Republic of the Philippines

SUPREME COURT
Manila

left by the deceased; that the defendant account for P21,634.80, and that that sum be
divided equally among the plaintiffs and defendant along with the other property of
deceased.

EN BANC

Ledesma, Lim and Irureta Goyena for appellants.

O'Brien and DeWitt for appellee.

The defendant denies the material allegations of the complaint and sets up as special
defense and counterclaim that the redemption of the real estate sold by his father was
made in the name of the plaintiffs and himself instead of in his name alone without
his knowledge or consent; and that it was not his intention to use the proceeds of the
insurance policy for the benefit of any person but himself, he alleging that he was
and is the sole owner thereof and that it is his individual property. He, therefore, asks
that he be declared the owner of the real estate redeemed by the payment of the
P18,365.20, the owner of the remaining P21,634.80, the balance of the insurance
policy, and that the plaintiff's account for the use and occupation of the premises so
redeemed since the date of the redemption.

MORELAND, J.:

The learned trial court refused to give relief to either party and dismissed the action.

This is an appeal from a judgment of the Court of First Instance of the city of Manila
dismissing the complaint with costs.

It says in its opinion: "This purports to be an action for partition, brought against an
heir by his coheirs. The complaint, however, fails to comply with Code Civ., Pro.
sec. 183, in that it does not 'contain an adequate description of the real property of
which partition is demanded.' Because of this defect (which has not been called to
our attention and was discovered only after the cause was submitted) it is more than
doubtful whether any relief can be awarded under the complaint, except by
agreement of all the parties."

G.R. No. L-9374

February 16, 1915

FRANCISCO DEL VAL, ET AL., plaintiffs-appellants,

vs.
ANDRES DEL VAL, defendant-appellee.

The pleadings set forth that the plaintiffs and defendant are brother and sisters; that
they are the only heirs at law and next of kin of Gregorio Nacianceno del Val, who
died in Manila on August 4, 1910, intestate; that an administrator was appointed for
the estate of the deceased, and, after a partial administration, it was closed and the
administrator discharged by order of the Court of First Instance dated December 9,
1911; that during the lifetime of the deceased he took out insurance on his life for the
sum of P40,000 and made it payable to the defendant as sole beneficiary; that after
his death the defendant collected the face of the policy; that of said policy he paid the
sum of P18,365.20 to redeem certain real estate which the decedent had sold to third
persons with a right to repurchase; that the redemption of said premises was made by
the attorney of the defendant in the name of the plaintiff and the defendant as heirs of
the deceased vendor; that the redemption of said premises they have had the use and
benefit thereof; that during that time the plaintiffs paid no taxes and made no repairs.
It further appears from the pleadings that the defendant, on the death of the deceased,
took possession of most of his personal property, which he still has in his possession,
and that he has also the balance on said insurance policy amounting to P21,634.80.
Plaintiffs contend that the amount of the insurance policy belonged to the estate of
the deceased and not to the defendant personally; that, therefore, they are entitled to a
partition not only of the real and personal property, but also of the P40,000 life
insurance. The complaint prays a partition of all the property, both real and personal,

1 | Page

This alleged defect of the complaint was made one of the two bases for the dismissal
of the action.
We do not regard this as sufficient reason for dismissing the action. It is the doctrine
of this court, set down in several decisions, Lizarraga Hermanos vs. Yap Tico, 24
Phil. Rep., 504, that, even though the complaint is defective to the extent of failing in
allegations necessary to constitute a cause of action, if, on the trial of the cause,
evidence is offered which establishes the cause of action which the complaint
intended to allege, and such evidence is received without objection, the defect is
thereby cured and cannot be made the ground of a subsequent objection. If, therefore,
evidence was introduced on the trial in this case definitely and clearly describing the
real estate sought to be partitioned, the defect in the complaint was cured in that
regard and should not have been used to dismiss the action. We do not stop to inquire
whether such evidence was or was not introduced on the trial, inasmuch as this case
must be turned for a new trial with opportunity to both parties to present such
evidence as is necessary to establish their respective claims.

The court in its decision further says: "It will be noticed that the provision above
quoted refers exclusively to real estate. . . . It is, in other words, an exclusive real
property action, and the institution thereof gives the court no jurisdiction over
chattels. . . . But no relief could possibly be granted in this action as to any property
except the last (real estate), for the law contemplated that all the personal property of
an estate be distributed before the administration is closed. Indeed, it is only in
exceptional cases that the partition of the real estate is provided for, and this too is
evidently intended to be effected as a part of the administration, but here the
complaint alleges that the estate was finally closed on December 9, 1911, and we
find upon referring to the record in that case that subsequent motion to reopen the
same were denied; so that the matter of the personal property at least must be
considered res judicata (for the final judgment in the administration proceedings
must be treated as concluding not merely what was adjudicated, but what might have
been). So far, therefore, as the personal property at least is concerned, plaintiffs' only
remedy was an appeal from said order."
We do not believe that the law is correctly laid down in this quotation. The courts of
the Islands have jurisdiction to divide personal property between the common
owners thereof and that power is as full and complete as is the power to partition real
property. If an actual partition of personal property cannot be made it will be sold
under the direction of the court and the proceeds divided among the owners after the
necessary expenses have been deducted.
The administration of the estate of the decedent consisted simply, so far as the record
shows, in the payment of the debts. No division of the property, either real or
personal, seems to have been made. On the contrary, the property appears, from the
record, to have been turned over to the heirs in bulk. The failure to partition the real
property may have been due either to the lack of request to the court by one or more
of the heirs to do so, as the court has no authority to make a partition of the real
estate without such request; or it may have been due to the fact that all the real
property of decedent had been sold under pacto de retro and that, therefore, he was
not the owner of any real estate at the time of his death. As to the personal property,
it does not appear that it was disposed of in the manner provided by law. (Sec. 753,
Code of Civil Procedure.) So far as this action is concerned, however, it is sufficient
for us to know that none of the property was actually divided among the heirs in the
administration proceeding and that they remain coowners and tenants-in- common
thereof at the present time. To maintain an action to partition real or personal
property it is necessary to show only that it is owned in common.
The order finally closing the administration and discharging the administrator,
referred to in the opinion of the trial court, has nothing to do with the division of
either the real or the personal property. The heirs have the right to ask the probate
court to turn over to them both the real and personal property without division; and

2 | Page

where that request is unanimous it is the duty of the court to comply with it, and
there is nothing in section 753 of the Code of Civil Procedure which prohibits it. In
such case an order finally settling the estate and discharging the administrator would
not bar a subsequent action to require a division of either the real or personal
property. If, on the other hand, an order had been made in the administration
proceedings dividing the personal or the real property, or both, among the heirs, then
it is quite possible that, to a subsequent action brought by one of the heirs for a
partition of the real or personal property, or both, there could have been interposed a
plea of res judicata based on such order. As the matter now stands, however, there is
no ground on which to base such a plea. Moreover, no such plea has been made and
no evidence offered to support it.
With the finding of the trial court that the proceeds of the life-insurance policy
belong exclusively to the defendant as his individual and separate property, we agree.
That the proceeds of an insurance policy belong exclusively to the beneficiary and
not to the estate of the person whose life was insured, and that such proceeds are the
separate and individual property of the beneficiary, and not of the heirs of the person
whose life was insured, is the doctrine in America. We believe that the same doctrine
obtains in these Islands by virtue of section 428 of the Code of Commerce, which
reads:
The amount which the underwriter must deliver to the person insured, in
fulfillment of the contract, shall be the property of the latter, even against
the claims of the legitimate heirs or creditors of any kind whatsoever of the
person who effected the insurance in favor of the former.
It is claimed by the attorney for the plaintiffs that the section just quoted is
subordinate to the provisions of the Civil Code as found in article 1035. This article
reads:
An heir by force of law surviving with others of the same character to a
succession must bring into the hereditary estate the property or securities he
may have received from the deceased during the life of the same, by way of
dowry, gift, or for any good consideration, in order to compute it in fixing
the legal portions and in the account of the division.
Counsel also claim that the proceeds of the insurance policy were a donation or gift
made by the father during his lifetime to the defendant and that, as such, its ultimate
destination is determined by those provisions of the Civil Code which relate to
donations, especially article 819. This article provides that "gifts made to children
which are not betterments shall be considered as part of their legal portion."

We cannot agree with these contentions. The contract of life insurance is a special
contract and the destination of the proceeds thereof is determined by special laws
which deal exclusively with that subject. The Civil Code has no provisions which
relate directly and specifically to life- insurance contracts or to the destination of life
insurance proceeds. That subject is regulated exclusively by the Code of Commerce
which provides for the terms of the contract, the relations of the parties and the
destination of the proceeds of the policy.
The proceeds of the life-insurance policy being the exclusive property of the
defendant and he having used a portion thereof in the repurchase of the real estate
sold by the decedent prior to his death with right to repurchase, and such repurchase
having been made and the conveyance taken in the names of all of the heirs instead
of the defendant alone, plaintiffs claim that the property belongs to the heirs in
common and not to the defendant alone.
We are not inclined to agree with this contention unless the fact appear or be shown
that the defendant acted as he did with the intention that the other heirs should enjoy
with him the ownership of the estate in other words, that he proposed, in effect, to
make a gift of the real estate to the other heirs. If it is established by the evidence that
that was his intention and that the real estate was delivered to the plaintiffs with that
understanding, then it is probable that their contention is correct and that they are
entitled to share equally with the defendant therein. If, however, it appears from the
evidence in the case that the conveyances were taken in the name of the plaintiffs
without his knowledge or consent, or that it was not his intention to make a gift to
them of the real estate, then it belongs to him. If that facts are as stated, he has two
remedies. The one is to compel the plaintiffs to reconvey to him and the other is to
let the title stand with them and to recover from them the sum he paid on their behalf.
For the complete and proper determination of the questions at issue in this case, we
are of the opinion that the cause should be returned to the trial court with instructions
to permit the parties to frame such issues as will permit the settlement of all the
questions involved and to introduce such evidence as may be necessary for the full
determination of the issues framed. Upon such issues and evidence taken thereunder
the court will decide the questions involved according to the evidence, subordinating
his conclusions of law to the rules laid down in this opinion.
We do not wish to be understood as having decided in this opinion any question of
fact which will arise on the trial and be there in controversy. The trial court is left
free to find the facts as the evidence requires. To the facts as so found he will apply
the law as herein laid down.

3 | Page

The judgment appealed from is set aside and the cause returned to the Court of First
Instance whence it came for the purpose hereinabove stated. So ordered.

Concepcion Felix, widow of the late Don Felipe Calderon and with whom she had
one living child, Concepcion Calderon, contracted a second marriage on June 20,
1929, with Domingo Rodriguez, widower with four children by a previous marriage,
named Geronimo, Esmeragdo, Jose and Mauricio, all surnamed Rodriguez. There
was no issue in this second marriage.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-23002

On March 6, 1953, Domingo Rodriguez died intestate, survived by the widow,

Concepcion Felix, his children Geronimo Esmeragdo and Mauricio and
grandchildren Oscar, Juan and Ana, surnamed Rodriguez, children of a son, Jose,
who had predeceased him.

