[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.
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, [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 respondent-husband
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.

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.[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,[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 court [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.[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.

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.

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.

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 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.
xxxxxxxxx

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.[6]

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.[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.

Petitioner filed a Motion for Reconsideration which was denied by the

respondent court in a Resolution dated November 28, 1994.[7]

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,[9] that the
husband as head of the family and as administrator of the conjugal partnership is
presumed to have contracted obligations for the benefit of the family or the conjugal
partnership.

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.

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.

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.

In the cases of Javier vs. Osmea,[10] Abella de Diaz vs. Erlanger & Galinger, Inc.,
Cobb-Perez vs. Lantin[12] and G-Tractors, Inc. vs. Court of Appeals,[13] cited by the
petitioners, we held that:
[11]

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.,[14] Liberty Insurance Corporation vs. Banuelos,[15] and Luzon
Surety Inc. vs. De Garcia,[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.
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.
xxxxxxxxx
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. [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
by-product or a spin-off of the loan itself.
In all our decisions involving accommodation contracts of the husband, [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.
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 respondents-appellants, are not
only incidental but also speculative.[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.
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.[20]
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.[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.[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
shall not be charged to the conjugal partnership except to the extent that they
redounded to the benefit of the family.
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.
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.

NANCY GO AND ALEX GO, petitioners, vs. THE HONORABLE COURT OF

APPEALS, HERMOGENES ONG and JANE C. ONG, respondents.
DECISION
ROMERO, J.:
No less than the Constitution commands us to protect marriage as an inviolable
social institution and the foundation of the family.[1] In our society, the importance of a
wedding ceremony cannot be underestimated as it is the matrix of the family and,
therefore, an occasion worth reliving in the succeeding years.
It is in this light that we narrate the following undisputed facts:
Private respondents spouses Hermogenes and Jane Ong were married on June
7, 1981, in Dumaguete City. The video coverage of the wedding was provided by
petitioners at a contract price of P1,650.00. Three times thereafter, the newlyweds
tried to claim the video tape of their wedding, which they planned to show to their
relatives in the United States where they were to spend their honeymoon, and thrice
they failed because the tape was apparently not yet processed. The parties then
agreed that the tape would be ready upon private respondents return.
When private respondents came home from their honeymoon, however, they
found out that the tape had been erased by petitioners and therefore, could no longer
be delivered.
Furious at the loss of the tape which was supposed to be the only record of their
wedding, private respondents filed on September 23, 1981 a complaint for specific
performance and damages against petitioners before the Regional Trial Court,
7th Judicial District, Branch 33, Dumaguete City. After a protracted trial, the court a
quo rendered a decision, to wit:
WHEREFORE, judgment is hereby granted:
1. Ordering the rescission of the agreement entered into between plaintiff
Hermogenes Ong and defendant Nancy Go;
2. Declaring defendants Alex Go and Nancy Go jointly and severally liable to plaintiffs
Hermogenes Ong and Jane C. Ong for the following sums:
a) P450.00, the down payment made at contract time;
b) P75,000.00, as moral damages;

[G.R. No. 114791. May 29, 1997]

c) P20,000.00, as exemplary damages;

d) P5,000.00, as attorneys fees; and

e) P2,000.00, as litigation expenses;
Defendants are also ordered to pay the costs.
SO ORDERED.
Dissatisfied with the decision, petitioners elevated the case to the Court of
Appeals which, on September 14, 1993, dismissed the appeal and affirmed the trial
courts decision.
Hence, this petition.
Petitioners contend that the Court of Appeals erred in not appreciating the
evidence they presented to prove that they acted only as agents of a certain Pablo
Lim and, as such, should not have been held liable. In addition, they aver that there is
no evidence to show that the erasure of the tape was done in bad faith so as to justify
the award of damages.[2]

It must also be noted that in the course of the protracted trial below, petitioners
did not even present Lim to corroborate their contention that they were mere agents
of the latter. It would not be unwarranted to assume that their failure to present such a
vital witness would have had an adverse result on the case.[4]
As regards the award of damages, petitioners would impress upon this Court
their lack of malice or fraudulent intent in the erasure of the tape. They insist that
since private respondents did not claim the tape after the lapse of thirty days, as
agreed upon in their contract, the erasure was done in consonance with consistent
business practice to minimize losses.[5]
We are not persuaded.
As correctly observed by the Court of Appeals, it is contrary to human nature for
any newlywed couple to neglect to claim the video coverage of their wedding; the fact
that private respondents filed a case against petitioners belies such assertion. Clearly,
petitioners are guilty of actionable delay for having failed to process the video
tape. Considering that private respondents were about to leave for the United States,
they took care to inform petitioners that they would just claim the tape upon their
return two months later. Thus, the erasure of the tape after the lapse of thirty days
was unjustified.

The petition is not meritorious.

Petitioners claim that for the video coverage, the cameraman was employed by
Pablo Lim who also owned the video equipment used. They further assert that they
merely get a commission for all customers solicited for their principal.[3]
This contention is primarily premised on Article 1883 of the Civil Code which
states thus:
ART. 1883. If an agent acts in his own name, the principal has no right of action
against the persons with whom the agent has contracted; neither have such persons
against the principal.
In such case the agent is the one directly bound in favor of the person with whom he
has contracted, as if the transaction were his own, except when the contract involves
things belonging to the principal.
xxx xxx xxx
Petitioners argument that since the video equipment used belonged to Lim and
thus the contract was actually entered into between private respondents and Lim is
not deserving of any serious consideration. In the instant case, the contract entered
into is one of service, that is, for the video coverage of the wedding. Consequently, it
can hardly be said that the object of the contract was the video equipment used. The
use by petitioners of the video equipment of another person is of no consequence.

In this regard, Article 1170 of the Civil Code provides that those who in the
performance of their obligations are guilty of fraud, negligence or delay, and those
who is any manner contravene the tenor thereof, are liable for damages.
In the instant case, petitioners and private respondents entered into a contract
whereby, for a fee, the former undertook to cover the latters wedding and deliver to
them a video copy of said event. For whatever reason, petitioners failed to provide
private respondents with their tape. Clearly, petitioners are guilty of contravening their
obligation to said private respondents and are thus liable for damages.
The grant of actual or compensatory damages in the amount of P450.00 is
justified, as reimbursement of the downpayment paid by private respondents to
petitioners.[6]
Generally, moral damages cannot be recovered in an action for breach of
contract because this case is not among those enumerated in Article 2219 of the Civil
Code. However, it is also accepted in this jurisdiction that liability for a quasidelict may still exist despite the presence of contractual relations, that is, the act
which violates the contract may also constitute a quasi-delict.[7] Consequently, moral
damages are recoverable for the breach of contract which was palpably wanton,
reckless, malicious or in bad faith, oppresive or abusive.[8]

Petitioners act or omission in recklessly erasing the video coverage of private

respondents wedding was precisely the cause of the suffering private respondents
had to undergo.
As the appellate court aptly observed:
Considering the sentimental value of the tapes and the fact that the event therein
recorded a wedding which in our culture is a significant milestone to be cherished and
remembered could no longer be reenacted and was lost forever, the trial court was
correct in awarding the appellees moral damages albeit in the amount of P75,000.00,
which was a great reduction from plaintiffs demand in the complaint, in compensation
for the mental anguish, tortured feelings, sleepless nights and humiliation that the
appellees suffered and which under the circumstances could be awarded as allowed
under Articles 2217 and 2218 of the Civil Code.[9]
Considering the attendant wanton negligence committed by petitioners in the
case at bar, the award of exemplary damages by the trial court is justified [10] to serve
as a warning to all entities engaged in the same business to observe due diligence in
the conduct of their affairs.
The award of attorneys fees and litigation expenses are likewise proper,
consistent with Article 2208[11] of the Civil Code.
Finally, petitioner Alex Go questions the finding of the trial and appellate courts
holding him jointly and severally liable with his wife Nancy regarding the pecuniary
liabilities imposed. He argues that when his wife entered into the contract with private
respondent, she was acting alone for her sole interest.[12]
We find merit in this contention. Under Article 117 of the Civil Code (now Article
73 of the Family Code), the wife may exercise any profession, occupation or engage
in business without the consent of the husband. In the instant case, we are convinced
that it was only petitioner Nancy Go who entered into the contract with private
respondent. Consequently, we rule that she is solely liable to private respondents for
the damages awarded below, pursuant to the principle that contracts produce effect
only as between the parties who execute them.[13]
WHEREFORE, the assailed decision dated September 14, 1993 is hereby
AFFIRMED with the MODIFICATION that petitioner Alex Go is absolved from any
liability to private respondents and that petitioner Nancy Go is solely liable to said
private respondents for the judgment award. Costs against petitioners.
SO ORDERED.
G.R. No. L-26270

October 30, 1969

BONIFACIA MATEO, ET AL., petitioners,

vs.
GERVASIO LAGUA, ET AL., respondents.
Pedro P. Tuason for petitioners.
Isaiah Asuncion for respondents.
REYES, J.B.L., J.:
This is a petition for review of the decision of the Court of Appeals (In CA-G.R. Nos.
30064-R and 30065-R), raising as only issue the correctness of the appellate court's
reduction of a donation propter nuptias, for being inofficious.
The established facts of this case are as follows:
Cipriano Lagua was the original registered owner of 3 parcels of land situated in
Asingan, Pangasinan, referred to as Lot No. 998, with an area of 11,080 sq.m., more
or less and covered by O.C.T. No. 362; Lot No. 6541, with an area of 808 sq.m., more
or less, covered by O.C.T. No. 6618; and Lot No. 5106, with an area of 3,303 sq.m.,
covered by O.C.T. No. 8137. Sometime in 1917, Lagua and his wife Alejandra
Dumlao, in a public instrument, donated Lots 998 and 6541 to their son Alejandro
Lagua, in consideration of the latter's marriage to Bonifacia Mateo. The marriage was
celebrated on 15 May 1917, and thereafter, the couple took possession of the
properties, but the Certificates of Title remained in the donor's name.
In 1923, the son, Alejandro, died. His widow, Bonifacia Mateo, and her infant daughter
lived with her father-in-law, Cipriano Lagua, who then undertook the farming of the
donated lots. It seems that at the start, Cipriano Lagua was giving to Bonifacia the
owner's share of the harvest from the land. In 1926, however, Cipriano refused to
deliver the said share, thus prompting Bonifacia to resort to the Justice of the Peace
Court of Asingan, Pangasinan, from where she obtained a judgment awarding to her
possession of the two lots plus damages.
On 31 July 1941, Cipriano Lagua, executed a deed of sale of the same two
parcels of land in favor of his younger son, Gervasio. This sale notwithstanding,
Bonifacia Mateo was continuously given the owner's share of the harvest until 1956,
when it was altogether stopped. It was only then that Bonifacia Mateo learned of
the sale of the lots to her brother-in-law, who had the sale in his favor
registered only on 22 September 1955. As a consequence, TCT Nos. 19152 and
19153 of the Register of Deeds of Pangasinan were issued to Gervasio.
Bonifacia Mateo and her daughter, Anatalia, assisted by her husband, Luis Alcantara,
went to the Court of First Instance of Pangasinan (Civil Case No. T-339), seeking
annulment of the deed of sale in favor of Gervasio Lagua and for recovery of
possession of the properties. On 3 January 1957, judgment was rendered in the
case

... declaring the sale executed by Cipriano Lagua in favor of the other
defendants, Gervasio Lagua and Sotera Casimero, as null and void and
non-existent; ordering the Register of Deeds for the Province of Pangasinan,
to cancel Transfer Certificates of Title Nos. 19152 and 19153; condemning
the defendants to pay jointly and severally to the plaintiffs the sum of
P200.00; ordering the defendants Gervasio Lagua and Sotera Lagua to
vacate and deliver the possession over the two parcels of land to the
plaintiffs, and to pay the costs of this suit.
The decision became final, and Bonifacia Mateo, and her daughter, Anatalia Lagua,
were installed in possession of the land.
On 18 August 1957, the spouses Gervasio Lagua and Sotera Casimero commenced
in the Justice of the Peace Court of Asingan, Pangasinan, an action against Bonifacia
Mateo and her daughter for reimbursement of the improvements allegedly made by
them on Lots 998 and 6541, plus damages. Dismissed by the Justice of the Peace
Court for being barred by the judgment in Civil Case No. T-339, therein plaintiffs
appealed to the Court of First Instance of Pangasinan where the case was docketed
as Civil Case No. T-433. At about the same time, another case was filed, this time by
Gervasio Lagua and Cipriano Lagua, for annulment of the donation of the two lots,
insofar as one-half portion thereof was concerned (civil Case No. T-442). It was their
claim that in donating the two lots, which allegedly were all that plaintiff Cipriano
Lagua owned, said plaintiff not only neglected leaving something for his own support
but also prejudiced the legitime of his forced heir, plaintiff Gervasio Lagua.
Being intimately related, the two cases were heard jointly. On November 12, 1958,
while the cases were pending final resolution, plaintiff Cipriano Lagua died. On
23 December 1960, the court rendered a single decision dismissing Civil Case No. T433 for lack of cause of action, plaintiffs spouses Gervasio Lagua and Sotera
Casimero having been declared possessors in bad faith in Civil Case No. T-339
and, therefore, not entitled to any reimbursement of the expenses and
improvements put up by them on the land. The other suit, Civil Case No. T-442,
was, likewise, dismissed on the ground of prescription, the action to annul the
donation having been brought only in 1958, or after the lapse of 41 years.
Defendants' counterclaims were similarly dismissed although they were awarded
attorneys' fees in the sum of P150.00.
Plaintiffs appealed the decision to the Court of Appeals (CA-G.R. Nos. 30064 and
30065-R). Said tribunal, on 18 March 1966, affirmed the ruling of the trial court in Civil
Case No. T-433 denying plaintiffs' claim for reimbursement of the improvements said
to have been made on the land. In regard to the annulment case (C.F.I. No. T-442),
however, the Court of Appeals held that the donation to Alejandro Lagua of the 2 lots
with a combined area of 11,888 square meters execeeded by 494.75 square meters
his (Alejandro's) legitime and the disposable portion that Cipriano Lagua could have
freely given by will, and, to the same extent prejudiced the legitime of Cipriano's other
heir, Gervasio Lagua. The donation was thus declared inofficious, and defendantsappellees were ordered to reconvey to plaintiff Gervasio Lagua a portion of 494.15

square meters to be taken from any convenient part of the lots. The award of
attorneys' fees to the defendants was also eliminated for lack of proper basis.
Bonifacia Mateo, et al., then resorted to this Court, assailing the decision of the Court
of Appeals insofar as it ordered them to reconvey a portion of the lots to herein
respondent Gervasio Lagua. It is petitioners' contention that (1) the validity of the
donation proper nuptias having been finally determined in Civil Case No. T-339, any
question in derogation of said validity is already barred; (2) that the action to annul the
donation, filed in 1958, or 41 years after its execution, is abated by prescription; (3)
that a donation proper nuptias is revocable only for any of the grounds enumerated in
Article 132 of the new Civil Code, and inofficiousness is not one of thorn; and (4) that
in determining the legitime of the Lagua brothers in the hereditary estate of Cipriano
Lagua, the Court of Appeals should have applied the provisions of the Civil Code of
1889, and not Article 888 of the new Civil Code.
Petitioners' first two assigned errors, it may be stated, are non-contentious issues that
have no bearing in the actual controversy in this case. All of them refer to
the validity of the donation a matter which was definitively settled in Civil Case No.
T-339 and which, precisely, was declared by the Court of Appeals to be "beyond the
realm of judicial inquiry." In reality, the only question this case presents is whether or
not the Court of Appeals acted correctly in ordering the reduction of the donation for
being inofficious and in ordering herein petitioners to reconvey to respondent
Gervasio Lagua an unidentified 494.75 square-meter portion of the donated lots.
We are in accord with the Court of Appeals that Civil Case No. 442 is not one
exclusively for annulment or revocation of the entire donation, but of merely that
portion thereof allegedly trenching on the legitime of respondent Gervasio
Lagua;1 that the cause of action to enforce Gervasio's legitime, having accrued only
upon the death of his father on 12 November 1958, the dispute has to be governed by
the pertinent provisions of the new Civil Code; and that a donation proper
nuptias property may be reduced for being inofficious. Contrary to the views of
appellants (petitioners), donations proper nuptias (by reason of marriage) are without
onerous consideration, the marriage being merely the occasion or motive for the
donation, not its causa. Being liberalities, they remain subject to reduction for
inofficiousness upon the donor's death, if they should infringe the legitime of a forced
heir.2
It is to be noted, however, that in rendering the judgment under review, the Court of
Appeals acted on several unsupported assumptions: that the three (3) lots mentioned
in the decision (Nos. 998, 5106 and 6541) were the only properties composing the net
hereditary estate of the deceased Cipriano Lagua; that Alejandro Lagua and Gervasio
Lagua were his only legal heirs; that the deceased left no unpaid debts, charges,
taxes, etc., for which the estate would be answerable.3 In the computation of the heirs'
legitime, the Court of Appeals also considered only the area, not the value, of the
properties.

The infirmity in the above course of action lies in the fact that in its Article 908 the new
Civil Code specifically provides as follows:
ART. 908. To determine the legitime, the value of the property left at the
death of the testator shall be considered, deducting all debts, and charges,
which shall not include those imposed in the will.
To the net value of the hereditary estate, shall be added the value of all
donations by the testator that are subject to collation, at the time he made
them.
In other words, before any conclusion about the legal share due to a compulsory heir
may be reached, it is necessary that certain steps be taken first. The net estate of the
decedent must be ascertained, by deducting an payable obligations and charges from
the value of the property owned by the deceased at the time of his death; then, all
donations subject to collation would be added to it. With the partible estate thus
determined, the legitimes of the compulsory heir or heirs can be established; and only
thereafter can it be ascertained whether or not a donation had prejudiced the
legitimes. Certainly, in order that a donation may be reduced for being inofficious,
there must be proof that the value of the donated property exceeds that of the
disposable free portion plus the donee's share as legitime in the properties of the
donor.4 In the present case, it can hardly be said that, with the evidence then before
the court, it was in any position to rule on the inofficiousness of the donation involved
here, and to order its reduction and reconveyance of the deducted portion to the
respondents.
FOR THE FOREGOING CONSIDERATIONS, the decision of the Court of Appeals,
insofar as Civil Case No. 442 of the court a quo is concerned, is hereby set aside and
the trial court's order of dismissal sustained, without prejudice to the parties' litigating
the issue of inofficiousness in a proper proceeding, giving due notice to all persons
interested in the estate of the late Cipriano Lagua. Without costs.
G.R. No. L-12093

June 29, 1959

ESTANISLAO SERRANO, plaintiff-appellant,

vs.
MELCHOR SOLOMON, defendant-appellee.
Constante Pimentel for appellant.
Faustino B. Tobia, Eufrecino T. Tagayana, Pedro R. Arce and Emmanuel U. Ujano for
appellee.
MONTEMAYOR, J.:
Estanislao Serrano is appealing the decision of the Court of First Instance of Ilocos
Sur, Judge Jose G. Bautista presiding, declaring null and void the supposed

donation propter nuptias on which his complaint was based and dismissing the later
upon motion of the defendant. The motion for dismissal was filed before the hearing
but the trial court deferred action upon it until after submission of evidence by the
parties. Said parties entered into a stipulation of facts after which they declined to
submit any other evidence except Exhibit "A", the supposed deed of donation propter
nuptias, the translation of which, for purposes of reference, is reproduced below:
That, I Melchor Solomon, single, Filipino, of legal age, native of the
municipality of Sinait, province of Ilocos Sur and residing at present in Sinait,
having decided to get married with the consent of my parents, brothers, or
sisters and relatives, have announced and manifested my determination and
desire to Mr. Estanislao Serrano to whose family the flower I intend to win
belongs, namely Miss Alejandria Feliciano single, born in Hawaii but is
actually residing in Cabugao, Ilocos Sur.
This ardent desire favored by good luck and accepted by the noble lady the
one concerned, is to be realized and complied with under agreement or
stipulation which affirms, promotes and vivifies the union. This agreement
donating all my exclusive properties in order that we shall have a basic
capital for our conjugal life and in order that there will be ready maintenance
and support of offsprings has come out voluntarily and expontaneously from
me, I the very one concerned.
These which I am donating my exclusive properties because I have honestly
acquired the same with the sweat of my brows and I donate them gladly, to
wit . . .;
The referred to properties are donated in accordance with the existing laws
of the Philippines and our children out of the wedlock will be the ones to
inherit same inherit same with equal shares. But if God will not bless our
union with any child one half of all my properties including the properties
acquired our conjugal union will be given the (to) my brothers or sisters or
their heirs if I, the husband will die before my wife and if my beloved wife will
die before me, one half of all my properties and those acquired by us will be
given to those who have reared my wife in token of my love to her. . . .
(Emphasis supplied)
Alejandria Feliciano, whose father went to Hawaii to seek his fortune and who until
now resides there, had been left to her father's friend named Estanislao Serrano who
took care of and raised her from the age 12 until she reached womanhood. On June
21, 1948, defendant Melchor Solomon married Alejandria. On the same day of the
marriage but before the marriage ceremony he executed the alleged Deed of
Donation, Exhibit "A" above reproduced. Less than nine months after marriage, or
rather on March 2, 1949, Alejandria died without issue. Several months thereafter
Estanislao Serrano commenced the present action to enforce and implement the
terms of the alleged donation particularly that portion thereof to the effect that if
Alejandria died before her husband Melchor and left no children, then one half of

Melchor's properties and those acquired by him and his wife would be given to those
persons who had raised and taken care of her namely, Estanislao Serrano.

never accepted by the donee either in the same instrument or donation or in a

separate document as required by law.

Acting upon the motion for dismissal the trial court found that the donation could not
be regarded as a donationpropter nuptias for the reason that though it was executed
before the marriage, it was not made in consideration of the marriage and, what is
more important, that the donation was not made to one or both of the (marriage)
contracting parties, but to a third person.

Again, may the donation be regarded a donation mortis causa, and given effect? The
answer has to be in the negative for the reason that this Tribunal has heretofore
consistently held that a donation to take effect after the death of the donor, is
equivalent to a disposition or bequest of property by last will, an it should be executed
in accordance with the requisites and strict provisions governing the execution
wills;1 and Exhibit "A" does not fulfill said requirements. Moreover, in the present
case, the donor is still alive and naturally, even if the donation were otherwise valid,
still, the time and occasion have not arrived for considering its operation and
implementation.

After a careful study of the case, we fully agree with the trial court. Article 1327 of the
Old Civil Code reads:
Art. 1327. Donations by reasons of marriage are those bestowed before its
celebration in consideration of the same, upon one or both of the spouses.
This article was reproduced in the Civil Code under Article 126. Whether we apply
Article 1327 for the reason that the document Exhibit "A" was executed in 1948
before the promulgation of the New Civil Code in 1950 or whether we apply Article
126 of the New Civil Code the result would be the same.
Was the donation made in considerations of the marriage between Melchor and
Alejandria or was it made consideration of the death of either of them in the absence
of any children? True, the Deed of Donation was executed on the occasion when they
married. But, the marriage in itself was not the only consideration or condition under
which terms of the donation would be carried out. The marriage would have to be
childless and one of the spouses would have to die before the other before the
donation would operate. So, strictly, speaking, the donation may not be regarded as
one made in consideration of the marriage.
But assuming for the moment that it was made in consideration of the marriage, still,
we have the fact that the donation was being made not in favor of Alejandria, the wife,
but rather in favor of those who acted as her parents and raised her from girlhood to
womanhood in the absence of her father. That does not place it within the provisions
of Article 1327 and Article 126 of the Old Civil Code and the New Civil Code,
respectively. Manresa, in his commentary on Article 1327 of the Civil Code says the
following:
Donations excluded are those (1) made in favor of the spouses after the
celebration of marriage; (2) executed in favor of the future spouses but not in
consideration of the marriage; and (3) granted to persons other than the
spouses even though they may be founded on the marriage (6 M. 232).
Having come to the conclusion that the Deed of Donation does not fulfill the
requirements of a donation propter nuptias and that it might be considered a
donation inter vivos, can it be considered valid and effective? Hardly, because it was

In view of the foregoing, the appealed decision is hereby affirmed, with costs.
G.R. No. L-20392

November 20, 1923

ANDREA UY COQUE, ET AL., plaintiffs-appellees,

vs.
JUAN NAVAS L. SIOCA, ET AL., defendants-appellants.
Crossfield and O'Brien for appellants.
Ruperto Kapunan for appellees.
STREET, J.:
This action was instituted in the Court of First Instance of the Province of Samar by
the plaintiffs, in the character of collateral heirs of Geronima Uy Coque, deceased,
against Juan Navas L. Sioca, husband of the said Geronima Uy Coque, and his
codefendants, for the purpose of securing a decree declaring fictitious certain
transfers of property made by Juan Navas L. Sioca to his various codefendants and
to have the same set aside as fraud upon the plaintiffs; to compel the said Navas to
effect a division of the ganancial property which had pertained to himself and
Geronima Uy Coque during her life; to declare the plaintiffs owners of the half of said
property which pertained to Geronima; to require the said Navas to deliver such half
to the plaintiffs; to compel him further to pay to the plaintiffs a sum of money as
damages, together with costs of suit; and to obtain such further and general relief as
might be appropriate in the premises.
In due time the defendants answered, admitting the character and heirship of the
plaintiffs as heirs of Geronima Uy Coque, deceased, as well as certain other points
alleged in the complaint. By way of special defense the defendants set forth in their
answer that the transfers made by Juan Navas L. Sioca and which are the subject of
attack in the complaint were made by him to his respective codefendants for a good
consideration and in the lawful exercise of his powers as a manager of the conjugal
partnership, composed of himself and his wife, Geronima Uy Coque, deceased. Other

matters involved in the complaint were for the most part made subject of general
denial; but by way of counterclaim the defendants prayed the court to compel one of
the plaintiffs, namely, Andrea Uy Coque, to return to the defendant Navas certain
jewelry and money pertaining to the community estate, alleged to have been
appropriated by her.
At the hearing the trial judge entered a judgment in favor of the plaintiffs, comprising
the following features, namely, (1) a declaration of the nullity of the transfers in
question; (2) a declaration that certain property specified in the opinion pertained to
the ganancial partnership composed of the defendant Navas and his wife Geronima,
and that the same should be divided equally between said Navas and the heirs of
Geronima, with the exception of a certain portion, to wit, lot No. 1 of paragraph D,
declared to be paraphernal property of Geronima; (3) requiring the defendants to
surrender to the plaintiffs, as heirs of said Geronima Uy Coque, or to her
administrator, the sum of P152,800, which the court found to be one-half the value of
a quantity of hemp which had pertained to the community estate and which
constituted part of the property found to have been fraudulently transferred by Navas
to one of his codefendants, also requiring the defendants to surrender one-half of
certain other property described in the complaint, or its equivalent; (4) and, finally,
requiring the defendants to pay the costs of the action. From this judgment the
defendants brought the cause to this court by means of a bill of exceptions, signed by
the judge of the lower court in response to an order from this court obtained in an
action for the writ of mandamus.
At the outset it should be noted that the attorney for the appellees challenges the
jurisdiction of this court over the appeal on substantially the same grounds and
considerations that were urged in opposition to the application for the writ of
mandamus in the case of Juan Navas L. Sioca et al., vs. Honorable N. Capistrano, as
Judge of the Court of First Instance of Samar, G.R. No. 19903. 1 However, a majority
of the justices participating in the decision of this case are of the opinion now, as in
the mandamus case, that the court has jurisdiction. Upon this point the writer of the
present opinion and Mr. Justice Avancea are not in accord with the court, but in
conformity with the resolution of the majority, we now proceed to deal with the case
upon its merits as appearing upon the record on appeal.
In the year 1883 a Chinese boy, named Lim Sioca, then of the age of about
seventeen years, arrived in the Philippine Islands and found his way to Catbalogan, in
the Province of Samar. Originally without means, he contrived in course of time to get
a start as keeper of a tienda, a business which was conducted by him for a time upon
a petty sale. He says that he had a Chinese wife whom he had left behind in China,
but this was no obstacle to the formation of an irregular matrimonial alliance with
Geronima Uy Coque, a woman apparently of Chines ancestry but born in this country.
In the year 1904 the wife in China died; and soon thereafter Lim Sioca, who had by
this time adopted the Christian name of Juan Navas, in addition to his original
patronymic, was united in Christian marriage with Geronima. No children were born to
the pair, and they lived together harmoniously until the death of Geronima which
occurred on August 21, 1919.

