therefore, null and void, can be raised in any stage of the
proceedings, and cause the dismissal of the application or the nullification
or setting aside of the decision granting registration for lack of
jurisdiction?

The core issue in this appeal is whether or not petitioner was denied due
process when the trial court denied the petition for the reopening and
review of the decree of registration, thereby depriving petitioner of the
opportunity to substantiate the allegations of fraud.

In reversing its earlier order granting the petition to reopen, the trial court
ruled:

The issue to be resolved in the instant motion for reconsideration is

whether or not there was fraud committed by the applicant in this case.
To the mind of the court there is no fraud committed. It should be noted
that the Report of the LRA that was submitted to the court states that
there are some corrections in the technical descriptions of the property
but the area of the property has remained the same as applied for. That is
why this court in its order dated October 28, 1993 granted the motion of
counsel for the applicant to approve the technical corrections for the
reason that the correction without need for the republication amendment
does not appear to be substantial. It should be noted also that the order
of the Land Registration Authority recommended the corrected technical
description of Lot 1832 Cad-688-D Cainta-Taytay Cadastre be approved
and the applicant be ordered to publish in the Official Gazette the
corrected technical description of Lot 1834 Cad-688-D Cainta-Taytay
Cadastre. Thereafter, an order be issued approving the said technical
description to be utilized in the issuance of the corresponding decree of
registration. So it is clear that with respect to Lot 1832, which is the subject
matter of the opposition in this case, the LRA merely stated that the
corrected technical description of Lot 1832 be approved. This court
approved the said corrected technical description of Lot 1832 as
recommended by LRA. There is therefore no fraud upon a review by the
court of the motion for reconsideration and the opposition thereto as well
as taking into account the oral arguments of both counsels for the
applicant and the oppositor on the matter of a legal fraud committed in
this case. The court merely complied with the recommendation of the LRA
for the approval of the corrected technical description of Lot 1832. The
court did not order to republish in the Official Gazette the corrected
technical description therein as it is not substantial for the area of the land
still remains the same.
Wherefore, premises considered, the court therefore reconsiders its order
of February 27, 1995 and hereby reiterates its decision in this case for the
registration of lots applied for by the applicants.

The court also approves the motion for issuance of the writ of possession
as prayed for by the applicants and hereby orders the issuance of said
writ.[22]

A careful scrutiny of the assailed order reveals that the trial court did not
entirely consider the allegations of fraud or falsity in the petition to reopen
and review the decree of registration. The trial court only resolved the
issue of republication of the corrected technical description of Lot 1832
and found that the area of the property was the same as that applied for.
It summarily dismissed the petition to review the decree of registration.

In the petition to reopen and review the decree of registration, petitioner

alleged that the first publication of the hearing of respondent's
application contained an erroneous technical description of Lot 1832,
which was later corrected; that application with the corrected technical
description was not republished; that respondent falsely represented that
Lot 1832 was part of the land which his predecessors-in-interest, Francisco
Santana, purchased from Maximo Cruz, but the same was omitted in the
original registration proceeding in LRC Case No. N-2710 of the Court of First
Instance of Pasig, Rizal, Branch VI; and that it is petitioner, by himself and
through his predecessors-in-interest, who has been in actual possession
and use of said Lot 1832 as owner, openly, continuously and exclusively,
for more than fifty years before the filing of respondent's application.
Furthermore, petitioner alleged that respondent is guilty of fraud in
making it appear in Tax Declaration No. 04-13781, which was obtained only
in March 1991, that he paid the arrears for the past ten years. Petitioner
also argues that the notation "Ownership of this property is also claimed
by CRISANTO L. FRANCISCO," is inscribed on the tax declaration. Thus,
respondent undeniably had notice of petitioner's claim of ownership and
possession of said Lot 1832 long before he actually declared it for taxation
and applied for registration. Other documents also prove petitioner's
prior right and possession, namely, the tax receipts for 1936 and 1937 both
in the name of Miguel Francisco, petitioner's grandfather and
predecessor-in-interest, Tax Declaration No. 13296 (1945-1974), Tax
Declaration No. 03-2348 (1980-1984), and Tax Declaration No. 03-3127
(1985 to date), all of which indicate petitioner's possession of Lot 1832 as
owner thereof.[23]

The foregoing are serious allegations which should have necessitated a

reopening of the application if only to ensure that the claims of
respondent of acquisitive prescription were valid. This was done by the
trial court in its order dated February 27, 1995 granting the reopening of
the case, wherein it stated that "the allegations of the oppositor as to the
actual fraud allegedly committed by the applicant in the latter's
application for registration of title of lot 1832 necessarily requires proof
which can only be adduced in a proper hearing or trial."[24] Subsequently,
however, it reversed its order and denied the petition to reopen and
review the decree of registration, thereby depriving petitioner the
opportunity to substantiate his allegations and protect his claims over the
property. In this regard, the trial court's act was reversible error and an
unwarranted deviation from both substantive and procedural norms. In
the early case of Minlay v. Sandoval,[25] we held:

Perhaps the trial judge had reasons to doubt the veracity of the supposed
fraudulent acts, attributed to respondents. This doubt, however, should
not have been made the basis of dismissal, because if a court doubts the
veracity of the allegations in the petition, the best thing it could do would
have been to deny the motion to dismiss and proceed with hearing on the
merits, of the petition.

A person deprived of land or any estate or interest therein by adjudication

or confirmation of title obtained by actual fraud may seek the reopening
and review of a decree of registration. The Torrens System is intended to
guarantee the integrity and conclusiveness of the certificate of
registration but it cannot be used for the perpetuation of fraud against
the real owner of the registered land.[26]

WHEREFORE, in view of the foregoing, the petition is GRANTED. The

decision of the Court of Appeals dated June 11, 1997 is REVERSED and SET
ASIDE. The Regional Trial Court of Antipolo, Rizal, Branch 73 is ordered to
reopen Land Registration Case No. 91-1016 and afford petitioner and
respondent full opportunity to substantiate their respective claims.

SO ORDERED.
EFREN V. MENDOZA and INOCENCIA R. DE MENDOZA, petitioners,
vs. PONCIANO S. REYES and THE COURT OF APPEALS, respondents.
G.R. No. L-31618 | 1983-08-17

D E C I S I O N

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. 56110 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) pro-indiviso 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 the 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 IN
QUESTION, AND IN NOT INVOKING THE DOCTRINE OF ESTOPPEL TO
RULE OUT ANY AND ALL SUCH PROOF ALTOGETHER.
II
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
THE COURT OF APPEALS ERRED UPON EQUITABLE GROUNDS IN, IN
EFFECT, GIVING JUDICIAL FIAT 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 facts 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 - hereinafter 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-1'). 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-
1'). 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 bean 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. 56110 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 (11 SCRA 102, 107):

". . . The position thus taken by appellants is meritorious, 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. 131) interpreting Par. 3,
Article 1401 of the old Civil Code, the Court in Castillo 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 allows 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 'O-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, and
-

"That 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, out 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. 11; Petitioner's Brief, L-316-318, 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
misrepresentation."
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 shall 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 pleading 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
misrepresentation 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, 43 Phil. 288; Ginoo
v. Court of Appeals, 97 Phil. 235, 238; Silos v. Ramos, 97 Phil. 263, 270,
citing Commonwealth 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 No. 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. The 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.
Quaio vs Quiao (2012)
G.R. No. 176556 | 2012-07-04

Subject:
Legal Separation; Retroactive Application of the Family Code; Definition
and Computation of Net Procceds or Fruits (Absolute Community of
Property vs Conjugal Partnership of Gains); Vested Right

Facts:
On October 10, 2005, Rita Quiao obtained a decree of legal
separation against her husband Brigido Quiao (for the reason that
Brigido was cohabiting with another woman not his wife). The RTC
judgment ordered, among other things, that the conjugal properties be
divided equally between the spouses. However, thehusband’s share of
the net profits earned by the conjugal partnership is forfeited in favor of
the common children.