July 31, 1967

CONCEPCION FELIX VDA. DE RODRIGUEZ, plaintiff-appellant,

vs.
GERONIMO RODRIGUEZ., ET AL., defendants-appellees.
Ozaeta, Gibbs and Ozaeta for plaintiff-appellant.
Sycip, Salazar, Luna and Associates and Carolina C. Grio-Aquino for defendantsappellees.
REYES, J.B.L., J.:
This is an appeal by Concepcion Felix Vda. de Rodriguez from the decision of the
Court of First Instance of Bulacan in Civil Case No. 2565, which she commenced on
May 28, 1962, to secure declaration, of nullity of two contracts executed on January
24, 1934 and for recovery of certain properties.
The facts of this case may be briefly stated as follows:

4 | Page

Prior to her marriage to Rodriguez, Concepcion Felix was the registered owner of 2
fishponds located in the barrio of Babagad, municipality of Bulacan, Bulacan
province. with a total area of 557,711 square meters covered by OCT Nos. 605 and
807. Under date of January 24, 1934, Concepcion Felix appeared to have executed a
deed of sale conveying ownership of the aforesaid properties to her daughter,
Concepcion Calderon, for the sum of P2,500.00, which the latter in turn appeared to
have transferred to her mother and stepfather by means of a document dated January
27, 1934. Both deeds, notarized by Notary Public Jose D. Mendoza, were registered
in the office of the Register of Deeds of Bulacan on January 29, 1934, as a
consequence of which, the original titles were cancelled and TCT Nos. 13815 and
13816 were issued in the names of the spouses Domingo Rodriguez and Concepcion
Felix.

On March 16, 1953, the above-named widow, children and grandchildren of the
deceased entered into an extra-judicial settlement of his (Domingo's) estate,
consisting of one-half of the properties allegedly belonging to the conjugal
partnership. Among the properties listed as conjugal were the two parcels of land in
Bulacan, Bulacan, which, together with another piece of property, were divided
among the heirs in this manner:
WHEREAS, the parties have furthermore agreed that the fishpond covered
by TCT Nos. 13815, 13816 and 24109 of the Office of the Register of
Deeds of Bulacan, containing an area of 557,971 sq. m., which is likewise
the conjugal property of the deceased and his surviving spouse; 1/2 of the
same or 278,985.5 sq. m. belongs to said Concepcion Felix Vda. de
Rodriguez, as her share in the conjugal property; and 3/4 of the remaining
half or 209,239.125 sq. m. are transferred in full ownership to Geronimo
Rodriguez, Esmeragdo Rodriguez and Mauricio Rodriguez, share and share
alike, while the other 1/4 or 69,746.375 sq. m. of the said remaining half
goes in equal shares to Oscar Rodriguez, Juan Rodriguez and Ana
Rodriguez.

As a result of this partition, TCT Nos. 13815 and 13816 were cancelled and TCT
Nos. T-11431 and T-14432 were issued in the names of the said heirs of the deceased.
On March 23, 1953, in a power of attorney executed by the children and
grandchildren of Domingo Rodriguez, Concepcion Felix Vda. de Rodriguez was
named their attorney in-fact, authorized to manage their shares in the fishponds (Exh.
4).
On July 2, 1954, the heirs ended their co-ownership by executing a deed of partition,
dividing and segregating their respective shares in the properties, pursuant to a
consolidation and subdivision plan (PCS-3702), in accordance with which,
Concepcion Felix Vda. de Rodriguez obtained TCT No. T-12910, for the portion
pertaining to her (Exh. L), while TCT No. T-12911 was issued to the other heirs, for
their shares. This latter title was subsequently replaced by TCT No. 16660 (Exh. M).
On October 12, 1954, the Rodriguez children executed another document granting
unto the widow lifetime usufruct over one-third of the fishpond which they received
as hereditary share in the estate of Domingo Rodriguez, which grant was accepted by
Concepcion Felix Vda. de Rodriguez.
Then, in a contract dated December 15, 1961, the widow appeared to have leased
from the Rodriguez children and grandchildren the fishpond (covered by TCT No.
16660) for a period of 5 years commencing August 16, 1962, for an annual rental of
P7,161.37 (Exh. 5).1wph1.t
At about this time, it seemed that the relationship between the widow and her
stepchildren had turned for the worse. Thus, when she failed to deliver to them the
balance of the earnings of the fishponds, in the amount of P3,000.00, her
stepchildren endorsed the matter to their lawyer who, on May 16, 1962, sent a letter
of demand to the widow for payment thereof. On, May 28, 1962, Concepcion Felix
Vda. de Rodriguez filed the present action in the Court of First Instance of Manila
naming as defendants, Geronimo Rodriguez, Esmeragdo Rodriguez, Oscar
Rodriguez, Concepcion Bautista Vda. de Rodriguez, as guardian of the minors Juan
and Ana Rodriguez, and Antonio Diaz de Rivera and Renato Diaz de Rivera, as
guardians of the minors Maria Ana, Mercedes, Margarita, Mauricio, Jr. and Domingo
(Children of Mauricio Rodriguez who had also died).
The action to declare null and void the deeds of transfer of plaintiff's properties to the
conjugal partnership was based on the alleged employment or exercise by plaintiff's
deceased husband of force and pressure on her; that the conveyances of the
properties from plaintiff to her daughter and then to the conjugal partnership of
plaintiff and her husband are both without consideration; that plaintiff participated

5 | Page

in the extrajudicial settlement of estate (of the deceased Domingo Rodriguez) and in
other subsequent deeds or instruments involving the properties in dispute, on the
false assumption that the said properties had become conjugal by reason of the
execution of the deeds of transfer in 1934; that laboring under the same false
assumption, plaintiff delivered to defendants, as income of the properties from 1956
to 1961, the total amount of P56,976.58. As alternative cause of action, she
contended that she would claim for her share, as surviving widow, of 1/5 of the
properties in controversy, should such properties be adjudged as belonging to the
conjugal partnership. Thus, plaintiff prayed that the deeds of transfer mentioned in
the complaint be declared fictitious and simulated; that the "Extrajudicial Settlement
of Estate" be also declared null and void; that TCT No. 16660 of the Registry of
Deeds of Bulacan be cancelled and another one be issued in the name of plaintiff,
Concepcion Felix Vda. de Felix; that defendants be ordered to pay plaintiff the sum
of P56,976.58, with legal interest thereon from the date of the filing of the complaint,
and for appropriate relief in connection with her alternative cause of action.
In their separate answers, defendants not only denied the material allegations of the
complaint, but also set up as affirmative defenses lack of cause of action,
prescription, estoppel and laches. As counterclaim, they asked for payment by the
plaintiff of the unpaid balance of the earnings of the land up to August 15, 1962 in
the sum of P3,000.00, for attorney's fees and expenses of litigation.
On October 5, 1963, judgment was rendered for the defendants. In upholding the
validity of the contracts, the court found that although the two documents, Exhibits A
and B, were executed for the purpose of converting plaintiff's separate properties into
conjugal assets of the marriage with Domingo Rodriguez, the consent of the parties
thereto was voluntary, contrary to the allegations of plaintiff and her witness. The
court also ruled that having taken part in the questioned transactions, plaintiff was
not the proper party to plead lack of consideration to avoid the transfers; that
contracts without consideration are not inexistent, but are only voidable, following
the ruling in the case of Concepcion vs. Sta. Ana (87 Phil. 787); that there was
ratification or confirmation by the plaintiff of the transfer of her property, by her
execution (with the other heirs) of the extrajudicial settlement of estate; that being a
voluntary party to the contracts, Exhibits A and B, plaintiff cannot recover the
properties she gave thereunder. Plaintiff's alternative cause of action was also
rejected on the ground that action for rescission of the deed of extrajudicial
settlement should have been filed within 4 years from its execution (on March 16,
1953).
From the decision of the Court of First Instance, plaintiff duly appealed to this Court,
insisting that the conveyances in issue were obtained through duress, and were
inexistent, being simulated and without consideration.

We agree with the trial Court that the evidence is not convincing that the contracts of
transfer from Concepcion Felix to her daughter, and from the latter to her mother and
stepfather were executed through violence or intimidation. The charge is predicated
solely upon the improbable and biased testimony of appellant's daughter, Concepcion
C. Martelino, whom the trial court, refused to believe, considering that her version of
violence and harassment was contradicted by Bartolome Gualberto who had lived
with the Rodriguez spouses from 1917 to 1953, and by the improbability of
Rodriguez threatening his stepdaughter in front of the Notary Public who ratified her
signature. Furthermore, as pointed out by the appealed decision, the charge of duress
should be treated with caution considering that Rodriguez had already died when the
suit was brought, for duress, like fraud, is not to be lightly paid at the door of men
already dead. (Cf. Prevost vs. Gratz, 6 Wheat. [U.S.] 481, 498; Sinco vs. Longa, 51
Phil. 507).
What is more decisive is that duress being merely a vice or defect of consent, an
action based upon it must be brought within four years after it has ceased; 1 and the
present action was instituted only in 1962, twenty eight (28) years after the
intimidation is claimed to have occurred, and no less than nine (9) years after the
supposed culprit died (1953). On top of it, appellant entered into a series of
subsequent transactions with appellees that confirmed the contracts that she now tries
to set aside. Therefore, this cause of action is clearly barred.
Appellant's main stand in attacking the conveyances in question is that they are
simulated or fictitious, and inexistent for lack of consideration. We shall examine
each purported defect separately.
The charge of simulation is untenable, for the characteristic of simulation is the fact
that the apparent contract is not really desired or intended to produce legal effects or
in way alter the juridical situation of the parties. Thus, where a person, in order to
place his property beyond the reach of his creditors, simulates a transfer of it to
another, he does not really intend to divest himself of his title and control of the
property; hence, the deed of transfer is but a sham. But appellant contends that the
sale by her to her daughter, and the subsequent sale by the latter to appellant and her
husband, the late Domingo Rodriguez, were done for the purpose of converting the
property from paraphernal to conjugal, thereby vesting a half interest in Rodriguez,
and evading the prohibition against donations from one spouse to another during
coverture (Civil Code of 1889, Art. 1334). If this is true, then the appellant and her
daughter must have intended the two conveyance to be real and effective; for
appellant could not intend to keep the ownership of the fishponds and at the same
time vest half of them in her husband. The two contracts of sale then could not have
been simulated, but were real and intended to be fully operative, being the means to
achieve the result desired.

6 | Page

Nor does the intention of the parties to circumvent by these contracts the law against
donations between spouses make them simulated ones.
Ferrara, in his classic book, "La Simulacion de los Negocios Juridicos" (Sp. trans,
1926), pp. 95, 105, clearly explains the difference between simulated transactions
and transactions in fraudem legis:
Otra figura que debe distinguirse de la simulacion es el fraus legis. Tambien
aqui se da una gran confusion que persiste aun en la jurisprudencia, apegada
tenazmente a antiguos errores. Se debe a Bahr el haber defendido con vigor
la antitesis teorica que existe entre negocio fingido y negocio fraudulento y
haber atacado la doctrina comun que hacia una mescolanza con los dos
conceptos.
Se confunde dice (2) , el negocio in fraudem legis con el negocio
simulado; aunque la naturaleza de ambos sea totalmente diversa. El negocio
fraudulento no es, en absolute, un negocio aparente. Es perfectamente serio:
se quiere realmente. Es mas, se quiere tal como se ha realizado, con todas
las consecuencias que correspondent a la forma juridica elegida. Muchas
veces, estas consecuencias con incomodas para una u otra de las partes,
aunque serian mucho mas incomodas las consecuencias que lievaria consigo
el acto prohibido.
xxx

xxx

xxx

El resultado de las precedentes investigaciones es el siguiente el negocio

simulado quiere producir una apariencia; el negocio fraudulente, una
realidad; los negocios simulados son ficticios, no queridos; los negocios in
fraudem son serios, reales, y realizados en tal forma por las partes para
consequir un resultado prohibido: la simulacion nunca es un medio para
eludir la ley sino para ocultar su violation. La transgresion del contenido
verbal e inmediato de la norma se encubre bajo el manto de un negocio
licito, lo cual no altera el caracter del contra legem agere. Tan verdad es,
que si se ha redactado una contra-escritura que documentary y declara la
verdadera naturaleza del negocio realizado, no queda mas que aplicar pura y
simplementela prohibicion.
Tambien el fraude quiere perjudicar la ley, pero emplea para ello medios
diversos y sigue distintos caminus. No oculta el acto exterior, sino que lo
deja claro y visible, tratando de huir sesgadamente de la aplicacion de la ley
merced a una artistica y sabia combinacion de varios medios juridicos no
reprobados.