It appears that Geronima Uy Coque, with her brothers and sisters, had inherited a
respectable property, the management of which had fallen to her, as the eldest of the
children. She was thus able to furnish a home for herself and her husband and
apparently a place in which to do business. The testimony for the plaintiffs also tends
to show that the capital used in the business thenceforth conducted by the conjugal
partnership came in great part, if not entirely, from Geronima Uy Coque; but Juan
Navas Lim Sioca, whom we shall hereafter designate by the shorter name of Sioca,
says that he had about P1,500 of his own money at the time he entered into relations
with Geronima. However this may be, it is evident that the business conducted by him
received a notable impulse from the alliance with her, and her resources and
intelligence supplied one of the bases of the success which followed. The evidence
shows that, throughout the joint lives of the spouses, as means were accumulated
and money was available to let out at interest, the management of loan was confided
to her, and apparently she otherwise took an intelligent and helpful part in the conduct
of business.
In the course of years, owing to the intelligence and economical mode of life of the
pair, the invested capital continued to grow, and the business was extended, with the
result that by the time of the death of Geronima Uy Coque a great wholesale business
had been established in Catbalogan. Dependent upon and contributory to this
establishment was a retail tienda in Catbalogan and numerous other stores which
Sioca had acquired or established in various small ports on the Island of Samar
accessible by water to Catbalogan. To keep in touch with these Sioca maintained a
fleet, from the home port of Catbalogan, of more than a half dozen motor boats,
launches and lorchas. By means of this admirable apparatus of commerce, Sioca did
a business of a varied character, but he specialized in the buying and selling of hemp;
and upon one of his lots in Catbalogan he maintained a press for the baling of hemp,
where great quantities of this commodity, purchased in the local market or brought in
by his boats from other ports and places, were baled and prepared for export through
the Manila market. Under the conditions described it is evident that when the
prolonged and phenomenal rise in the price of hemp occurred several years ago,
owing to conditions brought about by the World War, Sioca was in possession of a
business which, if properly managed, could not fail to make him rich.
In the peak year of 1918 the sales of the wholesale establishment alone were
reported to the Collector of Internal Revenue for purposes of taxation at more than
P572,000, without reference to the business done in the different stores contributory
to that establishment; and Sioca admits that at the time he sold out the main business
to Marcelo Navas there was on hand in Manila and Catbalogan, and included in the
sale, sufficient hemp to realize the gross amount of P235,152.25.
In the period of fifteen or twenty years during which the business of Sioca and his wife
was expanding in the manner stated, they came to feel the need of finding some
Chinese youths whom they might bring up according to their own system and whom
they might prepare for the larger duties incident to the conduct of the business. This
desire was felt no doubt the more for the reason that the pair were childless.
Moreover, they were rather close and sparing in their expenditures, and it seemed to

them that Chinese boys brought in from China would be less expensive than native
help. On one occasion Geronima complained that their employees who were natives
of this country were extravagant because they smoked cigarettes so much and were
accustomed to throw away the stubs before they were half smoked up. In conformity
with this idea, a Chinese boy named Tiu Quim Chiu was brought to the Islands in the
year 1907. This boy claims to be the son of one Tiu Sin Set, who had been
associated with Sioca in business. Nevertheless after the boy arrived in the Islands
he went into the establishment of Sioca in Catbalogan and was brought up in Sioca's
household in all respects as if he were Sioca's son.
On March 14, 1910, Tiu Quim Chiu was taken to the parish priest in the pueblo of
Tarangan and was there baptized with the Christian name of Marcelo Navas. The
certificate of baptism recites that the boy was then thirteen years of age and that he
was the son of natives from the City of Amoy. The certificate upon which he was
passed through the Customs by the immigration authorities indicates that he is
somewhat older than appears from the certificate of baptism. The testimony of
witnesses for the plaintiffs is to the effect that the baptism of Marcelo was done at the
instance of Sioca and wife. However this may be, in the family circle Marcelo was
always treated as a child of said spouses; and he called Geronima mother. Moreover,
he ate at their table, and was educated at the expense of the same persons.
Between the years 1913 and 1918, three other boys were brought in at intervals and
became likewise members of the Sioca circle. These youths are Tan Cao, Lim Isiu
and Tan Siu. As these boys got big enough to do anything, they were set to different
appropriate duties by Sioca, when not in school; and they grew up as if a part of
Sioca's establishment. Sioca claims that one of these boys, Lim Isiu, is his own son,
having been born to Sioca's Chinese wife in China about the year 1900. If this is true
it supposes that in the year 1899 Sioca was in China, and he claims to have made a
visit to China during that year. Other testimony tends to show that Sioca was in
Samar during the whole of the year 1899 and his presence at that time in the province
is fixed with considerable certainty by one of the witnesses, supposing the witness to
speak the truth, by the circumstance that Sioca was arrested that year for dealing in
contraband opium, and that he further acted as an informer to the Americans during
that year, giving them valuable information concerning the activities of
the insurrectos in that province. The trial judge, upon considering the evidence, came
to the conclusion that Lim Isiu is not in fact a son of Sioca but a nephew, being in fact
the son of one of Sioca's brothers. The point whether Lim Isiu is the son or the
nephew of Sioca is of no importance; and it is sufficient to record that he was treated
as an actual or adopted son by Sioca very much as the other three of whom
mention has been made.
As Sioca's business began to expand in the early years, he had around him more
than one native of China who assisted in different capacities in the conduct of the
business; and in the year 1909 the internal-revenue license was taken out in such
form as to show that the business of Sioca was a partnership conducted, under the
style of "Tiong Juat," by four persons, to wit, Sioca himself and three others, namely,
Tiu Sin Set, Tan Yengco, (Yana), and Ignacio Tan Ingco; and oral testimony given by

witnesses for the defendants shows that such a partnership had existed from 1907.
However, no scrap of writing has ever existed proving the information of any such
partnership. The trial judge fond as a fact that this partnership was purely fictitious,
and we do not hesitate to say that in our opinion this conclusion is an irresistible
inference from the evidence. It is a matter of common knowledge that persons having
the status of Chinese merchants are freely passed through the customhouse by the
immigration authorities when they wish to go to China and return upon visits to their
native land, and they are allowed to bring into this country the members of their
Chinese families, a privilege not conceded to Chinese laborers. As a consequence
of this Chines residents here have a strong desire to become certified as merchants;
and where a man like Sioca has around him a number of faithful helpers, not
infrequently of kin, the temptation to admit such persons into the fictitious relation of
partners is too strong to be resisted by persons of the clannish character of the
Chinese people. It is believed therefore that in order to permit the three persons
above mentioned to have the status of merchants and to visit China from time to time
Sioca became party to the fictitious declaration of partnership referred to.
An additional incentive undoubtedly was that Sioca wanted to get in more boys from
China, and more than one of the three who came in later were, if we mistake not,
brought in by some one or another of the titular partners in the "Tiong Juat." The
business, it is needless to say, in all its ramifications and details continued under the
guidance of Sioca, without the least external indication that any interest in the
business whatever was vested in any other person beside himself, and so the
situation remained until the climax came in 1919.
That the partnership was a mere figment of imagination and made little or no
impression upon the mind of Sioca, is indicated by the circumstance that when he
was called as a witness and asked when "Tiong Juat" was established, he said that it
was created in 1904, when all other witnesses who had testified about the matter
placed it in 1907; and it was only after careful questioning on the part of his skillful
and discerning attorney that he was brought around to modify his statement and
declare, in conformity with his other witnesses, that this partnership had been created
in 1907.
In 1915 one of the supposed partners died in China, and later still another died; and
in the latter part of 1917 Sioca thought it desirable to take out the internal-revenue
license in the future exclusively in his own name. However, the authorities of the
Bureau of Internal Revenue in that province required some sort of a showing to the
effect that the other three in whose names the license had appeared from 1909 to
that date no longer had any interest in the business. In order to meet this requirement
four persons got together in Catbalogan in January of the year 1918 in order to put an
end to the supposed partnership. These four persons were Sioca himself and Tan
Yengco (Yana), as original members, and two other persons, Tan Tiongco, assuming
to act as representative of his deceased brother, Ignacio Tan Ingco, and Tiu Quim
Chiu (Marcelo Navas) assuming to act in representation of his father Tiu Sin Set.
Upon this occasion a document, dated January 24, 1918, was drawn up and
acknowledged before a notary public, purporting to put an end to the: "Tiong Juat," or

partnership to which reference has been made. The material recitals and statements
contained in this document are these:
1st. That by a verbal agreement between us made on the first of January of
the year 1907, we have formed a general mercantile partnership under the
name and style of "Tiong Juat" for the purchase and sale of merchandise
from Europe and of this country, doing business in the first avenue in the
populated part of Catbalogan, Samar, P.I.
2nd. That the partners Ignacio Tan Yengco and Tiu Sin Set having died in
their respective towns in China, we have by mutual agreement appointed Mr.
Juan Navas Lim Sioca to make an inventory and a liquidation of the
partnership.
3rd. That in view of the fact that the inventory and liquidation have already
been finished, said partnership known as "Tiong Juat" is hereby declared
dissolved, and the aforementioned agreement void and of no effect, each
receiving the share corresponding to him, as found in the liquidation.
4th. And in order that each of us may freely engage in his respective trade
and business without any difficulty, we have executed these presents for
such purposes as may be proper.
Among recitals contained in the document from which we have quoted two are
especially noteworthy, namely, first, the statement that the partnership in question
was created by verbal agreement on January 1, 1907; and, secondly, the
acknowledgment that each member thereof, or his representative, was receiving,
contemporaneously with the execution of the document, the part in the assets of the
partnership which pertained to him according to the result of a liquidation already
effected by Sioca. Armed with this paper, Sioca caused the internal-revenue license
to be changed and thereafter the business appeared in the office of the Bureau of
Internal Revenue as being conducted in the name of Sioca alone.
The next incident important to be noted consists in the execution by Geronima Uy
Coque of the document Exhibit 15, dated March 11, 1918, and acknowledged on the
same date before a notary public. This document is a gratuitous deed of transfer by
which Geronima Uy Coque transfers, or purports to transfer, to her husband her entire
half interest in the community property pertaining to herself and husband. Said
document is in terms as follows:
I, Geronima Uy Coque, wife of the Christian Chinaman Juan Navas, Sioca,
both residents of the municipality of Catbalogan, Province of Samar, P.I., and
his legitimate heir of all the property acquired or to be acquired during his
marriage, by these presents make known, that I convey and transfer onehalf of the interest I may have in the aforesaid property to my aforesaid
husband Juan Navas Sioca, who may dispose as absolute owner of all said

property, whether personal or real, and of the business in which he is

engaged, and he may exercise his right to transfer the same to other
persons and make its distribution among his children as he pleases. Be it
also known that I stand responsible to my said husband Juan Navas Sioca,
his heirs and successors in interest, for all the aforesaid property which
corresponds to me by inheritance, the title to which I bind myself to defend
now and forever against all lawful claims that may be presented.
Considered with reference to its juridical effects, this document is of course a patent
nullity, being in direct contravention of two explicit provisions of the Civil Code,
namely, article 1334, which declares that all donations between spouses made during
the marriage shall be void; and article 1458, which expressly prohibits the husband
and wife from selling their property to each other except under certain conditions not
material to be here noted. Worthless, therefore, as this document is for the purposes
for which it was intended, it is nevertheless important as affording indubitable proof of
the motives that actuated the parties; for we find it there stated that the transfer was
made in order that the transferee, Juan Navas Sioca, might have absolute power of
disposal, not only of the real estate but of the business in which he was engaged,
"and that he might exercise his right to transfer the same to other persons and make
its distribution among his children as he pleases." (Emphasis ours.)
The word children as used in this document can refer to no other persons than the
four Chinese boys from whom Sioca and his wife had informally adopted; and the
design evidently was to enable Sioca the more freely to dispose of the property for
the purpose, among others, of the division of it among those boys. Subsequent
developments were in complete harmony with this design.
About a year after the document last above mentioned was executed, the health of
Geronima Uy Coque began rapidly to fail, and she died on August 21, 1919, after
having been helpless for several weeks or months. In evident anticipation of this
event, and as we believe with the purpose of getting practically all of his property
beyond the reach of the collateral heirs of his wife, Sioca executed a series of
documents, by which he stripped himself of nearly everything he possessed. The
transferees in these several documents were the four Chinese boys who had been
brought up, or were being brought up, by Sioca in his household and in his business.
In addition to these, one other Chinese, one Tan Po, is named. One of these,
documents (Exhibit D) appears to have been executed on June 27, 1919, and it was
acknowledged on June 30 of the same year, before a notary public. The other
conveyances here referred to (Exhibits A, B, C, E, and F) were executed upon various
dates between July 2, 1919, and July 11 of the same year. Taking them up in order,
we find that by the conveyance Exhibit A Sioca transferred to Tan Siu for the stated
consideration of P4,000 two lots in Catbalogan, with the residential house standing on
one and a warehouse located on the other. By the conveyance Exhibit B Sioca
transferred to Tan Cao for the stated consideration of P1,000 a lot in the municipality
of Tarangnan. By the conveyance Exhibit C the same Sioca, for the recited
consideration of P2,500, transferred to the same Tan Cao all the interest which Sioca
possessed in a tienda belonging to Sioca in the municipality of Tarangnan. By the

conveyance Exhibit D Sioca transferred to Lim Isiu, for the recited consideration of
P10,000, a parcel of land with the buildings and improvements thereon in the town of
Catbalogan. By the conveyance Exhibit E, the same Sioca, for a recited consideration
of P18,000, transferred to Marcelo Navas (Tiu Quim Chiu), all of Sioca's right, title
and interest in the business located in Catbalogan. In this sale is included all of the
furniture and all credits pertaining to Sioca and relating to the business which he had
previously conducted in Catbalogan, with the exception of the boats. By the
conveyance Exhibit F, the same Sioca, for a recited consideration of P12,000,
transferred to the Chino Tan Po, resident of the municipality of Wright, in the Province
of Samar, the seven boats which were being used by Sioca in the conduct of his
business.
By the documents above mentioned Sioca disposed, on paper at least, of nearly
everything of value that he and his wife had possessed; and there was included in
one of these transfers certain paraphernal property of the wife. To make it perfectly
clear that he had no further interest in the properties thus conveyed, he caused to be
drawn up an affidavit (Exhibit G), in which he enumerated the few remaining pieces of
property, of comparatively small value, which he still owned. This document was
acknowledged before a notary public on August 18, 1918, or three days before
Geronima Uy Coque died.
Notwithstanding the changes thus made in the nominal ownership of the various
properties conveyed by Exhibits A to F, inclusive, Sioca remained in possession of all
of said properties and continued to do business as before. Publicity was not given in
any way to these changes of ownership, and the very existence of said transfers was
unknown to the heirs of Geronima Uy Coque for several months.
In the second paragraph of article 1413 of the Civil Code it is declared that no
alienation in fraud of the wife which the husband may make of property belonging to
the conjugal partnership shall prejudice her or her heirs; and in conformity with that
precept this action was primarily instituted to set aside the conveyances above
mentioned as fraudulent. That the action is in this respect well founded and that said
conveyances were made with a view to putting these properties beyond the reach of
Geronima Uy Coque and her heirs is in our opinion clearly apparent from the proof
and capable of most complete demonstration. In this connection we shall quote a
lengthy passage from the appealed decision which supplies an answerable argument
against the good faith and honesty of the transactions in question. In the brief for the
appellants in this court some of the details stated in this excerpt have been
challenged, but a careful perusal of the evidence will show that the more important
facts herein stated are proved by a clear preponderance of the evidence, and even
the minor details are supported by testimony at least as credible as the denials and
assertions contained in the testimony for the appellants.
Says the trial judge in the appealed decision:
The defendant Juan Navas Sioca sold the properties in question for the price
of forty-eight thousand two hundred and seventy pesos (P48,270). On the

date of the sale, he had two thousand nine hundred ninety-nine (2,999)
bales of hemp stored in Manila, and six hundred thirty six (636) bales and
one thousand piculs of loose hemp in Catbalogan, making a total of eight
thousand two hundred eighty-five piculs, which, at the rate of twenty-four
pesos and fifty centavos (P24.50) per picul, are worth two hundred two
thousand nine hundred eighty-two pesos and fifty centavos (P202,982.50).
The eight thousand two hundred eighty-five (8,285) piculs of hemp were
included in the sale for the aforesaid price of P48,270.
Juan Navas Sioca, in explaining why he sold all his business, together with
all the properties and goods pertaining thereto, says that he owed the
purchaser, Tan Po, seventeen thousand pesos (P17,000); that he owed the
Chinaman Tiu Sin Set, father of the purchaser, Tiu Quim Chiu, fifteen
thousand ninety-nine pesos and ninety-three centavos (P15,099.93); that he
owed the same purchaser, Tiu Quim Chiu, the sum of eight hundred pesos
(P800.); that he owed the purchaser, Lim Isiu, a youth nineteen years old,
the sum of one thousand five hundred pesos (P1,500) for his salaries; that
he owed the purchaser, Tan Siu, a youth eighteen years of age, the sum of
four thousand pesos (P4,000) for his salaries.
The purchasers are members of the household of the vendor, and
dependents upon him for support.
Said Tan Po, a resident of Wright, is the purchaser of the seven vessels
mentioned in paragraph "A" for the price of twelve thousand pesos
(P12,000). The deed of sale executed on July 2, 1919, is Exhibit F of the
plaintiff and Exhibit 3 of the defense. This purchaser Tan Po had a small
retail store of cigars, pots, etc., in the municipality of Wright. His business
was of such a nature and in such a condition as not to require the acquisition
of any vessel. This Tan Po bought the seven vessels for a large business,
such as that of Juan Navas, and the vessels being of no use for the
purchaser, were left at the vendor's place.
According to the testimony of the vendor Juan Navas and the purchaser, Tan
Po, the former owed the latter the sum of seventeen thousand pesos
(P17,000), and the seven vessels were sold for twelve thousand pesos
(P12,000), as payment on account of the seventeen thousand pesos
(P17,000). But no document or competent proof was introduced to establish
this debt.
There is, besides, the circumstance that, after the sale of the vessels, the
vendor Juan Navas Sioca has been using them as formerly.
In the month of June, 1920, after the execution of said deed of sale, this
purchaser Tan Po made a voyage from Catbalogan to Wright on board the

launch Biri one of the vessels sold, and paid as freight for said voyage the
sum of twenty pesos (P20) to the engineer? Martin Banasta who made that
voyage by order of Juan Navas Sioca, to whom the engineer turned over,
later, the twenty pesos (P20).
In the months of September and October of the year 1919, and June of
1920, the vendor Juan Navas Sioca carried timbers from Tacloban to the
Catbalogan Trade School on board the launches sold, under a contract with
the principal teacher of the Trade School, named Vicente Macasiran, who
paid Juan Navas Sioca, through the provincial treasurer, the sum of four
hundred twenty pesos (P420) for the transportation of said timbers.
The Chinaman Tan Siu is the purchaser of the properties described in
paragraph B for four thousand pesos (P4,000), Exhibit A of the plaintiffs and
4 of the defense, which is the deed of sale executed on July 11, 1919. This
purchaser, Tan Siu, is eighteen years old; he came to the Philippines 1915 at
the age of thirteen years.
According to the evidence of the plaintiffs, Tan Siu was bought for five
hundred pesos (P500) by Juan Navas and his wife, and taken to the
Philippines by the Chinaman Yana Tan Yengco, whose child he appears to
be in the certificate issued to him when he landed in this country. And
according to the evidence of the defense, Tan Siu is the son of said Tan
Yengco. But now the undisputed fact is that, since his arrival, Tan Siu has
resided always in the house of Juan Navas Sioca and never in that of Tan
Yengco, from whom he did not receive a parental treatment.
According to Juan Navas Sioca, he sold the three properties in question to
Tan Siu, who on the date of the sale was seventeen years of age, because
he owed him the sum of four thousand pesos (P4,000) as salaries for his
services. So that this young man, who did not yet know how to work when
he arrived, being then but thirteen years old, earned the sum of four
thousand pesos (P4,000) from 1915 to the date of the sale, that is, during
three years approximately. Just what specific salary per month Juan paid to
this young man, it does not appear. Nor was any mention made in the
evidence of the amount or amounts this young employee had taken during
those three years on account of his salaries.
This debt of four thousand pesos (P4,000) was not proven by any
documentary evidence. About this debt there is nothing but the mere
testimony of the seller Juan Navas Sioca.
The Chinaman Tan Cao is the purchaser of the properties mentioned in
paragraph C for three thousand five hundred pesos (P3,500) Exhibits B and
C of the plaintiffs, which are the deeds of sale executed on July 8, 1919. This
purchaser, Tan Cao, is in China, and was there prior to the commencement

of this action. According to the evidence of the plaintiffs, he was also bought
by Juan Navas Sioca and his wife. His age does not appear. According to
the deeds of sale in his favor, Exhibits B and C, he is of age; but the attorney
and notary who prepared Exhibits B and C, is the same author of the deeds
of sale in favor of Tan Siu and Lim Isiu, Exhibits A and D, wherein he made it
appear that they were of age when they were, in fact, only seventeen ang
eighteen years old.
It is a fact, about which there is no question, that this purchaser Tan Cao
never resided in any other place than the store and house of Juan Navas
Sioca.
In the document Exhibit B, the vendor Juan Navas Sioca admits having
received, at the execution thereof, one thousand pesos (P1,000), which was
the price of the lot mentioned in Exhibit B, and in Exhibit C, that is the deed
of sale of the store, the vendor, Juan Navas Sioca, states that he had
previously received two thousand five hundred pesos (P2,500), which was
the purchase price of the business or store.
Lim Isiu is the purchaser of the properties mentioned in paragraph D for the
price of ten thousand pesos (P10,000), the deed of sale which, Exhibit D of
the plaintiffs and Exhibit 6 of the defense, was executed on June 27, 1919.
This purchaser was nineteen years old at the time of the execution of said
document. He came from China to Catbalogan in 1913 when he was thirteen
years of age.
According to the evidence of the defense, that is, according to the testimony
of Juan Navas Sioca and Lim Isiu himself, the latter is a son of Juan Navas
Sioca. But the court finds that the preponderance of evidence is to the effect
that Lim Isiu is not Juan Navas Sioca's child, but his nephew. Lim Isiu was
born of a Chinawoman in China in 1900, and the supposed father was in
Catbalogan, without having left the Philippines in the years 1898 to 1901.
The very treatment which Lim Isiu received from Juan Navas Sioca in these
transactions is a corroboration of the fact that Lim Isiu is not a son of Juan
Navas Sioca.
According to the document Exhibit D, the payment was made in two
installments; five thousand pesos (P5,000) prior to the execution of the
document and the balance of five thousand pesos (P5,000) at the signing
thereof. But according to the purchaser, the payment was made as follows:
For the first payment the purchaser borrowed two thousand pesos (P2,000)
from Nicolas Tan, and one thousand five hundred pesos (P1,500) from a
Chinaman named Simo. Both amounts, which, together with the one
thousand five hundred pesos (P1,500), due from the vendor to the purchaser
for the latter's salaries, as found in the liquidation made at the execution of
the deed, constituted full payment of the five thousand pesos (P5,000), were
furnished or lent by the father-in-law of the purchaser named Tan Po.

These loans, apparently unconditional and without any security, are not
shown by any document.

while in the house and store of Juan Navas Sioca, his status was that of a
real child, performing duties of trust and confidence.

This purchaser began to live with the vendor in the year 1913, upon his
arrival from China at the age of thirteen years. According to Navas Sioca,
this Lim Isiu began to earn, as employee, four hundred pesos (P400) in the
first year, and five hundred pesos (P500) thereafter. This Lim Isiu went to
China in 1917, where he married, and returned to Catbalogan a few days
prior to this transaction. So that Lim Isiu could not have served as an
employee for more than three years computed from 1913, when he was
thirteen years old, until the date of the sale. Aside from the fact that the
amount of the salary given is not in proportion to the small service which this
youth could have rendered, if the expenses for the round trips, the marriage,
and other personal expenses are taken into consideration, which Lim Isiu
had to pay with money from his master, Juan Navas, on account of his
salaries, the amount of one thousand five hundred pesos (P1,500), found as
balance in the liquidation made of such salaries upon his return from China,
cannot be justified.

An examination of all of the transactions involved in this case clearly shows

that this Tiu Quim Chiu has won Juan Navas' great distinction and
confidence to such a degree that their interests can be said to have become
identified.

This purchaser has been, for the last two years, in charge of the store in
Wright referred to in paragraph G. He bought for ten thousand pesos
(P10,000), without any money of his own, the camarin (shed) and the hemp
press, which had nothing to do with his business, and required a large
capital to operate, which he did not have. This purchaser did not take
possession of said properties, which continued in the hands of the vendor
Juan Navas Sioca.
The defendant Tiu Quim Chiu, known also as Marcelo paragraph "E" under
numbers 1, 2, and 3, for nineteen thousand five hundred ninety pesos
(P19,590), the documents of which were executed on June 7, 1919, Exhibit
E of the plaintiffs and 11 of the defense, as to property No. 1, and on
February 16, 1920, Exhibit 14 of the defense as, to No. 2. No document was
presented concerning the purchase of property No. 3. This purchaser is a
young man twenty-three years of age. According to the evidence of the
plaintiffs, he was, like Tan Siu and Tan Cao, bought by Juan Navas Sioca.
And according to the evidence of the defense, Tiu Quim Chiu is a son of a
Chinaman Tiu Sin Set. But it is a fact, proven and undisputed, that this Tiu
Quim Chiu arrived at Catbalogan from China in 1907; that the spouses Juan
Navas Sioca and Geronima Uy Coque had him baptized on March 14, 1910,
in the parish church of Tarangan, Samar, giving him the name of Marcelo
Navas Sioca, which they caused to appear in the baptismal certificate; that
since his arrival from China he has been living in the house of the spouses
as adopted child, enjoying a treatment and consideration as such until the
date of the transaction in question; that during the said period of time he was
studying in the public schools of the Government, wherein he reached the
second year of High School in 1918, when he stopped due to sickness; that

According to the explanation given by the purchaser, the payment was made
as follows: Fifteen thousand ninety-nine pesos and ninety-three centavos
(P15,099.93) was the debt due from the vendor to Tiu Sin Set, father of the
purchaser, and eight hundred pesos (P800) was the value of the house in
Tarangan, built by the purchaser on the lot of the vendor. Both amounts were
applied on the payment of the nineteen thousand five hundred ninety pesos
(P19,590). Nothing was said about the three thousand six hundred ninety
pesos and seven centavos (P3,690.07) lacking to complete the payment of
nineteen thousand five hundred ninety pesos (P19,590).
No complete evidence was presented of the aforesaid debt of fifteen
thousand ninety-nine pesos and ninety-three centavos (15,099.93).
The sale of the business, the gross receipts of which amounted to five
hundred seventy-two thousand five hundred fifteen pesos and twenty-six
centavos (P572,515.26) in 1918, and to three hundred nineteen thousand
five hundred seventy-eight pesos and eighteen centavos (P319,578.18) in
1919 (property No. 1 of paragraph E), included the furniture, all the debts
and credits in favor of, and against, said business, with all the hemp and rice
in stock in the warehouse and stores, as well as the books of the business,
specially the eight thousand two hundred eighty-five (8,285) piculs of hemp
in the warehouse appraised at two hundred two thousand nine hundred
eighty-two pesos and fifty centavos (P202,982.50), a part of the goods in
stock, that were sold for the price of eighteen thousand pesos (P18,000).
The purchaser Tiu Quim Chiu immediately after the execution of the deed of
sale, Exhibits E and 11, went to China to get married, or to take his wife to
Catbalogan in October, 1919, free from all cares about the large business
and properties which he had just bought, as if he had acquired nothing,
leaving the properties purchased in the hands of the vendor himself. If Tiu
Quim Chiu were the real owner of the properties in question, he could not
have left in the manner he did.
A very important circumstance is to be noted. The purchase of the business
by Tiu Quim Chiu did not include the basis of said business, that is, the
hemp press and the camarin (shed) in which it was installed, which
properties appear to have been purchased by Lim Isiu (Exhibits D and 6).
The press and the camarin were bought by Lim Isiu, who did not need them,
while Tiu Quim Chiu, who needed them for his business, did not purchase
them. But in spite of this division of the ownership of these properties which

should not be separated, the important fact is that the business and the
hemp press continued to operate, united to each other, as if they belonged
to one single owner, in the same way they did before the transaction.
We entirely agree with the trial judge that these conveyances are fictitious, in the
sense that they were made upon fictitious considerations; and they were without a
doubt executed for the purpose of defrauding Geronima Uy Coque and defeating the
rights of her heirs. Most preposterous of all, perhaps, is to suppose that the sale of
the fleet of boats to Tan Po was made in good faith something for which he had no
possible use and over which he has at no time exercised the slightest dominion. And
it is not pretended that he paid any cash consideration whatever, the supposed
consideration consisting of a preexisting debt concerning which there is not the
slightest documentary evidence. The three boys, Tan Siu, Tan Cao, and Lim Isiu,
could not possibly have commanded the resources necessary to make the purchases
attributed to them, and as to two, consideration is claimed to be, in whole or in part,
the value of their unpaid salaries for past services. Of course the conveyances to
these three, as well as that made in favor of Marcelo Navas, were merely made in
furtherance of the design, already revealed in Exhibit 5, of making a division among
Sioca's "sons." Neither of these three boys has at any time exercised any of the
external indicia of ownership over the property which they claim to have purchased,
their pretense being that they leased the properties back forthwith after purchasing
them to Sioca, or let them to his successor, Marcelo Navas.
This last named person acquired the wholesale business in Catbalogan with all the
property and outstanding credits pertaining thereto, but no steps were taken by him at
the time of the transfer to assert ownership or obtain possession. It is true that after
he had made two trips to China, coming back in the autumn, he began to take a more
intimate part in the conduct of business, and he claims that his vendor Sioca had now
become his agent in the management of things. Also at the end of the year the
internal revenue license for the conduct of the business was taken out in the name of
Marcelo Navas, and an important business house in Manila with whom Sioca had
business relations was informed of the change.
It is not claimed that Marcelo gave present value for what he received; the
consideration is said to consist in part of a debt owing to Marcelo's father, Tiu Sin Set,
from the liquidation of the famous partnership "Tiong Juat," of which something has
already been said. One would suppose that after that fictitious entity had been wiped
completely off the slate by the document executed in January, 1917, nothing more
would have been heard of it, especially as it was stated in that document that each of
the partners was receiving his share in the proceeds per the liquidation effected by
Sioca. But the memory of that fictitious entity has been revived for the purpose of
serving as a justification of these transfers by Sioca; and it is asserted that Sioca did
not pay the amounts due his former partners upon liquidation as stated in the
document Exhibit 15, which indebtedness remained outstanding until they began to
press him in 1919. It was for this reason, so Sioca asserts, that it became necessary
for him to sell out everything so hurriedly in June and July, 1919, in order to satisfy
those claims, which being accomplished, Sioca was left with little or nothing and