No motion for consideration nor notice of appeal was filed by either

parties within the period prescribed. The RTC thereafter issued a writ of
execution on the judgment which was partially executed. However, on
July 7, 2006, after more than nine months from the promulgation of the
Decision, Brigido filed a Motion for Clarification asking the RTC to define
the term “Net Profits Earned.”

The RTC held that the phrase “net profit earned” denotes “the
remainder of the properties of the parties after deducting the separate
properties of each of the spouse and the debts.”

Not satisfied with the RTC ruling, Briigido filed a petition for review
on certiorari under Rule 45 with the SC. Petitioner claims that the court a
quo is wrong when it applied Article 129 of the Family Code, instead of
Article 102.

Held:
Finality of Decree of Legal Separation
1. The petitioner had clearly slept on his right to question the RTC’s
Decision dated October 10, 2005. For 270 days, the petitioner never
raised a single issue until the decision had already been partially
executed. Thus at the time the petitioner filed his motion for
clarification, the trial court’s decision has become final and executory. A
judgment becomes final and executory when the reglementary period
to appeal lapses and no appeal is perfected within such period.
Consequently, no court, not even this Court, can arrogate unto itself
appellate jurisdiction to review a case or modify a judgment that
became final.

Void Judgment
2. Brigido argues that the RTC decision was a void judgment. Being such,
it never attains finality and cannot be a source of any right nor any
obligation.

3. A judgment is null and void when the court which rendered it had no
power to grant the relief or no jurisdiction over the subject matter or
over the parties or both. In other words, a court, which does not have
the power to decide a case or that has no jurisdiction over the subject
matter or the parties, will issue a void judgment or a coram non judice.

Jurisdiction of RTC over Legal Separation Cases

4. The trial court has jurisdiction over a case involving legal
separation. Republic Act (R.A.) No. 8369 confers upon an RTC,
designated as the Family Court of a city, the exclusive original
jurisdiction to hear and decide, among others, complaints or petitions
relating to marital status and property relations of the husband and
wife or those living together.

5. The Rule on Legal Separation provides that “the petition [for legal
separation] shall be filed in the Family Court of the province or city
where the petitioner or the respondent has been residing for at least six
months prior to the date of filing or in the case of a non-resident
respondent, where he may be found in the Philippines, at the election
of the petitioner.” Respondent Rita is found to reside in Tungao, Butuan
City for more than six months prior to the date of filing of the petition,
thus, the RTC, which has rendered the questioned judgment, has
jurisdiction over the complaint and the persons of the parties.

Immutability of a Final and Executory Judgment

6. Having become final and executory, the October 10, 2005 judgment
cannot anymore be disturbed, even if the modification is meant to
correct what may be considered an erroneous conclusion of fact or law.

7. As long as the court acted with jurisdiction, any error committed by it

in the exercise thereof will amount to nothing more than an error of
judgment which may be reviewed or corrected only by appeal. Granting
without admitting that the RTC's judgment dated October 10, 2005 was
erroneous, the petitioner's remedy should be an appeal filed within the
reglementary period. Unfortunately, the petitioner has already lost the
chance to question the trial court's decision, which has become
immutable and unalterable.

Law Governing Property Relations for Marriages entered into before

The Family Code
8. The spouses got married on January 6, 1977. Since at the time of the
exchange of marital vows, the operative law was the Civil Code of the
Philippines (R.A. No. 386) and since they did not agree on a marriage
settlement, the property relations between the petitioner and the
respondent is the system of relative community or conjugal partnership
of gains.

9. Article 119 of the Civil Code provides that, “In the absence of marriage
settlements, or when the same are void, the system of relative
community or conjugal partnership of gains [shall] govern the property
relations between husband and wife.

10. Under this property relation, “the husband and the wife place in a
common fund the fruits of their separate property and the income from
their work or industry.” The husband and wife also own in common all
the property of the conjugal partnership of gains.

Law Governing Dissolution of Property Relations for Marriages

entered into before The Family Code
11. Since at the time of the dissolution of the marriage the operative law
is already the Family Code, the same applies in the instant case and the
applicable law in so far as the liquidation of the conjugal partnership
assets and liabilities is concerned is Article 129 of the Family Code in
relation to Article 63(2) of the Family Code.
Retroactive application of the Family Code
12. The above provision is applicable because according to Article 256 of
theFamily Code “[t]his Code shall have retroactive effect insofar as
it does not prejudice or impair vested or acquired rights in accordance
with the Civil Code or other law.”

Vested Right
13. Petitioner claims that since he is one of the owners of the properties
covered by the conjugal partnership of gains, he has a vested right over
half of the said properties, even after the promulgation of the Family
Code. He insisted that no provision under the Family Code may deprive
him of this vested right

14. A vested right is one whose existence, effectivity and extent do not
depend upon events foreign to the will of the holder, or to the exercise
of which no obstacle exists, and which is immediate and perfect in itself
and not dependent upon a contingency. The term “vested right”
expresses the concept of present fixed interest which, in right reason
and natural justice, should be protected against arbitrary State action,
or an innately just and imperative right which enlightened free society,
sensitive to inherent and irrefragable individual rights, cannot deny. To
be vested, a right must have become a title—legal or equitable—to the
present or future enjoyment of property. (citing Go, Jr. v. Court of
Appeals)

15. Rights are considered vested when the right to enjoyment is a

present interest, absolute, unconditional, and perfect or fixed and
irrefutable. (citing Abakada Guro Party List vs Ermita)

16. While one may not be deprived of his “vested right,” he may lose the
same if there is due process and such deprivation is founded in law and
jurisprudence.

17. Petitioner was not deprived of his right to due process. Further, the
alleged deprivation of the petitioner's “vested right” is one founded,
not only in the provisions of the Family Code, but in Article 176 of the
Civil Code. This provision is like Articles 63 and 129 of the Family Code on
the forfeiture of the guilty spouse's share in the conjugal partnership
profits.
Forfeiture of Guilty Spouse of Share in Net Proceeds of the Conjugal
Property
18. Art. 176 of the Family Code provides that, “In case of legal
separation, theguilty spouse shall forfeit his or her share of the conjugal
partnership profits, which shall be awarded to the children of both, and
the children of the guilty spouse had by a prior marriage. However, if the
conjugal partnership property came mostly or entirely from the work or
industry, or from the wages and salaries, or from the fruits of the
separate property of the guilty spouse, this forfeiture shall not apply. In
case there are no children, the innocent spouse shall be entitled to all
the net profits.

19. Brigido's vested right claim may in fact be set aside under the Civil
Code since the trial court found him the guilty party.