Appellant invokes our decision in Vasquez vs. Porta, 98 Phil. 490, but to no purpose.
The mortgage and foreclosure sale involved in that case were typical simulations
merely apparent but not really intended to produce legal effects, as approved by the
Court's finding that the alleged creditor and buyer at the foreclosure sale "Porta
himself ostensibly acknowledged by his inertia in allowing the doctor (alleged
mortgagor debtor) to exercise dominical power thereon without any protest on his
part." (cas. cit., p. 495). Not only this, but the mortgagor's wife, when her husband
died, "found among his papers Porta's cancellation of the mortgage in his favor and
the draft of the complaint for foreclosure." Plainly, the precedent cited is here
inapplicable.
Were the two conveyances from appellant to her daughter and from the latter to the
spouses Rodriguez void ab initio or inexistent for lack of consideration? We do not
find them to be so. In the first transaction, the price of P2,500.00 is recited in the
deed itself (Exh. A); in the second (Exh. B), the consideration set forth is P3,000.00.
Now, Article 1274 of the Civil Code of 1889 (in force when the deeds were
executed) provided that
In onerous contracts the cause is understood to be, for each contracting
party, the prestation or promise of a thing or service by the other. (emphasis
supplied.)
Since in each conveyance the buyer became obligated to pay a definite price in
money, such undertaking constituted in themselves actual causa or consideration for
the conveyance of the fishponds. That the prices were not paid (assuming ad
arguendo that Concepcion Martelino's testimony, to this effect is true) does not make
the sales inexistent for want of causa. As ruled in Enriquez de la Cavada vs. Diaz, 37
Phil. 982, "the consideration (causa) need not pass from one (party) to the other at
the time the contract is entered into x x x . The consideration need not be paid at the
time of the promise. The one promise is a consideration for the other."
What would invalidate the conveyances now under scrutiny is the fact that they were
resorted to in order to circumvent the legal prohibition against donations between
spouses contained in Article 1334, paragraph 1, of the Civil Code of 1889, then
prevailing. That illegal purpose tainted the contracts, for as held by the Spanish
Tribunal Supreme in its decision of 2 April 1941.
ha de ser reputado ineficaz, por exigencias includibles del caracter social y
moral del Derecho, todo contrato que persiga un fin ilicito o immoral, sea
cualquiera el medio empleado por los contratantes para lograr esa finalidad,
no justificada por un interes digno de ser socialmente protegido.

7 | Page

The illicit purpose then becomes illegal causa within the terms of the old Civil Code,
for as declared by the same Spanish Court in its decision of 14 December 1940
toda vez que lo que caracteriza fundamentalmente la ilicitud de la causa es
la lesion de un interos general juridica 6 moral.
a ruling reiterated in the decision of 2 April 1941 when the Court ruled:
El concepto de la causa ilicita, tal como la desenvuelve y aplica con gran
amplitud y flexibilidad la doctrina moderna, permite cobijar, no solo las
convenciones ilicitas por razon de su objeto o de su motivo ... sino tambien
multiples convenciones que no encerrando en si ningun elemento de directa
antijuricidad son ilicitas por el matiz immoral que reviste la operation en su
conjunto x x x .
Unfortunately for herein appellant, in contracts invalidated by illegal subject matter
or illegal causa, Articles 1305 and 1306 of the Civil Code then in force apply
rigorously the rule in pari delicto non oritur action, denying all recovery to the guilty
parties inter se. And appellant is clearly as guilty as her husband in the attempt to
evade the legal interdiction of Article 1334 of the Code, already cited. Wherefore,
her present action to reivindicate the, conveyed properties was correctly repulsed by
the Court below.
Art. 1306. If the act which constitutes the illicit consideration is neither a
crime nor a misdemeanor, the following rules shall be observed:
1. When both parties are guilty, neither of them can recover what he may
have given by virtue of the contract, or enforce the performance of the
undertaking of the other party;
xxx

xxx

xxx

That Article 1306 applies to cases where the nullity arises from the illegality of the
consideration or the purpose of the contract was expressly recognized by this
Supreme Court in Gustilo vs. Maravilla, 48 Phil. 449-450.2
Finally, it cannot be denied that plaintiff-appellant had knowledge of the nullity of
the contract for the transfer of her properties in 1934, because she was even a party
thereto. And yet, her present action was filed only on May 28, 1962 and after the
breaking up of friendly relations between her and defendants-appellees. Appellant's
inaction to enforce her right, for 28 years, cannot be justified by the lame excuse that
she assumed that the transfer was valid. Knowledge of the effect of that transaction

would have been obtained by the exercise of diligence. Ignorance which is the effect
of inexcusable negligence, it has been said, is no excuse for laches. (Go Chi Gun,
etc., et al. vs. Co Cho, et al., G.R. No. L-5208, Feb. 28, 1955). Even assuming for the
sake of argument that appellant held her peace, during the lifetime of her husband,
out of legitimate fear for her life, there is no justification for her future to bring the
proper action after his death in 1953. Instead, she entered into a series of agreements
with herein appellees, the children of her husband by a prior marriage, of partition,
usufruct and lease of their share in the fishponds, transactions that necessarily
assumed that Rodriguez had acquired one-half of the litigated fishponds. In the
circumstances, appellant's cause has become a stale demand and her conduct placed
her in estoppel to question the Validity of the transfer of her properties. (Manila, et
al. vs. Galvan, et al., G.R. No. L-23507, May 24, 1967; Perez vs. Herranz, 7 Phil.
695-696).
In view of the foregoing, the decision appealed from is affirmed. Costs against
appellant Concepcion Felix Vda. de Rodriguez. So ordered.

DECISION
MARTINEZ, J.:
Under Article 161 of the Civil Code, what debts and obligations contracted by the
husband alone are considered for the benefit of the conjugal partnership which are
chargeable against the conjugal partnership? Is a surety agreement or an
accommodation contract entered into by the husband in favor of his employer within
the contemplation of the said provision?
These are the issues which we will resolve in this petition for review.
The petitioner assails the decision dated April 14, 1994 of the respondent Court of
Appeals in Spouses Alfredo and Encarnacion Ching vs. Ayala Investment and
Development Corporation, et. al., docketed as CA-G.R. CV No. 29632,i[1]
upholding the decision of the Regional Trial Court of Pasig, Branch 168, which ruled
that the conjugal partnership of gains of respondents-spouses Alfredo and
Encarnacion Ching is not liable for the payment of the debts secured by respondenthusband Alfredo Ching.
A chronology of the essential antecedent facts is necessary for a clear understanding
of the case at bar.
Philippine Blooming Mills (hereinafter referred to as PBM) obtained a
P50,300,000.00 loan from petitioner Ayala Investment and Development Corporation
(hereinafter referred to as AIDC). As added security for the credit line extended to
PBM, respondent Alfredo Ching, Executive Vice President of PBM, executed
security agreements on December 10, 1980 and on March 20, 1981 making himself
jointly and severally answerable with PBMs indebtedness to AIDC.
PBM failed to pay the loan. Thus, on July 30, 1981, AIDC filed a case for sum of
money against PBM and respondent-husband Alfredo Ching with the then Court of
First Instance of Rizal (Pasig), Branch VIII, entitled Ayala Investment and
Development Corporation vs. Philippine Blooming Mills and Alfredo Ching,
docketed as Civil Case No. 42228.

SECOND DIVISION
[G.R. No. 118305. February 12, 1998]
AYALA INVESTMENT & DEVELOPMENT CORP. and ABELARDO
MAGSAJO, petitioners, vs. COURT OF APPEALS and SPOUSES ALFREDO
& ENCARNACION CHING, respondents.

8 | Page

After trial, the court rendered judgment ordering PBM and respondent-husband
Alfredo Ching to jointly and severally pay AIDC the principal amount of
P50,300,000.00 with interests.
Pending appeal of the judgment in Civil Case No. 42228, upon motion of AIDC, the
lower court issued a writ of execution pending appeal. Upon AIDCs putting up of an
P8,000,000.00 bond, a writ of execution dated May 12, 1982 was issued. Thereafter,
petitioner Abelardo Magsajo, Sr., Deputy Sheriff of Rizal and appointed sheriff in
Civil Case No. 42228, caused the issuance and service upon respondents-spouses of

a notice of sheriff sale dated May 20, 1982 on three (3) of their conjugal properties.
Petitioner Magsajo then scheduled the auction sale of the properties levied.
On June 9, 1982, private respondents filed a case of injunction against petitioners
with the then Court of First Instance of Rizal (Pasig), Branch XIII, to enjoin the
auction sale alleging that petitioners cannot enforce the judgment against the
conjugal partnership levied on the ground that, among others, the subject loan did not
redound to the benefit of the said conjugal partnership.ii[2] Upon application of
private respondents, the lower court issued a temporary restraining order to prevent
petitioner Magsajo from proceeding with the enforcement of the writ of execution
and with the sale of the said properties at public auction.
AIDC filed a petition for certiorari before the Court of Appeals,iii[3] questioning the
order of the lower court enjoining the sale. Respondent Court of Appeals issued a
Temporary Restraining Order on June 25, 1982, enjoining the lower courtiv[4] from
enforcing its Order of June 14, 1982, thus paving the way for the scheduled auction
sale of respondents-spouses conjugal properties.
On June 25, 1982, the auction sale took place. AIDC being the only bidder, was
issued a Certificate of Sale by petitioner Magsajo, which was registered on July 2,
1982. Upon expiration of the redemption period, petitioner sheriff issued the final
deed of sale on August 4, 1982 which was registered on August 9, 1983.
In the meantime, the respondent court, on August 4, 1982, decided CA-G.R. SP No.
14404, in this manner:
WHEREFORE, the petition for certiorari in this case is granted and the
challenged order of the respondent Judge dated June 14, 1982 in Civil
Case No. 46309 is hereby set aside and nullified. The same petition
insofar as it seeks to enjoin the respondent Judge from proceeding with
Civil Case No. 46309 is, however, denied. No pronouncement is here
made as to costs. x x x x.v[5]
On September 3, 1983, AIDC filed a motion to dismiss the petition for injunction
filed before Branch XIII of the CFI of Rizal (Pasig) on the ground that the same had
become moot and academic with the consummation of the sale. Respondents filed
their opposition to the motion arguing, among others, that where a third party who
claims ownership of the property attached or levied upon, a different legal situation
is presented; and that in this case, two (2) of the real properties are actually in the
name of Encarnacion Ching, a non-party to Civil Case No. 42228.
The lower court denied the motion to dismiss. Hence, trial on the merits proceeded.
Private respondents presented several witnesses. On the other hand, petitioners did
not present any evidence.