dependent upon Marcelo Navas even for employment. It is impossible, upon a careful
examination of the evidence before us, to give credence to such a pretension.
We do not question the power of the defendant Sioca to make a valid conveyance,
disposing of any property belonging to the conjugal partnership, either during the line
of his wife or afterwards. That power Sioca undoubtedly had, as is fully established in
numerous decisions of this court, beginning with the case of Nable Jose vs. Nable
Jose (41 Phil., 713). But the proper exercise of the husband's power as administrator
of the community estate supposes that he acts in good faith, and where a transfer is
made upon a fictitious consideration and for the purpose of defrauding the wife and
her heirs, the transaction is devoid of validity, not because of any lack power on the
part of the husband, but because of the inherent nature of the transaction itself.
Much of the oral proof submitted in this case has reference to the point whether
"Tiong Juat" was a real association in the nature of the partnership between four
persons mentioned as participants therein, or whether it was a purely artificial
arrangement conceived for the purpose of enabling its alleged members freely to
make trips back and forth to China in the character of merchants and incidentally to
enable them to import young Chinamen as members of their respective families. This
proof relative to "Tiong Juat" is of course pertinent to the question whether the sales
which are under attack in this case were made in good faith and as a result of a
necessity imposed upon Sioca by the liquidation of said association; but it does not
otherwise affect the case, for it is to be remembered here that the supposed
partnership had been dissolved before the conveyances in question were made, and
all of its property had, by such dissolution, become vested exclusively in Sioca and in
his hands was community property.
The foregoing exposition of the facts of the case, as we see them, renders
unnecessary any elaborate discussion of the numerous assignments of error made in
this court by the appellant, and a few words will suffice to dispose of the greater part
of said errors. The first assignment is directed to an error of the court in admitting
certain testimony objected to by the attorney for the appellants in the lower court. The
objection is based upon the relevancy of the testimony referred to; and in the analysis
of the case, we have ignored said testimony as immaterial. Its admission therefore
does not constitute reversible error, if error in any sense.
The second assignment is directed to the error of the court in refusing, over the offer
made by the appellants' attorney, to permit the introduction of certain proof
concerning the constitution of "Tiong Juat," the names of the associates who created
it, and the amount due from Sioca to the alleged partners at the time of its dissolution.
We believe that the testimony thus offered was legally relevant as bearing upon the
good faith of the subsequent sales which were made by Sioca, ad the trial judge was
technically in error in rejecting it. Nevertheless, we note that his Honor did not
consistently maintain his position with respect to the exclusion of the items of proof
offered; and at a later stage of the trial the same facts which the court had excluded,
as indicated, in this assignment, were developed from the same and other witnesses
with abundant iteration. It results that whatever error may have been committed in

connection with the exclusion of the testimony to which this assignment as directed is
not reversible error.
Assignments Nos. 3 to 7, inclusive, are directed to supposed errors of the court in
sustaining objections to certain testimony or in striking out evidence upon the points
mentioned in said assignments. The testimony thus ruled out is before us in the
record, and has been considered by this court for what it is believed to be worth. With
respect to the eight assignment practically the same observation may be made as
noted above concerning the second. Assignments Nos. 9 to 13, inclusive, are directed
to supposed erroneous findings of the court upon points of fact which in our opinion
are either immaterial or sustained by a preponderance of the evidence. The same is
true of the errors assigned under Nos. 16, 17, 19, 20, 21, 22, 23, and 24.
Assignments Nos. 15, 18 and 25 are directed to questions of law, or mixed questions
of law and fact, which are disposed of adversely to the appellants' contention as a
consequence of the conclusions stated in this opinion upon the main issues.
Assignments Nos. 14 and 26 in our opinion are meritorious, and the errors therein
suggested will be pointed out, but for purposes of convenience our plan of treatment
will follow the order of the dispositive part of the appealed decision.
The trial judge first pronounces the several conveyances made by Sioca to Tan Po,
Tan Siu, Tan Cao, Lim Isiu, and Tiu Quim Chiu to be of no effect. The declaration of
the nullity of these instruments is correct; but it will be noted that when this
declaration is taken in relation with subsection (3) of the last paragraph of the
decision, the practical effect is that the conveyances referred to are nullified only to
the extent of the one-half interest of Geronima Uy Coque in those properties.
The trial judge next declares that all of the properties described in paragraphs A to G,
inclusive, of the decision, with the exception of lot No. 1 of paragraph D, is community
property of Sioca and wife. The property thus declared to be community property
includes everything that had been transferred by Sioca to his codefendants, except lot
No. 1 of paragraph D, as well as several parcels of little value which were retained by
Sioca unsold; and we are of opinion that no reversible error prejudicial to the
defendants was committed in this pronouncement. With the sole exception of lot 1 of
paragraph D, everything here declared to be community property, so far as appears,
was acquired by Sioca after he entered into marital relations with Geronima Uy
Coque and the whole must be presumed to be community property (art. 1407, Civ.
Code). It is true that Sioca says that he had a capital of P1,500 when he married
Geronima, but this point cannot be considered as established; and no question is
made upon it in the appellants' brief.
Concerning lot 1 of paragraph D, it appears that this property originally belonged in
common to Geronima Uy Coque and her brothers and sisters, having descended to
them from their parents. There were six of these heirs, four of whom, Juan,
Geronima, Andrea and Segundo Uy Coque, were each entitled to one-fourth of onehalf and one-sixth of the other half, and two of whom, Valentina Tingzan and Teodoro
Tingzan, were entitled to one-sixth of one-half. Now, Andrea Uy Coque, Valentina

Tingzan, and Teodoro Tingzan assigned their portions to Geronima Uy Coque, which
gave her seven-twelfths, and the other five-twelfths were purchased by Sioca. It
results that, in addition to the seven-twelfths which pertained to Geronima as her
separate (paraphernal) property, she was entitled to one-half of the remainder as her
ganancial interest. The exact extent of her participation in this lot was therefore
nineteen twenty-fourths; and in declaring her to be owner of only three-fourths (or
eighteen twenty-fourths) the trial judge erred indeed, but the error was prejudicial to
the heirs of Geronima Uy Coque (who have not appealed) rather than to the
appellants. The argument submitted in this court against the correctness of the finding
that Geronima was the owner of the portion of this lot just stated is rested manly, if not
entirely, upon the supposed effects of the document Exhibit 5, by which Geronima
attempted to convey all her interest in the community property of Geronima was not
included in that transfer, it is evident that said document would, as already
demonstrated, be legally ineffective, as being in contravention of the express
provisions of law.
The defendant Sioca disclaims any interest whatever in the item of property noted in
subdivision 9 of paragraph F of the appealed decision and which was declared by the
trial judge to be community property, consisting of a tienda located in the barrio of
Silanga, Samar. Sioca says that this tienda belongs to Tan Suico, Suya, in partnership
with Tima. From acts of ownership exercised by Sioca with respect to this tienda it
might be inferred that it is his property and pertains to the community estate.
Supposing, however, that the Chinos mentioned by Sioca are its real owners, the
judgment in this case will not be binding upon them since they are not parties. The
same observation holds good with respect to item No. 7, a tienda in the municipality
of Villareal, of which Sioca says that he owns only one-half, the other half belonging
to one Siwa. None of the parties mentioned by Sioca as owners or coowners with him
in connection with these properties have intervened to assert their claims in this case;
and the situation must be left with the observation that as they are not parties they will
not be absolutely bound by the decree.
After having made his pronouncement as to the nullity of the conveyances made by
Sioca to his codefendants and as to the ganancial character of the properties above
referred to, the trial judge proceeds to give effect to the legal consequences of his
findings; and to this end he orders Sioca and his codefendants to pay to the plaintiffs,
or to administrator of Geronima Uy Coque as their representative, the sum of
P152,800, being one-half of the proceeds of the hemp included in the sale made by
Sioca to Marcelo Navas. This order is in our opinion incorrect not only as regards the
persons upon whom this obligation is placed but as regards the amount due.
The legal effect of requiring Sioca and his codefendants to pay the sum of money
mentioned is to make all of the defendants jointly liable for said sum, whereas the
liability for this money cannot properly be extended beyond the two persons (Sioca
and Marcelo Navas) who made away with the proceeds of the hemp. There is no
proof that Tan Po, Tan Cao, Lim Isiu, and Tan Siu had anything to do with that act;
and there is nothing to indicate that there was any general conspiracy such as should
make all of the defendants equally liable for the proceeds of the hemp.

The court estimated the total value of the hemp which was on hand at the time of the
sale of the business to Marcelo Navas at P305,600, one-half of which, or P152,800,
represented the share of Geronima Uy Coque. We are of the opinion that the data
contained in the proof is not adequate to sustain this estimate in its entirety; and we
think it safer to fix the value of this hemp at the precise amounts which Sioca admits
having received for it in money, or P253,152.25. That the amount of money so
received by him could not have been less is proved not only by his admission, but by
the statistics irrefutably showing that hemp in a quantity sufficient to realize that sum,
or more, was deposited in Manila or Catbalogan at the time of the sale.
While it is undeniable that Sioca converted into money hemp of the value stated, he
says that there were debts outstanding in Manila against him to the extent of P235,
152.25 and that as he had to pay off these debts, there was a net balance of only
P18,000 for Marcelo Navas. And this is the breath of air by which this despoiler of his
wife's estate would dissipate responsibility for this large sum of money. Not one
scratch of paper, such as a receipt or old statement of account from any creditor
whatever, from which the existence of a debt of any sort could be even remotely
inferred, has been introduced in evidence. Yet it is certain that if there had been any
such debts paid off by him, he could readily have produced documents in support of
such fact. We believe him to be a fraudulent spoliator of a large fortune against whom
everything is to be presumed, in accordance with the maxim omnia prsumuntur
contra spoliatorem.
A single circumstance suffices to show the purely false and artificial character of
Sioca's pretense to have paid debts to the extent claimed. It will be remembered that
in the document of July 7, 1919, executed by Sioca in favor of Marcelo Navas, the
consideration was stated to be P18,000, paid to the entire satisfaction of the vendor.
Now, the hemp was at all sold for weeks, or even months, after that document was
executed, yet it will be noted that when the sale was finally effected the hemp brought
precisely such an amount that when debts to the amount of P235,152.25 were paid
off, there remained a balance of exactly P18,000 to be returned over to the new
owner. In other words it is apparent that the amount of the supposed debts was
arbitrarily fixed to tally with the consideration stated in the prior conveyance of July 7,
1919, and this was done, oddly enough, in total disregard of other elements of value
in the property sold.

parcels. A more correct way of wording the judgment with respect to these lands
would have been to declare the collateral heirs of Geronima Uy Coque to be the
owners in her right of the portions of property indicated and to require the defendants
to respect the rights of said heirs as coowners; and in so far as the appealed decision
disposes, or seems to dispose, otherwise, it must be modified.
Furthermore, though the point has not been brought into discussion in the
assignments of error, it is necessary to point out that Sioca's usufructuary interest in
the property which he transferred to the several defendants undoubtedly passed to
each transferee respectively. (Art. 480, Civ. Code.) The result is that each transferee
named in the several deeds became the lawful owner of the properties conveyed in
those deeds to the extent of the one-half interest which lawfully pertained to Sioca,
plus his usufructuary interest in one-half of the remainder; and said deeds can be
declared fraudulent against the plaintiffs only in so far as relates to what is left.
At this point it becomes desirable to say a few words concerning the character of the
action. The complaint states a complex cause of action, namely, first, to set aside
various conveyances as having been executed by the defendant Sioca in fraud of his
wife and her heirs; and, secondly, to compel Sioca to account for and surrender the
deceased wife's share in the community property or, as we take it, to enforce a
liquidation of the community estate. That an action in each of these aspects is
maintainable goes without saying, and there was no impropriety in joining the two in a
single proceeding, as was desirable and even necessary in this case.

Estimating the value of the hemp, or its proceeds, at P235,152.25, the half-interest of
Sioca therein will be found to be P126,576.13, leaving an equal amount for the estate
of Geronima Uy Coque. This, and not the amount found by the trial judge, constitutes
the portion pertaining to her collateral heirs in the proceeds of the hemp, subject,
however, to the usufructuary interest of Sioca, concerning which more will be said
further on in this opinion.

The defendants interposed an answer to the merits in the court below, and no
objection was there made at any time by demurrer or otherwise to the form of the
proceeding. Furthermore, no error has been assigned in this court directed to any
defect either of form or substance in the proceeding. Nevertheless it is suggested in
the lengthy discussion under assignment No. 26 that if the plaintiffs desired to call
Sioca to account for the property pertaining to his wife, they should have proceeded
against him as her administrator; and it is stated in the brief that Sioca was
administrator of his wife at the time this action was instituted. Our attention has not
been called to any proof in the record showing the fact to be as stated, but we may
doubtless take judicial notice of it, as the records of this court show, in a former
proceeding that came to us upon appeal, that the same Sioca had been removed as
administrator of his wife and another person appointed in his stead. If the defendants
had desired to invoke the supposed rule of law discapacitating the plaintiffs from
maintaining this action so long as Sioca occupied the position of administrator of his
wife, the question should have been presented in their answer. As no objection was
made in the Court of First Instance to the maintenance of the action in its aspect of a
proceeding to compel the defendants to account for the deceased wife's share in the
community property, the objection will not now be entertained in this court.

Subsections 2 and 3 of the dispositive parts of the appealed decision are concerned
with the disposition of the real property involved in the litigation; and the effect of this
part of the decision is to require the defendants to surrender to the administrator of
Geronima Uy Coque three-fourths of lot 1 of paragraph D and one-half of the other

But we think there is another sound and sufficient reason why it was proper for the
court to entertain the present action not only for the purpose of decreeing the nullity of
the questioned deeds but for the purpose of compelling Sioca and his codefendants
to surrender the property which had been appropriated by them. It is an accepted

doctrine of equity jurisprudence that when a court acquires jurisdiction over a

controversy for one purpose it will retain it for all purposes, to the end that the
litigation may be completely concluded. In this connection the maxim is applicable
that equity does nothing by halves. There can be no question that the court could
properly take cognizance of the action in its aspect of a proceeding to set aside the
fraudulent deeds, and having thus acquired jurisdiction over the subject-matter for
that purpose, no error was committed in giving complete relief. It is quite obvious that
if the court had stopped short of the requirement that the defendants should pay over
and surrender money and property to the extent allowed by us in the present
judgment, he ends of justice would have been frustrated. A husband who has turned
spoliator of his wife's estate and who has been removed as administrator may be
required to pay over the wife's share to her legal representative and to account for
such portion thereof as he may have squandered.
The preceding discussion conducts us to the point where it is necessary to confront
the practical problem presented by the existence of the usufructuary right of Sioca in
the estate of his deceased wife and the final liquidation of the estate into whose
hands soever the property may have come; and it is evident at once that the case is
not now in a condition where we can say the last word, and there are certain steps in
the liquidation which will require further proceedings in the court of origin.
As the spouses comprising the community partnership with which we are concerned
left neither ascendants not descendants, the surviving husband is, or was, entitled to
one-half of the deceased wife's property in usufruct (art. 837, Civ. Code;
Sarita vs. Candia, 23 Phil., 443). And as we have already seen, this right of the
husband undoubtedly passed by his transfer to his several codefendants.
Furthermore, the wife's share in the proceeds of the hemp amounts, according to our
previous computation, to the sum of P126,576.13. One-half of this amount is
P63,288.06, which represents the unencumbered portion pertaining to the collateral
heirs, the plaintiffs in this action, and which should be immediately paid by Sioca and
his codefendant Navas to the administrator of the deceased wife. If not duly paid,
execution therefor should be issued jointly and severally against these two only.
As to the remaining sum of P63,288.06, which pertained to Sioca in usufruct, the
plaintiffs are in law entitled to the capital, subject to the usufructuary right now vested
in Marcelo Navas. A specific portion of said sum should either be fixed, as
representing the shares of the respective parties, or other adjustment should be
attained compatible with the purposes contemplated by the law; but in any event the
parties are privileged, under article 838 of the Civil Code, to come to an amicable
agreement, if they see fit, in default of which the adjustment will be made by judicial
decision.
Again, the various defendants (except Sioca) who assert title to different pieces of
real property conveyed by him to them respectively likewise acquired his usufructuary
interest in said respective parcels, in addition to the undivided half that pertained to
Sioca as member of the community partnership. It is impossible for us in the present

state of the case to determine the value of said usufructuary interest or to assign any
specific piece of property to any of said claimants in satisfaction thereof. This problem
therefore also remains for future solution in the ultimate liquidation of the whole
estate. lawphil.net
By way of abbreviation of the foregoing, it is our judgment: (1) That the deeds Exhibits
A to f, inclusive, whose validity have been impugned in this cause, were properly
declared void by the trial court, as having been made in evident fraud of the rights of
the plaintiffs as collateral heirs of Geronima Uy Coque; (2) that the defendants Juan
Navas L. Sioca and Marcelo Navas (Tiu Quim Chiu) are jointly and severally liable for
the sum of P63,288.06, which they are required to pay to the representative of
Geronima Uy Coque, and in default thereof execution for said sum may issue jointly
and severally against them in due course; (3) that the defendant Marcelo Navas (Tiu
Quim Chiu) is entitled to the usufructuary right of Juan Navas L. Sioca in another
equal sum of P63,288.06, the corpus, or capital, of which belongs to the plaintiffs; (4)
That the various transferees mentioned in the deeds Exhibits A, B, C, E and F
severally acquired by those deeds an undivided one-half interest in the several
properties therein conveyed, plus the usufructuary right of Juan Navas L. Sioca
therein, and that Lim Isiu, as transferee in the deed Exhibit D, thereby acquired an
undivided one-eighth interest in the property therein conveyed, plus the usufructuary
right of Juan Navas L. Sioca in the whole; and, finally, that the remaining interest in
each of said properties belongs to the plaintiffs; (5) that the cause be remanded for
further proceedings in which the usufructuary interest will be determined and division
of the properties in question effected in conformity with the law and consistently with
the principles settled in this decision.
Wherefore, affirming the appealed decision in so far as the same is in harmony
herewith and reversing the same in so far as the sane is inconsistent herewith, the
cause is remanded for execution and further proceedings, without special
pronouncement as to costs of this instance. So ordered.
[G.R. No. 154645. July 13, 2004]
MILAGROS JOAQUINO a.k.a. MILAGROS J. REYES, petitioner, vs. LOURDES
REYES, MERCEDES, MANUEL, MIRIAM and RODOLFO JR. -- all
surnamed REYES, respondents.
DECISION
PANGANIBAN, J.:
Though registered in the paramours name, property acquired with the salaries
and earnings of a husband belongs to his conjugal partnership with the legal
spouse. The filiation of the paramours children must be settled in a probate or special
proceeding instituted for the purpose, not in an action for recovery of property.

The Case
Before the Court is a Petition for Review[1] under Rule 45 of the Rules of Court,
seeking to nullify the February 4, 2002 Decision [2] and the August 14, 2002
Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 45883. The CA disposed
as follows:
WHEREFORE, premises considered, the appeal is hereby partially DENIED and
the Decision dated May 30, 1994, of the Regional Trial Court of Pasay City, Branch
111 in Civil Case No. 9722-P is MODIFIED to read, as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against the
defendant as follows:
a. Declaring the house and lot registered under Transfer Certificate of Title No. 90293
(26627-A) of the Registry of Deeds of Metro Manila, District IV as conjugal
partnership property of the late Spouses Rodolfo and Lourdes Reyes;
b. Ordering the [petitioner] to surrender possession of said subject property, pursuant
to the applicable law on succession, to the respective estates of the late Rodolfo
Reyes and Lourdes Reyes and to pay a reasonable rental of P10,000.00 a month, to
the same juridical entities, upon their failure to do so until possession of the property
is delivered; and
c. To pay [respondents] attorneys fees in the sum of P20,000.00 and to pay the costs.
[4]

The questioned Resolution, on the other hand, denied petitioners Motion for
Reconsideration.
The Facts
The CA narrated the facts as follows:
[Respondents] filed a Complaint for reconveyance and damages, dated January 23,
1982, before the Court of First Instance of Rizal, containing the following allegations:
x x x The complaint alleges that [respondent] Lourdes P. Reyes is the widow of
Rodolfo A. Reyes who died on September 12, 1981; that [respondents] Mercedes,
Manuel, Miriam and Rodolfo, Jr. are the legitimate children of [respondent] Lourdes P.
Reyes and the deceased Rodolfo A. Reyes; that for years before his death, Rodolfo
A. Reyes had illicit relations with [petitioner] Milagros B. Joaquino; that before his
death, x x x Rodolfo A. Reyes was Vice President and Comptroller of Warner Barnes
and Company with an income of P15,000.00 a month and, after retirement on
September 30, 1980, received from said company benefits and emoluments in the

amount of P315,0[1]1.79; that [respondent] wife was not the recipient of any portion of
the said amount.
The complaint further alleges that on July 12, 1979, a [D]eed of [S]ale of a property
consisting of a house and lot at BF Homes, Paraaque, Metro Manila was executed by
the spouses Ramiro Golez and Corazon Golez in favor of [petitioner] Milagros B.
Joaquino for which Transfer Certificate of Title No. 90293 of the Register of Deeds of
Metro Manila, District IV was issued in the name of [petitioner] Milagros B. Joaquino;
that the funds used to purchase this property were conjugal funds and earnings of the
deceased Rodolfo A. Reyes as executive of Warner Barnes and Company as
[petitioner] Joaquino was without the means to pay for the same; that [petitioner]
executed a Special Power of Attorney in favor of Rodolfo A. Reyes to mortgage the
property to Commonwealth Insurance Corporation in order to pay the balance of the
purchase price; that said Rodolfo A. Reyes executed a mortgage in favor of
Commonwealth Insurance Corporation for P140,000.00 and to guaranty payment
thereof, he secured a life insurance [policy] with Philam Life Insurance Corporation for
the said amount, assigning the proceeds thereof to Commonwealth Insurance
Corporation; that the monthly amortizations of the mortgage were paid by said
Rodolfo A. Reyes before his death and at the time of his death, the outstanding
balance of P110,000.00 was to be paid out of his Philam Life Insurance [p]olicy.
The complaint finally alleges that the deceased had two cars in [petitioners]
possession and that the real and personal properties in [petitioners] possession are
conjugal partnership propert[ies] of the spouses Lourdes P. Reyes and Rodolfo A.
Reyes and one-half belongs exclusively to [respondent] Lourdes P. Reyes and the
other half to the estate of Rodolfo A. Reyes to be apportioned among the [other
respondents] as his forced heirs. [Respondents] therefore, pray that the property
covered by T.C.T. No. 90293 be declared conjugal property of the spouses Lourdes P.
Reyes and Rodolfo A. Reyes and that [petitioner] be ordered to reconvey the property
in [respondents] favor; that the two cars in [petitioners] possession be delivered to
[respondents] and that [petitioner] be made to pay actual, compensatory and moral
damages to [respondents] as well as attorneys fees.
xxxxxxxxx
[Petitioner] eventually filed her Answer, dated August 1, 1982, the allegations of which
have been summarized by the trial court in the following manner:
In her Answer, [petitioner] Milagros B. Joaquino alleges that she purchased the real
property in question with her own exclusive funds and it was only for convenience that
the late Rodolfo Reyes facilitated the mortgage over the same; that although the late
Rodolfo Reyes paid the monthly amortization of the mortgage as attorney-in-fact of
[petitioner], the money came exclusively from [her].
[Petitioner] further alleges in her answer, by way of special and affirmative defenses,
that during all the nineteen (19) years that [she] lived with Rodolfo Reyes from 1962

continuously up to September 12, 1981 when the latter died, [petitioner] never had
knowledge whatsoever that he was married to someone else, much less to
[respondent] Lourdes P. Reyes; that [petitioner] was never the beneficiary of the
emoluments or other pecuniary benefits of the late Rodolfo Reyes during his lifetime
or after his death because [she] had the financial capacity to support herself and her
children begotten with the late Rodolfo Reyes. [Petitioner] prays for a judgment
dismissing [respondents] complaint and for the latter to pay unto [petitioner] moral
and exemplary damages in such amounts as may be determined during the trial,
including atto[r]neys fees and the costs of the suit. x x x.

of P109,797.64 was paid in full to the Commonwealth Insurance by the Philam Life
Insurance Co. as insurer of the deceased Rodolfo A. Reyes.[5]
On appeal to the CA, petitioner questioned the following findings of the trial
court: 1) that the house and lot had been paid in full from the proceeds of the loan
that Rodolfo Reyes obtained from the Commonwealth Insurance Company; 2) that his
salaries and earnings, which were his and Lourdes conjugal funds, paid for the loan
and, hence, the disputed property was conjugal; and 3) that petitioners illegitimate
children, not having been recognized or acknowledged by him in any of the ways
provided by law, acquired no successional rights to his estate.

xxxxxxxxx
Ruling of the Court of Appeals
On February 2, 1993, [respondent] Lourdes Reyes died.
Subsequently, the trial court granted the complaint based on the following factual
findings:
Lourdes Reyes was legally married to Rodolfo Reyes on January 3,
1947 in Manila. They have four children, namely: Mercedes, Manuel, Miriam and
Rodolfo Jr., all surnamed Reyes and co-[respondents] in this case. Rodolfo Reyes
died on September 12, 1981. At the time of his death, Rodolfo Reyes was living with
his common-law wife, Milagros Joaquino, x x x with whom she begot three (3)
children namely: Jose Romillo, Imelda May and Charina, all surnamed Reyes.
During his lifetime, Rodolfo Reyes worked with Marsman and Company and later
transferred to Warner Barnes & Co., where he assumed the position of Vice-President
[Comptroller] until he retired on September 30, 1980. His monthly salary at Warner
Barnes & Co. was P15,000.00 x x x and upon his separation or retirement from said
company, Rodolfo Reyes received a lump sum of P315,011.79 in full payment and
settlement of his separation and retirement benefits.
During the common-law relationship of Rodolfo Reyes and [petitioner] Milagros
Joaquino and while living together, they decided to buy the house and lot situated at
No. 12 Baghdad Street, Phase 3, BF Homes, Paraaque, Metro Manila. A Deed of
Absolute Sale dated July 12, 1979 was executed in favor of [petitioner] Milagros
Joaquino and Transfer Certificate of Title No. S-90293 covering the said property was
issued in the name of [petitioner only] on July 20, 1979.
To secure the finances with which to pay the purchase price of the property in the
amount of P140,000.00, [petitioner] executed on July 20, 1979, a Special Power of
Attorney in favor of Rodolfo A. Reyes for the latter, as attorney-in-fact, to secure a
loan from the Commonwealth Insurance Company. An application for mortgage loan
was filed by Rodolfo Reyes with the Commonwealth Insurance Company and a Real
Estate Mortgage Contract was executed as collateral to the mortgage loan. The loan
was payable in ten (10) years with a monthly amortization of P1,166.67. The monthly
amortizations were paid by Rodolfo Reyes and after his death, the balance

Affirming the RTC, the CA held that the property had been paid out of the
conjugal funds of Rodolfo and Lourdes because the monthly amortizations for the
loan, as well as the premiums for the life insurance policy that paid for the balance
thereof, came from his salaries and earnings. Like the trial court, it found no sufficient
proof that petitioner was financially capable of buying the disputed property, or that
she had actually contributed her own exclusive funds to pay for it. Hence, it ordered
her to surrender possession of the property to the respective estates of the spouses.
The appellate court, however, held that the trial court should not have resolved
the issue of the filiation and the successional rights of petitioners children. Such
issues, it said, were not properly cognizable in an ordinary civil action for
reconveyance and damages and were better ventilated in a probate or special
proceeding instituted for the purpose.
Hence, this Petition.[6]
Issues
Petitioner submits the following issues for the Courts consideration:
I.
Whether or not it has been indubitably established in a court of law and trier of facts,
the Regional Trial Court, that petitioners three [3] illegitimate children are x x x indeed
the children of the late Rodolfo Reyes.
II.
Whether or not it is legally permissible for [respondents] to make a mockery of the law
by denying [the] filiations of their [two] 2 illegitimate sisters and one [1] illegitimate
brother when in fact the very complaint filed by their mother, the lawful wife,

Lourdes[,] shows that her husband Rodolfo had illicit relations with the petitioner
Milagros and had lived with her in a house and lot at Baghdad Street.
III.
Whether or not the fact that the Court of Appeals made a finding that the house and
lot at Baghdad Street are conjugal property of lawfully wedded Rodolfo and Lourdes
including the insurance proceeds which was used to pay the final bill for the house
and lot, this will prevail over Articles 19 and 21 of the Civil Code.
IV.
Whether or not the Supreme Court should enforce the rule that the parties to a lawsuit
should only tell the truth at the trial and in [their] pleadings x x x.
V.
Whether or not the legitimate children of the late Rodolfo Reyes should respect their
fathers desire that his illegitimate children should have a home or a roof over their
heads in consonance with his duty to love, care and provide for his children even after
his death.[7]
The issues boil down to the following: 1) the nature of the house and lot
on Baghdad Street (BF Homes Paraaque, Metro Manila); and 2) the propriety of
ruling on the filiation and the successional rights of petitioners children.