20. Prior to the liquidation of the conjugal partnership, the interest of

each spouse in the conjugal assets is inchoate, a mere expectancy,
which constitutes neither a legal nor an equitable estate, and does not
ripen into title until it appears that there are assets in the community as
a result of the liquidation and settlement. The interest of each spouse is
limited to the net remainder or “remanente liquido” (haber ganancial)
resulting from the liquidation of the affairs of the partnership after its
dissolution. Thus, the right of the husband or wife to one-half of the
conjugal assets does not vest until the dissolution andliquidation of the
conjugal partnership, or after dissolution of the marriage, when it is
finally determined that, after settlement of conjugal obligations, there
are net assets left which can be divided between the spouses or their
respective heirs

Net Profits of the Conjugal Property

21. The net profits of the conjugal partnership of gains are all the fruits
of the separate properties of the spouses and the products of their labor
and industry.

22. Article 102(4) applies to both the dissolution of the absolute

community regime under Article 102 of the Family Code, and to the
dissolution of the conjugal partnership regime under Article 129 of the
Family Code.
23. Under Article 102(4) of the Family Code, net profits “shall be
the increase in value between the market value of the community
property at the time of the celebration of the marriage and the market
value at the time of its dissolution.”

24. The difference lies in the processes used under the dissolution of the
absolute community regime under Article 102 of the Family Code, and in
the processes used under the dissolution of the conjugal partnership
regime under Article 129 of the Family Code.

A. Absolute Community Regime

a. When a couple enters into a regime of absolute community, the

husband and the wife become joint owners of all the properties of the
marriage. Whatever property each spouse brings into the marriage, and
those acquired during the marriage (except those excluded under
Article 92 of the Family Code) form the common mass of the couple's
properties. And when the couple's marriage or community is dissolved,
that common mass is divided between the spouses, or their respective
heirs, equally or in the proportion the parties have established,
irrespective of the value each one may have originally owned.

b. Under Article 102 of the Family Code, upon dissolution of marriage, an

inventory is prepared, listing separately all the properties of the
absolute community and the exclusive properties of each; then the
debts and obligations of the absolute community are paid out of the
absolute community's assets and if the community's properties are
insufficient, the separate properties of each of the couple will be
solidarily liable for the unpaid balance. Whatever is left of the separate
properties will be delivered to each of them. The net remainder of the
absolute community is its net assets, which shall be divided between the
husband and the wife; and for purposes of computing the net profits
subject to forfeiture, said profits shall be the increase in value between
the market value of the community property at the time of the
celebration of the marriage and the market value at the time of its
dissolution.

c. Applying Article 102 of the Family Code, the “net profits” requires that
we first find the market value of the properties at the time of the
community's dissolution. From the totality of the market value of all the
properties, we subtract the debts and obligations of the absolute
community and this result to the net assets or net remainder of the
properties of the absolute community, from which we deduct the
market value of the properties at the time of marriage, which then
results to the net profits.

d. In the present case, since both husband and wife have no separate
properties, and nothing would be returned to each of them, what will
be divided equally between them is simply the “net profits.” However,
the trial court forfeited the half-share of the petitioner in favor of his
children. Thus, if we use Article 102 in the instant case (which should not
be the case), nothing is left to the petitioner since both parties entered
into their marriage without bringing with them any property

B. Conjugal Partnership of Gains

a. When a couple enters into a regime of conjugal partnership of gains

under Article 142 of the Civil Code, “the husband and the wife place in
common fund the fruits of their separate property and income from
their work or industry, and divide equally, upon the dissolution of the
marriage or of the partnership, the net gains or benefits obtained
indiscriminately by either spouse during the marriage.”[76] From the
foregoing provision, each of the couple has his and her own property
and debts. The law does not intend to effect a mixture or merger of
those debts or properties between the spouses. Rather, it establishes a
complete separation of capitals

b. In the normal course of events, the following are the steps in the
liquidation of the properties of the spouses:

c. An inventory of all the actual properties shall be made, separately

listing the couple's conjugal properties and their separate properties. (In
the instant case, the trial court found that the couple has no separate
properties when they married)

d. Ordinarily, the benefit received by a spouse from the conjugal

partnership during the marriage is returned in equal amount to the
assets of the conjugal partnership; and if the community is enriched at
the expense of the separate properties of either spouse, a restitution of
the value of such properties to their respective owners shall be made.

e. Subsequently, the couple's conjugal partnership shall pay the debts

of the conjugal partnership; while the debts and obligation of each of
the spouses shall be paid from their respective separate properties.

f. But if the conjugal partnership is not sufficient to pay all its debts and
obligations, the spouses with their separate properties shall be solidarily
liable.

g. What remains of the separate or exclusive properties of the husband

and of the wife shall be returned to each of them.

h. In the instant case, since it was already established by the trial court
that the spouses have no separate properties, there is nothing to return
to any of them. The listed properties above are considered part of the
conjugal partnership. Thus, ordinarily, what remains in the above-listed
properties should be divided equally between the spouses and/or their
respective heirs. However, since the trial court found the petitioner the
guilty party, his share from the net profits of the conjugal partnership is
forfeited in favor of the common children, pursuant to Article 63(2) of
the Family Code. Like in the absolute community regime, nothing will be
returned to the guilty party in the conjugal partnership regime, because
there is no separate property which may be accounted for in the guilty
party's favor.
ELENITA M. DEWARA, represented by her Attorney-in-Fact,
FERDINAND MAGALLANES, Petitioner, versus SPOUSES RONNIE AND
GINA LAMELA and STENILE ALVERO, Respondents.
G.R. No. 179010 | 2011-04-11 NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of

the Rules of Court, assailing the Decision [1] dated November 6, 2006
and the Resolution [2] dated July 10, 2007 of the Court of Appeals (CA)
in CA-G.R. CV No. 64936, which reversed and set aside the Decision [3]
dated September 2, 1999 of the Regional Trial Court (RTC), Branch 54,
Bacolod City, in Civil Case No. 93-7942.

The Facts
Eduardo Dewara (Eduardo) and petitioner Elenita Magallanes Dewara
(Elenita) were married before the enactment of the Family Code. Thus,
the Civil Code governed their marital relations. Husband and wife were
separated-in-fact because Elenita went to work in California, United
States of America, while Eduardo stayed in Bacolod City.

On January 20, 1985, Eduardo, while driving a private jeep registered in

the name of Elenita,[4] hit respondent Ronnie Lamela (Ronnie). Ronnie
filed a criminal case for serious physical injuries through reckless
imprudence[5] against Eduardo before the Municipal Trial Court in Cities
(MTCC), Branch IV, Bacolod City. The MTCC found Eduardo guilty of the
charge and sentenced him to suffer the penalty of imprisonment of two
(2) months and one (1) day to (3) months, and to pay civil indemnity of
Sixty-Two Thousand Five Hundred Ninety-Eight Pesos and Seventy
Centavos (P62,598.70) as actual damages and Ten Thousand Pesos
(P10,000.00) as moral damages. On appeal, the RTC[6] affirmed the
decision of the MTCC[7] and it became final and executory.[8]

The writ of execution on the civil liability was served on Eduardo, but it
was returned unsatisfied because he had no property in his name.
Ronnie requested the City Sheriff, respondent Stenile Alvero, to levy on
Lot No. 234-C, Psd. 26667 of the Bacolod Cadastre, with an area of One
Thousand Four Hundred Forty (1,440) square meters (sq m), under
Transfer Certificate of Title (TCT) No. T-80054, in the name of
“ELENITA M. DEWARA, of legal age, Filipino, married to Eduardo
Dewara, and resident of Bacolod City,” to satisfy the judgment on the
civil liability of Eduardo. The City Sheriff served a notice of embargo on
the title of the lot and subsequently sold the lot in a public auction. In
the execution sale, there were no interested buyers other than Ronnie.
The City Sheriff issued a certificate of sale to spouses Ronnie and Gina
Lamela to satisfy the civil liability in the decision against Eduardo.[9]
Ronnie then caused the consolidation of title in a Cadastral Proceeding
before the RTC, which ordered the cancellation of TCT No. T-80054 in
the name of Elenita and the issuance of a new certificate of title in the
name of respondent spouses.[10]