9 | Page

On September 18, 1991, the trial court promulgated its decision declaring the sale on
execution null and void. Petitioners appealed to the respondent court, which was
docketed as CA-G.R. CV No. 29632.
On April 14, 1994, the respondent court promulgated the assailed decision, affirming
the decision of the regional trial court. It held that:
The loan procured from respondent-appellant AIDC was for the
advancement and benefit of Philippine Blooming Mills and not for the
benefit of the conjugal partnership of petitioners-appellees.
x x xx x x

xxx

As to the applicable law, whether it is Article 161 of the New Civil

Code or Article 1211 of the Family Code-suffice it to say that the two
provisions are substantially the same. Nevertheless, We agree with the
trial court that the Family Code is the applicable law on the matter x x x
x x x.
Article 121 of the Family Code provides that The conjugal partnership
shall be liable for: x x x (2) All debts and obligations contracted during
the marriage by the designated Administrator-Spouse for the benefit of
the conjugal partnership of gains x x x. The burden of proof that the
debt was contracted for the benefit of the conjugal partnership of gains,
lies with the creditor-party litigant claiming as such. In the case at bar,
respondent-appellant AIDC failed to prove that the debt was contracted
by appellee-husband, for the benefit of the conjugal partnership of
gains.
The dispositive portion of the decision reads:
WHEREFORE, in view of all the foregoing, judgment is hereby
rendered DISMISSING the appeal. The decision of the Regional Trial
Court is AFFIRMED in toto.vi[6]
Petitioner filed a Motion for Reconsideration which was denied by the respondent
court in a Resolution dated November 28, 1994.vii[7]
Hence, this petition for review. Petitioner contends that the respondent court erred in
ruling that the conjugal partnership of private respondents is not liable for the
obligation by the respondent-husband.
Specifically, the errors allegedly committed by the respondent court are as follows:

I.RESPONDENT COURT ERRED IN RULING THAT THE OBLIGATION

INCURRED BY RESPONDENT HUSBAND DID NOT REDOUND TO THE
BENEFIT OF THE CONJUGAL PARTNERSHIP OF THE PRIVATE
RESPONDENT.
II
RESPONDENT COURT ERRED IN RULING THAT THE ACT OF
RESPONDENT HUSBAND IN SECURING THE SUBJECT LOAN IS NOT PART
OF HIS INDUSTRY, BUSINESS OR CAREER FROM WHICH HE SUPPORTS
HIS FAMILY.
Petitioners in their appeal point out that there is no need to prove that actual benefit
redounded to the benefit of the partnership; all that is necessary, they say, is that the
transaction was entered into for the benefit of the conjugal partnership. Thus,
petitioners aver that:
The wordings of Article 161 of the Civil Code is very clear: for the
partnership to be held liable, the husband must have contracted the debt
for the benefit of the partnership, thus:
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 x x x.

There is a difference between the phrases: redounded to the benefit of or

benefited from (on the one hand) and for the benefit of (on the other).
The former require that actual benefit must have been realized; the latter
requires only that the transaction should be one which normally would
produce benefit to the partnership, regardless of whether or not actual
benefit accrued.viii[8]
We do not agree with petitioners that there is a difference between the terms
redounded to the benefit of or benefited from on the one hand; and for the benefit of
on the other. They mean one and the same thing. Article 161 (1) of the Civil Code
and Article 121 (2) of the Family Code are similarly worded, i.e., both use the term
for the benefit of. On the other hand, Article 122 of the Family Code provides that
The payment of personal debts by the husband or the wife before or during the
marriage shall not be charged to the conjugal partnership except insofar as they
redounded to the benefit of the family. As can be seen, the terms are used
interchangeably.
Petitioners further contend that the ruling of the respondent court runs counter to the
pronouncement of this Court in the case of Cobb-Perez vs. Lantin,ix[9] that the
husband as head of the family and as administrator of the conjugal partnership is

10 | P a g e

presumed to have contracted obligations for the benefit of the family or the conjugal
partnership.
Contrary to the contention of the petitioners, the case of Cobb-Perez is not applicable
in the case at bar. This Court has, on several instances, interpreted the term for the
benefit of the conjugal partnership.
In the cases of Javier vs. Osmea,x[10] Abella de Diaz vs. Erlanger & Galinger, Inc.,xi
[11] Cobb-Perez vs. Lantinxii[12] and G-Tractors, Inc. vs. Court of Appeals,xiii[13]
cited by the petitioners, we held that:
The debts contracted by the husband during the marriage relation, for
and in the exercise of the industry or profession by which he contributes
toward the support of his family, are not his personal and private debts,
and the products or income from the wifes own property, which, like
those of her husbands, are liable for the payment of the marriage
expenses, cannot be excepted from the payment of such debts. (Javier)
The husband, as the manager of the partnership (Article 1412, Civil
Code), has a right to embark the partnership in an ordinary commercial
enterprise for gain, and the fact that the wife may not approve of a
venture does not make it a private and personal one of the husband.
(Abella de Diaz)
Debts contracted by the husband for and in the exercise of the industry
or profession by which he contributes to the support of the family,
cannot be deemed to be his exclusive and private debts. (Cobb-Perez)
x x x if he incurs an indebtedness in the legitimate pursuit of his career
or profession or suffers losses in a legitimate business, the conjugal
partnership must equally bear the indebtedness and the losses, unless he
deliberately acted to the prejudice of his family. (G-Tractors)
However, in the cases of Ansaldo vs. Sheriff of Manila, Fidelity Insurance & Luzon
Insurance Co.,xiv[14] Liberty Insurance Corporation vs. Banuelos,xv[15] and Luzon
Surety Inc. vs. De Garcia,xvi[16] cited by the respondents, we ruled that:
The fruits of the paraphernal property which form part of the assets of
the conjugal partnership, are subject to the payment of the debts and
expenses of the spouses, but not to the payment of the personal
obligations (guaranty agreements) of the husband, unless it be proved
that such obligations were productive of some benefit to the family.
(Ansaldo; parenthetical phrase ours.)
When there is no showing that the execution of an indemnity agreement
by the husband redounded to the benefit of his family, the undertaking is

not a conjugal debt but an obligation personal to him. (Liberty

Insurance)
In the most categorical language, a conjugal partnership under Article
161 of the new Civil Code is liable only for such debts and obligations
contracted by the husband for the benefit of the conjugal partnership.
There must be the requisite showing then of some advantage which
clearly accrued to the welfare of the spouses. Certainly, to make a
conjugal partnership respond for a liability that should appertain to the
husband alone is to defeat and frustrate the avowed objective of the new
Civil Code to show the utmost concern for the solidarity and well-being
of the family as a unit. The husband, therefore, is denied the power to
assume unnecessary and unwarranted risks to the financial stability of
the conjugal partnership. (Luzon Surety, Inc.)
From the foregoing jurisprudential rulings of this Court, we can derive the following
conclusions:
(A) If the husband himself is the principal obligor in the contract, i.e., he directly
received the money and services to be used in or for his own business or his own
profession, that contract falls within the term x x x x obligations for the benefit of the
conjugal partnership. Here, no actual benefit may be proved. It is enough that the
benefit to the family is apparent at the time of the signing of the contract. From the
very nature of the contract of loan or services, the family stands to benefit from the
loan facility or services to be rendered to the business or profession of the husband. It
is immaterial, if in the end, his business or profession fails or does not succeed.
Simply stated, where the husband contracts obligations on behalf of the family
business, the law presumes, and rightly so, that such obligation will redound to the
benefit of the conjugal partnership.
(B) On the other hand, if the money or services are given to another person or entity,
and the husband acted only as a surety or guarantor, that contract cannot, by itself,
alone be categorized as falling within the context of obligations for the benefit of the
conjugal partnership. The contract of loan or services is clearly for the benefit of the
principal debtor and not for the surety or his family. No presumption can be inferred
that, when a husband enters into a contract of surety or accommodation agreement, it
is for the benefit of the conjugal partnership. Proof must be presented to establish
benefit redounding to the conjugal partnership.
Thus, the distinction between the Cobb-Perez case, and we add, that of the three
other companion cases, on the one hand, and that of Ansaldo, Liberty Insurance and
Luzon Surety, is that in the former, the husband contracted the obligation for his own
business; while in the latter, the husband merely acted as a surety for the loan
contracted by another for the latters business.

11 | P a g e

The evidence of petitioner indubitably show that co-respondent Alfredo Ching signed
as surety for the P50M loan contracted on behalf of PBM. Petitioner should have
adduced evidence to prove that Alfredo Chings acting as surety redounded to the
benefit of the conjugal partnership. The reason for this is as lucidly explained by the
respondent court:
The loan procured from respondent-appellant AIDC was for the
advancement and benefit of Philippine Blooming Mills and not for the
benefit of the conjugal partnership of petitioners-appellees. Philippine
Blooming Mills has a personality distinct and separate from the family
of petitioners-appellees - this despite the fact that the members of the
said family happened to be stockholders of said corporate entity.
x x xx x x

xxx

x x x. The burden of proof that the debt was contracted for the benefit of
the conjugal partnership of gains, lies with the creditor-party litigant
claiming as such. In the case at bar, respondent-appellant AIDC failed to
prove that the debt was contracted by appellee-husband, for the benefit
of the conjugal partnership of gains. What is apparent from the facts of
the case is that the judgment debt was contracted by or in the name of
the Corporation Philippine Blooming Mills and appellee-husband only
signed as surety thereof. The debt is clearly a corporate debt and
respondent-appellants right of recourse against appellee-husband as
surety is only to the extent of his corporate stockholdings. It does not
extend to the conjugal partnership of gains of the family of petitionersappellees. x x x x x x. xvii[17]
Petitioners contend that no actual benefit need accrue to the conjugal partnership. To
support this contention, they cite Justice J.B.L. Reyes authoritative opinion in the
Luzon Surety Company case:
I concur in the result, but would like to make of record that, in my
opinion, the words all debts and obligations contracted by the husband
for the benefit of the conjugal partnership used in Article 161 of the
Civil Code of the Philippines in describing the charges and obligations
for which the conjugal partnership is liable do not require that actual
profit or benefit must accrue to the conjugal partnership from the
husbands transaction; but it suffices that the transaction should be one
that normally would produce such benefit for the partnership. This is the
ratio behind our ruling in Javier vs. Osmea, 34 Phil. 336, that
obligations incurred by the husband in the practice of his profession are
collectible from the conjugal partnership.

The aforequoted concurring opinion agreed with the majority decision that the
conjugal partnership should not be made liable for the surety agreement which was
clearly for the benefit of a third party. Such opinion merely registered an exception to
what may be construed as a sweeping statement that in all cases actual profit or
benefit must accrue to the conjugal partnership. The opinion merely made it clear
that no actual benefits to the family need be proved in some cases such as in the
Javier case. There, the husband was the principal obligor himself. Thus, said
transaction was found to be one that would normally produce x x x benefit for the
partnership. In the later case of G-Tractors, Inc., the husband was also the principal
obligor - not merely the surety. This latter case, therefore, did not create any
precedent. It did not also supersede the Luzon Surety Company case, nor any of the
previous accommodation contract cases, where this Court ruled that they were for the
benefit of third parties.
But it could be argued, as the petitioner suggests, that even in such kind of contract
of accommodation, a benefit for the family may also result, when the guarantee is in
favor of the husbands employer.
In the case at bar, petitioner claims that the benefits the respondent family would
reasonably anticipate were the following:
(a)The employment of co-respondent Alfredo Ching would be
prolonged and he would be entitled to his monthly salary of P20,000.00
for an extended length of time because of the loan he guaranteed;
(b) The shares of stock of the members of his family would appreciate if
the PBM could be rehabilitated through the loan obtained;
(c) His prestige in the corporation would be enhanced and his career
would be boosted should PBM survive because of the loan.
However, these are not the benefits contemplated by Article 161 of the Civil Code.
The benefits must be one directly resulting from the loan. It cannot merely be a byproduct or a spin-off of the loan itself.
In all our decisions involving accommodation contracts of the husband, xviii[18] we
underscored the requirement that: there must be the requisite showing x x x of some
advantage which clearly accrued to the welfare of the spouses or benefits to his
family or that such obligations are productive of some benefit to the family.
Unfortunately, the petition did not present any proof to show: (a) Whether or not the
corporate existence of PBM was prolonged and for how many months or years;
and/or (b) Whether or not the PBM was saved by the loan and its shares of stock
appreciated, if so, how much and how substantial was the holdings of the Ching
family.