Plainly, therefore, the applicable law is the Civil Code of the Philippines. Under
Article 145 thereof, a conjugal partnership of gains (CPG) is created upon
marriage[9] and lasts until the legal union is dissolved by death, annulment, legal
separation or judicial separation of property.[10] Conjugal properties are by law owned
in common by the husband and wife.[11] As to what constitutes such properties are laid
out in Article 153 of the Code, which we quote:
(1) That which is acquired by onerous title during the marriage at the expense of the
common fund, whether the acquisition be for the partnership, or for only one of the
spouses;
(2) That which is obtained by the industry, or work, or as salary of the spouses, or of
either of them;
(3) The fruits, rents or interests received or due during the marriage, coming from the
common property or from the exclusive property of each spouse.
Moreover, under Article 160 of the Code, all properties of the marriage, unless
proven to pertain to the husband or the wife exclusively, are presumed to belong to
the CPG. For the rebuttable presumption to arise, however, the properties must first
be proven to have been acquired during the existence of the marriage.[12]
The law places the burden of proof [13] on the plaintiffs (respondents herein) to
establish their claim by a preponderance of evidence[14] -- evidence that has greater
weight or is more convincing than that which is offered to oppose it.[15]

The Conjugal Nature of the Disputed Property

On the other hand, Article 144 [16] of the Civil Code mandates a co-ownership
between a man and a woman who are living together but are not legally
married. Prevailing jurisprudence holds, though, that for Article 144 to apply, the
couple must not be incapacitated to contract marriage.[17] It has been held that the
Article is inapplicable to common-law relations amounting to adultery or concubinage,
as in this case. The reason therefor is the absurdity of creating a co-ownership in
cases in which there exists a prior conjugal partnership between the man and his
lawful wife.[18]

Before tackling the merits, we must first point out some undisputed facts and
guiding principles.

In default of Article 144 of the Civil Code, Article 148 of the Family Code has
been applied.[19] The latter Article provides:

As to the facts, it is undisputed that the deceased Rodolfo Reyes was legally
married to Respondent Lourdes Reyes on January 3, 1947.[8] It is also admitted that
for 19 years or so, and while their marriage was subsisting, he was actually living with
petitioner. It was during this time, in 1979, that the disputed house and lot was
purchased and registered in petitioners name.

Art. 148. In cases of cohabitation not falling under the preceding Article, only the
properties acquired by both of the parties through their actual joint contribution of
money, property, or industry shall be owned by them in common in proportion to their
respective contributions. In the absence of proof to the contrary, their contributions
and corresponding shares are presumed to be equal. The same rule and presumption
shall apply to joint deposits of money and evidence of credit.

The Courts Ruling

The Petition is devoid of merit.
First Issue:

If one of the parties is validly married to another, his or her share in the co-ownership
shall accrue to the absolute community or conjugal partnership existing in such valid
marriage. If the party which acted in bad faith is not validly married to another, his or
her share shall be forfeited in the manner provided in the last paragraph of the
preceding Article.
The foregoing rules on forfeiture shall likewise apply even if both parties are in bad
faith.
Thus, when a common-law couple have a legal impediment to marriage, only
the property acquired by them -- through their actual joint contribution of money,
property or industry -- shall be owned by them in common and in proportion to their
respective contributions.
With these facts and principles firmly settled, we now proceed to the merits of
the first issue.
The present controversy hinges on the source of the funds paid for the house
and lot in question. Upon the resolution of this issue depends the determination of
whether the property is conjugal (owned by Rodolfo and Lourdes) or exclusive
(owned by Milagros) or co-owned by Rodolfo and Milagros.
The above issue, which is clearly factual, has been passed upon by both the
trial and the appellate courts, with similar results in favor of respondents. Such finding
is generally conclusive; it is not the function of this Court to review questions of
fact. [20]
Moreover, it is well-settled that only errors of law and not of facts are reviewable
by this Court in cases brought to it from the Court of Appeals or under Rule 45 of the
Rules of Court.[21]This principle applies with greater force herein, because the CA
came up with the same factual findings as those of the RTC.
Even then, heeding petitioners plea, we have gone through the pleadings and
the evidence presented by the parties to find out if there is any circumstance that
might warrant a reversal of the factual findings. Unfortunately for petitioner, we have
found none.
Indeed, a preponderance of evidence has duly established that the disputed
house and lot was paid by Rodolfo Reyes, using his salaries and earnings. By
substantial evidence, respondents showed the following facts: 1) that Rodolfo was
gainfully employed as comptroller at Warner, Barnes and Co., Inc. until his retirement
on September 30, 1980, upon which he received a sizeable retirement package; [22] 2)
that at exactly the same time the property was allegedly purchased,[23] he applied for a
mortgage loan[24] -- intended for housing[25] -- from the Commonwealth Insurance
Company; 3) that he secured the loan with a real estate mortgage[26] over the same
property; 4) that he paid the monthly amortizations for the loan [27] as well as the semi-

annual premiums[28] for a Philam Life insurance policy, which he was required to take
as additional security; and 5) that with the proceeds of his life insurance policy, the
balance of the loan was paid to Commonwealth by Philam Life Insurance Company.[29]
All told, respondents have shown that the property was bought during the
marriage of Rodolfo and Lourdes, a fact that gives rise to the presumption that it is
conjugal. More important, they have established that the proceeds of the loan
obtained by Rodolfo were used to pay for the property; and that the loan was, in turn,
paid from his salaries and earnings, which were conjugal funds under the Civil Code.
In contrast, petitioner has failed to substantiate either of her claims -- that she
was financially capable of buying the house and lot, or that she actually contributed to
the payments therefor.
Indeed, it does not appear that she was gainfully employed at any time after
1961[30] when the property was purchased. Hearsay are the Affidavits[31] and the
undated Certification[32]she had presented to prove that she borrowed money from her
siblings and had earnings from a jewelry business. Respondents had not been given
any opportunity to cross-examine the affiants, who had not testified on these
matters. Based on the rules of evidence, the Affidavits and the Certification have to be
rejected. In fact, they have no probative value.[33] The CA was also correct in
disregarding petitioners allegation that part of the purchase money had come from the
sale of a drugstore[34] four years earlier.
Under the circumstances, therefore, the purchase and the subsequent
registration of the realty in petitioners name was tantamount to a donation by Rodolfo
to Milagros. By express provision of Article 739(1) of the Civil Code, such donation
was void, because it was made between persons who were guilty of adultery or
concubinage at the time of the donation.
The prohibition against donations between spouses[35] must likewise apply to
donations between persons living together in illicit relations; otherwise, the latter
would be better situated than the former.[36] Article 87 of the Family Code now
expressly provides thus:
Art. 87. Every donation or grant of gratuitous advantage, direct or indirect, between
the spouses during the marriage shall be void, except moderate gifts which the
spouses may give each other on the occasion of any family rejoicing. The prohibition
shall also apply to persons living together as husband and wife without a valid
marriage. (Italics supplied)
Regarding the registration of the property in petitioners name, it is enough to
stress that a certificate of title under the Torrens system aims to protect dominion; it
cannot be used as an instrument for the deprivation of ownership. [37] It has been held
that property is conjugal if acquired in a common-law relationship during the
subsistence of a preexisting legal marriage, even if it is titled in the name of the

common-law wife.[38] In this case, a constructive trust is deemed created under Article
1456 of the Civil Code, which we quote:
Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is,
by force of law, considered a trustee of an implied trust for the benefit of the person
from whom the property comes.
The registration of the property in petitioners name was clearly designed to
deprive Rodolfos legal spouse and compulsory heirs of ownership. By operation of
law, petitioner is deemed to hold the property in trust for them. Therefore, she cannot
rely on the registration in repudiation of the trust, for this case is a well-known
exception to the principle of conclusiveness of a certificate of title.[39]
Second Issue:
Ruling on Illegitimate Filiation

In view of the foregoing reasons, the CA cannot be faulted for tackling the
propriety of the RTCs ruling on the status of the children of petitioner, though she did
not assign this matter as an error. The general rule -- that only errors assigned may
be passed upon by an appellate court admits of exceptions. Even unassigned errors
may be taken up by such court if the consideration of those errors would be
necessary for arriving at a just decision or for serving the interest of justice.[48]
The invocation by petitioner of Articles 19[49] and 21[50] of the Civil Code is also
unmeritorious. Clearly, the illegitimate filiation of her children was not the subject of
inquiry and was in fact not duly established in this case. Thus, she could not have
shown that respondents had acted in bad faith or with intent to prejudice her
children. These are conditions necessary to show that an act constitutes an abuse of
rights under Article 19.[51] She also failed to show that respondents -- in violation of the
provisions of Article 21 of the Civil Code -- had acted in a manner contrary to morals,
good customs or public policy.

Not Proper

Moreover, we note that the issue concerning the applicability of Articles 19 and
21 was not raised by petitioner in the trial court or even in the CA. Hence, she should
not be permitted to raise it now. Basic is the rule that parties may not bring up on
appeal issues that have not been raised on trial.[52]

It is petitioners alternative submission that her children are entitled to a share in

the disputed property, because they were voluntarily acknowledged by Rodolfo as his
children. Claiming that the issue of her childrens illegitimate filiation was duly
established in the trial court, she faults the CA for ruling that the issue was improper
in the instant case.

WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and
Resolution of the Court of Appeals AFFIRMED. Costs against petitioner.
SO ORDERED.

Her position is untenable.

Indeed, it has been ruled that matters relating to the rights of filiation and
heirship must be ventilated in the proper probate court in a special proceeding
instituted precisely for the purpose of determining such rights. [40] Sustaining the
appellate court in Agapay v. Palang,[41] this Court held that the status of an illegitimate
child who claimed to be an heir to a decedents estate could not be adjudicated in an
ordinary civil action which, as in this case, was for the recovery of property.

[G.R. No. 116668. July 28, 1997]

ERLINDA A. AGAPAY, petitioner, vs. CARLINA (CORNELIA) V. PALANG and
HERMINIA P. DELA CRUZ, respondents.
DECISION
ROMERO, J.:

Considerations of due process should have likewise deterred the RTC from
ruling on the status of petitioners children. It is evident from the pleadings of the
parties that this issue was not presented in either the original [42] or the Supplemental
Complaint[43] for reconveyance of property and damages; that it was not pleaded and
specifically prayed for by petitioner in her Answers [44] thereto; and that it was not
traversed by respondents Reply to the Supplemental Complaint.[45] Neither did
petitioners Memorandum,[46] which was submitted to the trial court, raise and discuss
this issue. In view thereof, the illegitimate filiation of her children could not have been
duly established by the proceedings as required by Article 887 of the Civil Code.[47]

Before us is a petition for review of the decision of the Court of Appeals in CAG.R. CV No. 24199 entitled Erlinda Agapay v. Carlina (Cornelia) Palang and Herminia
P. Dela Cruz dated June 22, 1994 involving the ownership of two parcels of land
acquired during the cohabitation of petitioner and private respondents legitimate
spouse.
Miguel Palang contracted his first marriage on July 16, 1949 when he took
private respondent Carlina (or Cornelia) Vallesterol as a wife at the Pozorrubio
Roman Catholic Church in Pangasinan. A few months after the wedding, in October

1949, he left to work in Hawaii. Miguel and Carlinas only child, Herminia Palang, was
born on May 12, 1950.
Miguel returned in 1954 for a year. His next visit to the Philippines was in 1964
and during the entire duration of his year-long sojourn he stayed in Zambales with his
brother, not in Pangasinan with his wife and child. The trial court found evidence that
as early as 1957, Miguel had attempted to divorce Carlina in Hawaii. [1] When he
returned for good in 1972, he refused to live with private respondents, but stayed
alone in a house in Pozorrubio, Pangasinan.

After trial on the merits, the lower court rendered its decision on June 30, 1989
dismissing the complaint after declaring that there was little evidence to prove that the
subject properties pertained to the conjugal property of Carlina and Miguel
Palang. The lower court went on to provide for the intestate shares of the parties,
particularly of Kristopher Palang, Miguels illegitimate son. The dispositive portion of
the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered1) Dismissing the complaint, with costs against plaintiffs;

On July 15, 1973, the then sixty-three-year-old Miguel contracted his second
marriage with nineteen-year-old Erlinda Agapay, herein petitioner.[2] Two months
earlier, on May 17, 1973, Miguel and Erlinda, as evidenced by the Deed of Sale,
jointly purchased a parcel of agricultural land located at San Felipe, Binalonan,
Pangasinan with an area of 10,080 square meters. Consequently, Transfer Certificate
of Title No. 101736 covering said rice land was issued in their names.
A house and lot in Binalonan, Pangasinan was likewise purchased on
September 23, 1975, allegedly by Erlinda as the sole vendee. TCT No. 143120
covering said property was later issued in her name.
On October 30, 1975, Miguel and Cornelia Palang executed a Deed of Donation
as a form of compromise agreement to settle and end a case filed by the latter. [3] The
parties therein agreed to donate their conjugal property consisting of six parcels of
land to their only child, Herminia Palang.[4]
Miguel and Erlindas cohabitation produced a son, Kristopher A. Palang, born on
December 6, 1977. In 1979, Miguel and Erlinda were convicted of Concubinage upon
Carlinas complaint.[5] Two years later, on February 15, 1981, Miguel died.

2) Confirming the ownership of defendant Erlinda Agapay of the residential lot located
at Poblacion, Binalonan, Pangasinan, as evidenced by TCT No. 143120, Lot 290-B
including the old house standing therein;
3) Confirming the ownership of one-half (1/2) portion of that piece of agricultural land
situated at Balisa, San Felipe, Binalonan, Pangasinan, consisting of 10,080 square
meters and as evidenced by TCT No. 101736, Lot 1123-A to Erlinda Agapay;
4) Adjudicating to Kristopher Palang as his inheritance from his deceased father,
Miguel Palang, the one-half (1/2) of the agricultural land situated at Balisa, San
Felipe, Binalonan, Pangasinan, under TCT No. 101736 in the name of Miguel Palang,
provided that the former (Kristopher) executes, within 15 days after this decision
becomes final and executory, a quit-claim forever renouncing any claims to
annul/reduce the donation to Herminia Palang de la Cruz of all conjugal properties of
her parents, Miguel Palang and Carlina Vallesterol Palang, dated October 30, 1975,
otherwise, the estate of deceased Miguel Palang will have to be settled in another
separate action;
5) No pronouncement as to damages and attorneys fees.

On July 11, 1981, Carlina Palang and her daughter Herminia Palang de la Cruz,
herein private respondents, instituted the case at bar, an action for recovery of
ownership and possession with damages against petitioner before the Regional Trial
Court in Urdaneta, Pangasinan (Civil Case No. U-4265). Private respondents sought
to get back the riceland and the house and lot both located at Binalonan, Pangasinan
allegedly purchased by Miguel during his cohabitation with petitioner.
Petitioner, as defendant below, contended that while the riceland covered by
TCT No. 101736 is registered in their names (Miguel and Erlinda), she had already
given her half of the property to their son Kristopher Palang. She added that the
house and lot covered by TCT No. 143120 is her sole property, having bought the
same with her own money. Erlinda added that Carlina is precluded from claiming
aforesaid properties since the latter had already donated their conjugal estate to
Herminia.

SO ORDERED.[6]
On appeal, respondent court reversed the trial courts decision. The Court of
Appeals rendered its decision on July 22, 1994 with the following dispositive portion:
WHEREFORE, PREMISES CONSIDERED, the appealed decision is hereby
REVERSED and another one entered:
1. Declaring plaintiffs-appellants the owners of the properties in question;
2. Ordering defendant-appellee to vacate and deliver the properties in question to
herein plaintiffs-appellants;

3. Ordering the Register of Deeds of Pangasinan to cancel Transfer Certificate of Title

Nos. 143120 and 101736 and to issue in lieu thereof another certificate of title in the
name of plaintiffs-appellants.
No pronouncement as to costs.[7]
Hence, this petition.
Petitioner claims that the Court of Appeals erred in not sustaining the validity of
two deeds of absolute sale covering the riceland and the house and lot, the first in
favor of Miguel Palang and Erlinda Agapay and the second, in favor of Erlinda Agapay
alone. Second, petitioner contends that respondent appellate court erred in not
declaring Kristopher A. Palang as Miguel Palangs illegitimate son and thus entitled to
inherit from Miguels estate. Third, respondent court erred, according to petitioner, in
not finding that there is sufficient pleading and evidence that Kristoffer A. Palang or
Christopher A. Palang should be considered as party-defendant in Civil Case No. U4625 before the trial court and in CA-G.R. No. 24199.[8]
After studying the merits of the instant case, as well as the pertinent provisions
of law and jurisprudence, the Court denies the petition and affirms the questioned
decision of the Court of Appeals.
The first and principal issue is the ownership of the two pieces of property
subject of this action. Petitioner assails the validity of the deeds of conveyance over
the same parcels of land.There is no dispute that the transfers of ownership from the
original owners of the riceland and the house and lot, Corazon Ilomin and the
spouses Cespedes, respectively, were valid.
The sale of the riceland on May 17, 1973, was made in favor of Miguel and
Erlinda. The provision of law applicable here is Article 148 of the Family Code
providing for cases of cohabitation when a man and a woman who
are not capacitated to marry each other live exclusively with each other as husband
and wife without the benefit of marriage or under a void marriage. While Miguel and
Erlinda contracted marriage on July 15, 1973, said union was patently void because
the earlier marriage of Miguel and Carlina was still susbsisting and unaffected by the
latters de facto separation.
Under Article 148, only the properties acquired by both of the parties through
their actual joint contribution of money, property or industry shall be owned by
them in common in proportion to their respective contributions. It must be stressed
that actual contribution is required by this provision, in contrast to Article 147 which
states that efforts in the care and maintenance of the family and household, are
regarded as contributions to the acquisition of common property by one who has no
salary or income or work or industry. If the actual contribution of the party is not
proved, there will be no co-ownership and no presumption of equal shares.[9]

In the case at bar, Erlinda tried to establish by her testimony that she is engaged
in the business of buy and sell and had a sari-sari store[10] but failed to persuade us
that she actually contributed money to buy the subject riceland. Worth noting is the
fact that on the date of conveyance, May 17, 1973, petitioner was only around twenty
years of age and Miguel Palang was already sixty-four and a pensioner of the U.S.
Government. Considering her youthfulness, it is unrealistic to conclude that in 1973
she contributed P3,750.00 as her share in the purchase price of subject property,
[11]
there being no proof of the same.
Petitioner now claims that the riceland was bought two months before Miguel
and Erlinda actually cohabited. In the nature of an afterthought, said added assertion
was intended to exclude their case from the operation of Article 148 of the Family
Code. Proof of the precise date when they commenced their adulterous cohabitation
not having been adduced, we cannot state definitively that the riceland was
purchased even before they started living together. In any case, even assuming that
the subject property was bought before cohabitation, the rules of co-ownership would
still apply and proof of actual contribution would still be essential.
Since petitioner failed to prove that she contributed money to the purchase price
of the riceland in Binalonan, Pangasinan, we find no basis to justify her co-ownership
with Miguel over the same. Consequently, the riceland should, as correctly held by
the Court of Appeals, revert to the conjugal partnership property of the deceased
Miguel and private respondent Carlina Palang.
Furthermore, it is immaterial that Miguel and Carlina previously agreed to
donate their conjugal property in favor of their daughter Herminia in 1975. The trial
court erred in holding that the decision adopting their compromise agreement in effect
partakes the nature of judicial confirmation of the separation of property between
spouses and the termination of the conjugal partnership.[12] Separation of property
between spouses during the marriage shall not take place except by judicial order or
without judicial conferment when there is an express stipulation in the marriage
settlements.[13] The judgment which resulted from the parties compromise was not
specifically and expressly for separation of property and should not be so inferred.
With respect to the house and lot, Erlinda allegedly bought the same
for P20,000.00 on September 23, 1975 when she was only 22 years old. The
testimony of the notary public who prepared the deed of conveyance for the property
reveals the falsehood of this claim. Atty. Constantino Sagun testified that Miguel
Palang provided the money for the purchase price and directed that Erlindas name
alone be placed as the vendee.[14]
The transaction was properly a donation made by Miguel to Erlinda, but one
which was clearly void and inexistent by express provision of law because it was
made between persons guilty of adultery or concubinage at the time of the donation,
under Article 739 of the Civil Code. Moreover, Article 87 of the Family Code expressly
provides that the prohibition against donations between spouses now applies to
donations between persons living together as husband and wife without a valid

marriage,[15] for otherwise, the condition of those who incurred guilt would turn out to
be better than those in legal union.[16]
The second issue concerning Kristopher Palangs status and claim as an
illegitimate son and heir to Miguels estate is here resolved in favor of respondent
courts correct assessment that the trial court erred in making pronouncements
regarding Kristophers heirship and filiation inasmuch as questions as to who are the
heirs of the decedent, proof of filiation of illegitimate children and the determination of
the estate of the latter and claims thereto should be ventilated in the proper probate
court or in a special proceeding instituted for the purpose and cannot be adjudicated
in the instant ordinary civil action which is for recovery of ownership and possession.
[17]

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:
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.

As regards the third issue, petitioner contends that Kristopher Palang should be
considered as party-defendant in the case at bar following the trial courts decision
which expressly found that Kristopher had not been impleaded as party defendant but
theorized that he had submitted to the courts jurisdiction through his
mother/guardian ad litem.[18] The trial court erred gravely. Kristopher, not having been
impleaded, was, therefore, not a party to the case at bar. His mother, Erlinda, cannot
be called his guardian ad litem for he was not involved in the case at bar. Petitioner
adds that there is no need for Kristopher to file another action to prove that he is the
illegitimate son of Miguel, in order to avoid multiplicity of suits. [19] Petitioners grave
error has been discussed in the preceeding paragraph where the need for probate
proceedings to resolve the settlement of Miguels estate and Kristophers successional
rights has been pointed out.

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.

WHEREFORE, the instant petition is hereby DENIED. The questioned decision

of the Court of Appeals is AFFIRMED. Costs against petitioner.

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.

SO ORDERED.

G.R. No. L-23002

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.:

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 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.
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.
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.
G.R. No. 164584

June 22, 2009

PHILIP MATTHEWS, Petitioner,

vs.
BENJAMIN A. TAYLOR and JOSELYN C. TAYLOR, Respondents.

DECISION
NACHURA, J.:
Assailed in this petition for review on certiorari are the Court of Appeals (CA)
December 19, 2003 Decision1 and July 14, 2004 Resolution2 in CA-G.R. CV No.
59573. The assailed decision affirmed and upheld the June 30, 1997 Decision3 of the
Regional Trial Court (RTC), Branch 8, Kalibo, Aklan in Civil Case No. 4632 for
Declaration of Nullity of Agreement of Lease with Damages.

In his Answer,14 petitioner claimed good faith in transacting with Joselyn. Since
Joselyn appeared to be the owner of the Boracay property, he found it unnecessary to
obtain the consent of Benjamin. Moreover, as appearing in the Agreement, Benjamin
signed as a witness to the contract, indicating his knowledge of the transaction and,
impliedly, his conformity to the agreement entered into by his wife. Benjamin was,
therefore, estopped from questioning the validity of the Agreement.
There being no amicable settlement during the pre-trial, trial on the merits ensued.
On June 30, 1997, the RTC disposed of the case in this manner:

On June 30, 1988, respondent Benjamin A. Taylor (Benjamin), a British subject,

married Joselyn C. Taylor (Joselyn), a 17-year old Filipina.4 On June 9, 1989, while
their marriage was subsisting, Joselyn bought from Diosa M. Martin a 1,294 squaremeter lot (Boracay property) situated at Manoc-Manoc, Boracay Island, Malay, Aklan,
for and in consideration of P129,000.00.5 The sale was allegedly financed by
Benjamin.6 Joselyn and Benjamin, also using the latters funds, constructed
improvements thereon and eventually converted the property to a vacation and tourist
resort known as the Admiral Ben Bow Inn.7 All required permits and licenses for the
operation of the resort were obtained in the name of Ginna Celestino, Joselyns
sister.8
However, Benjamin and Joselyn had a falling out, and Joselyn ran away with Kim
Philippsen. On June 8, 1992, Joselyn executed a Special Power of Attorney (SPA) in
favor of Benjamin, authorizing the latter to maintain, sell, lease, and sub-lease and
otherwise enter into contract with third parties with respect to their Boracay property.9
On July 20, 1992, Joselyn as lessor and petitioner Philip Matthews as lessee, entered
into an Agreement of Lease10 (Agreement) involving the Boracay property for a period
of 25 years, with an annual rental of P12,000.00. The agreement was signed by the
parties and executed before a Notary Public. Petitioner thereafter took possession of
the property and renamed the resort as Music Garden Resort.1avvphi1
Claiming that the Agreement was null and void since it was entered into by Joselyn
without his (Benjamins) consent, Benjamin instituted an action for Declaration of
Nullity of Agreement of Lease with Damages11 against Joselyn and the petitioner.
Benjamin claimed that his funds were used in the acquisition and improvement of the
Boracay property, and coupled with the fact that he was Joselyns husband, any
transaction involving said property required his consent.
No Answer was filed, hence, the RTC declared Joselyn and the petitioner in defeault.
On March 14, 1994, the RTC rendered judgment by default declaring the Agreement
null and void.12 The decision was, however, set aside by the CA in CA-G.R. SP No.
34054.13 The CA also ordered the RTC to allow the petitioner to file his Answer, and to
conduct further proceedings.

WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiff and against the defendants as follows:
1. The Agreement of Lease dated July 20, 1992 consisting of eight (8) pages
(Exhibits "T", "T-1", "T-2", "T-3", "T-4", "T-5", "T-6" and "T-7") entered into by
and between Joselyn C. Taylor and Philip Matthews before Notary Public
Lenito T. Serrano under Doc. No. 390, Page 79, Book I, Series of 1992 is
hereby declared NULL and VOID;
2. Defendants are hereby ordered, jointly and severally, to pay plaintiff the
sum of SIXTEEN THOUSAND (P16,000.00) PESOS as damages
representing unrealized income for the residential building and cottages
computed monthly from July 1992 up to the time the property in question is
restored to plaintiff; and
3. Defendants are hereby ordered, jointly and severally, to pay plaintiff the
sum of TWENTY THOUSAND (P20,000.00) PESOS, Philippine Currency, for
attorneys fees and other incidental expenses.
SO ORDERED.15
The RTC considered the Boracay property as community property of Benjamin and
Joselyn; thus, the consent of the spouses was necessary to validate any contract
involving the property. Benjamins right over the Boracay property was bolstered by
the courts findings that the property was purchased and improved through funds
provided by Benjamin. Although the Agreement was evidenced by a public document,
the trial court refused to consider the alleged participation of Benjamin in the
questioned transaction primarily because his signature appeared only on the last
page of the document and not on every page thereof.
On appeal to the CA, petitioner still failed to obtain a favorable decision. In its
December 19, 2003 Decision,16 the CA affirmed the conclusions made by the RTC.
The appellate court was of the view that if, indeed, Benjamin was a willing participant
in the questioned transaction, the parties to the Agreement should have used the
phrase "with my consent" instead of "signed in the presence of." The CA noted that

Joselyn already prepared an SPA in favor of Benjamin involving the Boracay property;
it was therefore unnecessary for Joselyn to participate in the execution of the
Agreement. Taken together, these circumstances yielded the inevitable conclusion
that the contract was null and void having been entered into by Joselyn without the
consent of Benjamin.
Aggrieved, petitioner now comes before this Court in this petition for review on
certiorari based on the following grounds:
4.1. THE MARITAL CONSENT OF RESPONDENT BENJAMIN TAYLOR IS
NOT REQUIRED IN THE AGREEMENT OF LEASE DATED 20 JULY 1992.
GRANTING ARGUENDO THAT HIS CONSENT IS REQUIRED, BENJAMIN
TAYLOR IS DEEMED TO HAVE GIVEN HIS CONSENT WHEN HE
AFFIXED HIS SIGNATURE IN THE AGREEMENT OF LEASE AS WITNESS
IN THE LIGHT OF THE RULING OF THE SUPREME COURT IN THE CASE
OF SPOUSES PELAYO VS. MELKI PEREZ, G.R. NO. 141323, JUNE 8,
2005.
4.2. THE PARCEL OF LAND SUBJECT OF THE AGREEMENT OF LEASE
IS THE EXCLUSIVE PROPERTY OF JOCELYN C. TAYLOR, A FILIPINO
CITIZEN, IN THE LIGHT OF CHEESMAN VS. IAC, G.R. NO. 74833,
JANUARY 21, 1991.
4.3. THE COURTS A QUO ERRONEOUSLY APPLIED ARTICLE 96 OF THE
FAMILY CODE OF THE PHILIPPINES WHICH IS A PROVISION
REFERRING TO THE ABSOLUTE COMMUNITY OF PROPERTY. THE
PROPERTY REGIME GOVERNING THE PROPERTY RELATIONS OF
BENJAMIN TAYLOR AND JOSELYN TAYLOR IS THE CONJUGAL
PARTNERSHIP OF GAINS BECAUSE THEY WERE MARRIED ON 30
JUNE 1988 WHICH IS PRIOR TO THE EFFECTIVITY OF THE FAMILY
CODE. ARTICLE 96 OF THE FAMILY CODE OF THE PHILIPPINES FINDS
NO APPLICATION IN THIS CASE.
4.4. THE HONORABLE COURT OF APPEALS IGNORED THE
PRESUMPTION OF REGULARITY IN THE EXECUTION OF NOTARIAL
DOCUMENTS.
4.5. THE HONORABLE COURT OF APPEALS FAILED TO PASS UPON
THE COUNTERCLAIM OF PETITIONER DESPITE THE FACT THAT IT
WAS NOT CONTESTED AND DESPITE THE PRESENTATION OF
EVIDENCE ESTABLISHING SAID CLAIM.17
The petition is impressed with merit.
In fine, we are called upon to determine the validity of an Agreement of Lease of a
parcel of land entered into by a Filipino wife without the consent of her British

husband. In addressing the matter before us, we are confronted not only with civil law
or conflicts of law issues, but more importantly, with a constitutional question.
It is undisputed that Joselyn acquired the Boracay property in 1989. Said acquisition
was evidenced by a Deed of Sale with Joselyn as the vendee. The property was also
declared for taxation purposes under her name. When Joselyn leased the property to
petitioner, Benjamin sought the nullification of the contract on two grounds: first, that
he was the actual owner of the property since he provided the funds used in
purchasing the same; and second, that Joselyn could not enter into a valid contract
involving the subject property without his consent.
The trial and appellate courts both focused on the property relations of petitioner and
respondent in light of the Civil Code and Family Code provisions. They, however,
failed to observe the applicable constitutional principles, which, in fact, are the more
decisive.
Section 7, Article XII of the 1987 Constitution states:18
Section 7. Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or associations qualified
to acquire or hold lands of the public domain.1avvphi1
Aliens, whether individuals or corporations, have been disqualified from acquiring
lands of the public domain. Hence, by virtue of the aforecited constitutional provision,
they are also disqualified from acquiring private lands.19 The primary purpose of this
constitutional provision is the conservation of the national patrimony.20 Our
fundamental law cannot be any clearer. The right to acquire lands of the public
domain is reserved only to Filipino citizens or corporations at least sixty percent of the
capital of which is owned by Filipinos.21
In Krivenko v. Register of Deeds,22 cited in Muller v. Muller,23 we had the occasion to
explain the constitutional prohibition:
Under Section 1 of Article XIII of the Constitution, "natural resources, with the
exception of public agricultural land, shall not be alienated," and with respect to public
agricultural lands, their alienation is limited to Filipino citizens. But this constitutional
purpose conserving agricultural resources in the hands of Filipino citizens may easily
be defeated by the Filipino citizens themselves who may alienate their agricultural
lands in favor of aliens. It is partly to prevent this result that Section 5 is included in
Article XIII, and it reads as follows:
"Section 5. Save in cases of hereditary succession, no private agricultural land will be
transferred or assigned except to individuals, corporations, or associations qualified to
acquire or hold lands of the public domain in the Philippines."