The levy on execution, public auction, issuance of certificate of sale, and

cancellation of title of the lot in the name of Elenita were done while
Elenita was working in California.[11] Thus, Elenita, represented by her
attorney-in-fact, Ferdinand Magallanes, filed a case for annulment of
sale and for damages against respondent spouses and ex-officio sheriff
Stenile Alvero before the RTC of Bacolod City. Petitioner claimed that
the levy on execution of Lot No. 234-C was illegal because the said
property was her paraphernal or exclusive property and could not be
made to answer for the personal liability of her husband. Furthermore,
as the registered owner of the property, she received no notice of the
execution sale. She sought the annulment of the sale and the annulment
of the issuance of the new TCT in the name of respondent spouses.[12]

On the other hand, respondent spouses averred that the subject lot was
the conjugal property of petitioner Elenita and Eduardo. They asserted
that the property was acquired by Elenita during her marriage to
Eduardo; that the property was acquired with the money of Eduardo
because, at the time of the acquisition of the property, Elenita was a
plain housewife; that the jeep involved in the accident was registered in
the name of petitioner; and that Elenita did not interpose any objection
pending the levy on execution of the property.[13]

On September 2, 1999, the RTC rendered a decision in favor of

petitioner, the fallo of which reads:

WHEREFORE, judgment is hereby rendered in favor of the [petitioner]

and against the [respondents]:
1. The levy on execution on Lot No. 234-C of the Bacolod Cadastre
covered by TCT No. 80054 in the name of [petitioner] Elenita M. Dewara,
the public auction of the property, and the consolidation of the title and
issuance of new TCT No. 167403 in the name of [respondent] Ronnie
Lamela, are hereby declared null and void;

2. The Register of Deeds of Bacolod City is ordered to cancel TCT No.

167403 in the name of [respondent] Ronnie Lamela and TCT No. 80054
be reinstated or a new one issued in the name of [petitioner] Elenita M.
Dewara;

3. There is no pronouncement on damages with cost de officio.

SO ORDERED.[14]

The RTC declared that said property was paraphernal in nature. It

arrived at this conclusion by tracing how Elenita acquired the subject
property. Based on the documentary evidence submitted, Elenita’s
grandfather, Exequiel Magallanes, originally owned Lot No. 234-C. Upon
his demise, his children, Jesus (Elenita’s father), Salud, and Concepcion,
inherited the property, each entitled to a share equal to one-third (1/3)
of the total area of the land. They were issued a new title (TCT No. T-
17541) for the property. On July 6, 1966, petitioner’s aunt, Salud,
executed a waiver of rights duly registered with the Office of the
Register of Deeds under Entry No. 76392, thereby waiving her rights and
participation over her 1/3 share of the property in favor of her siblings,
Jesus and Concepcion. The two siblings then became the owners of the
property, each owning one-half (1/2) of the property. Jesus
subsequently sold his share to his daughter, Elenita, for the sum of Five
Thousand Pesos (P5,000.00), based on the deed of sale dated March 26,
1975. The deed of sale was duly registered with the Register of Deeds
under Entry No. 76393. Concepcion also sold her share to her niece,
Elenita, for the sum of Ten Thousand Pesos (P10,000.00), based on the
deed of sale dated April 29, 1975, which was duly registered with the
Register of Deeds under Entry No. 76394. By virtue of the sale
transactions, TCT No. T-17541 was cancelled and a new title, TCT No. T-
80054, was issued in the name of Elenita.[15]

The RTC gave credence to the testimony of Elenita on the circumstances

surrounding the sale of the property. First, it was sold to her by her
father and her aunt so that the family would remain on the lot. Second,
the minimal and inadequate consideration for the 1,440 sq m property
was for the purpose of helping her expand her capital in her business at
the time. Thus, the sale was essentially a donation and was therefore
gratuitous in character.[16]

Having declared that the property was the paraphernal property of

Elenita, the RTC ruled that the civil liability of Eduardo, which was
personal to him, could not be charged to the exclusive property of his
wife.[17]

On appeal, the CA reversed the decision of the RTC. The dispositive

portion of the Decision reads:

WHEREFORE, in view of all the foregoing, the instant appeal is

GRANTED. The assailed decision of the Regional Trial Court of Bacolod
City, Branch 54, dated September 2, 1999, in Civil Case No. 93-7942 is
hereby REVERSED and SET ASIDE, and a new Decision is entered
DISMISSING the complaint for lack of merit. Let a copy of this Decision
be furnished to the Office of the Register of Deeds of Bacolod City,
Negros Occidental [which] is hereby ordered to cancel Transfer
Certificate of Title No. T-80054 or any transfer certificate of title
covering Lot No. 234-C issued in the name of Elenita M. Dewara, and
reinstate Transfer Certificate of Title No. 167403 or issue a new transfer
certificate of title covering Lot No. 234-C in the name of Ronnie Lamela.
No pronouncement as to costs.

SO ORDERED.[18]

In reversing the decision of the RTC, the CA elucidated that the gross
inadequacy of the price alone does not affect a contract of sale, except
that it may indicate a defect in the consent, or that the parties really
intended a donation or some other act or contract. Except for the
assertions of Elenita, there was nothing in the records that would
indicate a defect in Jesus and Concepcion Magallanes’ consent to the
sale.[19] The CA ruled that Elenita and Eduardo acquired the property by
onerous title during their marriage through their common fund. Thus, it
belonged to the conjugal partnership of gains and might be levied upon
to answer for civil liabilities adjudged against Eduardo.[20]
Hence, this petition.

The Issue
The sole issue for resolution is whether the subject property is the
paraphernal/exclusive property of Elenita or the conjugal property of
spouses Elenita and Eduardo.

The answer to this question will define whether the property may be
subject to levy and execution sale to answer for the civil liability
adjudged against Eduardo in the criminal case for serious physical
injuries, which judgment had already attained finality.

The Ruling of the Court

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.[21] Registration in the name of the husband or
the wife alone does not destroy this presumption.[22] The separation-
in-fact between the husband and the wife without judicial approval shall
not affect the conjugal partnership. The lot retains its conjugal
nature.[23] Moreover, the presumption of conjugal ownership applies
even when the manner in which the property was acquired does not
appear. The use of the conjugal funds is not an essential requirement for
the presumption to arise.[24]

There is no dispute that the subject property was acquired by spouses

Elenita and Eduardo during their marriage. It is also undisputed that
their marital relations are governed by the conjugal partnership of gains,
since they were married before the enactment of the Family Code and
they did not execute any prenuptial agreement as to their property
relations. Thus, the legal presumption of the conjugal nature of the
property applies to the lot in question. The presumption that the
property is conjugal property may be rebutted only by strong, clear,
categorical, and convincing evidence—there must be strict proof of the
exclusive ownership of one of the spouses, and the burden of proof
rests upon the party asserting it.[25]

Aside from the assertions of Elenita that the sale of the property by her
father and her aunt was in the nature of a donation because of the
alleged gross disparity between the actual value of the property and the
monetary consideration for the sale, there is no other evidence that
would convince this Court of the paraphernal character of the property.
Elenita proffered no evidence of the market value or assessed value of
the subject property in 1975. Thus, we agree with the CA that Elenita has
not sufficiently proven that the prices involved in the sales in question
were so inadequate for the Court to reach a conclusion that the
transfers were in the nature of a donation rather than a sale.