12 | P a g e

Such benefits (prospects of longer employment and probable increase in the value of
stocks) might have been already apparent or could be anticipated at the time the
accommodation agreement was entered into. But would those benefits qualify the
transaction as one of the obligations x x x for the benefit of the conjugal partnership?
Are indirect and remote probable benefits, the ones referred to in Article 161 of the
Civil Code? The Court of Appeals in denying the motion for reconsideration,
disposed of these questions in the following manner:
No matter how one looks at it, the debt/credit extended by respondentsappellants is purely a corporate debt granted to PBM, with petitionerappellee-husband merely signing as surety. While such petitionerappellee-husband, as such surety, is solidarily liable with the principal
debtor AIDC, such liability under the Civil Code provisions is
specifically restricted by Article 122 (par. 1) of the Family Code, so that
debts for which the husband is liable may not be charged against
conjugal partnership properties. Article 122 of the Family Code is
explicit The payment of personal debts contracted by the husband or the
wife before or during the marriage shall not be charged to the conjugal
partnership except insofar as they redounded to the benefit of the family.
Respondents-appellants insist that the corporate debt in question falls
under the exception laid down in said Article 122 (par. one). We do not
agree. The loan procured from respondent-appellant AIDC was for the
sole advancement and benefit of Philippine Blooming Mills and not for
the benefit of the conjugal partnership of petitioners-appellees.
x x x appellee-husband derives salaries, dividends benefits from
Philippine Blooming Mills (the debtor corporation), only because said
husband is an employee of said PBM. These salaries and benefits, are
not the benefits contemplated by Articles 121 and 122 of the Family
Code. The benefits contemplated by the exception in Article 122
(Family Code) is that benefit derived directly from the use of the loan.
In the case at bar, the loan is a corporate loan extended to PBM and
used by PBM itself, not by petitioner-appellee-husband or his family.
The alleged benefit, if any, continuously harped by respondentsappellants, are not only incidental but also speculative.xix[19]
We agree with the respondent court. Indeed, considering the odds involved in
guaranteeing a large amount (P50,000,000.00) of loan, the probable prolongation of
employment in PBM and increase in value of its stocks, would be too small to
qualify the transaction as one for the benefit of the suretys family. Verily, no one
could say, with a degree of certainty, that the said contract is even productive of some
benefits to the conjugal partnership.
We likewise agree with the respondent court (and this view is not contested by the
petitioners) that the provisions of the Family Code is applicable in this case. These
provisions highlight the underlying concern of the law for the conservation of the

conjugal partnership; for the husbands duty to protect and safeguard, if not augment,
not to dissipate it.

shall not be charged to the conjugal partnership except to the extent that they
redounded to the benefit of the family.

This is the underlying reason why the Family Code clarifies that the obligations
entered into by one of the spouses must be those that redounded to the benefit of the
family and that the measure of the partnerships liability is to the extent that the
family is benefited.xx[20]

Here, the property in dispute also involves the family home. The loan is a corporate
loan not a personal one. Signing as a surety is certainly not an exercise of an industry
or profession nor an act of administration for the benefit of the family.

These are all in keeping with the spirit and intent of the other provisions of the Civil
Code which prohibits any of the spouses to donate or convey gratuitously any part of
the conjugal property.xxi[21] Thus, when co-respondent Alfredo Ching entered into a
surety agreement he, from then on, definitely put in peril the conjugal property (in
this case, including the family home) and placed it in danger of being taken
gratuitously as in cases of donation.
In the second assignment of error, the petitioner advances the view that acting as
surety is part of the business or profession of the respondent-husband.
This theory is new as it is novel.
The respondent court correctly observed that:
Signing as a surety is certainly not an exercise of an industry or
profession, hence the cited cases of Cobb-Perez vs. Lantin; Abella de
Diaz vs. Erlanger & Galinger; G-Tractors, Inc. vs. CA do not apply in
the instant case. Signing as a surety is not embarking in a business.xxii
[22]
We are likewise of the view that no matter how often an executive acted or was
persuaded to act, as a surety for his own employer, this should not be taken to mean
that he had thereby embarked in the business of suretyship or guaranty.
This is not to say, however, that we are unaware that executives are often asked to
stand as surety for their companys loan obligations. This is especially true if the
corporate officials have sufficient property of their own; otherwise, their spouses
signatures are required in order to bind the conjugal partnerships.
The fact that on several occasions the lending institutions did not require the
signature of the wife and the husband signed alone does not mean that being a surety
became part of his profession. Neither could he be presumed to have acted for the
conjugal partnership.
Article 121, paragraph 3, of the Family Code is emphatic that the payment of
personal debts contracted by the husband or the wife before or during the marriage

13 | P a g e

On the basis of the facts, the rules, the law and equity, the assailed decision should be
upheld as we now uphold it. This is, of course, without prejudice to petitioners right
to enforce the obligation in its favor against the PBM receiver in accordance with the
rehabilitation program and payment schedule approved or to be approved by the
Securities & Exchange Commission.
WHEREFORE, the petition for review should be, as it is hereby, DENIED for lack
of merit.
SO ORDERED.

DECISION
YNARES-SANTIAGO, J.:
Under the regime of the Civil Code, the alienation or encumbrance of a conjugal real
property requires the consent of the wife. The absence of such consent renders the
entire transaction[1] merely voidable and not void.[2] The wife may, during the
marriage and within ten years from the transaction questioned, bring an action for the
annulment of the contract entered into by her husband without her consent.[3]
Assailed in this petition for review on certiorari are the January 26, 2000 Decision[4]
and June 19, 2000, Resolution[5] of the Court of Appeals in CA-G.R. No. 28464
which declared respondents as purchasers in good faith and set aside the May 31,
1990 and June 29, 1990 Orders of the Regional Trial Court of Quezon City, Branch
101, in Civil Case No. Q-48018.
The controversy stemmed from a dispute over Lot No. 4349-B-2,[6] approximately
396 square meters, previously covered by Transfer Certificate of Title (TCT) No.
205445, located in Balintawak, Quezon City and registered in the name of Spouses
Vicente Reyes and Ignacia Aguilar-Reyes.[7] Said lot and the apartments built thereon
were part of the spouses' conjugal properties having been purchased using conjugal
funds from their garments business.[8]
Vicente and Ignacia were married in 1960, but had been separated de facto since
1974.[9] Sometime in 1984, Ignacia learned that on March 1, 1983, Vicente sold Lot
No. 4349-B-2 to respondent spouses Cipriano and Florentina Mijares for P40,000.00.
[10]
As a consequence thereof, TCT No. 205445 was cancelled and TCT No. 306087
was issued on April 19, 1983 in the name of respondent spouses.[11] She likewise
found out that Vicente filed a petition for administration and appointment of guardian
with the Metropolitan Trial Court of Quezon City, Branch XXI. Vicente
misrepresented therein that his wife, Ignacia, died on March 22, 1982, and that he
and their 5 minor children were her only heirs.[12] On September 29, 1983, the court
appointed Vicente as the guardian of their minor children.[13] Subsequently, in its
Order dated October 14, 1983, the court authorized Vicente to sell the estate of
Ignacia.[14]
457 Phil. 120
FIRST DIVISION
[ G.R. No. 143826, August 28, 2003 ]
HEIRS OF IGNACIA AGUILAR-REYES, PETITIONERS, VS. SPOUSES
CIPRIANO MIJARES AND FLORENTINA MIJARES, RESPONDENTS.

14 | P a g e

On August 9, 1984, Ignacia, through her counsel, sent a letter to respondent spouses
demanding the return of her share in the lot. Failing to settle the matter amicably,
Ignacia filed on June 4, 1996 a complaint[15] for annulment of sale against respondent
spouses. The complaint was thereafter amended to include Vicente Reyes as one of
the defendants.[16]
In their answer, respondent spouses claimed that they are purchasers in good faith
and that the sale was valid because it was duly approved by the court.[17] Vicente
Reyes, on the other hand, contended that what he sold to the spouses was only his

share in Lot No. 4349-B-2, excluding the share of his wife, and that he never
represented that the latter was already dead.[18] He likewise testified that respondent
spouses, through the counsel they provided him, took advantage of his illiteracy by
filing a petition for the issuance of letters of administration and appointment of
guardian without his knowledge.[19]
On February 15, 1990, the court a quo rendered a decision declaring the sale of Lot
No. 4349-B-2 void with respect to the share of Ignacia. It held that the purchase price
of the lot was P110,000.00 and ordered Vicente to return thereof or P55,000.00 to
respondent spouses. The dispositive portion of the said decision, readsWHEREFORE, premises above considered, judgment is hereby rendered declaring
the subject Deed of Absolute Sale, dated March [1,] 1983 signed by and between
defendants Vicente Reyes and defendant Cipriano Mijares NULL AND VOID WITH
RESPECT TO ONE-HALF (1/2) OF THE SAID PROPERTY;
The Register of Deeds of Quezon City is hereby ordered to cancel TCT No. 306083
(sic) in the names of defendant spouses Cipriano Mijares and Florentina Mijares and
to issue a new TCT in the name of the plaintiff Ignacia Aguilar-Reyes as owner in fee
simple of one-half (1/2) of said property and the other half in the names of defendant
spouses Cipriano Mijares and Florentin[a] Mijares, upon payment of the required
fees therefore;
Said defendant spouses Mijares are also ordered to allow plaintiff the use and
exercise of rights, as well as obligations, pertinent to her one-half (1/2) ownership of
the subject property;
Defendant Vicente Reyes is hereby ordered to reimburse P55,000.00 with legal rate
of interest from the execution of the subject Deed of Absolute Sale on March 1,
1983, to the defendant spouses Cipriano Mijares and Florentina Mijares which
corresponds to the one-half (1/2) of the actual purchase price by the said Mijares but
is annulled in this decision (sic);
Defendant Vicente Reyes is hereby further ordered to pay plaintiff the amount of
P50,000.00 by way of moral and exemplary damages, plus costs of this suit.
SO ORDERED.[20]
Ignacia filed a motion for modification of the decision praying that the sale be
declared void in its entirety and that the respondents be ordered to reimburse to her
the rentals they collected on the apartments built on Lot No. 4349-B-2 computed
from March 1, 1983.
On May 31, 1990, the trial court modified its decision by declaring the sale void in
its entirety and ordering Vicente Reyes to reimburse respondent spouses the purchase
price of P110,000, thus WHEREFORE, premises considered, judgment is hereby rendered declaring the
subject Deed of Absolute Sale, dated March 1, 1983 signed by and between