This constitutional provision closes the only remaining avenue through which
agricultural resources may leak into aliens hands. It would certainly be futile to
prohibit the alienation of public agricultural lands to aliens if, after all, they may be
freely so alienated upon their becoming private agricultural lands in the hands of
Filipino citizens. x x x

petitioner because of said prohibition. Hence, we denied his attempt at subsequently

asserting a right to the said property in the form of a claim for reimbursement. Neither
did the Court declare that an implied trust was created by operation of law in view of
petitioners marriage to respondent. We said that to rule otherwise would permit
circumvention of the constitutional prohibition.

xxxx

In Frenzel v. Catito,32 petitioner, an Australian citizen, was married to Teresita Santos;

while respondent, a Filipina, was married to Klaus Muller. Petitioner and respondent
met and later cohabited in a common-law relationship, during which petitioner
acquired real properties; and since he was disqualified from owning lands in the
Philippines, respondents name appeared as the vendee in the deeds of sale. When
their relationship turned sour, petitioner filed an action for the recovery of the real
properties registered in the name of respondent, claiming that he was the real owner.
Again, as in the other cases, the Court refused to declare petitioner as the owner
mainly because of the constitutional prohibition. The Court added that being a party to
an illegal contract, he could not come to court and ask to have his illegal objective
carried out. One who loses his money or property by knowingly engaging in an illegal
contract may not maintain an action for his losses.

If the term "private agricultural lands" is to be construed as not including residential

lots or lands not strictly agricultural, the result would be that "aliens may freely acquire
and possess not only residential lots and houses for themselves but entire
subdivisions, and whole towns and cities," and that "they may validly buy and hold in
their names lands of any area for building homes, factories, industrial plants,
fisheries, hatcheries, schools, health and vacation resorts, markets, golf courses,
playgrounds, airfields, and a host of other uses and purposes that are not, in
appellants words, strictly agricultural." (Solicitor Generals Brief, p. 6) That this is
obnoxious to the conservative spirit of the Constitution is beyond question.24
The rule is clear and inflexible: aliens are absolutely not allowed to acquire public or
private lands in the Philippines, save only in constitutionally recognized
exceptions.25 There is no rule more settled than this constitutional prohibition, as more
and more aliens attempt to circumvent the provision by trying to own lands through
another. In a long line of cases, we have settled issues that directly or indirectly
involve the above constitutional provision. We had cases where aliens wanted that a
particular property be declared as part of their fathers estate;26 that they be
reimbursed the funds used in purchasing a property titled in the name of
another;27that an implied trust be declared in their (aliens) favor;28 and that a contract
of sale be nullified for their lack of consent.29
In Ting Ho, Jr. v. Teng Gui,30 Felix Ting Ho, a Chinese citizen, acquired a parcel of
land, together with the improvements thereon. Upon his death, his heirs (the
petitioners therein) claimed the properties as part of the estate of their deceased
father, and sought the partition of said properties among themselves. We, however,
excluded the land and improvements thereon from the estate of Felix Ting Ho,
precisely because he never became the owner thereof in light of the abovementioned constitutional prohibition.
In Muller v. Muller,31 petitioner Elena Buenaventura Muller and respondent Helmut
Muller were married in Germany. During the subsistence of their marriage,
respondent purchased a parcel of land in Antipolo City and constructed a house
thereon. The Antipolo property was registered in the name of the petitioner. They
eventually separated, prompting the respondent to file a petition for separation of
property. Specifically, respondent prayed for reimbursement of the funds he paid for
the acquisition of said property. In deciding the case in favor of the petitioner, the
Court held that respondent was aware that as an alien, he was prohibited from
owning a parcel of land situated in the Philippines. He had, in fact, declared that when
the spouses acquired the Antipolo property, he had it titled in the name of the

Finally, in Cheesman v. Intermediate Appellate Court,33 petitioner (an American

citizen) and Criselda Cheesman acquired a parcel of land that was later registered in
the latters name. Criselda subsequently sold the land to a third person without the
knowledge of the petitioner. The petitioner then sought the nullification of the sale as
he did not give his consent thereto. The Court held that assuming that it was his
(petitioners) intention that the lot in question be purchased by him and his wife, he
acquired no right whatever over the property by virtue of that purchase; and in
attempting to acquire a right or interest in land, vicariously and clandestinely, he
knowingly violated the Constitution; thus, the sale as to him was null and void.
In light of the foregoing jurisprudence, we find and so hold that Benjamin has no right
to nullify the Agreement of Lease between Joselyn and petitioner. Benjamin, being an
alien, is absolutely prohibited from acquiring private and public lands in the
Philippines. Considering that Joselyn appeared to be the designated "vendee" in the
Deed of Sale of said property, she acquired sole ownership thereto. This is true even
if we sustain Benjamins claim that he provided the funds for such acquisition. By
entering into such contract knowing that it was illegal, no implied trust was created in
his favor; no reimbursement for his expenses can be allowed; and no declaration can
be made that the subject property was part of the conjugal/community property of the
spouses. In any event, he had and has no capacity or personality to question the
subsequent lease of the Boracay property by his wife on the theory that in so doing,
he was merely exercising the prerogative of a husband in respect of conjugal
property. To sustain such a theory would countenance indirect controversion of the
constitutional prohibition. If the property were to be declared conjugal, this would
accord the alien husband a substantial interest and right over the land, as he would
then have a decisive vote as to its transfer or disposition. This is a right that the
Constitution does not permit him to have.34

In fine, the Agreement of Lease entered into between Joselyn and petitioner cannot
be nullified on the grounds advanced by Benjamin. Thus, we uphold its validity.
With the foregoing disquisition, we find it unnecessary to address the other issues
raised by the petitioner.
WHEREFORE, premises considered, the December 19, 2003 Decision and July 14,
2004 Resolution of the Court of Appeals in CA-G.R. CV No. 59573, are REVERSED
and SET ASIDE and a new one is entered DISMISSING the complaint against
petitioner Philip Matthews.
SO ORDERED.
G.R. No. L-43257

February 19, 1937

MARGARITA QUINTOS DE ANSALDO and ANGEL A. ANSALDO, plaintiffsappellees,

vs.
THE SHERIFF OF THE CITY OF MANILA, FIDELITY & SURETY COMPANY OF
THE PHILIPPINE ISLANDS and LUZON SURETY COMPANY, defendantsappellants.
Ross, Lawrence and Selph for appellants.
Angel A. Ansaldo for appellees.
ABAD SANTOS, J.:
Upon the express guaranty of the appellant Fidelity & Surety Company of the
Philippine Islands, the Philippine Trust Company granted Romarico Agcaoili a credit in
current account not to exceed at any one time P20,000. Appellee Angel A. Ansaldo, in
turn, agreed to indemnify the Fidelity & Surety Company of the Philippine Islands for
any and all losses and damages that it might sustain by reason of having guaranteed
Agcaoili's obligations to the said Philippine Trust Company. Agcaoili defaulted, and
the surety company, as his guarantor, paid the Philippine Trust Company the sum of
P19,065.17. Thereafter, the surety company brought an action against the appellee
Angel A. Ansaldo for the recovery of the said sum of P19,065.17, and after obtaining
a judgment on its favor, caused the sheriff of the City of Manila to levy on the
following properties:
The joint savings account in the name of Angel A. Ansaldo and Margarita
Quintos de Ansaldo in the said Bank of the Philippine Islands amounting to
P165.84.
Upon learning of the action taken by the sheriff, appellees filed with him a third party
claim alleging that the money on which he levied execution was the property of the

conjugal partnership existing between the said appellees and not liable for the
payment of personal obligations of the appellee Angel A. Ansaldo; but upon execution
of an indemnity bond by the appellant Luzon Surety Company, the sheriff retained the
money in his possession.
Subsequently, appellees instituted an action against the appellants in the Court of
First Instance of Manila to have the execution levied by the sheriff declared null and
void. The court below granted the relief prayed for and sentenced the appellants,
jointly and severally, to pay the appellees the sum of P636.80 with interest thereon at
the rate of ten per centum per annum from June 6, 1934 until paid, and the costs of
suit.
As stated by counsel for the appellants, the question involved in this appeal is
whether a joint savings account and a joint current account, in a bank, of a husband
and his wife are liable for the payment of the obligation of the husband.
It is undisputed that the sum of P636.80 which is now in controversy was derived from
the paraphernal property of the appellee, Margarita Quintos de Ansaldo, the wife of
the other appellee Angel A. Ansaldo. It therefore belongs to the conjugal partnership
of the said spouses. (Civil Code, art. 1401.)
The provision of article 1408 of the Civil Code to the effect that the conjugal
partnership shall be liable for all the debts and obligations contracted during the
marriage by the husband must be understood as subject to the qualifications
established by article 1386 of the same Code, which provides that:
The fruits of the paraphernal property cannot be subject to the payment of
personal obligations of the husband, unless it be proved that such obligation
were productive of some benefit to the family.
The meaning of this article is clarified by reference to the first paragraph of the
preceding article 1385 which reads as follows:
The fruit of the paraphernal property form part of the assets of the conjugal
partnership and are subject to the payment of the debts and expenses of the
spouses.
Construing the two article together, it seems clear that the fruits of the paraphernal
property which become part of the assets of the conjugal partnership are not liable for
the payment of personal obligations of the husband, unless it be proved that such
obligations were productive of some benefit to the family.
In the case now before us no attempt has been made to prove that the obligations
contracted by the appellee, Angel A. Ansaldo, were productive of some benefit to his
family. It is, however, claimed that, as the sum of P636.80 has become the property of
the conjugal partnership, at least one-half thereof was property levied on execution,

as the share of the appellee Angel A. Ansaldo. This contention is without merit. The
right of the husband to one-half of the property of the conjugal partnership does not
vest until the dissolution of the marriage when the conjugal partnership is also
dissolved. (Civil Code, arts. 1392 and 1426.)

"WHEREFORE, premises considered, the Decision appealed from is hereby

REVERSED and SET ASIDE. The Sheriff's Certificate of Sale dated August 12, 1981
and the Final Sheriff's Certificate of Sale dated August 26, 1982 are declared NULL
and VOID."4

Counsel for the appellants call attention to the fact that in the third party claim filed
with the sheriff of the City of Manila by the appellees, the latter did not allege that the
money on which the sheriff levied execution was property belonging exclusively to the
appellee Margarita Quintos de Ansaldo. Counsel contend that, as it was then claimed
that the said amount of P638.80 was conjugal property, appellees are now in estoppel
to claim that the same sum was not conjugal property but paraphernal property of the
appellee Margarita Quintos de Ansaldo for the appellants are arguing from a wrong
premise. Appellees do not contend that said sum of P636.80 is not conjugal property.
They contend that while it forms part of the assets of the conjugal partnership under
article 1385 of the Civil Code, it could not be levied upon, because it was not
applicable to this case.

The CA denied reconsideration in its September 17, 2003 Resolution.

The judgment appealed from is affirmed with costs against the appellants. So
ordered.

G.R. No. 160762

May 3, 2006

Spouses JOSEPHINE MENDOZA GO & HENRY GO, Petitioners,

vs.
LEONARDO YAMANE, Respondent.
DECISION
PANGANIBAN, CJ:
Property purchased by spouses during the existence of their marriage is presumed to
be conjugal in nature. This presumption stands, absent any clear, categorical, and
convincing evidence that the property is paraphernal. Conjugal property cannot be
held liable for the personal obligation contracted by one spouse, unless some
advantage or benefit is shown to have accrued to the conjugal partnership.
The Case
Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court,
challenging the November 22, 2002 Decision2 and the September 17, 2003
Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 60939. The assailed
Decision disposed as follows:

The Facts
The undisputed factual findings of the CA are as follows:
"Involved in the suit is a 750 square meters (sic) parcel of lot located at Res. Sec. 'K',
Baguio City, registered in the name of Muriel Pucay Yamane, wife of Leonardo
Yamane, [respondent] herein, under Transfer Certificate of Title No. 12491.
"As a result of a motion for execution of a charging lien filed by Atty. Guillermo F. De
Guzman in Civil Case No. 1841, entitled 'Florence Pucay De Gomez, Elsie Pucay
Kiwas and Muriel Pucay Yamane v. Cypress Corporation,' which said counsel
handled for the plaintiffs therein, hereinafter collectively referred to as the Pucay
sisters, the subject property was levied to satisfy the lien for attorney's fees in the
amount of P10,000. The said property was scheduled to be sold at public auction on
August 11, 1981.
"Four days prior to the auction sale, [respondent] filed a Third-Party Claim with the
Office of the Provincial Sheriff to stop the public auction on the ground that the subject
property is conjugal property and, therefore, should not be held answerable for the
personal obligation of the Pucay sisters. However, the Sheriff proceeded with the
auction sale despite [respondent's] protest. The subject property was sold to spouses
Josephine [and] Henry Go (or [petitioners]) as highest bidder. No redemption having
been made during the one-year period, a Final Sheriff's Certificate of Sale was
eventually issued on August 26, 1982 conveying and transferring the said property to
[petitioners].
"On September 4, 1984, [respondent] filed a Complaint with the Regional Trial Court
of Baguio City, docketed as Civil Case No. 417-R, against [petitioners] and Sheriff
Melgar for annulment and cancellation of auction sale upon the same ground stated
in the abovementioned third-party claim. Citing the Order of the Regional Trial Court
of Baguio City, Branch V in LRC Case No. 2288, which ordered the cancellation of
TCT No. 12491 and directed the Register of Deeds to issue new title in the name of
Josephine Go x x x, [petitioners] moved to dismiss the complaint on the ground of res
judicata. In the Order dated November 28, 1984, the motion was denied by the trial
court.
"In their Answer filed on December 10, 1984, [petitioners] denied the material
allegations of the complaint and interposed the following special affirmative defenses:
that the cause of action was barred by prior judgment; that [respondent] has not

pursued any lawful remedy to annul the execution proceeding; that there is no flaw or
irregularity in the auction sale; and that since the execution sale was made in
accordance with Section 21, Rule 39 of the Revised Rules of Court, it is deemed final
and any irregularity committed in the course thereof will not vitiate its validity.
"On December 28, 1984, Muriel likewise lodged a Complaint for Damages, docketed
as Civil Case No. 505-R, against [petitioners] and Atty. Guillermo De Guzman
alleging, in gist, fraud, misrepresentation, manipulation and unlawful acts of the
defendants in causing the levy of the subject property with an estimated commercial
value of P200,000 as against a charging lien in the amount of P10,000.
"In its May 27, 1985 Order, the trial court ordered the joint hearing of Civil Cases Nos.
417-R and 505-R. On August 30, 1985, Muriel was declared non-suited for failure to
appear in the hearing despite due notice. As a consequence, Civil Case No. 505-R
was dismissed on October 15, 1985."5
In its Decision6 dated March 25, 1998, the Regional Trial Court (RTC) of Baguio City,
Branch 4, held that the subject parcel of land was the paraphernal property of the late
Muriel Pucay Yamane -- spouse of respondent -- and was not their conjugal property.
The appearance of his name on the Transfer Certificate of Title (TCT) was deemed to
be merely descriptive of the civil status of the registered owner, his late wife. Hence,
finding that he had no legal standing to question the auction sale or to pray for its
annulment or cancellation, the RTC dismissed the case for lack of merit.
Upon receipt of the RTC Decision on April 8, 1998, respondent filed a Motion,7 in
which he prayed that he be allowed to file his Motion for Reconsideration of the
Decision, on or before May 30, 1998. The trial court granted8his Motion; received the
Motion for Reconsideration,9 which was filed on May 28, 1998; and eventually denied
it in its Order dated June 5, 1998.10 He then elevated the matter to the CA on June 15,
1998.
Ruling of the Court of Appeals
The CA reversed the RTC's Decision. The Sheriff's Certificate of Sale dated August
12, 1981, and the Final Sheriff's Certificate of Sale dated August 26, 1982, were
declared null and void.
According to the appellate court, property acquired during marriage is presumed to be
conjugal, unless the exclusive funds of one spouse are shown to have been used for
the purpose. That the land was acquired during the spouses' coverture was
sufficiently established by the TCT and the Deed of Absolute Sale, both indicating that
Muriel Pucay Yamane was "married to Leonardo Yamane"; and by the undisputed
testimony of the previous owner, Eugene Pucay. Because of petitioners' failure to
establish that the land in question had been acquired by Muriel using her exclusive
funds, the CA concluded that the contested land was conjugal property.

The appellate court further held thus:

"x x x [T]he disputed property being a conjugal property of [respondent] and his wife,
and absent any showing of some advantage or benefit that accrued to their conjugal
partnership from the transaction between the Pucay sisters and Atty. De Guzman, the
public auction sale of the subject property in favor of [petitioners] is null and void."11
Hence, this Petition.12
Issues
Petitioners submit the following issues for our consideration:
"I. The Court of Appeals gravely erred in taking cognizance of the appeal
and in not dismissing the same, despite the fact that the respondent failed to
perfect his appeal within the 15-day reglementary period set by the Rules of
Court.
"II. The Court of Appeals gravely erred in declaring the subject property as
conjugal property, despite the existence of clear evidence showing that the
subject property is the exclusive paraphernal property of Muriel who, even
during her lifetime, always claimed the said property as her own exclusive
paraphernal property and not as property co-owned with her husband, the
respondent herein.1avvphil.net
"III. The Court of Appeals, assuming, ex grati argumenti, that the subject
property is conjugal property between respondent and Muriel, gravely erred
in ruling that the same cannot answer for the charging lien of Atty. Guillermo
de Guzman in Civil Case No. 1841."13
In the main, they posit two issues. They raise, first, the procedural question of
whether the CA erred in giving due course to respondent's lapsed appeal;
and, second, the substantive issue of whether the subject property is conjugal or
paraphernal.
The Court's Ruling
The Petition has no merit.
Procedural Issue:
Whether Respondent's Appeal Should Be Given Due Course
Petitioners contend that the CA erred in giving due course to the appeal filed by
respondent beyond the 15-day reglementary period.

Concededly, he received a copy of the RTC Decision on April 8, 1998. He had,

therefore, until April 23, 1998, within which to file an appeal. Prior to the latter date,
however, he moved that his new counsel be allowed to file a motion for
reconsideration on May 30, 1998. It was eventually filed on May 28, 1998, but was
denied. Respondent subsequently filed a Notice of Appeal on June 15, 1998. By this
time, the original period to appeal had expired. It should be clear that the Rules
prohibit an extension to file a motion for reconsideration.14
The perfection of an appeal in the manner and within the period prescribed by the
Rules of Civil Procedure is not only mandatory, but also jurisdictional; and the lapse of
the appeal period of fifteen days deprives a court of the jurisdiction to alter a final
judgment.15
There have been exceptions, however, in which the Court dispensed with technical
infirmities and gave due course to tardy appeals. In some of those instances, the
presence of any justifying circumstance recognized by law -- such as fraud, accident,
mistake or excusable negligence -- properly vested the judge with discretion to
approve or admit an appeal filed out of time.16 In other instances, lapsed appeals
were allowed in order to serve substantial justice, upon consideration of a) matters of
life, liberty, honor or property; b) the existence of special or compelling circumstances;
c) the merits of the case; d) causes not entirely attributable to the fault or negligence
of the party that would be favored by the suspension of the rules; e) the failure to
show that the review being sought was merely frivolous and dilatory; and f) the fact
that the other party would not be unjustly prejudiced.17
Indeed, in some exceptional cases, the Court has allowed the relaxation of the rules
regulating the reglementary periods of appeal. These exceptions were cited in Manila
Memorial Park Cemetery v. CA,18 from which we quote:
"In Ramos vs. Bagasao, the Court excused the delay of four days in the filing of the
notice of appeal because the questioned decision of the trial court had been served
upon appellant Ramos at a time when her counsel of record was already dead. The
new counsel could only file the appeal four days after the prescribed reglementary
period was over. In Republic vs. Court of Appeals, the Court allowed the perfection of
an appeal by the Republic despite the delay of six days to prevent a gross
miscarriage of justice since the Republic stood to lose hundreds of hectares of land
already titled in its name and had since then been devoted for public purposes. In
Olacao vs. National Labor Relations Commission, a tardy appeal was accepted
considering that the subject matter in issue had theretofore been judicially settled with
finality in another case, and a dismissal of the appeal would have had the effect of the
appellant being ordered twice to make the same reparation to the appellee."19
We believe that a suspension of the Rules is similarly warranted in the present
controversy. We have carefully studied the merits of the case and noted that the
review being sought has not been shown to be merely frivolous and dilatory. The
Court has come to the conclusion that the Decision of the RTC, Branch 4 (in Civil
Case No. 417-R), must be set aside. It would be far better and more prudent to attain

the ends of justice, rather than to dispose of the case on technicality and cause grave
injustice in the process. Thus, we would rather excuse a technical lapse and afford
respondent a review of the case on appeal.
Substantive Issue:
Paraphernal or Conjugal?
The purchase of the property had been concluded in 1967, before the Family Code
took effect on August 3, 1988.20 Accordingly, the transaction was aptly covered by the
then governing provisions of the New Civil Code. On the latter basis, therefore, we
shall resolve the issue of the nature of the contested property.
Article 160 of the New Civil Code provides that "all property of the marriage is
presumed to belong to the conjugal partnership, unless it be proved that it pertains
exclusively to the husband or to the wife."21 As a conditio sine qua non for the
operation of this article in favor of the conjugal partnership,22 the party who invokes
the presumption must first prove that the property was acquired during the marriage.23
In other words, the presumption in favor of conjugality does not operate if there is no
showing of when the property alleged to be conjugal was acquired.24 Moreover, the
presumption may be rebutted only with strong, clear, categorical and convincing
evidence.25 There must be strict proof of the exclusive ownership of one of the
spouses,26 and the burden of proof rests upon the party asserting it.27
The CA committed no error in declaring that the parcel of land belonged to the
conjugal partnership of Spouses Muriel and Leonardo Yamane. They acquired it from
Eugene Pucay on February 27, 1967,28 or specifically during the marriage.29 We then
follow the rule that proof of the acquisition of the subject property during a marriage
suffices to render the statutory presumption operative. It is clear enough that the
presently disputed piece of land pertains to the conjugal partnership.
Petitioners concede that the property was acquired during the subsistence of the
marriage of Muriel to respondent.30 Nonetheless, they insist that it belonged
exclusively to her for the following reasons:
First. Respondent never denied nor opposed her claim in Civil Case No.
505-R, which she had filed during her lifetime; or in AG-GR Sp. No. 01616
(entitled "Muriel Pucay Yamane v. Josephine Go"), that the disputed parcel
of land was her exclusive paraphernal property. They allege that his failure to
file a denial or opposition in those cases is tantamount to a judicial
admission that militates against his belated claim.
Second. The Deed of Absolute Sale of the property is in the sole name of
Muriel. Petitioners posit that, had the spouses jointly purchased this piece of

land, the document should have indicated this fact or carried the name of
respondent as buyer.
Third. The failure of respondent to redeem the parcel of land within the
redemption period after the auction sale indicated that he was not its coowner.
We will discuss the three arguments seriatim.
Unilateral Declaration
Respondent's interest cannot be prejudiced by the claim of Muriel in her Complaint in
Civil Case No. 505-R that the subject parcel of land was her paraphernal property.
Significantly, the nature of a property -- whether conjugal or paraphernal -- is
determined by law and not by the will of one of the spouses.31 Thus, no unilateral
declaration by one spouse can change the character of a conjugal property.32
Besides, the issue presented in Civil Case No. 505-R was not the nature of the
subject piece of land being levied upon, but whether Atty. Guillermo de Guzman was
entitled to a charging lien. In that case, Muriel claimed that she had not officially
retained him as counsel, and that no lawyer-client relationship had been established
between them.33

"As a general rule, all property acquired by the spouses, regardless of in whose name
the same is registered, during the marriage is presumed to belong to the conjugal
partnership of gains, unless it is proved that it pertains exclusively to the husband or
to the wife. In the case at bar, the fishpond lease right is not paraphernal having been
acquired during the coverture of the marriage between Matilde and Tiburcio, which
was on April 9, 1940. The fact that the grant was solely in the name of Matilde did not
make the property paraphernal property. What was material was the time the fishpond
lease right was acquired by the grantee, and that was during the lawful existence of
Matilde's marriage to Tiburcio.
"x x x [T]his presumption is rebuttable, but only with strong, clear and convincing
evidence. The burden of proving that the property belongs exclusively to the wife
rests upon the party asserting it. Mere assertion of the property's paraphernal nature
is not sufficient."
"The record as well as the foregoing established jurisprudence lead us to conclude
that the contested property was indeed acquired during the marriage of herein
[respondent] and Muriel. To prove that it is nonetheless paraphernal property, it is
incumbent upon [petitioners] to adduce strong, clear and convincing evidence that
Muriel bought the same with her exclusive funds. [Petitioners] failed to discharge the
burden. Nowhere in the evidence presented by them do We find any indication that
the land in question was acquired by Muriel with her exclusive funds. The
presumption not having been overthrown, the conclusion is that the contested land is
conjugal property."36

Deed and Title in the Name of One Spouse

Non-Redemption After the Auction Sale
Further, the mere registration of a property in the name of one spouse does not
destroy its conjugal nature.34Hence, it cannot be contended in the present case that,
simply because the title and the Deed of Sale covering the parcel of land were in the
name of Muriel alone, it was therefore her personal and exclusive property. In
concluding that it was paraphernal, the trial court's reliance on Stuart v. Yatco35 was
clearly erroneous.
As stated earlier, to rebut the presumption of the conjugal nature of the property,
petitioners must present clear and convincing evidence. We affirm and quote below,
for easy reference, the relevant dispositions of the CA:
"x x x. We are unable to go along with [petitioners'] contention that the subject
property was acquired by Muriel with her exclusive funds. Mere registration of the
contested property in the name of the wife is not sufficient to establish the
paraphernal nature of the property. This reminds Us of the teaching in the recent case
of Diancin v. Court of Appeals, that all the property acquired by the spouses,
regardless of in whose name the same is registered, during the marriage is presumed
to belong to the conjugal partnership of gains, unless it is proved that it pertains
exclusively to the husband or to the wife. To quote:

The non-redemption of the property by respondent within the period prescribed by law
did not, in any way, indicate the absence of his right or title to it. Contrary to
petitioners' allegation, the fact is that he filed a Third-Party Claim37 with the sheriff,
upon learning of the levy and impending auction sale. This fact was specifically
admitted by petitioners.38 Respondent claimed that the parcel of land was conjugal,
and that he could not answer for the separate obligation of his wife and her
sisters.39 Notwithstanding his claim, the disputed piece of land was sold at a public
auction on August 11, 1981. Consequently issued were a Sheriff's Certificate of Sale
dated August 12, 1981, and a Final Sheriff's Certificate of Sale dated August 26,
1982.40
Likewise, in his Opposition (Answer) to the Petition in LRC File Adm. Case No.
2288,41 respondent raised the issue of the conjugal nature of the property and
reserved his right to file an independent action to annul the auction sale. In its March
30, 1983 Order,42 however, Branch 5 of the RTC of Baguio City did not rule on either
the actual ownership or the nature of the parcel of land. Rather, it granted the Petition
to issue a new certificate of title in favor of Petitioner Josephine Mendoza Go. It found
that, under Section 75 of Presidential Decree 1529, respondent had no legal standing
to question the auction sale, because he was not the registered owner of the property.
Instead, his right to prove his claim in a separate and independent action was

upheld.43 Thus, he instituted the present case for annulment and cancellation of the
auction sale.
The foregoing points clearly explain the failure of respondent to redeem the property.
Misplaced is petitioners' emphasis on his failure to do so within the period required by
law, because redemption in this case would have been inconsistent with his claim that
the sale was invalid.44 Redemption would have served as an implied admission of the
regularity of the sale and estopped him from later impugning its validity on that
ground.45
Since petitioners have failed to present convincing evidence that the property is
paraphernal, the presumption that it is conjugal therefore stands. The next question
before us is, whether the charging lien of Atty. de Guzman may be properly enforced
against the piece of land in question.
Charging Lien Not Chargeable Against Conjugal Property
It is indisputable that the services of Atty. de Guzman were acquired during the
marriage of respondent and Muriel. The lawyer's legal services were engaged to
recover from Cypress Corporation (in Civil Case No. 1841) the balance of the
purchase price of the sale of the exclusive property of Muriel and her sisters.46 The
recovery was done during the marriage.47

piece of land may not be used to pay for her indebtedness, because her obligation
has not been shown to be one of the charges against the conjugal
partnership.50 Moreover, her rights to the property are merely inchoate prior to the
liquidation of the conjugal partnership.
Under the New Civil Code, a wife may bind the conjugal partnership only when she
purchases things necessary for the support of the family, or when she borrows money
for that purpose upon her husband's failure to deliver the needed sum;51 when
administration of the conjugal partnership is transferred to the wife by the courts52 or
by the husband;53 or when the wife gives moderate donations for charity.54 Failure to
establish any of these circumstances in the present case means that the conjugal
asset may not be bound to answer for Muriel's personal obligation.
The power of the court in executing judgments extends only to properties
unquestionably belonging to the judgment debtor alone.55 In this case, therefore, the
property -- being conjugal in nature -- cannot be levied upon.56
WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution
AFFIRMED. Costs against petitioners.
SO ORDERED.