Furthermore, gross inadequacy of the price does not affect a contract

of sale, except as it may indicate a defect in the consent, or that the
parties really intended a donation or some other act or contract.[26] The
records are bereft of proof that the consent of petitioner’s father and
her aunt were vitiated or that, in reality, they intended the sale to be a
donation or some other contract. Inadequacy of the price per se will not
rule out the transaction as one of sale; the price must be grossly
inadequate or shocking to the conscience, such that the mind would
revolt at it and such that a reasonable man would neither directly nor
indirectly consent to it.[27]

However, even after having declared that Lot No. 234-C is the conjugal
property of spouses Elenita and Eduardo, it does not necessarily follow
that it may automatically be levied upon in an execution to answer for
debts, obligations, fines, or indemnities of one of the spouses. Before
debts and obligations may be charged against the conjugal partnership,
it must be shown that the same were contracted for, or the debts and
obligations should have redounded to, the benefit of the conjugal
partnership. Fines and pecuniary indemnities imposed upon the
husband or the wife, as a rule, may not be charged to the partnership.
However, if the spouse who is bound should have no exclusive property
or if the property should be insufficient, the fines and indemnities may
be enforced upon the partnership assets only after the responsibilities
enumerated in Article 161 of the Civil Code have been covered.

In this case, it is just and proper that Ronnie be compensated for the
serious physical injuries he suffered. It should be remembered that even
though the vehicle that hit Ronnie was registered in the name of Elenita,
she was not made a party in the said criminal case. Thus, she may not be
compelled to answer for Eduardo’s liability. Nevertheless, their conjugal
partnership property may be held accountable for it since Eduardo has
no property in his name. The payment of indemnity adjudged by the RTC
of Bacolod City in Criminal Case No. 7155 in favor of Ronnie may be
enforced against the partnership assets of spouses Elenita and Eduardo
after the responsibilities enumerated under Article 161 of the Civil Code
have been covered. This remedy is provided for under Article 163 of the
Civil Code, viz.:

Art. 163. The payment of debts contracted by the husband or the wife
before the marriage shall not be charged to the conjugal partnership.

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

However, the payment of debts contracted by the husband or the wife

before the marriage, and that of fines and indemnities imposed upon
them, may be enforced against the partnership assets after the
responsibilities enumerated in Article 161 have been covered, if the
spouse who is bound should have no exclusive property or if it should
be insufficient; but at the time of the liquidation of the partnership such
spouse shall be charged for what has been paid for the purposes above-
mentioned.[28]

Article 161 of the Civil Code enumerates the obligations which the
conjugal partnership may be held answerable, viz.:

Art. 161. The conjugal partnership shall be liable for:

(1) All debts and obligations contracted by the husband for the benefit
of the conjugal partnership, and those contracted by the wife, also for
the same purpose, in the cases where she may legally bind the
partnership;

(2) Arrears or income due, during the marriage, from obligations which
constitute a charge upon property of either spouse or of the
partnership;
(3) Minor repairs or for mere preservation made during the marriage
upon the separate property of either the husband or the wife; major
repairs shall not be charged to the partnership;

(4) Major or minor repairs upon the conjugal partnership property;

(5) The maintenance of the family and the education of the children of
both the husband and wife, and of legitimate children of one of the
spouses;

(6) Expenses to permit the spouses to complete a professional,

vocational or other course.

The enumeration above-listed should first be complied with before the

conjugal partnership may be held to answer for the liability adjudged
against Eduardo.

Finally, the indemnity imposed against Eduardo shall earn an interest at

the rate of twelve percent per annum, in accordance with our ruling in
Eastern Shipping Lines, Inc. v. Court of Appeals.[29]

WHEREFORE, in view of the foregoing, the Decision dated November 6,

2006 and the Resolution dated July 10, 2007 of the Court of Appeals in
CA-G.R. CV No. 64936 are hereby ANNULLED and SET ASIDE. The
decision dated September 2, 1999 of the Regional Trial Court of Bacolod
City in Civil Case No. 93-7942 is hereby REINSTATED WITH
MODIFICATION that the conjugal properties of spouses Elenita Dewara
and Eduardo Dewara shall be held to answer for the judgment of
Seventy-Two Thousand Five Hundred Ninety-Eight Pesos and Seventy
Centavos (P72,598.70), plus an interest rate of twelve (12) percent per
annum from the date of finality of the decision of the Regional Trial
Court of Bacolod City in Criminal Case No. 7155, after complying with the
provisions of Article 161 of the Civil Code.

SO ORDERED.
Villanueva vs. Court of Appeals (2004)
G.R. No. 143286 | 2004-04-14

Subject:
No Alleged Failure to Claim that the Properties were Conjugal; Defense of
Prescription and Laches by Petitioners Not Raised During Pre-Trial Deemed
Waived; Family Code Governs Marriage of Nicolas and Eusebia (Presumption
on Conjugality Applies); Properties Ruled to be Acquired During Marriage of
Nicolas and Eusebia; Documents in the name of Pacita Did Not Prove Her
Ownership; Tax Declarations Insufficient Evidence to Destroy Presumption
of Conjugality; Nature of the Property Not Subject to the Will of the Parties;
Cohabitation of Spouse with Another Person Does Not Sever Tie of Existing
Marriage; Presumption of Equality of Contribution Arises Only in Absence of
Proof of Actual Contribution

Facts:
Plaintiff Eusebia Retuya was the legal wife of defendant Nicolas Retuya.
They begot 5 children and resided in Mandaue City. During their marriage,
they acquired real properties and all improvements situated in Mandaue and
Consolacion, Cebu. Furthermore, Nicolas was the co-owner of a parcel of
land in Mandaue, which he inherited from his parents as well as the
purchasers of hereditary shares of approximately 8 parcels of land in
Mandaue. Some of these properties earn income from coconuts and the
other lands and houses were leased.

In 1945, Nicolas no longer lived with his legitimate family and cohabited
with defendant Pacita Villanueva. They had a son, defendant Procopio
Villanueva. Nicolas was the only person then who received the income of the
properties. It was known that Pacita had no occupation and properties of
her own from which she could derive income.

From the time defendant Nicolas suffered a stroke until the case was
brought before the court, it was defendant Procopio, who had been
receiving the income of these properties. The request of the legitimate
family to discuss matters regarding the management of the properties was
left unheeded by Procopio.

Plaintiff complained to the Barangay Captain for

reconciliation/mediation but no settlement was reached, hence, the said
official issued a certification to file action. Plaintiff then filed a complaint,
seeking for reconveyance of the properties from Nicolas and Pacita and
claiming that the subject properties were conjugal in nature.

The trial court ruled in favor of Eusebia. It applied the presumption that
the property should belong to the marriage if it was acquired during the
marriage, unless the opposite was proven. The trial court ruled that the
documents and other evidence Eusebia presented constitute "solid
evidence" which proved that the subject properties were acquired during
her marriage with Nicolas. In the same vein, the Court of Appeals ruled that
the petitioners failed to rebut the presumption. Hence, the decision of the
trial court was affirmed.