15 | P a g e

defendants Vicente Reyes and defendant Cipriano Mijares as null and void ab initio,
in view of the absence of the wife's conformity to said transaction.
Consequent thereto, the Register of Deeds for Quezon City is hereby ordered to
cancel TCT No. 306083 (sic) in the name of Cipriano Mijares and Florentin[a]
Mijares and issue a new TCT in the name of the plaintiff and defendant Ignacia
Aguilar-Reyes and Vicente Reyes as owners in fee simple, upon payment of required
fees therefore.
Defendant Vicente Reyes is hereby ordered to pay the amount of one hundred ten
thousand pesos (P110,000.00) with legal rate of interest at 12% per annum from the
execution of the subject Deed of Absolute Sale on March 1, 1983.
Further, defendant Vicente Reyes is ordered to pay the amount of P50,000.00 by way
of moral and exemplary damages, plus costs of this suit.
SO ORDERED.[21]
On motion[22] of Ignacia, the court issued an Order dated June 29, 1990 amending the
dispositive portion of the May 31, 1990 decision by correcting the Transfer
Certificate of Title of Lot No. 4349-B-2, in the name of Cipriano Mijares and
Florentina Mijares, from TCT No. 306083 to TCT No. 306087; and directing the
Register of Deeds of Quezon City to issue a new title in the name of Ignacia AguilarReyes and Vicente Reyes. The Order likewise specified that Vicente Reyes should
pay Ignacia Aguilar-Reyes the amount of P50,000.00 as moral and exemplary
damages.[23]
Both Ignacia Aguilar-Reyes and respondent spouses appealed the decision to the
Court of Appeals.[24] Pending the appeal, Ignacia died and she was substituted by her
compulsory heirs.[25]
Petitioners contended that they are entitled to reimbursement of the rentals collected
on the apartment built on Lot No. 4349-B-2, while respondent spouses claimed that
they are buyers in good faith. On January 26, 2000, the Court of Appeals reversed
and set aside the decision of the trial court. It ruled that notwithstanding the absence
of Ignacia's consent to the sale, the same must be held valid in favor of respondents
because they were innocent purchasers for value.[26] The decretal potion of the
appellate court's decision states WHEREFORE, premises considered, the Decision appealed from and the Orders
dated May 31, 1990 and June 29, 1990, are SET ASIDE and in lieu thereof a new
one is rendered 1.

Declaring the Deed of Absolute Sale dated March 1, 1983 executed

by Vicente Reyes in favor of spouses Cipriano and [Florentina]
Mijares valid and lawful;

2.

Ordering Vicente Reyes to pay spouses Mijares the amount of

P30,000.00 as attorney's fees and legal expenses; and

3.

Ordering Vicente Reyes to pay spouses Mijares P50,000.00 as

moral damages.

No pronouncement as to costs.
SO ORDERED.[27]
Undaunted by the denial of their motion for reconsideration,[28] petitioners filed the
instant petition contending that the assailed sale of Lot No. 4392-B-2 should be
annulled because respondent spouses were not purchasers in good faith.
The issues for resolution are as follows: (1) What is the status of the sale of Lot No.
4349-B-2 to respondent spouses? (2) Assuming that the sale is annullable, should it
be annulled in its entirety or only with respect to the share of Ignacia? (3) Are
respondent spouses purchasers in good faith?
Articles 166 and 173 of the Civil Code,[29] the governing laws at the time the assailed
sale was contracted, provide:
Art.166. Unless the wife has been declared a non compos mentis or a spendthrift, or
is under civil interdiction or is confined in a leprosarium, the husband cannot alienate
or encumber any real property of the conjugal partnership without the wife's consent.
If she refuses unreasonably to give her consent, the court may compel her to grant
the same...
Art. 173. The wife may, during the marriage and within ten years from the
transaction questioned, ask the courts for the annulment of any contract of the
husband entered into without her consent, when such consent is required, or any act
or contract of the husband which tends to defraud her or impair her interest in the
conjugal partnership property. Should the wife fail to exercise this right, she or her
heirs after the dissolution of the marriage, may demand the value of property
fraudulently alienated by the husband.
Pursuant to the foregoing provisions, the husband could not alienate or encumber any
conjugal real property without the consent, express or implied, of the wife otherwise,
the contract is voidable. Indeed, in several cases[30] the Court had ruled that such
alienation or encumbrance by the husband is void. The better view, however, is to
consider the transaction as merely voidable and not void.[31] This is consistent with
Article 173 of the Civil Code pursuant to which the wife could, during the marriage
and within 10 years from the questioned transaction, seek its annulment.[32]
In the case of Heirs of Christina Ayuste v. Court of Appeals,[33] it was categorically
held that There is no ambiguity in the wording of the law. A sale of real property of the
conjugal partnership made by the husband without the consent of his wife is

16 | P a g e

voidable. The action for annulment must be brought during the marriage and within
ten years from the questioned transaction by the wife. Where the law speaks in clear
and categorical language, there is no room for interpretation -- there is room only for
application.[34]
Likewise, in Spouses Guiang v. Court of Appeals,[35] the Court quoted with approval
the ruling of the trial court that under the Civil Code, the encumbrance or alienation
of a conjugal real property by the husband absent the wife's consent, is voidable and
not void. Thus ...Under Article 166 of the Civil Code, the husband cannot generally alienate or
encumber any real property of the conjugal partnership without the wife's consent.
The alienation or encumbrance if so made however is not null and void. It is merely
voidable. The offended wife may bring an action to annul the said alienation or
encumbrance. Thus, the provision of Article 173 of the Civil Code of the Philippines,
to wit:
Art. 173. The wife may, during the marriage and within ten years from the
transaction questioned, ask the courts for the annulment of any contract of the
husband entered into without her consent, when such consent is required, or any act
or contract of the husband which tends to defraud her or impair her interest in the
conjugal partnership property. Should the wife fail to exercise this right, she or her
heirs after the dissolution of the marriage, may demand the value of property
fraudulently alienated by the husband.
This particular provision giving the wife ten (10) years x x x during [the] marriage to
annul the alienation or encumbrance was not carried over to the Family Code. It is
thus clear that any alienation or encumbrance made after August 3, 1988 when the
Family Code took effect by the husband of the conjugal partnership property without
the consent of the wife is null and void...
In the case at bar, there is no dispute that Lot No. 4349-B-2, is a conjugal property
having been purchased using the conjugal funds of the spouses during the
subsistence of their marriage. It is beyond cavil therefore that the sale of said lot to
respondent spouses without the knowledge and consent of Ignacia is voidable. Her
action to annul the March 1, 1983 sale which was filed on June 4, 1986, before her
demise is perfectly within the 10 year prescriptive period under Article 173 of the
Civil Code. Even if we reckon the period from November 25, 1978 which was the
date when Vicente and the respondent spouses entered into a contract concerning Lot
No. 4349-B-2, Ignacia's action would still be within the prescribed period.
Anent the second issue, the trial court correctly annulled the voidable sale of Lot No.
4349-B-2 in its entirety. In Bucoy v. Paulino,[36] a case involving the annulment of
sale with assumption of mortgages executed by the husband without the consent of
the wife, it was held that the alienation or encumbrance must be annulled in its
entirety and not only insofar as the share of the wife in the conjugal property is
concerned. Although the transaction in the said case was declared void and not
merely voidable, the rationale for the annulment of the whole transaction is the same
thus -

The plain meaning attached to the plain language of the law is that the contract, in its
entirety, executed by the husband without the wife's consent, may be annulled by the
wife. Had Congress intended to limit such annulment in so far as the contract shall
"prejudice" the wife, such limitation should have been spelled out in the statute. It is
not the legitimate concern of this Court to recast the law. As Mr. Justice Jose B. L.
Reyes of this Court and Judge Ricardo C. Puno of the Court of First Instance
correctly stated, "[t]he rule (in the first sentence of Article 173) revokes Baello vs.
Villanueva, 54 Phil. 213 and Coque vs. Navas Sioca, 45 Phil. 430," in which cases
annulment was held to refer only to the extent of the one-half interest of the wife...
The necessity to strike down the contract of July 5, 1963 as a whole, not merely as to
the share of the wife, is not without its basis in the common-sense rule. To be
underscored here is that upon the provisions of Articles 161, 162 and 163 of the Civil
Code, the conjugal partnership is liable for many obligations while the conjugal
partnership exists. Not only that. The conjugal property is even subject to the
payment of debts contracted by either spouse before the marriage, as those for the
payment of fines and indemnities imposed upon them after the responsibilities in
Article 161 have been covered (Article 163, par. 3), if it turns out that the spouse
who is bound thereby, "should have no exclusive property or if it should be
insufficient." These are considerations that go beyond the mere equitable share of the
wife in the property. These are reasons enough for the husband to be stopped from
disposing of the conjugal property without the consent of the wife. Even more
fundamental is the fact that the nullity is decreed by the Code not on the basis of
prejudice but lack of consent of an indispensable party to the contract under Article
166.[37]
With respect to the third issue, the Court finds that respondent spouses are not
purchasers in good faith. A purchaser in good faith is one who buys property of
another, without notice that some other person has a right to, or interest in, such
property and pays full and fair price for the same, at the time of such purchase, or
before he has notice of the claim or interest of some other persons in the property. He
buys the property with the belief that the person from whom he receives the thing
was the owner and could convey title to the property. A purchaser cannot close his
eyes to facts which should put a reasonable man on his guard and still claim he acted
in good faith.[38]
In the instant case, there existed circumstances that should have placed respondent
spouses on guard. The death certificate of Ignacia, shows that she died on March 22,
1982. The same death certificate, however, reveals that - (1) it was issued by the
Office of the Civil Registrar of Lubao Pampanga on March 10, 1982; (2) the alleged
death of Ignacia was reported to the Office of the Civil Registrar on March 4, 1982;
and (3) her burial or cremation would be on March 8, 1982.[39] These obvious flaws
in the death certificate should have prompted respondents to investigate further,
especially so that respondent Florentina Mijares admitted on cross examination that
she asked for the death certificate of Ignacia because she was suspicious that Ignacia
was still alive.[40] Moreover, respondent spouses had all the opportunity to verify the
claim of Vicente that he is a widower because it was their lawyer, Atty. Rodriguito S.

17 | P a g e

Saet, who represented Vicente in the special proceedings before the Metropolitan
Trial Court.
Neither can respondent spouses rely on the alleged court approval of the sale. Note
that the Order issued by the Metropolitan Trial Court of Quezon City, Branch XXXI,
appointing Vicente as guardian of his 5 minor children, as well as the Order
authorizing him to sell the estate of Ignacia were issued only on September 29, 1983
and October 14, 1983, respectively. On the other hand, the sale of the entire Lot No.
4349-B-2 to respondent spouses appears to have been made not on March 1, 1983,
but even as early as November 25, 1978. In the "Agreement" dated November 25,
1978, Vicente in consideration of the amount of P110,000.00, sold to Cipriano
Mijares Lot No. 4349-B-2 on installment basis, with the first installment due on or
before July 31, 1979.[41] This was followed by a "Memorandum of Understanding"
executed on July 30, 1979, by Vicente and Cipriano - (1) acknowledging Cipriano's
receipt of Vicente's down payment in the amount of P50,000.00; and (2) authorizing
Florentina Mijares to collect rentals.[42] On July 14, 1981, Vicente and Cipriano
executed another "Memorandum of Agreement," stating, among other, that out of the
purchase price of P110,000.00 Vicente had remaining balance of P19,000.00.[43]
Clearly therefore, the special proceedings before the Metropolitan Trial Court of
Quezon City, Branch XXXI, could not have been the basis of respondent spouses'
claim of good faith because the sale of Lot No. 4349-B-2 occurred prior thereto.
Respondent spouses cannot deny knowledge that at the time of the sale in 1978,
Vicente was married to Ignacia and that the latter did not give her conformity to the
sale. This is so because the 1978 "Agreement" described Vicente as "married" but the
conformity of his wife to the sale did not appear in the deed. Obviously, the
execution of another deed of sale in 1983 over the same Lot No. 4349-B-2, after the
alleged death of Ignacia on March 22, 1982, as well as the institution of the special
proceedings were, intended to correct the absence of Ignacia's consent to the sale.
Even assuming that respondent spouses believed in good faith that Ignacia really
died on March 22, 1982, after they purchased the lot, the fact remains that the sale of
Lot No. 4349-B-2 prior to Ignacia's alleged demise was without her consent and
therefore subject to annulment. The October 14, 1983 order authorizing the sale of
the estate of Ignacia, could not have validated the sale of Lot No. 4349-B-2 because
said order was issued on the assumption that Ignacia was already dead and that the
sale dated March 1, 1983 was never categorically approved in the said order.
The fact that the 5 minor children[44] of Vicente represented by the latter, signed the
March 1, 1983 deed of sale of Lot No. 4349-B-2 will not estop them from assailing
the validity thereof. Not only were they too young at that time to understand the
repercussions of the sale, they likewise had no right to sell the property of their
mother who, when they signed the deed, was very much alive.
If a voidable contract is annulled, the restoration of what has been given is proper.
The relationship between parties in any contract even if subsequently annulled must
always be characterized and punctuated by good faith and fair dealing. Hence, for the