The CA elucidated on this matter as follows:

"x x x. The contract or transaction between Atty. De Guzman and the Pucay sisters
appears to have been incurred for the exclusive interest of the latter. Muriel was
acting privately for her exclusive interest when she joined her two sisters in hiring the
services of Atty. De Guzman to handle a case for them. Accordingly, whatever
expenses were incurred by Muriel in the litigation for her and her sisters' private and
exclusive interests, are her exclusive responsibility and certainly cannot be charged
against the contested conjugal property.
"Even on the remote assumption that the conjugal property could be held liable, levy
on execution of the same property should still be denied in accordance with the ruling
in Luzon Surety Co., Inc. v. De Garcia that before a conjugal property could be held
liable for the obligation contracted by a spouse, there must be a showing of some
advantage or benefit that accrued to the conjugal partnership. Concededly, the
burden is on the [petitioners] to prove that the services rendered by Atty. De Guzman
in handling Civil Case No. 1841 for the Pucay sisters had, somehow, redounded to
the benefit of the conjugal partnership of herein [respondent] and Muriel. This onus,
[petitioners], however, failed to discharge."48
We find no reason to deviate from the CA's findings, which are amply supported by
evidence. The expenses incurred by Muriel for the recovery of the balance of the
purchase price of her paraphernal property are her exclusive responsibility.49 This

ARCADIO and MARIA LUISA CARANDANG,

Petitioners,

G.R. No. 160347

Present:

- versus HEIRS OF QUIRINO A. DE GUZMAN,

namely: MILAGROS DE GUZMAN, VICTOR DE
GUZMAN, REYNALDO DE GUZMAN, CYNTHIA
G. RAGASA and QUIRINO DE GUZMAN, JR.,
Respondents.

PANGANIBAN, C.J.
Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
Promulgated:

November 29, 2006

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

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari assailing the Court of Appeals

Decision[1] and Resolution affirming the Regional Trial Court (RTC) Decision rendering
herein petitioners Arcadio and Luisa Carandang [hereinafter referred to as spouses
Carandang] jointly and severally liable for their loan to Quirino A. de Guzman.

(3) P20,000.00 as attorneys fees;

(4) Costs of suit.

The Court of Appeals summarized the facts as follows:

[Quirino de Guzman] and [the Spouses Carandang] are
stockholders as well as corporate officers of Mabuhay Broadcasting
System (MBS for brevity), with equities at fifty four percent (54%)
and forty six percent (46%) respectively.
On November 26, 1983, the capital stock of MBS was
increased, from P500,000 to P1.5 million and P345,000 of this
increase was subscribed by [the spouses Carandang]. Thereafter,
onMarch 3, 1989, MBS again increased its capital stock, from P1.5
million to P3 million, [the spouses Carandang] yet again subscribed
to the increase. They subscribed to P93,750 worth of newly issued
capital stock.
[De Guzman] claims that, part of the payment for these
subscriptions were paid by him, P293,250 for the November 26,
1983 capital stock increase and P43,125 for the March 3, 1989
Capital Stock increase or a total of P336,375. Thus, on March 31,
1992, [de Guzman] sent a demand letter to [the spouses
Carandang] for the payment of said total amount.
[The spouses Carandang] refused to pay the amount,
contending that a pre-incorporation agreement was executed
between [Arcadio Carandang] and [de Guzman], whereby the latter
promised to pay for the stock subscriptions of the former without
cost, in consideration for [Arcadio Carandangs] technical expertise,
his newly purchased equipment, and his skill in repairing and
upgrading radio/communication equipment therefore, there is no
indebtedness on their part [sic].
On June 5, 1992, [de Guzman] filed his complaint, seeking
to recover the P336,375 together with damages. After trial on the
merits, the trial court disposed of the case in this wise:
WHEREFORE, premises considered,
judgment is hereby rendered in favor of [de
Guzman]. Accordingly, [the spouses Carandang]
are ordered to jointly and severally pay [de
Guzman], to wit:
(1) P336,375.00
representing
spouses Carandangs] loan to de Guzman;

(2) interest on the preceding amount at

the rate of twelve percent (12%) per annum
from June 5, 1992 when this complaint was filed
until the principal amount shall have been fully
paid;

[the

The spouses Carandang appealed the RTC Decision to the Court of

Appeals, which affirmed the same in the 22 April 2003 assailed Decision:
WHEREFORE, in view of all the foregoing the assailed
Decision is hereby AFFIRMED. No costs.[2]

The Motion for Reconsideration filed by the spouses Carandang was

similarly denied by the Court of Appeals in the 6 October 2003 assailed Resolution:
WHEREFORE, in view thereof, the motion for
reconsideration is hereby DENIED and our Decision of April 22,
2003, which is based on applicable law and jurisprudence on the
matter is hereby AFFIRMED and REITERATED.[3]

The spouses Carandang then filed before this Court the instant Petition for
Review on Certiorari, bringing forth the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED MANIFEST ERROR IN FAILING TO STRICTLY
COMPLY WITH SECTION 16, RULE 3 OF THE 1997 RULES OF
CIVIL PROCEDURE.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
SERIOUSLY ERRED IN ITS FINDING THAT THERE IS AN
ALLEGED LOAN FOR WHICH PETITIONERS ARE LIABLE,
CONTRARY TO EXPRESS PROVISIONS OF BOOK IV, TITLE XI,
OF THE NEW CIVIL CODE PERTAINING TO LOANS.
III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS

SERIOUSLY ERRED IN FINDING THAT THE RESPONDENTS
WERE ABLE TO DISCHARGE THEIR BURDEN OF PROOF, IN
COMPLETE DISREGARD OF THE REVISED RULES ON
EVIDENCE.

the specified period, the court may order the opposing party, within
a specified time, to procure the appointment of an executor or
administrator for the estate of the deceased and the latter shall
immediately appear for and on behalf of the deceased. The court
charges in procuring such appointment, if defrayed by the opposing
party, may be recovered as costs.

IV.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR WHEN IT FAILED TO APPLY
SECTIONS 2 AND 7, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
V.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
SERIOUSLY ERRED IN FINDING THAT THE PURPORTED
LIABILITY OF PETITIONERS ARE JOINT AND SOLIDARY, IN
VIOLATION OF ARTICLE 1207 OF THE NEW CIVIL CODE.[4]
Whether or not the RTC Decision is
void for failing to comply with
Section 16, Rule 3 of the Rules of
Court

The spouses Carandang claims that the Decision of the RTC, having been
rendered after the death of Quirino de Guzman, is void for failing to comply with
Section 16, Rule 3 of the Rules of Court, which provides:
SEC. 16. Death of party; duty of counsel. Whenever a
party to a pending action dies, and the claim is not thereby
extinguished, it shall be the duty of his counsel to inform the court
within thirty (30) days after such death of the fact thereof, and to
give the name and address of his legal representative or
representatives. Failure of counsel to comply with this duty shall be
a ground for disciplinary action.
The heirs of the deceased may be allowed to be
substituted for the deceased, without requiring the appointment of
an executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.
The court shall forthwith order the legal representative or
representatives to appear and be substituted within a period of
thirty (30) days from notice.
If no legal representative is named by the counsel for the
deceased party, or if the one so named shall fail to appear within

The spouses Carandang posits that such failure to comply with the above
rule renders void the decision of the RTC, in adherence to the following
pronouncements in Vda. de Haberer v. Court of Appeals[5] and Ferreria v. Vda. de
Gonzales[6]:
Thus, it has been held that when a party dies in an action that
survives and no order is issued by the court for the appearance of
the legal representative or of the heirs of the deceased in
substitution of the deceased, and as a matter of fact no substitution
has ever been effected, the trial held by the court without such legal
representatives or heirs and the judgment rendered after such trial
are null and void because the court acquired no jurisdiction over the
persons of the legal representatives or of the heirs upon whom the
trial and judgment would be binding.[7]
In the present case, there had been no court order for the
legal representative of the deceased to appear, nor had any such
legal representative appeared in court to be substituted for the
deceased; neither had the complainant ever procured the
appointment of such legal representative of the deceased, including
appellant, ever asked to be substituted for the deceased. As a
result, no valid substitution was effected, consequently, the court
never acquired jurisdiction over appellant for the purpose of making
her a party to the case and making the decision binding upon her,
either personally or as a representative of the estate of her
deceased mother.[8]

However, unlike jurisdiction over the subject matter which is conferred by law
and is not subject to the discretion of the parties, [9] jurisdiction over the person of the
parties to the case may be waived either expressly or impliedly.[10] Implied waiver
comes in the form of either voluntary appearance or a failure to object.[11]
In the cases cited by the spouses Carandang, we held that there had been
no valid substitution by the heirs of the deceased party, and therefore the judgment
cannot be made binding upon them. In the case at bar, not only do the heirs of de
Guzman interpose no objection to the jurisdiction of the court over their persons; they

are actually claiming and embracing such jurisdiction. In doing so, their waiver is not
even merely implied (by their participation in the appeal of said Decision), but express

Before proceeding with the substantive aspects of the case, however, there

(by their explicit espousal of such view in both the Court of Appeals and in this

is still one more procedural issue to tackle, the fourth issue presented by the spouses

Court). The heirs of de Guzman had no objection to being bound by the Decision of

Carandang on the non-inclusion in the complaint of an indispensable party.

the RTC.
Thus, lack of jurisdiction over the person, being subject to waiver, is a
personal defense which can only be asserted by the party who can thereby waive it
by silence.
It also pays to look into the spirit behind the general rule requiring a formal
substitution of heirs. The underlying principle therefor is not really because
substitution of heirs is a jurisdictional requirement, but because non-compliance
therewith results in the undeniable violation of the right to due process of those who,
though not duly notified of the proceedings, are substantially affected by the decision
rendered therein.[12] Such violation of due process can only be asserted by the
persons whose rights are claimed to have been violated, namely the heirs to whom
the adverse judgment is sought to be enforced.
Care

should,

however,

be

taken

in

applying

the

foregoing

conclusions. In People v. Florendo,[13] where we likewise held that the proceedings

that took place after the death of the party are void, we gave another reason for such
nullity: the attorneys for the offended party ceased to be the attorneys for the
deceased upon the death of the latter, the principal x x x. Nevertheless, the case at
bar had already been submitted for decision before the RTC on 4 June 1998, several
months before the passing away of de Guzman on19 February 1999. Hence, no
further proceedings requiring the appearance of de Guzmans counsel were
conducted before the promulgation of the RTC Decision. Consequently, de Guzmans
counsel cannot be said to have no authority to appear in trial, as trial had already
ceased upon the death of de Guzman.
In sum, the RTC Decision is valid despite the failure to comply with Section
16, Rule 3 of the Rules of Court, because of the express waiver of the heirs to the
jurisdiction over their persons, and because there had been, before the promulgation
of the RTC Decision, no further proceedings requiring the appearance of de Guzmans
counsel.

Whether or not the RTC should have

dismissed the case for failure to state
a cause of action, considering that
Milagros de Guzman, allegedly an
indispensable
party,
was
not
included as a party-plaintiff

The spouses Carandang claim that, since three of the four checks used to
pay their stock subscriptions were issued in the name of Milagros de Guzman, the
latter should be considered an indispensable party. Being such, the spouses
Carandang claim, the failure to join Mrs. de Guzman as a party-plaintiff should cause
the dismissal of the action because (i)f a suit is not brought in the name of or against
the real party in interest, a motion to dismiss may be filed on the ground that the
complaint states no cause of action.[14]
The Court of Appeals held:
We disagree. The joint account of spouses Quirino A de
Guzman and Milagros de Guzman from which the four (4) checks
were drawn is part of their conjugal property and under both the
Civil Code and the Family Code the husband alone may institute an
action for the recovery or protection of the spouses conjugal
property.
Thus, in Docena v. Lapesura [355 SCRA 658], the
Supreme Court held that x x x Under the New Civil Code, the
husband is the administrator of the conjugal partnership. In fact, he
is the sole administrator, and the wife is not entitled as a matter of
right to join him in this endeavor. The husband may defend the
conjugal partnership in a suit or action without being joined by the
wife. x x x Under the Family Code, the administration of the
conjugal property belongs to the husband and the wife
jointly. However, unlike an act of alienation or encumbrance where
the consent of both spouses is required, joint management or
administration does not require that the husband and wife always
act together. Each spouse may validly exercise full power of
management alone, subject to the intervention of the court in
proper cases as provided under Article 124 of the Family Code. x x
x.

such, Quirino de Guzman, being a co-owner of specific partnership property,[22] is

The Court of Appeals is correct. Petitioners erroneously interchange the
terms real party in interest and indispensable party. A real party in interest is the
party who stands to be benefited or injured by the judgment of the suit, or the party
entitled to the avails of the suit. [15] On the other hand, an indispensable party is a
party in interest without whom no final determination can be had of an action,[16] in
contrast to a necessary party, which is one who is not indispensable but who ought
to be joined as a party if complete relief is to be accorded as to those already parties,
or for a complete determination or settlement of the claim subject of the action. [17]
The spouses Carandang are indeed correct that (i)f a suit is not brought in
the name of or against the real party in interest, a motion to dismiss may be filed on
the ground that the complaint states no cause of action. [18] However, what dismissal
on this ground entails is an examination of whether the parties presently pleaded are
interested in the outcome of the litigation, and not whether all persons interested in
such outcome are actually pleaded. The latter query is relevant in discussions
concerning indispensable

and

necessary

parties,

but not in

discussions

concerning real parties in interest. Both indispensable and necessary parties are
considered as real parties in interest, since both classes of parties stand to be
benefited or injured by the judgment of the suit.
Quirino and Milagros de Guzman were married before the effectivity of the
Family Code on 3 August 1988. As they did not execute any marriage settlement, the
regime of conjugal partnership of gains govern their property relations.[19]
All property acquired during the marriage, whether the acquisition appears to
have been made, contracted or registered in the name of one or both spouses, is
presumed to be conjugal unless the contrary is proved.[20] Credits are personal
properties,[21] acquired during the time the loan or other credit transaction was
executed. Therefore, credits loaned during the time of the marriage are presumed to
be conjugal property.
Consequently, assuming that the four checks created a debt for which the
spouses Carandang are liable, such credits are presumed to be conjugal
property. There being no evidence to the contrary, such presumption subsists. As

certainly a real party in interest.Dismissal on the ground of failure to state a cause of

action, by reason that the suit was allegedly not brought by a real party in interest, is
therefore unwarranted.
So now we come to the discussion concerning indispensable and necessary
parties. When an indispensable party is not before the court, the action should
likewise be dismissed.[23] The absence of an indispensable party renders all
subsequent actuations of the court void, for want of authority to act, not only as to the
absent parties but even as to those present.[24] On the other hand, the non-joinder of
necessary parties do not result in the dismissal of the case. Instead, Section 9, Rule 3
of the Rules of Court provides for the consequences of such non-joinder:
Sec. 9. Non-joinder of necessary parties to be pleaded.
Whenever in any pleading in which a claim is asserted a necessary
party is not joined, the pleader shall set forth his name, if known,
and shall state why he is omitted. Should the court find the reason
for the omission unmeritorious, it may order the inclusion of the
omitted necessary party if jurisdiction over his person may be
obtained.
The failure to comply with the order for his inclusion,
without justifiable cause, shall be deemed a waiver of the claim
against such party.
The non-inclusion of a necessary party does not prevent
the court from proceeding in the action, and the judgment rendered
therein shall be without prejudice to the rights of such necessary
party.
Non-compliance with the order for the inclusion of a necessary party would
not warrant the dismissal of the complaint. This is an exception to Section 3, Rule 17
which allows the dismissal of the complaint for failure to comply with an order of the
court, as Section 9, Rule 3 specifically provides for the effect of such non-inclusion: it
shall not prevent the court from proceeding in the action, and the judgment rendered
therein shall be without prejudice to the rights of such necessary party. Section 11,
Rule 3 likewise provides that the non-joinder of parties is not a ground for the
dismissal of the action.

Other than the indispensable and necessary parties, there is a third set of
parties: the pro-forma parties, which are those who are required to be joined as coparties in suits by or against another party as may be provided by the applicable

Art. 108. The conjugal partnership shall be governed by

the rules on the contract of partnership in all that is not in conflict
with what is expressly determined in this Chapter or by the spouses
in their marriage settlements.

substantive law or procedural rule.[25] An example is provided by Section 4, Rule 3 of

the Rules of Court:

This provision is practically the same as the Civil Code provision it superceded:

Sec. 4. Spouses as parties. Husband and wife shall sue or

be sued jointly, except as provided by law.

Art. 147. The conjugal partnership shall be governed by

the rules on the contract of partnership in all that is not in conflict
with what is expressly determined in this Chapter.

Pro-forma parties can either be indispensable, necessary or neither

indispensable nor necessary. The third case occurs if, for example, a husband files an

In this connection, Article 1811 of the Civil Code provides that [a] partner is a

action to recover a property which he claims to be part of his exclusive property. The

co-owner with the other partners of specific partnership property. Taken with the

wife may have no legal interest in such property, but the rules nevertheless require
that she be joined as a party.

presumption of the conjugal nature of the funds used to finance the four checks used
to pay for petitioners stock subscriptions, and with the presumption that the credits

In cases of pro-forma parties who are neither indispensable nor necessary,

the general rule under Section 11, Rule 3 must be followed: such non-joinder is not a
ground for dismissal. Hence, in a case concerning an action to recover a sum of

themselves are part of conjugal funds, Article 1811 makes Quirino and Milagros de
Guzman co-owners of the alleged credit.

money, we held that the failure to join the spouse in that case was not a jurisdictional
defect.[26] The non-joinder of a spouse does not warrant dismissal as it is merely a
formal requirement which may be cured by amendment.

[27]

Being co-owners of the alleged credit, Quirino and Milagros de Guzman

may separately bring an action for the recovery thereof. In the fairly recent cases
of Baloloy v. Hular[28] and Adlawan v. Adlawan,[29] we held that, in a co-ownership, co-

Conversely, in the instances that the pro-forma parties are also

owners may bring actions for the recovery of co-owned property without the necessity

indispensable or necessary parties, the rules concerning indispensable or necessary

of joining all the other co-owners as co-plaintiffs because the suit is presumed to have

parties, as the case may be, should be applied. Thus, dismissal is warranted only if

been filed for the benefit of his co-owners. In the latter case and in that of De Guia v.

the pro-forma party not joined in the complaint is an indispensable party.

Court of Appeals,[30] we also held that Article 487 of the Civil Code, which provides
that any of the co-owners may bring an action for ejectment, covers all kinds of action

Milagros de Guzman, being presumed to be a co-owner of the credits

for the recovery of possession.[31]

allegedly extended to the spouses Carandang, seems to be either an indispensable

In sum, in suits to recover properties, all co-owners are real parties in

or a necessary party. If she is an indispensable party, dismissal would be proper. If

interest. However, pursuant to Article 487 of the Civil Code and relevant

she is merely a necessary party, dismissal is not warranted, whether or not there was

jurisprudence, any one of them may bring an action, any kind of action, for the

an order for her inclusion in the complaint pursuant to Section 9, Rule 3.

recovery of co-owned properties. Therefore, only one of the co-owners, namely the
co-owner who filed the suit for the recovery of the co-owned property, is an

Article 108 of the Family Code provides:

indispensable party thereto. The other co-owners are not indispensable parties. They
are not even necessary parties, for a complete relief can be accorded in the suit even

without their participation, since the suit is presumed to have been filed for the benefit
of all co-owners.[32]
We therefore hold that Milagros de Guzman is not an indispensable party in
the action for the recovery of the allegedly loaned money to the spouses
Carandang. As such, she need not have been impleaded in said suit, and dismissal of

for not reimbursing the latter is the alleged pre-incorporation

agreement, to which they offer no clear proof as to its existence.
It is a basic rule in evidence that each party must prove his
affirmative allegation. Thus, the plaintiff or complainant has to prove
his affirmative allegations in the complaints and the defendant or
respondent has to prove the affirmative allegations in his affirmative
defenses and counterclaims.[33]

the suit is not warranted by her not being a party thereto.

The spouses Carandang, however, insist that the de Guzmans have not
Whether or not respondents were
able to prove the loan sought to be
collected from petitioners
In the second and third issues presented by the spouses Carandang, they
claim that the de Guzmans failed to prove the alleged loan for which the spouses
Carandang were held liable. As previously stated, spouses Quirino and Milagros de
Guzman paid for the stock subscriptions of the spouses Carandang, amounting
to P336,375.00. The de Guzmans claim that these payments were in the form of
loans and/or advances and it was agreed upon between the late Quirino de Guzman,
Sr. and the spouses Carandang that the latter would repay him. Petitioners, on the
other hand, argue that there was an oral pre-incorporation agreement wherein it was

proven the loan itself, having presented evidence only of the payment in favor of the
Carandangs.They claim:
It is an undeniable fact that payment is not equivalent to a loan. For
instance, if Mr. A decides to pay for Mr. Bs obligation, that payment
by Mr. A cannot, by any stretch of imagination, possibly mean that
there is now a loan by Mr. B to Mr. A. There is a possibility that such
payment by Mr. A is purely out of generosity or that there is a
mutual agreement between them. As applied to the instant case,
that mutual agreement is the pre-incorporation agreement (supra)
existing between Mr. de Guzman and the petitioners --- to the effect
that the former shall be responsible for paying stock subscriptions
of the latter. Thus, when Mr. de Guzman paid for the stock
subscriptions of the petitioners, there was no loan to speak of, but
only a compliance with the pre-incorporation agreement.[34]

agreed that Arcardio Carandang would always maintain his 46% equity participation
in the corporation even if the capital structures were increased, and that Quirino de
Guzman would personally pay the equity shares/stock subscriptions of Arcardio
Carandang with no cost to the latter.
On this main issue, the Court of Appeals held:
[The spouses Carandang] aver in its ninth assigned error
that [the de Guzmans] failed to prove by preponderance of
evidence, either the existence of the purported loan or the nonpayment thereof.
Simply put, preponderance of evidence means that the
evidence as a whole adduced by one side is superior to that of the
other. The concept of preponderance of evidence refers to
evidence that is of greater weight, or more convincing, than that
which is offered in opposition to it; it means probability of truth.
[The spouses Carandang] admitted that it was indeed [the
de Guzmans] who paid their stock subscriptions and their reason

The spouses Carandang are mistaken. If indeed a Mr. A decides to pay for a
Mr. Bs obligation, the presumption is that Mr. B is indebted to Mr. A for such amount
that has been paid. This is pursuant to Articles 1236 and 1237 of the Civil Code,
which provide:
Art. 1236. The creditor is not bound to accept payment or
performance by a third person who has no interest in the fulfillment
of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the
debtor what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can recover only
insofar as the payment has been beneficial to the debtor.
Art. 1237. Whoever pays on behalf of the debtor without
the knowledge or against the will of the latter, cannot compel the
creditor to subrogate him in his rights, such as those arising from a
mortgage, guarantee, or penalty.

Articles 1236 and 1237 are clear that, even in cases where the debtor has

late Quirino A. de Guzman, Sr. in their behalf, they said that they had already paid for

no knowledge of payment by a third person, and even in cases where the third person

it thereby negating their own defense that there was a pre-incorporation agreement

paid against the will of the debtor, such payment would produce a debt in favor of the

excusing themselves from paying Mr. de Guzman the amounts he advanced or

paying third person. In fact, the only consequences for the failure to inform or get the

loaned to them. This basic and irrefutable fact can be gleaned from their testimonies

consent of the debtor are the following: (1) the third person can recover only insofar

which the private respondents are quoting for easy reference:

as the payment has been beneficial to the debtor; and (2) the third person is not
subrogated to the rights of the creditor, such as those arising from a mortgage,

a. With respect to the testimony of Ma. Luisa Carandang

[35]

guarantee or penalty.

We say, however, that this is merely a presumption. By virtue of the parties

freedom to contract, the parties could stipulate otherwise and thus, as suggested by
the spouses Carandang, there is indeed a possibility that such payment by Mr. A was
purely out of generosity or that there was a mutual agreement between them. But

Q: Now, can you tell this Honorable Court how do you feel with
respect to the Complaint of the plaintiff in this case
charging you that you paid for this year and asking enough
to paid (sic) your tax?
A: We have paid already, so, we are not liable for anything payment
(sic).[41]

such mutual agreement, being an exception to presumed course of events as laid

down by Articles 1236 and 1237, must be adequately proven.
The de Guzmans have successfully proven their payment of the spouses
Carandangs stock subscriptions. These payments were, in fact, admitted by the
spouses Carandang.Consequently, it is now up to the spouses Carandang to prove
the existence of the pre-incorporation agreement that was their defense to the
purported loan.
Unfortunately for the spouses Carandang, the only testimony which touched
on the existence and substance of the pre-incorporation agreement, that of petitioner
Arcardio Carandang, was stricken off the record because he did not submit himself to
a cross-examination of the opposing party. On the other hand, the testimonies of
Romeo Saavedra,[36] Roberto S. Carandang,[37] Gertrudes Z. Esteban,[38] Ceferino

b. With respect to the testimony of Arcadio Carandang

Q: How much?
A: P40,000.00 to P50,000.00 per month.
Q: The plaintiff also claimed thru witness Edgar Ragasa, that there
were receipts issued for the payment of your shares; which
receipts were marked as Exhibits G to L (Plaintiff).
Im showing to you these receipts so marked by the plaintiff as their
exhibits which were issued in the name of Ma. Luisa
Carandang, your wife; and also, Arcadio M.
Carandang. Will you please go over this Official Receipt
and state for the records, who made for the payment stated
in these receipts in your name?
A: I paid for those shares.[42]

Basilio,[39] and Ma. Luisa Carandang[40] touched on matters other than the existence
and substance of the pre-incorporation agreement. So aside from the fact that these
witnesses had no personal knowledge as to the alleged existence of the pre-

There being no testimony or documentary evidence proving the existence of

incorporation agreement, the testimonies of these witnesses did not even mention the

the pre-incorporation agreement, the spouses Carandang are forced to rely upon an

existence of a pre-incorporation agreement.

alleged admission by the original plaintiff of the existence of the pre-incorporation

agreement.

Worse, the testimonies of petitioners Arcadio Carandang and Ma. Luisa Carandang
even contradicted the existence of a pre-incorporation agreement because when they
were asked by their counsel regarding the matter of the check payments made by the

Petitioners claim that the late Quirino A. de Guzman, Sr. had admitted the
existence of the pre-incorporation agreement by virtue of paragraphs 13 and 14 of

Meanwhile, paragraphs 3 and 4 of private respondents Reply dated 29 July

1992 state in full:

their Answer and paragraph 4 of private respondents Reply.

3. Plaintiffs admits the allegation in paragraph 13.1 of the
Answer only insofar the plaintiff and defendant Arcadio M.
Carandang
organized
a
corporation
known
as
MabuhayBroadcasting Systems, Inc. Plaintiff specifically denies the
other allegations in paragraph 13 of the Answer, the same being
devoid of any legal or factual bases. The truth of the matter is that
defendant Arcadio M. Carandang was not able to pay plaintiff the
agreed amount of the lease for a number of months forcing the
plaintiff to terminate lease. Additionally, the records would show
that it was the defendant Arcadio M. Carandang who proposed a
joint venture with the plaintiff.

Paragraphs 13 and 14 of petitioners Answer dated 7 July 1992 state in full:

13. Sometime in November, 1973 or thereabout, herein plaintiff
invited defendant Arcadio M. Carandang to a joint venture
by pooling together their technical expertise, equipments,
financial resources and franchise. Plaintiff proposed to
defendant and mutually agreed on the following:
1.