Held:
No Failure to Claim that the Properties were Conjugal
1. Petitioners’ contention that Eusebia’s complaint failed to state that the
subject properties are conjugal is absolutely without basis.

2. A cursory reading of the complaint readily shows that the complaint

maintains that the subject properties are conjugal. The same claim is
restated and repleaded throughout the complaint. Petitioners should know
better than to clutter their appeal with useless arguments such as this.

Defense of Prescription and Laches by Petitioners Not Raised During Pre-

Trial Deemed Waived
3. While petitioners did raise the issue of prescription and laches in their
Answer, they failed to have the same included in the pre-trial order for
consideration during the trial.

4. The determination of issues during the pre-trial conference bars the

consideration of other questions, whether during trial or on
appeal.Petitioners in fact raised in their answer the defense of prescription
and laches. However, despite raising the defense of prescription and laches
in their answer, petitioners failed to include this defense among the issues
for consideration during the trial.The non-inclusion of this defense in the pre-
trial order barred its consideration during the trial.

Family Code Governs Marriage of Nicolas and Eusebia (Presumption on

Conjugality Applies)
5. The Family Code provisions on conjugal partnerships govern the property
relations between Nicolas and Eusebia even if they were married before the
effectivity of Family Code.
6. Article 105 of the Family Code explicitly mandates that the Family Code
shall apply to conjugal partnerships established before the Family Code
without prejudice to vested rights already acquired under the Civil Code or
other laws.

7. Under the Family Code, if the properties are acquired during the marriage,
the presumption is that they are conjugal. The burden of proof is on the
party claiming that they are not conjugal. This is counter-balanced by the
requirement that the properties must first be proven to have been acquired
during the marriage before they are presumed conjugal.

Properties Ruled to be Acquired During Marriage of Nicolas and Eusebia

8. The question of whether the subject properties were acquired during the
marriage of Nicolas and Eusebia was a factual issue. Both the trial and
appellate courts agreed that the subject properties were in fact acquired
during the marriage of Nicolas and Eusebia.

9. The tax declarations covering the subject properties, along with the
unrebutted testimony of Eusebia’s witnesses, establish this fact. The
Supreme Court gave due deference to factual findings of trial courts,
especially when affirmed by the appellate court.

Documents in the name of Pacita Did Not Prove Her Ownership

10. Petitioners pointed out that the deed of sale, the transfer certificate of
title and the tax declaration of a lot were all in the name of Pacita. Petitioners
maintain that this can only mean that Pacita is the real owner.

11. The Supreme Court disagreed. The totality of the evidence reveals that
this was merely just one of the several schemes Nicolas employed to deprive
Eusebia of their conjugal property.

Tax Declarations Insufficient Evidence to Destroy Presumption of

Conjugality
12. Petitioners pointed out that all the other tax declarations presented
before the trial court werein the name of Nicolas alone. Petitioners argued
that this served as proof of Nicolas’ exclusive ownership of these properties.
Petitioners were mistaken.

13. The tax declarations are not sufficient proof to overcome the
presumption under Article 116 of the Family Code. All property acquired by
the spouses during the marriage, regardless in whose name the property is
registered, is presumed conjugal unless proved otherwise. The presumption
is not rebutted by the mere fact that the certificate of title of the property
or the tax declaration is in the name of one of the spouses only.

14. Article 116 of the Family Code expressly provides that the presumption
remains even if the property is "registered in the name of one or both of the
spouses."

Nature of the Property Not Subject to the Will of the Parties

15. Whether a property is conjugal or not is determined by law and not by
the will of one of the spouses. No unilateral declaration by one spouse can
change the character of conjugal property.

Cohabitation of Spouse with Another Person Does Not Sever Tie of Existing
Marriage
16. The cohabitation of a spouse with another person, even for a long period,
does not sever the tie of a subsisting previous marriage. Otherwise, the law
would be giving a stamp of approval to an act that is both illegal and
immoral.

17. What petitioners failed to grasp was that Nicolas and Pacita’s
cohabitation cannot work to the detriment of Eusebia, the legal spouse. The
marriage of Nicolas and Eusebia continued to exist regardless of the fact
that Nicolas was already living with Pacita. Hence, all property acquired from
the date of Nicolas and Eusebia’s marriage, until Eusebia’s death, were still
presumed conjugal.

Presumption of Equality of Contribution Arises Only in Absence of Proof of

Actual Contribution
18. A reading of Article 148 readily shows that there must be proof of "actual
joint contribution" by both the live-in partners before the property becomes
co-owned by them in proportion to their contribution. The presumption of
equality of contribution arises only in the absence of proof of their
proportionate contributions, subject to the condition that actual joint
contribution is proven first.

19. Proof of actual contribution by both parties is required, otherwise there

is no co-ownership and no presumption of equal sharing. Petitioners failed
to show proof of actual contribution by Pacita in the acquisition of the parcel
of land.
WILHELMINA JOVELLANOS, MERCY JOVELLANOS-MARTINEZ and JOSE
HERMILO JOVELLANOS, petitioners, vs. THE COURT OF APPEALS, and ANNETTE
H. JOVELLANOS, for and in her behalf, and in representation of her two minor
daughters as natural guardian, ANA MARIA and MA. JENNETTE, both surnamed
JOVELLANOS, respondents. G.R. No. 100728 | 1992-06-18 REGALADO, J.:

This petition for review on certiorari seeks to reverse and set aside the
decision 1 promulgated by respondent court on June 28, 1991 in CA-G.R.
CV No. 27556 affirming with some modifications the earlier decision of
the Regional Trial Court of Quezon City, Branch 85, which, inter alia,
awarded one-half (1/2) of the property subject of Civil Case No. Q-52058
therein to private respondent Annette H. Jovellanos and one-sixth (1/6)
each of the other half of said property to the three private respondents,
all as pro indiviso owners of their aforesaid respective portions.

As found by respondent court, 2 on September 2, 1955, Daniel

Jovellanos
and Philippine American Life Insurance Company (Philamlife) entered
into a contract denominated as a lease and conditional sale agreement
over Lot 8, Block 3 of the latter's Quezon City Community Development
Project, including a bungalow thereon, located at and known as No. 55
South Maya Drive, Philamlife Homes, Quezon City. At that time, Daniel
Jovellanos was married to Leonor Dizon, with whom he had three
children, the petitioners herein, Leonor Dizon died on January 2, 1959.
On May 30, 1967, Daniel married private respondent Annette H.
Jovellanos with whom he begot two children, her herein co-
respondents.

On December 18, 1971, petitioner Mercy Jovellanos married Gil Martinez

and,
at the behest of Daniel Jovellanos, they built a house on the back portion
of the premises. On January 8, 1975, with the lease amounts having been
paid. Philamlife executed to Daniel Jovellanos a deed of absolute sale
and, on the next day, the latter donated to herein petitioners all his
rights, title and interests over the lot and bungalow thereon. On
September 8, 1985, Daniel Jovellanos died and his death spawned the
present controversy, resulting in the filing by private respondents of
Civil Case No. Q-52058 in the court below.
Private respondent Annette H. Jovellanos claimed in the lower court
that the aforestated property was acquired by her deceased husband
while their marriage was still subsisting, by virtue of the deed of
absolute sale dated January 8, 1975 executed by Philamlife in favor of
her husband. Daniel Jovellanos, who was issued Transfer Certificate of
Title No. 212286 of the Register of Deeds of Quezon City and which
forms part of the conjugal partnership of the second marriage.
Petitioners, on the other hand, contend that the property, specifically
the lot and the bungalow erected thereon, as well as the beneficial and
equitable title thereto, were acquired by their parents during the
existence of the first marriage under their lease and conditional sale
agreement with Philamlife of September 2, 1955.