sake of justice and equity, and in consonance with the salutary principle of nonenrichment at another's expense, the Court sustains the trial court's order directing
Vicente to refund to respondent spouses the amount of P110,000.00 which they have
paid as purchase price of Lot No. 4349-B-2.[45] The court a quo correctly found that
the subject of the sale was the entire Lot No. 4349-B-2 and that the consideration
thereof is not P40,000.00 as stated in the March 1, 1983 deed of sale, but
P110,000.00 as evidenced by the - (1) "Agreement" dated November 25, 1978 as
well as the July 30, 1979 "Memorandum of Understanding" and the July 14, 1981
"Memorandum of Agreement" which served as receipts of the installment payments
made by respondent Cipriano Mijares; and (2) the receipt duly signed by Vicente
Reyes acknowledging receipt of the amount of P110,000.00 from respondent spouses
as payment of the sale of the controverted lot.[46]

jurisprudence authorize a tribunal to consider errors, although unassigned, if they

involve (1) errors affecting the lower court's jurisdiction over the subject matter, (2)
plain errors not specified, and (3) clerical errors.[51] In this case, though defendant
Vicente Reyes did not appeal, the "plain error" committed by the court a quo as to
the award of moral and exemplary damages must be corrected. These awards cannot
be lumped together as was done by the trial court.[52] Moral and exemplary damages
are different in nature, and require separate determination. Moral damages are
awarded where the claimant experienced physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury as a result of the act complained of.[53] The award of
exemplary damages, on the other hand, is warranted when moral, temperate,
liquidated, or compensatory damages were likewise awarded by the court.[54]

The trial court, however, erred in imposing 12% interest per annum on the amount
due the respondents. In Eastern Shipping Lines, Inc. v. Court of Appeals,[47] it was
held that interest on obligations not constituting a loan or forbearance of money is six
percent (6%) annually. If the purchase price could be established with certainty at the
time of the filing of the complaint, the six percent (6%) interest should be computed
from the date the complaint was filed until finality of the decision. In Lui v. Loy,[48]
involving a suit for reconveyance and annulment of title filed by the first buyer
against the seller and the second buyer, the Court, ruling in favor of the first buyer
and annulling the second sale, ordered the seller to refund to the second buyer (who
was not a purchaser in good faith) the purchase price of the lots. It was held therein
that the 6% interest should be computed from the date of the filing of the complaint
by the first buyer. After the judgment becomes final and executory until the
obligation is satisfied, the amount due shall earn interest at 12% per year, the interim
period being deemed equivalent to a forbearance of credit.[49]

Hence, the trial court's award of "P50,000.00 by way of moral and exemplary
damages" should be modified. Vicente Reyes should be ordered to pay the amounts
of P25,000.00 as moral damages and P25,000.00 as exemplary damages. Since
Vicente Reyes was among the heirs substituted to the late Ignacia Aguilar-Reyes,
payment of moral and exemplary damages must be made by Vicente to his children,
petitioners in this case.

Accordingly, the amount of P110,000.00 due the respondent spouses which could be
determined with certainty at the time of the filing of the complaint shall earn 6%
interest per annum from June 4, 1986 until the finality of this decision. If the
adjudged principal and the interest (or any part thereof) remain unpaid thereafter, the
interest rate shall be twelve percent (12%) per annum computed from the time the
judgment becomes final and executory until it is fully satisfied.
Petitioner's prayer for payment of rentals should be denied. Other than the allegation
of Ignacia in her Sinumpaang Salaysay that the apartments could be rented at
P1,000.00 a month, no other evidence was presented to substantiate her claim. In
awarding rentals which are in the nature of actual damages, the Court cannot rely on
mere assertions, speculations, conjectures or guesswork but must depend on
competent proof and on the best evidence obtainable regarding the actual amount of
loss.[50] None, having been presented in the case at bar, petitioner's claim for rentals
must be denied.
While as a general rule, a party who has not appealed is not entitled to affirmative
relief other than the ones granted in the decision of the court below, law and

18 | P a g e

WHEREFORE, in view of all the foregoing, the petition is PARTIALLY

GRANTED. The January 26, 2000 Decision and June 19, 2002, Resolution of the
Court of Appeals in CA-G.R. No. 28464 are REVERSED and SET ASIDE. The
May 31, 1990 Order of the Regional Trial Court of Quezon City, Branch 101, in
Civil Case No. Q-48018, which annulled the March 1, 1983 Deed of Absolute Sale
over Lot No. 4349-B-2, and ordered the Register of Deeds of Quezon City to cancel
TCT No. 306087 in the name of respondent spouses Cipriano Mijares and Florentina
Mijares covering the same property; as well as the June 29, 1990 Order correcting
the typographical errors in the order dated March 1, 1983, are REINSTATED, with
the following MODIFICATIONS (1) The Register of Deeds of Quezon City is ordered to issue a new certificate of title
over Lot No. 4349-B-2, in the name of petitioners as co-owners thereof;
(2) Vicente Reyes is ordered to reimburse the respondent spouses the amount of
P110,000.00 as purchase price of Lot No. 4349-B-2, with interest at 6% per annum
from June 4, 1986, until finality of this decision. After this decision becomes final,
interest at the rate of 12% per annum on the principal and interest (or any part
thereof) shall be imposed until full payment.
(3) Defendant Vicente Reyes is ordered to pay the heirs of the late Ignacia AguilarReyes, the amounts of P25,000.00 as moral damages and P25,000.00 as exemplary
damages.
SO ORDERED.

G.R. No. 155043

September 30, 2004

ARTURO R. ABALOS, petitioner,

vs.
DR. GALICANO S. MACATANGAY, JR., respondent.
DECISION
TINGA, J.:
The instant petition seeks a reversal of the Decision of the Court of Appeals in CAG.R. CV No. 48355 entitled "Dr. Galicano S. Macatangay, Jr. v. Arturo R. Abalos
and Esther Palisoc-Abalos," promulgated on March 14, 2002. The appellate court
reversed the trial courts decision which dismissed the action for specific
performance filed by respondent, and ordered petitioner and his wife to execute in
favor of herein respondent a deed of sale over the subject property.
Spouses Arturo and Esther Abalos are the registered owners of a parcel of land with
improvements located at Azucena St., Makati City consisting of about three hundred
twenty-seven (327) square meters, covered by Transfer Certificate of Title (TCT) No.
145316 of the Registry of Deeds of Makati.
Armed with a Special Power of Attorney dated June 2, 1988, purportedly issued by
his wife, Arturo executed a Receipt and Memorandum of Agreement (RMOA) dated
October 17, 1989, in favor of respondent, binding himself to sell to respondent the
subject property and not to offer the same to any other party within thirty (30) days
from date. Arturo acknowledged receipt of a check from respondent in the amount of
Five Thousand Pesos (P5,000.00), representing earnest money for the subject
property, the amount of which would be deducted from the purchase price of One
Million Three Hundred Three Hundred Thousand Pesos (P1,300,000.00). Further, the
RMOA stated that full payment would be effected as soon as possession of the
property shall have been turned over to respondent.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

19 | P a g e

Subsequently, Arturos wife, Esther, executed a Special Power of Attorney dated

October 25, 1989, appointing her sister, Bernadette Ramos, to act for and in her
behalf relative to the transfer of the property to respondent. Ostensibly, a marital
squabble was brewing between Arturo and Esther at the time and to protect his
interest, respondent caused the annotation of his adverse claim on the title of the
spouses to the property on November 14, 1989.
On November 16, 1989, respondent sent a letter to Arturo and Esther informing them
of his readiness and willingness to pay the full amount of the purchase price. The

letter contained a demand upon the spouses to comply with their obligation to turn
over possession of the property to him. On the same date, Esther, through her
attorney-in-fact, executed in favor of respondent, a Contract to Sell the property to
the extent of her conjugal interest therein for the sum of six hundred fifty thousand
pesos (P650,000.00) less the sum already received by her and Arturo. Esther agreed
to surrender possession of the property to respondent within twenty (20) days from
November 16, 1989, while the latter promised to pay the balance of the purchase
price in the amount of one million two hundred ninety thousand pesos
(P1,290,000.00) after being placed in possession of the property. Esther also
obligated herself to execute and deliver to respondent a deed of absolute sale upon
full payment.
In a letter dated December 7, 1989, respondent informed the spouses that he had set
aside the amount of One Million Two Hundred Ninety Thousand Pesos
(P1,290,000.00) as evidenced by Citibank Check No. 278107 as full payment of the
purchase price. He reiterated his demand upon them to comply with their obligation
to turn over possession of the property. Arturo and Esther failed to deliver the
property which prompted respondent to cause the annotation of another adverse
claim on TCT No. 145316. On January 12, 1990, respondent filed a complaint for
specific performance with damages against petitioners. Arturo filed his answer to the
complaint while his wife was declared in default.
The Regional Trial Court (RTC) dismissed the complaint for specific performance. It
ruled that the Special Power of Attorney (SPA) ostensibly issued by Esther in favor
of Arturo was void as it was falsified. Hence, the court concluded that the SPA could
not have authorized Arturo to sell the property to respondent. The trial court also
noted that the check issued by respondent to cover the earnest money was dishonored
due to insufficiency of funds and while it was replaced with another check by
respondent, there is no showing that the second check was issued as payment for the
earnest money on the property.
On appeal taken by respondent, the Court of Appeals reversed the decision of the
trial court. It ruled that the SPA in favor of Arturo, assuming that it was void, cannot
affect the transaction between Esther and respondent. The appellate court
ratiocinated that it was by virtue of the SPA executed by Esther, in favor of her sister,
that the sale of the property to respondent was effected. On the other hand, the
appellate court considered the RMOA executed by Arturo in favor of respondent
valid to effect the sale of Arturos conjugal share in the property.
Dissatisfied with the appellate courts disposition of the case, petitioner seeks a
reversal of its decision alleging that:

20 | P a g e

I.
The Court of Appeals committed serious and manifest error when it decided
on the appeal without affording petitioner his right to due process.
II.
The Court of Appeals committed serious and manifest error in reversing and
setting aside the findings of fact by the trial court.
III.
The Court of Appeals erred in ruling that a contract to sell is a contract of
sale, and in ordering petitioner to execute a registrable form of deed of sale
over the property in favor of respondent.1
Petitioner contends that he was not personally served with copies of summons,
pleadings, and processes in the appeal proceedings nor was he given an opportunity
to submit an appellees brief. He alleges that his counsel was in the United States
from 1994 to June 2000, and he never received any news or communication from
him after the proceedings in the trial court were terminated. Petitioner submits that
he was denied due process because he was not informed of the appeal proceedings,
nor given the chance to have legal representation before the appellate court.
We are not convinced. The essence of due process is an opportunity to be heard.
Petitioners failure to participate in the appeal proceedings is not due to a cause
imputable to the appellate court but because of petitioners own neglect in
ascertaining the status of his case. Petitioners counsel is equally negligent in failing
to inform his client about the recent developments in the appeal proceedings. Settled
is the rule that a party is bound by the conduct, negligence and mistakes of his
counsel.2 Thus, petitioners plea of denial of due process is downright baseless.
Petitioner also blames the appellate court for setting aside the factual findings of the
trial court and argues that factual findings of the trial court are given much weight
and respect when supported by substantial evidence. He asserts that the sale between
him and respondent is void for lack of consent because the SPA purportedly executed
by his wife Esther is a forgery and therefore, he could not have validly sold the
subject property to respondent.
Next, petitioner theorizes that the RMOA he executed in favor of respondent was not
perfected because the check representing the earnest money was dishonored. He adds

that there is no evidence on record that the second check issued by respondent was
intended to replace the first check representing payment of earnest money.
Respondent admits that the subject property is co-owned by petitioner and his wife,
but he objects to the allegations in the petition bearing a relation to the supposed date
of the marriage of the vendors. He contends that the alleged date of marriage
between petitioner and his wife is a new factual issue which was not raised nor
established in the court a quo. Respondent claims that there is no basis to annul the
sale freely and voluntarily entered into by the husband and the wife.
The focal issue in the instant petition is whether petitioner may be compelled to
convey the property to respondent under the terms of the RMOA and the Contract to
Sell. At bottom, the resolution of the issue entails the ascertainment of the
contractual nature of the two documents and the status of the contracts contained
therein.
Contracts, in general, require the presence of three essential elements: (1) consent of
the contracting parties; (2) object certain which is the subject matter of the contract;
and (3) cause of the obligation which is established.3
Until the contract is perfected, it cannot, as an independent source of obligation,
serve as a binding juridical relation.4 In a contract of sale, the seller must consent to
transfer ownership in exchange for the price, the subject matter must be determinate,
and the price must be certain in money or its equivalent.5 Being essentially
consensual, a contract of sale is perfected at the moment there is a meeting of the
minds upon the thing which is the object of the contract and upon the price.6
However, ownership of the thing sold shall not be transferred to the vendee until
actual or constructive delivery of the property.7

not even bear his signature thereon. It is quite clear that after the lapse of the thirtyday period, without respondent having exercised his option, Arturo is free to sell the
property to another. This shows that the intent of Arturo is merely to grant respondent
the privilege to buy the property within the period therein stated. There is nothing in
the RMOA which indicates that Arturo agreed therein to transfer ownership of the
land which is an essential element in a contract of sale. Unfortunately, the option is
not binding upon the promissory since it is not supported by a consideration distinct
from the price.12
As a rule, the holder of the option, after accepting the promise and before he
exercises his option, is not bound to buy. He is free either to buy or not to buy later.
In Sanchez v. Rigos13 we ruled that in an accepted unilateral promise to sell, the
promissor is not bound by his promise and may, accordingly, withdraw it, since there
may be no valid contract without a cause or consideration. Pending notice of its
withdrawal, his accepted promise partakes of the nature of an offer to sell which, if
acceded or consented to, results in a perfected contract of sale.
Even conceding for the nonce that respondent had accepted the offer within the
period stated and, as a consequence, a bilateral contract of purchase and sale was
perfected, the outcome would be the same. To benefit from such situation,
respondent would have to pay or at least make a valid tender of payment of the price
for only then could he exact compliance with the undertaking of the other party.14
This respondent failed to do. By his own admission, he merely informed respondent
spouses of his readiness and willingness to pay. The fact that he had set aside a check
in the amount of One Million Two Hundred Ninety Thousand Pesos (P1,290,000.00)
representing the balance of the purchase price could not help his cause. Settled is the
rule that tender of payment must be made in legal tender. A check is not legal tender,
and therefore cannot constitute a valid tender of payment.15 Not having made a valid
tender of payment, respondents action for specific performance must fail.

On the other hand, an accepted unilateral promise which specifies the thing to be
sold and the price to be paid, when coupled with a valuable consideration distinct
and separate from the price, is what may properly be termed a perfected contract of
option.8 An option merely grants a privilege to buy or sell within an agreed time and
at a determined price. It is separate and distinct from that which the parties may enter
into upon the consummation of the option.9 A perfected contract of option does not
result in the perfection or consummation of the sale; only when the option is
exercised may a sale be perfected.10 The option must, however, be supported by a
consideration distinct from the price.11

With regard to the payment of Five Thousand Pesos (P5,000.00), the Court is of the
view that the amount is not earnest money as the term is understood in Article 1482
which signifies proof of the perfection of the contract of sale, but merely a guarantee
that respondent is really interested to buy the property. It is not the giving of earnest
money, but the proof of the concurrence of all the essential elements of the contract
of sale which establishes the existence of a perfected sale.16 No reservation of
ownership on the part of Arturo is necessary since, as previously stated, he has never
agreed to transfer ownership of the property to respondent.

Perusing the RMOA, it signifies a unilateral offer of Arturo to sell the property to
respondent for a price certain within a period of thirty days. The RMOA does not
impose upon respondent an obligation to buy petitioners property, as in fact it does

Granting for the sake of argument that the RMOA is a contract of sale, the same
would still be void not only for want of consideration and absence of respondents
signature thereon, but also for lack of Esthers conformity thereto. Quite glaring is
the absence of the signature of Esther in the RMOA, which proves that she did not

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give her consent to the transaction initiated by Arturo. The husband cannot alienate
any real property of the conjugal partnership without the wifes consent.17
However, it was the Contract to Sell executed by Esther through her attorney-in-fact
which the Court of Appeals made full use of. Holding that the contract is valid, the
appellate court explained that while Esther did not authorize Arturo to sell the
property, her execution of the SPA authorizing her sister to sell the land to respondent
clearly shows her intention to convey her interest in favor of respondent. In effect,
the court declared that the lack of Esthers consent to the sale made by Arturo was
cured by her subsequent conveyance of her interest in the property through her
attorney-in-fact.
We do not share the ruling.
The nullity of the RMOA as a contract of sale emanates not only from lack of
Esthers consent thereto but also from want of consideration and absence of
respondents signature thereon. Such nullity cannot be obliterated by Esthers
subsequent confirmation of the putative transaction as expressed in the Contract to
Sell. Under the law, a void contract cannot be ratified18 and the action or defense for
the declaration of the inexistence of a contract does not prescribe. 19 A void contract
produces no effect either against or in favor of anyoneit cannot create, modify or
extinguish the juridical relation to which it refers.20
True, in the Contract to Sell, Esther made reference to the earlier RMOA executed by
Arturo in favor of respondent. However, the RMOA which Arturo signed is different
from the deed which Esther executed through her attorney-in-fact. For one, the first
is sought to be enforced as a contract of sale while the second is purportedly a
contract to sell only. For another, the terms and conditions as to the issuance of title
and delivery of possession are divergent.
The congruence of the wills of the spouses is essential for the valid disposition of
conjugal property. Where the conveyance is contained in the same document which
bears the conformity of both husband and wife, there could be no question on the
validity of the transaction. But when there are two (2) documents on which the
signatures of the spouses separately appear, textual concordance of the documents is
indispensable. Hence, in this case where the wifes putative consent to the sale of
conjugal property appears in a separate document which does not, however, contain
the same terms and conditions as in the first document signed by the husband, a valid
transaction could not have arisen.
Quite a bit of elucidation on the conjugal partnership of gains is in order.

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Arturo and Esther appear to have been married before the effectivity of the Family
Code. There being no indication that they have adopted a different property regime,
their property relations would automatically be governed by the regime of conjugal
partnership of gains.21
The subject land which had been admittedly acquired during the marriage of the
spouses forms part of their conjugal partnership.22
Under the Civil Code, the husband is the administrator of the conjugal partnership.
This right is clearly granted to him by law.23 More, the husband is the sole
administrator. The wife is not entitled as of right to joint administration.24
The husband, even if he is statutorily designated as administrator of the conjugal
partnership, cannot validly alienate or encumber any real property of the conjugal
partnership without the wifes consent.25 Similarly, the wife cannot dispose of any
property belonging to the conjugal partnership without the conformity of the
husband. The law is explicit that the wife cannot bind the conjugal partnership
without the husbands consent, except in cases provided by law.26
More significantly, it has been held that 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.27 Thus, the right of the husband or wife to onehalf of the conjugal assets does not vest until the dissolution and liquidation of the
conjugal partnership, or after dissolution of the marriage, when it is finally
determined that, after settlement of conjugal obligations, there are net assets left
which can be divided between the spouses or their respective heirs. 28
In not a few cases, we ruled that the sale by the husband of property belonging to the
conjugal partnership without the consent of the wife when there is no showing that
the latter is incapacitated is void ab initio because it is in contravention of the
mandatory
requirements of Article 166 of the Civil Code.29 Since Article 166 of the Civil Code
requires the consent of the wife before the husband may alienate or encumber any
real property of the conjugal partnership, it follows that acts or transactions executed
against this mandatory provision are void except when the law itself authorizes their
validity.30

Quite recently, in San Juan Structural and Steel Fabricators, Inc. v. Court of
Appeals,31 we ruled that neither spouse could alienate in favor of another, his or her
interest in the partnership or in any property belonging to it, or ask for partition of
the properties before the partnership itself had been legally dissolved. Nonetheless,
alienation of the share of each spouse in the conjugal partnership could be had after
separation of property of the spouses during the marriage had been judicially
decreed, upon their petition for any of the causes specified in Article 19132 of the
Civil Code in relation to Article 21433 thereof.
As an exception, the husband may dispose of conjugal property without the wifes
consent if such sale is necessary to answer for conjugal liabilities mentioned in
Articles 161 and 162 of the Civil Code.34 In Tinitigan v. Tinitigan, Sr.,35 the Court
ruled that the husband may sell property belonging to the conjugal partnership even
without the consent of the wife if the sale is necessary to answer for a big conjugal
liability which might endanger the familys economic standing. This is one instance
where the wifes consent is not required and, impliedly, no judicial intervention is
necessary.
Significantly, the Family Code has introduced some changes particularly on the
aspect of the administration of the conjugal partnership. The new law provides that
the administration of the conjugal partnership is now a joint undertaking of the
husband and the wife. In the event that one spouse is incapacitated or otherwise
unable to participate in the administration of the conjugal partnership, the other
spouse may assume sole powers of administration. However, the power of
administration does not include the power to dispose or encumber property

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belonging to the conjugal partnership.36 In all instances, the present law specifically
requires the written consent of the other spouse, or authority of the court for the
disposition or encumbrance of conjugal partnership property without which, the
disposition or encumbrance shall be void.37
Inescapably, herein petitioners action for specific performance must fail. Even on
the supposition that the parties only disposed of their respective shares in the
property, the sale, assuming that it exists, is still void for as previously stated, the
right of the husband or the wife to one-half of the conjugal assets does not vest until
the liquidation of the conjugal partnership. Nemo dat qui non habet. No one can give
what he has not.
WHEREFORE, the appealed Decision is hereby REVERSED and SET ASIDE.
The complaint in Civil Case No. 90-106 of the Regional Trial Court of Makati is
ordered DISMISSED. No pronouncement as to costs.
SO ORDERED.

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