That they would organize a corporation known as

Mabuhay Broadcasting Systems, Inc.

2.

Considering the technical expertise and talent of

defendant Arcadio M. Carandang and his new equipments
he bought, and his skill in repairing and modifying
radio/communication equipments into high proficiency,
said defendant would have an equity participation in the
corporation of 46%, and plaintiff 54% because of his
financial resources and franchise.

3.

That defendant would always maintain his 46% equity

participation in the corporation even if the capital
structures are increased, and that plaintiff would personally
pay the equity shares/stock subscriptions of defendant
with no cost to the latter.

4. Plaintiff admits the allegations in paragraph 14 of the

Answer.[44]

That because of defendants expertise in the trade

including the marketing aspects, he would be the
President and General Manager, and plaintiff the
Chairman of the Board.

Guzman stated that he admitted paragraph 14 of the Answer, which incidentally

4.

5.

That considering their past and trustworthy relations, they

would maintain such relations in the joint venture without
any mental reservation for their common benefit and
success of the business.

14. Having mutually agreed on the above arrangements, the single

proprietorship of plaintiff was immediately spun-off into a
corporation now known as Mabuhay Broadcasting System,
Inc.The incorporators are plaintiff and his family
members/nominees controlling jointly 54% of the stocks
and defendant Arcadio M. Carandang controlling singly
46% as previously agreed.[43]

It appears that plaintiff agreed to the formation of the

corporation principally because of a directive of then President
Marcos indicating the need to broaden the ownership of radio
broadcasting stations. The plaintiff owned the franchise, the radio
transmitter, the antenna tower, the building containing the radio
transmitter and other equipment. Verily, he would be placed in a
great disadvantage if he would still have to personally pay for the
shares of defendant Arcadio M. Carandang.

In effect, the spouses Carandang are relying on the fact that Quirino de
contained the opening clause (h)aving mutually agreed on the above arrangements, x
x x.
Admissions, however, should be clear and unambiguous. This purported
admission by Quirino de Guzman reeks of ambiguity, as the clause (h)aving mutually
agreed on the above arrangements, seems to be a mere introduction to the statement
that the single proprietorship of Quirino de Guzman had been converted into a
corporation. If Quirino de Guzman had meant to admit paragraph 13.3, he could have
easily said so, as he did the other paragraphs he categorically admitted. Instead,
Quirino de Guzman expressly stated the opposite: that (p)laintiff specifically denies
the other allegations of paragraph 13 of the Answer.[45] The Reply furthermore states
that the only portion of paragraph 13 which Quirino de Guzman had admitted is

paragraph 13.1, and only insofar as it said that Quirino de Guzman and Arcardio
Carandang organized Mabuhay Broadcasting Systems, Inc.

[46]

The Court of Appeals is correct insofar as it held that when the spouses are
sued for the enforcement of the obligation entered into by them, they are being
impleaded in their capacity as representatives of the conjugal partnership and not as

All the foregoing considered, we hold that Quirino de Guzman had not

independent debtors. Hence, either of them may be sued for the whole amount,

admitted the alleged pre-incorporation agreement. As there was no admission, and as

similar to that of a solidary liability, although the amount is chargeable against their

the testimony of Arcardio Carandang was stricken off the record, we are constrained

conjugal partnership property. Thus, in the case cited by the Court of Appeals, Alipio

to rule that there was no pre-incorporation agreement rendering Quirino de Guzman

v. Court of Appeals,[48] the two sets of defendant-spouses therein were held liable

liable for the spouses Carandangs stock subscription. The payment by the spouses

for P25,300.00 each, chargeable to their respective conjugal partnerships.

de Guzman of the stock subscriptions of the spouses Carandang are therefore by

way of loan which the spouses Carandang are liable to pay.

WHEREFORE, the Decision of the Court of Appeals, affirming the judgment

rendered

Whether or not the liability of the

spouses Carandang is joint and
solidary
Finally, the Court of Appeals also upheld the RTC Decision insofar as it

against

(1)

It must be noted that for marriages governed by the rules

of conjugal partnership of gains, an obligation entered into by the
husband and wife is chargeable against their conjugal partnership
and it is the partnership, which is primarily bound for its
repayment. Thus, when the spouses are sued for the enforcement
of the obligation entered into by them, they are being impleaded in
their capacity as representatives of the conjugal partnership and
not as independent debtors, such that the concept of joint and
solidary liability, as between them, does not apply.[47]

is

hereby AFFIRMED with

the

P336,375.00 representing the spouses Carandangs loan to

Quirino de Guzman; and

(2)

It is apparent from the facts of the case that [the spouses

Carandang] were married way before the effectivity of the Family
Code hence; their property regime is conjugal partnership under the
Civil Code.

Carandang,

following amounts from their conjugal partnership properties:

With regards (sic) the tenth assigned error, [the spouses

Carandang] contend that:

Furthermore, the purported obligation of [the spouses

Carandang] does not at all qualify as one of the obligations required
by law to be solidary x x x.

spouses

following MODIFICATION: The spouses Carandang are ORDERED to pay the

decreed a solidary liability. According to the Court of Appeals:

There is absolutely no evidence, testimonial or

documentary, showing that the purported obligation of [the spouses
Carandang] is joint and solidary. x x x

the

Interest on the preceding amount at the rate of twelve percent

(12%) per annum from 5 June 1992 when the complaint was filed
until the principal amount can be fully paid; and

(3)

P20,000.00 as attorneys fees.

No costs.
SO ORDERED.
G.R. No. L-22383

October 6, 1924

THE PHILIPPINE NATIONAL BANK, plaintiff-appellee,

vs.
MARGARITA QUINTOS E YPARRAGUIRRE and ANGEL A.
ANSALSO, defendants-appellants.
Angel A. Ansaldo for appellants.
Roman J. Lacson for appellee.

VILLAMOR, J.:

The appellants pray for the dismissal of the complaint with costs against the plaintiff,
alleging that the judgment appealed from is erroneous: (1) Because it holds that the
document Exhibit A does not contain anything that makes the plaintiff agent of the
defendants; (2) because it finds without any ground that the defendant were husband
and wife when they executed said document; (3) because upon this finding, it
considers unnecessary to discuss whether or not the obligation evidence by said
document is solidary between the defendants (4) because to maintain such opinion
amounts to compelling the defendants to comply with said obligation in a manner
distinct from that stipulated in the contract; and (5) because it sanctions an arbitrary,
unjust and illegal procedure.
The Honorable Pedro Concepcion, judge, who tried this case, rendered decision in
the following terms:
The plaintiff seeks to recover of the defendants the sum of P31,785.96, the
amount of an alleged overdraft against them and in favor of the plaintiff
bank, with interest thereon at 8 per cent per annum from October 1, 1922.
It appears from the evidence that in a document dated June 20, 1918, the
Philippine National Bank granted the defendants a credit to the amount of
P31,284, and to secure the payment thereof, as well as the interest and
costs, the defendants mortgaged and pledged to the bank certain certificates
of one hundred fifty-eight shares of stock of the Bank of the Philippine
Islands of the nominal value of P200 each. Later on, a certificate of fifty
shares and another of forty were substituted by others of 10 and 30 shares,
respectively. Besides these shares, the defendants delivered to the bank, as
additional securities, fifty shares of stock of the "Compaia Naviera" of the
nominal value of P100 each; eighty shares of stock of the Davao Agriculture
and Commercial Company of P100 each, and 10 second liberty bonds.
These bonds were sold by the plaintiff bank on or before August 19, 1922,
having realized the sum of P2,360 from the sale thereof. (Exhibit 3.)
On August 21, 1920, the herein defendant, Mr. Angel Ansaldo, in his answer
to a letter of the bank addressed to him or to his wife, his codefendant
Margarita Q. de Ansaldo, stated, as may be seen in Exhibit B, that the
balance in his current account in favor of said bank in the sum of
P33,558.445 on July 31, 1920, had been examined by him and found
correct. This balance with the interest due from the said date up to
September 30, 1922, amounted to P41,212.05 and after deducting the credit
and deposits from August 1, 1920, to September 30, 1922, which amount to
P9,426.09, there remains a balance of P31,785.96, payment of which is
claimed in the complaint.
And the complaint was filed because between April 2, 1921, and July 22,
192, the date of the letter Exhibit 6, the defendant Mr. Ansaldo was several
times required to pay his debt, the securities given having been found to be

insufficient to secure the payment of his obligations, but the defendants

failed to give the new additional securities demanded.
The defendants discuss in the first place the nature of the obligation sued
on, maintaining that the same is not of a solidary nature because, say they,
there is nothing in it that expressly determines said character, and therefore
it binds only those who have contacted the same to the extent of their share
in said obligation; and in connection with this point it was attempted to prove
that the defendant Margarita Q. de Ansaldo, making use of the credit
granted, has received from the bank only the sum of P10,000 (Exhibit 5). As
an answer to the question raised the attorney for the bank calls attention to
Exhibit A where it appears that the defendant Angel A. Ansaldo "and or"
Margarita A. de Ansaldo, both or either of them indiscriminately, could sign
checks against the bank in their current account.
The court is of the opinion that it is not necessary to discuss whether the
obligation in question is solidary or joint, because in either case this debt is
in the last analysis chargeable to the conjugal partnership of the defendant
spouses. According to article 1408 of the Civil Code, all the debts and
obligations contracted during the marriage by the husband, as well as those
incurred by the wife in those cases in which she may legally bind the
partnership, are chargeable to the conjugal partnership. In the instant case,
the defendant Margarita Q. de Ansaldo joined her husband in the execution
of the document, evidencing the obligation in question, on June 20, 1918,
Exhibit A. (See Joaquin vs. Avellana, 11 Phil., 249; Fulgencio vs. Gatchalian,
21 Phil., 252; Falcon vs. Manzano, 15 Phil., 441.)
Another question raised, although indirectly, by the defendants is that, this
being, as it is, a case of a loan for an indefinite period of time they were not
asked to pay in accordance with law, articles 313 and 316 of the Code of
Commerce. This contention is untenable. Under the provision of section 33
of Act No. 2938, amending the charter of the Philippine National Bank, if,
from any cause whatsoever, any of the securities specified for the loans
provided for therein, or accepted by said bank as security for loans should
decline or depreciate in market value wholly or in part, said bank may
demand additional securities or may forthwith declare such obligation due
and payable; and it is a fact admitted by the defendants themselves that the
securities given by them have suffered a considerable depreciation and it is
a fact proven that they were required to give additional securities but failed
to do so.
If the securities were found to have depreciated in value, say the
defendants, "the plaintiff bank's remedy was the one provided in the
document executed by the defendants in its favor and in accordance with its
own charter." According to the contract, it may hold or sell the securities
above mentioned although as an agent (articles 1710, 1713, 1714, 1718,
1719, and 1796 of the Civil Code); and in accordance with its charter

(section 42, Act No. 2612), said sale may be ordered 15 days after a
demand in writing is made upon the debtor to increase the amount thereof, if
in the meantime said debtor should have failed to comply with this
requirement . . . "The plaintiff, say they, cannot be considered authorized to
be negligent, as soon as it shall have learned that the securities had begun
to depreciate, as compared with the value they had when they were
delivered; for then it neither would comply with the agency stipulated in the
document in its favor, which would render it liable, nor could in justice claim
from the debtor what by its own negligence it may have failed to receive." As
an answer to this, it may be said that:
". . . it must be borne in mind that it is a recognized doctrine in the
matter of suretyship that with respect to the surety, the creditor is
under no obligation to display any diligence in the enforcement of
his rights as a creditor. His mere inaction, indulgence, passiveness,
or delay in proceeding against the principal debtor, or the fact that
he did not enforce the guaranty or apply to the payment of such
funds as were available, constitute no defense at all for the surety,
unless the contract expressly requires diligence and promptness on
the part of the creditor, which is not in the case in the present
action." (Clark vs. Sellner, 42 Phil., 384.
Furthermore, there is nothing in the document evidencing the contract which
makes the plaintiff, as the defendants believe, their agent with the obligation
to sell the securities to the document, has a right, not an obligation, to elect
to enforce the securities in the manner it now does by bringing this action.
As to the amount of the obligation, the defendants argue that the
acknowledgment of the debit balance on July 31, 1920, in the amount of
P33,548.55, (Exhibit B), is not any evidence that may legally bind the
defendant Margarita Q. de Ansaldo, who has not accepted it as correct. The
truth, however, is that the defendant Mr. Ansaldo who gave his conformity
with the aforesaid balance is the husband of the other defendant and the
legal manager of the property of the conjugal partnership which is liable for
the payment of this debt.
The interest computed was likewise discussed in this case, the defendants
claiming that the same was not fixed with their consent, nor does there exist,
say they, any proof that it was ever fixed by the Board of Directors of the
bank. It appears, however, from the evidence of the plaintiff that the National
Bank had authorized various officers thereof to fix certain rate of interest on
certain occasions; as for instance, the rate of interest for the months of
August to September, 1920, was raised from 12 to 8 per cent. At all events,
we believe that the defendants have no right to raise this question because
they have paid interest at the rate of 9 per cent per annum, as appears from
the document marked Exhibit I.

For all of the foregoing, judgment is rendered sentencing the defendants to

pay the plaintiff bank the sum of thirty-one thousand seven hundred eightyfive pesos and ninety-six centavos (P31,785.96), with interest thereon at the
rate of 8 per cent per annum from October 1, 1922, until full payment, with
the costs; in case of failure to pay, let the certificates of shares described in
Exhibit A be sold, and if the proceeds of the sale of said shares are not
sufficient to cover the whole amount of the debt, let an execution issue
against any property of the conjugal partnership of the defendants and, in
default thereof, against the private property of each of them, sufficient to
cover the whole amount of the balance that may be remaining unpaid.
So ordered.
G.R. No. L-25788 April 30, 1980
PACIFICO C. DEL MUNDO, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, ANTONIO, EUGENIA, DELFIN and
MARCIANA, all surnamed ALVAREZ, and SIMPLICIO BALCOS, respondents.
Manuel P. Dumatol for petitioner.
Balcos & Salazar for respondents.

DE CASTRO, J.:
Petitioner seeks in this petition for certiorari to reverse in toto the decision of the Court
of Appeals promulgated on 3 January 1966 in CA-G. R. No. 28276-R, entitled
"Antonio Alvarez, Eugenia Alvarez, Delfin Alvarez, Marciana Alvarez, and Simplicio
Balcos, plaintiffs-appellants vs. Isidra de la Cruz, Teodora Alvarez and Pacifico C. del
Mundo, defendants-appellees, the dispositive portion of which reads: 1
WHEREFORE, the extrajudicial partition executed by Isidra de la
Cruz and Teodora Alvarez on July 31, 1956 acknowledged before
Notary Public Benjamin N. Domingo and recorded as document No.
143 on page 43, book 1, series of 1956 of his notarial registry, copy
of which is attached to the records and marked as Exhibit G is
hereby declared null and void and of no force nor effect.
Transfer Certificate of Title No. 32529 of the land records for
Quezon City is hereby declared cancelled and of no force and
effect. In lieu thereof, the Register of Deeds of Quezon City is
hereby ordered to issue a new Transfer Certificate of Title in the

names of Antonio Alvarez, Eugenia Alvarez, Delfin Alvarez, as coowners pro indiviso in the following proportions: To each of Antonio,
Eugenia, Delfin, Marciana and Teodora all surnamed Alvarez, 13/75
share in full ownership and 2/75 share in naked ownership, to Isidra
de la Cruz 10/75 share in full.

2. Declaring null and void T.C.T. No. 32529, Registry of Deeds for
Quezon City, and reviving T.C.T. No. 42562, Registry of Deeds for
the Province of Rizal;
3. Declaring the plaintiffs Alvarez' entitled to an undivided share of
1/10 each of the lot in question with right to dispose of the same;

The Court of Appeals found undisputed the following facts. 2

Plaintiffs (herein private respondents) Antonio, Eugenia, Delfin and
Marciana all surnamed Alvarez are legitimate children of Agripino
Alvarez and his first wife Alejandra Martin. After the death of
Alejandra Martin, Agripino Alvarez married Isidra de la Cruz in
February 1927 and they had one child named Teodora Alvarez.
On December 23, 1947, Agripino Alvarez died intestate, survived by
his widow Isidra and his five children, the four plaintiffs and
Teodora.
On July 31, 1956, a public instrument entitled 'Extra-judicial
Partition with Absolute Sale of Shares' was executed by the widow
Isidra and her daughter Teodora Alvarez (Exhibit G) wherein, after
reciting that they are 'the legal and absolute heirs, the first being the
wife and the second, is the daughter of the deceased Agripino
Alvarez', they adjudicated to themselves in equal shares the
property covered by Transfer Certificate of Title No. 42562 of the
land records for Rizal and in the same instrument, both Isidra and
her daughter Teodora sold the entire property to Pacifico C. del
Mundo who registered the instrument in August 1956. As a result of
such registration, Transfer Certificate of Title No. 32529 of the land
records for Quezon City was issued in the name of del Mundo.
On February 10, 1958, the children of Agripino by his first wife sold
to Simplicio Balcos four tenths (4/10) undivided share in the
property in question (which they claim as their share in the estate of
their father). The deed of sale has never been registered.
On May 31, 1958, said children by the first marriage of Agripino
Alvarez and their vendee Simplicio Balcos brought the present
action against Isidra de la Cruz and her daughter Teodora Alvarez
as well as against the vendee Pacifico del Mundo before the Court
of First Instance of Rizal asking that judgment be rendered:
1. Declaring the Extra-Judicial Partition with Absolute Sale of
Shares Annex 'B', null and void;

4. Ordering the defendant Pacifica C. del Mundo, married to Ester

dela Cruz and plaintiff Simplicio Balcos to enter into and agreement
or extra-judicial petition of the property in accordance with their
participation as purchasers of the shares of the original heirs;
5. Ordering the defendants to pay attorney's fees in the sum of
P1,000.00 and to pay the costs.
After trial the Court of First Instance of Rizal rendered its decision 3 dated 20 June
1960 dismissing private respondents' complaint, holding that the property in question
is the paraphernal property of Isidra de la Cruz.
Their motion for reconsideration of the above decision having been denied, private
respondents appealed to the Court of Appeals the dispositive portion of whose
decision was quoted at the beginning of this decision, said Court sustaining the
appeal thereby reversing the judgment of the lower court.
Only petitioner Pacifico del Mundo filed a motion for reconsideration which was,
however, denied by the Court of Appeals on 21 February 1966. 4 Hence, the instant
petition filed by him to review the decision of the appellate court, following assignment
of errors. 5
I
THE COURT OF APPEALS ERRED IN DECLARING THE
PROPERTY IN QUESTION AS CONJUGAL PROPERTY OF
AGRIPINO ALVAREZ AND ISIDRA DE LA CRUZ AND NOT AS
PARAPHERNAL PROPERTY OF ISIDRA DE LA CRUZ ALONE.
II
THE COURT OF APPEALS ERRED IN ORDERING THE
CANCELLATION OF TRANSFER CERTIFICATE OF TITLE NO.
32529 OF THE REGISTRY OF DEEDS OF QUEZON CITY WHICH
IS IN THE NAME OF HEREIN PETITIONER APPELLANT.
III

THE COURT OF APPEALS ERRED IN ORDERING THE

REGISTER OF DEEDS OF QUEZON CITY TO ISSUE A NEW
TRANSFER CERTIFICATE OF TITLE IN THE NAMES OF
ANTONIO ALVAREZ, EUGENIA ALVAREZ, DELFIN ALVAREZ,
MARCIANA ALVAREZ AND TEODORA ALVAREZ AS COOWNERS PRO-INDIVISO IN THE FOLLOWING PROPORTIONS:
TO EACH OF ANTONIO, EUGENIA, DELFIN, MARCIANA AND
TEODORA, ALL SURNAMED ALVAREZ, 13/75 SHARE IN FULL
OWNERSHIP AND 2/75 SHARE IN NAKED OWNERSHIP: TO
ISIDRA DE LA CRUZ, 10/75 SHARE IN FULL.
The pivotal question thus presented in this petition is whether the property formerly
covered by Transfer Certificate of Title No. 42562 (Rizal) now Transfer Certificate of
Title No. 32529 (Quezon City) is the conjugal property of Agripino Alvarez and Isidra
de la Cruz or the paraphernal property of the latter alone. Petitioner maintains that it
is the paraphernal property of Isidra de la Cruz as ruled by the lower court because of
two grounds, namely: 6 "(1) the admission by Agripino Alvarez in Exhibit F, the deed of
sale executed by Simplicio Dantes and Emilia Rivera of the property in question to
Isidra de la Cruz, that the said property is Isidras paraphernal property'; and (2) the
said admission operates as estoppel against Agripino Alvarez and/or his heirs,
namely, the respondents-appellees in the instant case, from claiming any interest in
said property, adverse to that of Isidra de la Cruz and/or transferee or persons privy to
her.
Private respondents, on the other hand, seek to uphold the decision of the
respondent Court of Appeals which, as aforestated, ruled in favor of the conjugal
nature of the property and discredited the evidence of petitioner, as well as that of his
co-defendants in the court a quo, regarding the purchase of the property by Isidra de
la Cruz prior to her marriage with Agripino, by saying, inter alia that: 7
... If the sale by Juan Dantes and his wife to Isidra is true and was
really not reduced to writing for the reasons given by Simplicio, why
is it that Juan Dantes, in executing the deed of sale in favor of
Simplicio stated in the deed of sale that he sold the entire lot of
over three hectares to Simplicio instead of stating that he previously
sold a portion thereof to Isidra and the remainder to Simplicio? Had
this been stated in the deed of sale to Simplicio, there would have
been no need for Simplicio to execute Exhibit F in favor of Isidra de
la Cruz.
Moreover, if the property was really sold by Juan Dantes to Isidra in
1920 or 1921. as claimed by the defendants, why is it that in Exhibit
F, Simplicio did not state so? Simplicio stated in said document
(Exhibit F) that he was the one selling the lot to Isidra. Had he
stated that he was merely transfering to Isidra the smaller lot which
was not actually purchased by him from Juan Dantes, there would

have been no necessity of making it appear in Exhibit F that the

money used by Isidra was her own paraphernalia property.
Apparently, the question is factual for it involves an examination of the probative value
of the evidence Presented by the litigants or any of them, 8 in order to determine the
true nature of the property in question. While as a rule, the findings of fact of the
Court of Appeals are final and conclusive and cannot be reviewed on appeal to this
Court, one of the recognized exceptions to said rule is when the conclusion made is
manifestly mistaken. 9 We are of the opinion that the ruling of the Court of Appeals is
not persuasive, and We are accordingly constrained to hold that it is in error in
concluding that the property in question is conjugal.
The testimony of Marcelo Bernal, which "was wholly corroborated by Simplicio Dantes
and Valentina San Andres" as correctly observed by the lower court, 10 anent the sale
of the questioned property to Isidra in 1920 or 1921 when the latter was then single, it
having been admitted that Agripino married Isidra only in February 1927, appears to
be unrebutted by the private respondents. They place reliance mainly on the deed of
sale 11 executed by Simplicio Dantes and his wife in favor of Isidra de la Cruz, when
the latter was already married and where in said deed, no mention was made about
the sale by the original owners to Isidra. They lose sight of the fact, however, that this
deed of sale was executed only for the purpose of recognizing or confirming the
verbal sale made by the original owners to Isidra in 1920 or 1921, long before her
marriage to Agripino in February 1927. This is the very reason why Agripino had to
sign in said deed of sale, declaring that "the money with which Lot No. 1189-C was
purchased from the spouses Simplicio Dantes and Emilia Rivera is her own money,
and does not belong to our conjugal property, and therefore, the said Lot No. 1189-C,
is her, Isidra's paraphernal property" (sic). 12 The declaration aforequoted is of the
highest evidentiary value being one against the declarant's own interest. It may well
be presumed that Agripino would not have made the said declaration unless he
believed the same to be true, prejudicial as it is to his children's interests as his heirs,
with his first wife. Good faith is always to be presumed, and a person always takes
ordinary care of his concerns. 13 Against these presumptions, the contrary must be
clearly established and proven by sufficient evidence, which is clearly wanting in the
instant case. No explanation was given why the aforesaid declaration should not be
given due weight. It is significant to note that the same was made on 28 February
1941 or more than six (6) years prior to Agripino's death on 23 December 1947
without his having repudiated the same. Neither did the private respondents, as heirs,
question said declaration. Agripino was, therefore, clearly in estoppel to deny his
declaration. As such, he can lay no claim nor interest in the questioned property, nor
can the private respondents do so, for the person from whom they claim to have
succeeded to the property had no title thereto. Estoppel is effective even on
successors in interest. 14
Moreover, when the question is exclusively between husband and wife, or between
one of them and the heirs of the other, the admission or acknowledgment of one
spouse that the money used to purchase the property came from the other spouse, is
evidence against the party making the admission or his heirs. 15 Likewise, where the

husband has been a party to an act of purchase of immovable property in the name of
his wife, which recited that the purchase was made with paraphernal funds, and that
the property was to be and remain paraphernal property, neither he nor his heirs can
be permitted to go behind the deed and contest the wife's title to the property by
claiming that it is conjugal. 16Since the property is the paraphernal property of Isidra,
the same having been acquired by her prior to her marriage with Agripino 17 and
having been purchased with her exclusive or private funds 18 any declaration to the
contrary made by her, as well as that of her child, cannot prevail nor change the
character of the property in question. The extra-judicial partition was evidently an
expedient only to facilitate the sale without giving rise to any question as to the
legality of the transmission of the property to Isidra and his daughter, as the death of
Agripino Alvarez may occasion, for the better protection of the vendee, the petitioner
herein. If the property were conjugal the private respondents would have been made
parties to the extra-judicial partition and made signatories thereto. As the Court of
First Instance aptly observed.
The Court believed that the Deed of Extra-Judicial Partition
submitted in the case at bar cannot affect or change the
paraphernal character of the property in question. ... Since the
deceased Agripino Alvarez has formally and categorically declared
that he has no right or interest whatsoever in the property in
question, the same being paraphernal it follows that his heirs, the
plaintiffs herein, have not inherited any portion or right in the
property, as the heirs merely step into the shoes of the decedent.
Moreover, the law does not provide that separate property becomes
conjugal simply by reason of an extra-judicial partition after the
death of one spouse, or by erroneous conclusions or declarations
made later. The Court has noticed that defendant Isidra de la Cruz
affixed only her thumb-mark on the deed of extra-judicial partition it
is therefore obvious that she is illiterate and does not know the
technical intricacies of the law of property. Reason and justice
demand that acts done beyond the manifest understanding of
illiterates must not be used to deprive them of their acquired rights
or their property, or as a weapon to work injustice upon them
Hence, the Court is of the opinion that in the instant case the
money used in the purchase chase of the property subject of
litigation is the exclusive money of defendant Isidra de la Cruz.
From what has been said on the foregoing, We find the first two assigned errors t be
well taken. Since the property involved in this case is the paraphernal property of
Isidra, it follows that the Court of Appeals erred in ordering the cancellation of transfer
Certificate of Title No. 32529 of the Registry of Deeds of Quezon City which is in the
name of herein petitioner. The sale between Isidra and herein petitioner is a perfectly
valid sale, although in the document drawn 19 the property was erroneously treated as
conjugal. No valid reason is shown to invalidate the same, especially so where the

persons, herein private respondents, claiming to be entitled to a portion thereof have

been shown to have neither interest nor title thereto.
And finally, the third assigned error is likewise meritorious. As stated beforehand, the
Court of Appeal found that the property in litigation is the conjugal property of the
spouses Agripino Alvarez and Isidra de la Cruz. Granting that finding to be true, said
Court should have first liquidated the conjugal partnership of the spouses and
adjudicate one half of the property in favor of the surviving spouse Isidra, in full
ownership; 20 and the other half, to the deceased husband's heirs, wherein Isidra shall
likewise be entitled to a portion thereof in usufruct equal to that corresponding by way
of legitime to each of the legitimate children or descendants who has not received any
betterment 21to be taken from the third at the free disposal of the deceased
parent. 22 This, said Court did not do. Instead, in designating the fractional shares of
Agripino's heirs, it had treated the property as his capital alone. The dispositive
portion, therefore, is in conflict with the basic finding of said Court, which actuation
was branded by the petitioner as a showing of "seeming partiality. 23 Hence, the
questioned decision is a nullity, giving justification for its reversal and for Us to revert
to that of the lower court.
UPON THE FOREGOING CONSIDERATIONS, the decision appealed from should
be, as it is hereby, REVERSED and the complaint filed by the private respondents'
DISMISSED. No pronouncements as to costs.
SO ORDERED.

[G.R. No. 153802. March 11, 2005]

HOMEOWNERS SAVINGS &

DAILO, respondent.

LOAN

BANK, petitioner, vs.

MIGUELA

C.