On December 28, 1989, the court a quo rendered judgment 3 with the
following dispositions:

"WHEREFORE, premises considered, judgment is hereby rendered as

follows:

1. Ordering the liquidation of the partnership of the second marriage and

directing the reimbursement of the amount advanced by the
partnership of the first marriage as well (as) by the late Daniel Jovellanos
and the defendants spouses Gil and Mercia * J. Martinez in the
acquisition of the lot and bungalow described in the Lease and
Conditional Sale Agreement (Exhs. D and 1);

2. After such liquidation and reimbursement, declaring the plaintiff

Annette Jovellanos as pro-indiviso owner of 1/2 of the property
described in TCT No. 212268 (sic) and the bungalow erected there in;

3. Declaring the plaintiff Annette Jovellanos, as well as the minors Anna

Marie and Ma. Jeannette (sic) both surnamed Jovellanos and the herein
defendants, as owners pro indiviso of 1/6 each of the other half of said
property;

4. Declaring the defendants spouses Gil and Mercia Martinez as

exclusive owners of the two-storey house erected on the property at
the back of the said bungalow, with all the rights vested in them as
builders in good faith under Article 448 of the New Civil Code;
5. Ordering the parties to make a partition among themselves by proper
instruments of conveyances, subject to the confirmation of this Court,
and if they are unable to agree upon the partition, ordering that the
partition should be made by not more than three (3) competent and
disinterested persons as commissioners who shall make the partition in
accordance with Sec. 5, Rule 69 of the Revised Rules of Court;

6. Ordering the defendant(s) to pay plaintiffs, jointly and severally, the

sum of P5,000.00 as attorney' s fees, plus costs.

SO ORDERED." 4

Respondent Court of Appeals, in its challenged decision, held that the

lease and conditional sale agreement executed by and between Daniel
Jovellanos, and Philamlife is a lease contract and, in support of its
conclusion, reproduced as its own the following findings of the trial
court:

"It is therefore incumbent upon the vendee to comply with all his
obligations, i.e., the payment of the stipulated rentals and adherence to
the limitations set forth in the contract before the legal title over the
property is conveyed to the lessee-vendee. This, in effect, is a pactum
reservati dominii which is common in sales on installment plan of real
estate whereby ownership is retained by the vendor and payment of the
agreed price being a condition precedent before full ownership could be
transferred (Wells vs. Samonte, 38768-R, March 23, 1973; Perez vs.
Erlanger and Galinger Inc., CA 54 OG 6088). The dominion or full
ownership of the subject property was only transferred to Daniel
Jovellanos upon full payment of the stipulated price giving rise to the
execution of the Deed of Absolute Sale on January 8, 1975 (Exh. 2) when
the marriage between the plaintiff and Daniel Jovellanos was already in
existence.

"The contention of the defendants that the jus in re aliena or right in the
property of another person (Gabuya vs. Cruz, 38 SCRA 98) or beneficial
use and enjoyment of the property or the equitable title has long been
vested in the vendee-lessee Daniel Jovellanos upon execution of Exh. '1'
is true. But the instant case should be differentiated from the cited cases
of Pugeda v. Trias, et al., 4 SCRA 849; and Alvarez vs. Espiritu, G.R. L-
18833, August 14, 1965, which cannot be applied herein even by analogy.
In Pugeda, the subject property refers solely to friar lands and is
governed by Act 1120 wherein the certificate of sale is considered a
conveyance of ownership subject only to the resolutory condition that
the sale may be rescinded if the agreed price has not been paid in full; in
the case at bar, however, payment of the stipulated price is a condition
precedent before ownership could be transferred to the vendee." 5

With the modification that private respondents should also reimburse

to petitioners their proportionate shares in the proven hospitalization
and burial expenses of the late Daniel Jovellanos, respondent Court of
Appeals affirmed the judgment of the trial court, applying Article 118 of
the Family Code which provides:

"Art. 118. Property bought on installment paid partly from exclusive

funds of either or both spouses and partly from conjugal funds belongs
to the buyer or buyers if full ownership was vested before the marriage
and to the conjugal partnership if such ownership was vested during the
marriage. In either case, any amount advanced by the partnership or by
either or both spouses shall be reimbursed by the owner or owners
upon liquidation of the partnership."

Petitioners now seek this review, invoking their assignment of errors

raised before the respondent court and which may be capsulized into
two contentions, namely, that (1) the lower court erred in holding that
the lot and bungalow covered by the lease and conditional sale
agreement (Exhibit 1) is conjugal property of the second marriage of the
late Daniel Jovellanos; and (2) the lower court erred in holding that the
provisions of the Family Code are applicable in resolving the rights of the
parties herein. 6

It is petitioners' position that the Family Code should not be applied in

determining the successional rights of the party litigants to the estate
of Daniel Jovellanos, for to do so would be to impair their vested
property rights over the property in litigation which they have acquired
long before the Family Code took effect. 7

To arrive at the applicable law, it would accordingly be best to look into

the nature of the contract entered into by the contracting parties. As
oppositely observed by respondent court, the so-called lease
agreement is, therefore, very much in issue. Preliminarily, we do not lose
sight of the basic rule that a contract which is not contrary to law,
morals, good customs, public order or public policy has the force of law
between the contracting parties and should be complied with in good
faith. 8 Its provisions are binding not only upon them but also upon their
heirs and assigns. 9

The contract entered into by the late Daniel Jovellanos and Philamlife is
specifically denominated as a "Lease and Conditional Sale Agreement"
over the property involved with a lease period of twenty years at a
monthly rental of P288.87, by virtue of which the former, as lessee-
vendee, had only the right of possession over the property. 10 In a lease
agreement, the lessor transfers merely the temporary use and
enjoyment of the thing leased. 11 In fact, Daniel Jovellanos bound
himself therein, among other things, to use the property solely as a
residence, take care thereof like a good father of a family, permit
inspection thereof by representatives of Philamlife, and abide by all
rules and regulations of Philamlife, and abide by all rules and regulations
of Philamlife in regard to the use and preservation of the property. 12

It is specifically provided, however, that "(i)f, at the expiration of the

lease period herein agreed upon, the LESSEE-VENDEE shall have fully
and faithfully complied with all his obligations herein stipulated, the
LESSOR-VENDOR shall immediately sell, transfer and convey to the
LESSEE-VENDEE the property which is the subject matter of this
agreement; . . ." 13

The conditional sale agreement in said contract is, therefore, also in the
nature of a contract to sell, as contradistinguished from a contract of
sale. In a contract to sell or a conditional sale, ownership is not
transferred upon delivery of the property but upon full payment of the
purchase price. 14 Generally, ownership is transferred upon delivery, but
even if delivered, the ownership may still be with the seller until full
payment of the price is made, if there is a stipulation to this effect. The
stipulation is usually known as pactum reservati dominii, or contractual
reservation of title, and is common in sales on the installment plan. 15
Compliance with the stipulated payments is a suspensive condition. 16
the failure of which prevents the obligation of the vendor to convey title
from acquiring binding force. 17

Hornbook lore from civilists clearly lays down the distinctions between
a contract of sale in which the title passes to the buyer upon delivery of
the thing sold, and a contract to sell where, by agreement, the
ownership is reserved in the seller and is not to pass until full payment
of the purchase-price. In the former, non-payment of the price is a
negative resolutory condition; in the latter, full payment is a positive
suspensive condition. In the former, the vendor loses and cannot
recover the ownership of the thing sold until and unless the contract of
sale is rescinded or set aside; in the latter, the title remains in the vendor
if the vendee does not comply with the condition precedent of making
full payment as specified in the contract.

Accordingly, viewed either as a lease contract or a contract to sell, or as

a contractual amalgam with facets of both, what was vested by the
aforestated contract in petitioners' predecessor in interest was merely
the beneficial title to the property in question. His monthly payments
were made in the concept of rentals, but with the agreement that if he
faithfully complied with all the stipulations in the contract the same
would in effect be considered as amortization payments to be applied
to the predetermined price of the said property. He consequently
acquired ownership thereof only upon full payment of the said amount
hence, although he had been in possession of the premises since
September 2, 1955, it was only on January 8, 1975 that Philamlife
executed the deed of absolute sale thereof in his favor.

The conditions of the aforesaid agreement also bear notice, considering

the stipulations therein that Daniel Jovellanos, as lessee-vendee, shall
not

xxx xxx xxx

"(b) Sublease said property to a third party;

(c) Engage in business or practice any profession within the property;

xxx xxx xxx

(f) Make any alteration or improvement on the property without the
prior written consent of the LESSOR-VENDOR;

(g) Cut down, damage, or remove any tree or shrub, or remove or quarry
any stone, rock or earth within the property, without the prior written
consent of the LESSOR-VENDOR;

(h) Assign to another his right, title and interest under and by virtue of
this Agreement, without the prior written consent and approval of the
LESSOR-VENDOR." 18

The above restrictions further bolster the conclusion that Daniel

Jovellanos did not enjoy the full attributes of ownership until the
execution of the deed of sale in his favor. The law recognizes in the
owner the right to enjoy and dispose of a thing, without other
limitations than those established by law, 19 and, under the contract,
Daniel Jovellanos evidently did not possess or enjoy such rights of
ownership.

We find no legal impediment to the application in this case of the rule of

retroactivity provided in the Family Code to the effect that

"Art. 256. This Code shall have retroactive effect insofar as it does not
prejudice or impair vested or acquired rights in accordance with the Civil
Code or other laws."

The right of Daniel Jovellanos to the property under the contract with
Philamlife was merely an inchoate and expectant right which would
ripen into a vested right only upon his acquisition of ownership which,
as aforestated, was contingent upon his full payment of the rentals and
compliance with all his contractual obligations thereunder. A vested
right is an immediate fixed right of present and future enjoyment. It is
to be distinguished from a right that is expectant or contingent. 20 It is
a right which is fixed, unalterable, absolute, complete and unconditional
to the exercise of which no obstacle exists, 21 and which is perfect in
itself and not dependent upon a contingency. 22 Thus, for a property
right to be vested, there must be a transition from the potential or
contingent to the actual, and the proprietary interest must have
attached to a thing; it must have become fixed or established and is no
longer open to doubt or controversy. 23

The trial court, which was upheld by respondent court, correctly ruled
that the cases cited by petitioners are inapplicable to the case at bar
since said cases involved friar lands which are governed by a special law,
Act 1120, which was specifically enacted for the purpose. In the sale of
friar lands, upon execution of the contract to sell, a certificate of sale is
delivered to the vendee and such act is considered as a conveyance of
ownership, subject only to the resolutory condition that the sale may be
rescinded if the agreed price shall not be paid in full. In the instant case,
no certificate of sale was delivered and full payment of the rentals was
a condition precedent before ownership could be transferred to the
vendee. 24

We have earlier underscored that the deed of absolute sale was

executed in 1975 by Philamlife, pursuant to the basic contract between
the parties, only after full payment of the rentals. Upon the execution
of said deed of absolute sale, full ownership was vested in Daniel
Jovellanos. Since, as early as 1967, he was already married to Annette H.
Jovellanos, this property necessarily belonged to his conjugal
partnership with his said second wife.

As found by the trial court, the parties stipulated during the pre-trial
conference in the case below that the rentals/installments under the
lease and conditional sale agreement were paid as follows: (a) from
September 2, 1955 to January 2, 1959, by conjugal funds of the first
marriage; (b) from January 3, 1959 to May 29, 1967, by capital of Daniel
Jovellanos; (c) from May 30, 1967 to 1971, by conjugal funds of the
second marriage; and (d) from 1972 to January 8, 1975, by conjugal funds
of the spouses Gil and Mercy Jovellanos-Martinez. 25 Both courts,
therefore, ordered that reimbursements should be made in line with the
pertinent provision of Article 118 of the Family Code that "any amount
advanced by the partnership or by either or both spouses shall be
reimbursed by the owner or owners upon liquidation of the
partnership."

ACCORDINGLY, finding no reversible error in the judgment of

respondent court, the same is hereby AFFIRMED.
SO ORDERED.
FRANCISCO MUNOZ, JR., Petitioner, versus ERLINDA RAMIREZ and
ELISEO CARLOS, Respondents
G.R. No. 156125 | 2010-08-25 BRION, J.:

We resolve the present petition for review on certiorari[1] filed by

petitioner Francisco Muñoz, Jr. (petitioner) to challenge the decision[2]
and the resolution[3] of the Court of Appeals (CA) in CA-G.R. CV No.
57126.[4] The CA decision set aside the decision[5] of the Regional Trial
Court (RTC), Branch 166, Pasig City, in Civil Case No. 63665. The CA
resolution denied the petitioner's 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 Erlinda's 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 petitioner's 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 P200,000.00[10] 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 P176,445.27[11] 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 Eliseo's affidavit, unsigned; since
Eliseo's 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
the P200,000.00 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 petitioner's 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
case[16] 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

examination[18] conducted by the National Bureau of Investigation of
Eliseo's purported signatures in the Special Power of Attorney[19] 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
Erlinda's name; the residential lot was part of a large parcel of land
owned by Pedro Ramirez and Fructuosa Urcla, Erlinda's 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, Erlinda's 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 Erlinda's exclusive paraphernal
property that was inherited from her father. It also upheld the sale to
the petitioner, even without Eliseo's 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 Eliseo's
signatures in the special power of attorney and in the affidavit were
forgeries was immaterial because Eliseo's 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 158[23] of the Civil Code and Calimlim-Canullas v.
Hon. Fortun,[24] the CA held that the subject property, originally
Erlinda's exclusive paraphernal property, became conjugal property
when it was used as collateral for a housing loan that was paid through
conjugal funds - Eliseo's monthly salary deductions; the subject
property, therefore, cannot be validly sold or mortgaged without
Eliseo's consent, pursuant to Article 124[25] of the Family Code. Thus,
the CA declared void the deed of absolute sale, and set aside the RTC
decision.

When the CA denied[26] 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-Canullas[28] 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 120[29] 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 received P200,000.00 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 92[36] and 109[37] 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 Erlinda's 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 CA's 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:

x x x x

The provisions of this Chapter [on the Conjugal Partnership of Gains]

shall also apply to conjugal partnerships of gains already established
between spouses before the effectivity of this Code, without prejudice
to vested rights already acquired in accordance with the Civil Code or
other laws, as provided in Article 256.

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, 1989[42] 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
P176,445.27[45] 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 Eliseo's 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 Eliseo's 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;[50] payment 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 or P19,233.00 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
CA-G.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.