DECISION
TINGA, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court, assailing the Decision[1] of the Court of Appeals in CA-G.R. CV No. 59986
rendered on June 3, 2002, which affirmed with modification the October 18,
1997 Decision[2] of the Regional Trial Court, Branch 29, San Pablo City, Laguna in
Civil Case No. SP-4748 (97).
The following factual antecedents are undisputed.
Respondent Miguela C. Dailo and Marcelino Dailo, Jr. were married on August
8, 1967. During their marriage, the spouses purchased a house and lot situated at

Barangay San Francisco, San Pablo City from a certain Sandra Dalida. The subject
property was declared for tax assessment purposes under Assessment of Real
Property No. 94-051-2802. The Deed of Absolute Sale, however, was executed only
in favor of the late Marcelino Dailo, Jr. as vendee thereof to the exclusion of his wife.[3]
On December 1, 1993, Marcelino Dailo, Jr. executed a Special Power of
Attorney (SPA) in favor of one Lilibeth Gesmundo, authorizing the latter to obtain a
loan from petitioner Homeowners Savings and Loan Bank to be secured by the
spouses Dailos house and lot in San Pablo City. Pursuant to the SPA, Gesmundo
obtained a loan in the amount of P300,000.00 from petitioner. As security therefor,
Gesmundo executed on the same day a Real Estate Mortgage constituted on the
subject property in favor of petitioner. The abovementioned transactions, including the
execution of the SPA in favor of Gesmundo, took place without the knowledge and
consent of respondent.[4]
Upon maturity, the loan remained outstanding. As a result, petitioner instituted
extrajudicial foreclosure proceedings on the mortgaged property. After the
extrajudicial sale thereof, a Certificate of Sale was issued in favor of petitioner as the
highest bidder. After the lapse of one year without the property being redeemed,
petitioner, through its vice-president, consolidated the ownership thereof by executing
on June 6, 1996 an Affidavit of Consolidation of Ownership and a Deed of Absolute
Sale.[5]
In the meantime, Marcelino Dailo, Jr. died on December 20, 1995. In one of her
visits to the subject property, respondent learned that petitioner had already employed
a certain Roldan Brion to clean its premises and that her car, a Ford sedan, was
razed because Brion allowed a boy to play with fire within the premises.
Claiming that she had no knowledge of the mortgage constituted on the subject
property, which was conjugal in nature, respondent instituted with the Regional Trial
Court, Branch 29, San Pablo City, Civil Case No. SP-2222 (97) for Nullity of Real
Estate Mortgage and Certificate of Sale, Affidavit of Consolidation of Ownership,
Deed of Sale, Reconveyance with Prayer for Preliminary Injunction and
Damages against petitioner. In the latters Answer with Counterclaim, petitioner
prayed for the dismissal of the complaint on the ground that the property in question
was the exclusive property of the late Marcelino Dailo, Jr.
After trial on the merits, the trial court rendered a Decision on October 18, 1997.
The dispositive portion thereof reads as follows:
WHEREFORE, the plaintiff having proved by the preponderance of evidence the
allegations of the Complaint, the Court finds for the plaintiff and hereby orders:
ON THE FIRST CAUSE OF ACTION:
1. The declaration of the following documents as null and void:
(a) The Deed of Real Estate Mortgage dated December 1, 1993
executed before Notary Public Romulo Urrea and his notarial
register entered as Doc. No. 212; Page No. 44, Book No. XXI,
Series of 1993.

(b) The Certificate of Sale executed by Notary Public Reynaldo

Alcantara on April 20, 1995.
(c) The Affidavit of Consolidation of Ownership executed by the
defendant
(c) The Affidavit of Consolidation of Ownership executed by the
defendant over the residential lot located at Brgy. San
Francisco, San Pablo City, covered by ARP No. 95-091-1236
entered as Doc. No. 406; Page No. 83, Book No. III, Series of
1996 of Notary Public Octavio M. Zayas.
(d) The assessment of real property No. 95-051-1236.
2. The defendant is ordered to reconvey the property subject of this complaint to the
plaintiff.
ON THE SECOND CAUSE OF ACTION
1. The defendant to pay the plaintiff the sum of P40,000.00 representing the
value of the car which was burned.
ON BOTH CAUSES OF ACTION
1. The defendant to pay the plaintiff the sum of P25,000.00 as attorneys fees;
2. The defendant to pay plaintiff P25,000.00 as moral damages;
3. The defendant to pay the plaintiff the sum of P10,000.00 as exemplary
damages;
4. To pay the cost of the suit.
The counterclaim is dismissed.
SO ORDERED.[6]
Upon elevation of the case to the Court of Appeals, the appellate court affirmed
the trial courts finding that the subject property was conjugal in nature, in the absence
of clear and convincing evidence to rebut the presumption that the subject property
acquired during the marriage of spouses Dailo belongs to their conjugal partnership.
[7]
The appellate court declared as void the mortgage on the subject property because
it was constituted without the knowledge and consent of respondent, in accordance
with Article 124 of the Family Code. Thus, it upheld the trial courts order to reconvey
the subject property to respondent.[8] With respect to the damage to respondents car,
the appellate court found petitioner to be liable therefor because it is responsible for
the consequences of the acts or omissions of the person it hired to accomplish the

assigned task.[9] All told, the appellate court affirmed the trial courts Decision, but
deleted the award for damages and attorneys fees for lack of basis.[10]
Hence, this petition, raising the following issues for this Courts consideration:
1. WHETHER OR NOT THE MORTGAGE CONSTITUTED BY THE LATE
MARCELINO DAILO, JR. ON THE SUBJECT PROPERTY AS CO-OWNER
THEREOF IS VALID AS TO HIS UNDIVIDED SHARE.
2. WHETHER OR NOT THE CONJUGAL PARTNERSHIP IS LIABLE FOR THE
PAYMENT OF THE LOAN OBTAINED BY THE LATE MARCELINO DAILO, JR. THE
SAME HAVING REDOUNDED TO THE BENEFIT OF THE FAMILY.[11]
First, petitioner takes issue with the legal provision applicable to the factual
milieu of this case. It contends that Article 124 of the Family Code should be
construed in relation to Article 493 of the Civil Code, which states:
ART. 493. Each co-owner shall have the full ownership of his part and of the fruits and
benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and
even substitute another person in its enjoyment, except when personal rights are
involved. But the effect of the alienation or the mortgage, with respect to the coowners, shall be limited to the portion which may be allotted to him in the division
upon the termination of the co-ownership.
Article 124 of the Family Code provides in part:
ART. 124. The administration and enjoyment of the conjugal partnership property
shall belong to both spouses jointly. . . .
In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers
of administration. These powers do not include the powers of disposition or
encumbrance which must have the authority of the court or the written consent of the
other spouse. In the absence of such authority or consent, the disposition or
encumbrance shall be void. . . .
Petitioner argues that although Article 124 of the Family Code requires the
consent of the other spouse to the mortgage of conjugal properties, the framers of the
law could not have intended to curtail the right of a spouse from exercising full
ownership over the portion of the conjugal property pertaining to him under the
concept of co-ownership.[12] Thus, petitioner would have this Court uphold the validity
of the mortgage to the extent of the late Marcelino Dailo, Jr.s share in the conjugal
partnership.
In Guiang v. Court of Appeals,[13] it was held that the sale of a conjugal property
requires the consent of both the husband and wife.[14] In applying Article 124 of the
Family Code, this Court declared that the absence of the consent of one renders the
entire sale null and void, including the portion of the conjugal property pertaining to
the husband who contracted the sale. The same principle in Guiang squarely applies

to the instant case. As shall be discussed next, there is no legal basis to construe
Article 493 of the Civil Code as an exception to Article 124 of the Family Code.
Respondent and the late Marcelino Dailo, Jr. were married on August 8, 1967. In
the absence of a marriage settlement, the system of relative community or conjugal
partnership of gains governed the property relations between respondent and her late
husband.[15] With the effectivity of the Family Code on August 3, 1988, Chapter 4
on Conjugal Partnership of Gainsin the Family Code was made applicable to conjugal
partnership of gains already established before its effectivity unless vested rights
have already been acquired under the Civil Code or other laws.[16]
The rules on co-ownership do not even apply to the property relations of
respondent and the late Marcelino Dailo, Jr. even in a suppletory manner. The regime
of conjugal partnership of gains is a special type of partnership, where the husband
and wife place in a common fund the proceeds, products, fruits and income from their
separate properties and those acquired by either or both spouses through their efforts
or by chance.[17] Unlike the absolute community of property wherein the rules on coownership apply in a suppletory manner,[18] the conjugal partnership shall be governed
by the rules on contract of partnership in all that is not in conflict with what is
expressly determined in the chapter (on conjugal partnership of gains) or by the
spouses in their marriage settlements.[19] Thus, the property relations of respondent
and her late husband shall be governed, foremost, by Chapter 4 on Conjugal
Partnership of Gains of the Family Code and, suppletorily, by the rules on partnership
under the Civil Code. In case of conflict, the former prevails because the Civil Code
provisions on partnership apply only when the Family Code is silent on the matter.
The basic and established fact is that during his lifetime, without the knowledge
and consent of his wife, Marcelino Dailo, Jr. constituted a real estate mortgage on the
subject property, which formed part of their conjugal partnership. By express provision
of Article 124 of the Family Code, in the absence of (court) authority or written
consent of the other spouse, any disposition or encumbrance of the conjugal property
shall be void.
The aforequoted provision does not qualify with respect to the share of the
spouse who makes the disposition or encumbrance in the same manner that the rule
on co-ownership under Article 493 of the Civil Code does. Where the law does not
distinguish, courts should not distinguish.[20] Thus, both the trial court and the
appellate court are correct in declaring the nullity of the real estate mortgage on the
subject property for lack of respondents consent.
Second, petitioner imposes the liability for the payment of the principal obligation
obtained by the late Marcelino Dailo, Jr. on the conjugal partnership to the extent that
it redounded to the benefit of the family.[21]
Under Article 121 of the Family Code, [T]he conjugal partnership shall be liable
for: . . . (3) Debts and obligations contracted by either spouse without the consent of
the other to the extent that the family may have been benefited; . . . . For the subject
property to be held liable, the obligation contracted by the late Marcelino Dailo, Jr.
must have redounded to 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.[22]

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.[23] Ei incumbit
probatio qui dicit, non qui negat (he who asserts, not he who denies, must prove).
[24]
Petitioners sweeping conclusion that the loan obtained by the late Marcelino Dailo,
Jr. to finance the construction of housing units without a doubt redounded to the
benefit of his family, without adducing adequate proof, does not persuade this Court.
Other than petitioners bare allegation, there is nothing from the records of the case to
compel a finding that, indeed, the loan obtained by the late Marcelino Dailo, Jr.
redounded to the benefit of the family. Consequently, the conjugal partnership cannot
be held liable for the payment of the principal obligation.
In addition, a perusal of the records of the case reveals that during the trial,
petitioner vigorously asserted that the subject property was the exclusive property of
the late Marcelino Dailo, Jr. Nowhere in the answer filed with the trial court was it
alleged that the proceeds of the loan redounded to the benefit of the family. Even on
appeal, petitioner never claimed that the family benefited from the proceeds of the
loan. When a party adopts a certain theory in the court below, he will not be permitted
to change his theory on appeal, for to permit him to do so would not only be unfair to
the other party but it would also be offensive to the basic rules of fair play, justice and
due process.[25] A party may change his legal theory on appeal only when the factual
bases thereof would not require presentation of any further evidence by the adverse
party in order to enable it to properly meet the issue raised in the new theory.[26]
WHEREFORE, the petition is DENIED. Costs against petitioner.
SO ORDERED.
G.R. No. L-21533

June 29, 1967

HERMOGENES MARAMBA, plaintiff-appellant,

vs.
NIEVES DE LOZANO, ET AL., defendants-appellees.
N. Tanopo, Jr. and Millora for plaintiff-appellant.
Manuel Ancheta and Bausa, Ampil and Suarez for defendants-appellees.
MAKALINTAL., J.:
Appeal from an order of the Court of First Instance of Dagupan City in its Civil Case
No. 10485, dated June 28, 1961. This case was originally brought to the Court of
Appeals, but subsequently certified to Us on the ground that the issues raised are
purely legal.
It appears that on November 3, 1948, the plaintiff filed an action against the
defendant Nieves de Lozano and her husband Pascual Lozano for the collection of a
sum of money. After trial, the court a quo on June 23, 1959 rendered its decision, the
dispositive part of which is as follows:
WHEREFORE, the court hereby renders judgment, sentencing the
defendants herein, Nieves de Lozano and Pascual Lozano, to pay unto the

herein plaintiff, Hermogenes Maramba, the total sum of Three Thousand

Five Hundred Pesos and Seven Centavos (P3,500.07), with legal interest
thereon from date of the filing of the instant complaint until fully paid.
With costs against the said defendants.
Not satisfied with the judgment, the defendants interposed an appeal to the Court of
Appeals but the appeal was dismissed on March 30, 1960 for failure of the
defendants to file their brief on time. After the record the case was remanded to the
court a quo, a writ of execution was issued, and on August 18, 1960 levy was made
upon a parcel of land covered by transfer certificate title No. 8192 of Pangasinan in
the name of Nieves de Lozano. The notice of sale at public auction was published in
accordance with law and scheduled for September 16, 1960.
On that date, however, defendant Nieves de Lozano made a partial satisfaction of the
judgment in the amount P2,000.00, and requested for an adjournment of the sale to
October 26, 1960. On October 17, 1960, she filed amended motion, dated October
14, alleging that on November 11, 1952, during the pendency of the case, defendant
Pascual Lozano died and that the property levied upon was her paraphernal property,
and praying that her liability be fixed at one-half () of the amount awarded in the
judgment and that pending the resolution of the issue an order be issued restraining
the Sheriff from carrying out the auction sale scheduled on October 26, 1960.
On that date the sale proceeded anyway, and the property of Nieves de Lozano which
has been levied upon was sold to the judgment creditor, as the highest bidder, for the
amount of P4,175.12, the balance of the judgment debt.1wph1.t
On October 27, 1960, plaintiff filed an opposition to the defendant's amended motion
dated October 14, 1960. And on June 28, 1961, the trial court issued the questioned
order, the dispositive part of which is as follows:
WHEREFORE, the court hereby grants the motion of counsel for defendant
Nieves de Lozano, dated October 5, 1960, which was amended on October
14, 1960, and holds that the liability of the said defendant under the
judgment of June 23, 1959, is only joint, or P1,750.04, which is one-half ()
of the judgment debt of P3,500.07 awarded to the plaintiff and that the writ of
execution be accordingly modified in the sense that the liability of defendant
Nieves de Lozano be only P1,750.04 with legal interest from the date of the
filing of the complaint on November 5, 1948 until fully paid, plus the amount
of P21.28 which is also one-half () of the costs taxed by the Clerk of Court
against the defendant spouses. Let the auction sale of the above-mentioned
property of defendant Nieves de Lozano proceed to satisfy her liability of
P1,750.04 with legal interest as above stated and the further sum of P21.28
representing the costs, unless she voluntarily pays the same to the judgment
creditor (herein plaintiff).

Plaintiff interposed an appeal from the above-quoted order and assigned several
errors, which present three major issues, to wit:
(a) whether or not the decision of the lower court dated June 23, 1959 could
still be questioned;
(b) whether or not the judgment was joint or solidary; and
(c) whether or not the judgment debt could be satisfied from the proceeds of
the properties sold at public auction.
Plaintiff-appellant submits that a "nunc pro tunc" order should have been issued by
the trial court dismissing, as of November 11, 1952, the case against the late Pascual
Lozano by reason of his death, and that the lower court should have corrected its
decision of June 23, 1959, by striking out the letter "s" in the word "defendants" and
deleting the words "and Pascual Lozano."
We do not think that the action suggested would be legally justified. It would entail a
substantial amendment of the decision of June 23, 1959, which has long become final
and in fact partially executed. A decision which has become final and executory can
no longer be amended or corrected by the court except for clerical errors or
mistakes,1 and however erroneous it may be, cannot be disobeyed;2 otherwise
litigations would be endless and no questions could be considered finally settled.3 The
amendment sought by appellee involves not merely clerical errors but the very
substance of the controversy. And it cannot be accomplished by the issuance of a
"nunc pro tunc" order such as that sought in this case. The purpose of an "nunc pro
tunc" is to make a present record of an which the court made at a previous term, but
which not then recorded. It can only be made when the ordered has previously been
made, but by inadvertence not been entered. In the instant case there was no order
previously made by the court and therefore there is no now to be recorded.
Now then, it is clear that the decision of June 23, 1959 does not specify the extent of
the liability of each defendant. The rule is that when the judgment does not order the
defendants to pay jointly and severally their liability is merely joint, and none of them
may be compelled to satisfy the judgment in full. This is in harmony with Articles 1137
and 1138 of the Civil Code.
Plaintiff-appellant contends that in any event the entire judgment debt can be satisfied
from the proceeds the property sold at public auction in view of the presumption that it
is conjugal in character although in the of only one of the spouses. The contention is
incorrect. The presumption under Article 160 of the Civil Code to property acquired
during the marriage. But in the instant case there is no showing as to when the
property in question was acquired and hence the fact that the title is in the wife's
name alone is determinative. Furthermore, appellant himself admits in his brief (p. 17)
that the property in question is paraphernal.

Appellant next points out that even if the land levied upon were originally paraphernal,
it became conjugal property by virtue of the construction of a house thereon at the
expense of the common fund, pursuant to Article 158 paragraph 2 of the Civil Code.
However, it has been by this Court that the construction of a house at conjugal
expense on the exclusive property of one of the spouses doe not automatically make
it conjugal. It is true that meantime the conjugal partnership may use both in the land
and the building, but it does so not as owner but in the exercise of the right of
usufruct. The ownership of the land remains the same until the value thereof is paid,
and this payment can only be demanded in the liquidation of the partnership (Coingco
vs. Flores, 82 Phil. 284; Paterno vs. Bibby Vda. de Padilla, 74 Phil. 377; Testate
Estate of Narciso Padilla, G.R.No. L-8748, Dec. 26, 1961). The record does not show
that there has already been a liquidation of the conjugal partnership between the late
Pascual Lozano and Nieves de Lozano. Consequently, the property levied upon,
being the separate property of defendant Nieves de Lozano, cannot be made to
answer for the liability of the other defendant.
On May 18, 1967 counsel for defendants-appellees filed with Us a petition
alleging, inter alia; that prior to the expiration of the redemption period and pursuant
to an order of the lower court defendants filed a surety bond in the amount of
P3,175.12 as the redemption price, which bond was duly approved by the lower court;
that sometime last September 1966, defendants filed a petition before the lower court
praying that the sheriff of Pangasinan be ordered to execute the corresponding deed
of redemption in favor of defendant Nieves de Lozano represented by her judicial
administrator or that, in the alternative, the Register of Deeds of Dagupan City be
directed to cancel Entries Nos. 19234 and 20042 at the back of TCT No. 8192; and
that said petition was denied by the lower court. The same prayer made below is
reiterated in the said petition of May 18, 1967.
The foregoing petition of May 18, 1967 alleges facts which occurred after the
perfection of the present appeal and which should therefore be submitted to and
passed upon by the trial court in connection with the implementation of the order
appealed from, which is hereby affirmed, with costs.
G.R. No. L-16951

February 28, 1962

ROBERTO LAPERAL, JR. and PURIFICACION M. LAPERAL, plaintiffs-appellees,

vs.
RAMON L. KATIGBAK, ET AL., defendants,
EVELINA KALAW-KATIGBAK, defendant-appellant.
William H. Quasha and Associates for plaintiffs-appellees.
Bausa, Ampil and Suarez for defendant-appellant.
LABRADOR, J.:

Appeal from an order of the Court of First Instance of Manila, the Hon. Magno
Gatmaitan presiding, holding that the decision rendered by this Court in G.R. No. L4299, promulgated January 31, 1952, dismissing the action instituted by Roberto
Laperal, Jr. and Purificacion M. Laperal against Ramon L. Katigbak and Evelina
Kalaw-Katigbak, Civil Case No. 11767 of the Court of First Instance of Manila, insofar
as Evelina Kalaw-Katigbak was concerned does not bar the present action, Civil Case
No. 25235, and finally deciding this latter case, and sentencing Evelina KalawKatigbak to pay unto plaintiffs one-half of the sum of P14,000, with legal interest and
one-half of P97,500, also with legal interest.
A review of the facts and circumstances involved, as well as the proceedings had in
the case at bar and in the G.R. No. L-4299, is necessary for an understanding of the
issues involved. G.R. No. L-4299, Laperal, et al., vs. Katigbak, et al., was filed in the
Court of First Instance of Manila as Civil Case No. 11767, to collect the sum of
P14,000, with interest, and another sum of P97,500, also with interest, against the
defendants spouses Ramon L. Katigbak and Evelina Kalaw-Katigbak. The complaint
alleges as causes of action that defendants are husband and wife; that from March 1,
1950 to May 31, 1950, the husband Ramon L. Katigbak borrowed and received
various sums of money from plaintiffs amounting to P14,000; that on the same dates
defendant Ramon L. Katigbak received from plaintiffs jewelry valued at P97,500; that
notwithstanding demands made upon them they have failed to pay the same. The
promissory notes constituting the first amount of P14,000 was signed by Ramon L.
Katigbak alone; he also signed a receipt for a jewelry the value of which totals
P97,500, alone. Defendant Evelina Kalaw-Katigbak thereupon filed a motion to
dismiss on the ground that since the receipts for the amount borrowed, as well as for
the jewelry received, were signed by Ramon L. Katigbak alone and without the
concurrence of his wife, the latter is not liable for the reason that she is not bound by
obligations contracted by her husband nor answerable in a suit for the enforcement
thereof. The court trying the case granted the motion to dismiss on the ground that
since the wife did not take part in the execution of the documents sued upon, she is
not responsible therefor. The above resolution of the lower court was appealed to this
Court, which on January 31, 1952, affirmed the order of dismissal of the action
against Evelina Kalaw-Katigbak. We held, as to the first cause of action that as the
notes were not signed by Evelina, the latter is personally liable, as the husband was
not her agent; as to the second cause of action, that as it is not alleged that the
obligation contracted redounded to the benefit of the family, the same rule applies,
because the receipts for jewelry were not also signed by Evelina.
On February 10, 1955, plaintiffs filed another action, Civil Case No. 25235, against
the same spouses, alleging that in the previous case, No. 11767, defendant Ramon L.
Katigbak confessed judgment, as a result of which said defendant was ordered to pay
P14,000, with interest, and P97,500, also with interest until full payment. The other
principal allegations of the complaint are: that defendants were married since
September 11, 1938; that they did not execute any ante-nuptial contract before the
celebration of their marriage, so that they entered the marriage under the system of
conjugal partnership; that on December 18, 1950, Evelina Kalaw-Katigbak filed an
action for judicial separation of property and separate administration by the wife; that

on September 25, 1951, the defendants submitted an agreement of facts wherein the
parties to the action agreed to dissolve the conjugal partnership; that all the
proceedings and steps leading to the dissolution of the conjugal partnership were
made without notice to the creditors of the conjugal partnership and especially the
plaintiffs herein and that said agreement was made to defraud creditors and,
therefore, void; that a certain real property on Evangelista Street, City of Manila,
described under Certificate of Title No. 57626, although in the name of Evelina KalawKatigbak, is in truth and at least the fruits thereof are conjugal partnership property,
that a theatre known as Center Theatre on Quezon Boulevard, registered in the name
of Teodoro Kalaw, Jr. is Evelina Kalaw's property, the fruits of which are also conjugal
partnership property; that of the amount of the judgment plus 6% interest totalling
P141.047.50, only P20,000 has been paid, leaving a balance of P121,047.50 still
unpaid.
As second cause of action it is alleged that the fruits of the conjugal partnership
properties, as well as the fruits of the paraphernal property of Evelina Kalaw-Katigbak
belonged to the conjugal partnership; that plaintiff's cause of action arose before the
effectivity of the new Civil Code and, therefore, their liability as above described is
chargeable against the conjugal partnership of Katigbak and Kalaw, including the
fruits of the paraphernal property of the wife; that demand was made by plaintiffs
upon the defendant Katigbak as well as on defendant Evelina Kalaw-Katigbak, on the
fruits of the properties mentioned hereinbefore, but neither one nor the other paid the
same.
In the prayer it is demanded that the proceedings for the judicial separation of the
properties of the spouses be declared null and void or inefficacious against the
plaintiffs; that Evelina Kalaw-Katigbak be sentenced to render an accounting and turn
over to plaintiffs the net fruits of the Center Theatre, the property covered by TCT No.
57626 and all other properties, as well as the fruits of the paraphernal properties of
Evelina Kalaw-Katigbak, until the full amount of the judgment be paid. The last prayer
is that the property covered by TCT No. 57626 and improvements thereon, be
declared conjugal partnership property subject to the indebtedness in favor of the
plaintiffs.
Evelina Kalaw-Katigbak answered the complaint denying the allegations as to the
existence of conjugal partnership properties alleged in the complaint and the
imputation to her that her properties were fraudulently registered in the name of
others. As special defenses, she alleged "that as a matter of fact, the answering
defendant in this case who was impleaded as one of the defendants in Civil Case No.
11767 of the Court of First Instance of Manila was absolved from said complaint
which was dismissed insofar as it concerns her; said dismissal having been confirmed
by the Supreme Court;" that she does not have in her possession property belonging
to the conjugal partnership nor fruits thereof derived from any paraphernal property,
which may be considered as conjugal; and that the fruits of any of her own properties
belonged to her, and neither her husband nor creditors have any interest therein. As a
counterclaim it is alleged that plaintiffs have registered a notice of lis pendens in the
office of the register of deeds of Manila on TCT No. 25626, thus causing her damage

to the extent of P10,000. She prays for a dismissal of the complaint and that the
plaintiffs be sentenced to pay the amount of her counterclaim. On August 31, 1956,
the Court of First Instance of Manila rendered a decision on the issues presented by
the answer of the defendants in the following language:
One of the points in debate is whether plaintiffs have the right to insist that
notwithstanding the decree of judicial separation in Civil Case No. 12860
they can secure a pronouncement from this Court to the effect that the
conjugal properties of the spouses Ramon Katigbak and Evelina Kalaw
should answer for the judgment secured by plaintiff against Ramon
Katigbak; and in that eventuality what properties should be made to answer
therefor. Defendant Evelina Kalaw contends that the decision of the
Supreme Court absolving her of liability in Civil Case No. 11767 would be
enough to bar the present action as against her; the Court does not concur;
for what was decided in that case was whether on the promissory notes
signed by Ramon Katigbak, Evelina Kalaw could be personally liable with
her paraphernal properties and the Supreme Court said that she could not; it
was not there decided whether the conjugal property, this would include the
fruits of the paraphernal, could not be liable; in fact a reading of the decision
of the Supreme Court would show that the ratio decidendi there was that her
husband alone was liable with his private funds and at most the assets of the
conjugal partnership, ....
The court further held that for the reason that no proof was submitted to show that the
obligations contracted by Ramon Katigbak redounded to the benefit of the family, the
obligation subject to the complaint could not be enforced upon the paraphernal
properties or the fruits thereof, although they could be enforced upon the conjugal
partnership property; that since the Civil Code has been amended and "the
exemption from liability for personal obligations of the husband is a right given to the
conjugal partnership for the first time by the amendment in the new Code, it should be
operative at once, unless it should impair a right vested under the old legislation (Art.
2253), New Civil Code. But the right of the Laperals so far as the judgment against
Ramon Katigbak is concerned is one thing and their right to proceed against the
conjugal properties of Ramon and Evelina is another, the first one was a property
right vested under the Old Code; the second was a right also under that but one that
had not yet vested before the New Code came into being. All vested rights are
property but not all rights are; the Legislature can come in and destroy rights not yet
vested without impairment of due process. Perhaps the case can be illustrated by
analogy to Article 2261 of the New Civil Code; that legislator there has decreed that
exemptions from liability under Article 302 were operative at once; and as this is a
case analogous it should under Article 2269, be solved in the same manner. The
result will be a "dismissal." Hence the court dismissed the action, without costs.
The above decision of the court was appealed to Us in G.R. No. L-11418. In this
Court, the plaintiffs Roberto Laperal, Jr. and Purificacion M. Laperal assigned the
following errors: .

THE COURT BELOW ERRED IN HOLDING THAT THE OBLIGATIONS

INCURRED BY KATIGBAK DID NOT REDOUND TO THE BENEFIT OF
THE FAMILY OF KATIGBAK AND KALAW.
THE COURT BELOW ERRED IN HOLDING THAT THE OBLIGATIONS
INCURRED BY KATIGBAK CANNOT BE ENFORCED AGAINST THE
FRUITS OF THE PARAPHERNAL PROPERTY OF KALAW.
THE COURT BELOW ERRED IN NOT REQUIRING KALAW TO ACCOUNT
AND PAY TO THE LAPERALS THE NET FRUITS OF THE CENTER
THEATRE BUILDING ON QUEZON BOULEVARD, MANILA AND OF
OTHER PARAPHERNAL PROPERTY OF KALAW IN SATISFACTION OF
DECISION IN FAVOR OF THE LAPERALS. (G.R. No. L-11418, R.O.A., pp.
11-12.)
The defendants Ramon L. Katigbak and Evelina Kalaw-Katigbak did not appeal from
the decision of the lower court, evidently because the case against them was
dismissed by the lower court. In the decision rendered by Us in the appealed case,
the matters considered are those raised in the briefs of the plaintiffs-appellants. After
considering those points we held: .
The question is whether or not any vested or acquired right is involved in the
instant case. The answer, in our opinion, is in the affirmative. When the
Laperals granted the loans and delivered the jewelry to Katigbak to be paid
and accounted for by him, the law then in force (Article 1408, Old Civil Code)
made the conjugal partnership liable for the obligation. In other words, in
giving the loan and delivering the jewelry to Katigbak, the Laperals, for
purposes of security and assurances, presumably or undoubtedly looked to
the conjugal properties as security to answer for the obligation, should
Katigbak fail to make good his undertaking. Stated differently, the Laperals
acquired a sort of lien on said conjugal properties. ... The right of the
Laperals vested at the very moment the obligation was contracted, under the
provisions of the Old Civil Code. For this reason, the provisions of Article 161
of the New Civil Code cannot apply, and the trial court erred in applying the
same.
However, our holding does not write a finis to the case. Because the trial
court held that the conjugal partnership was not liable, it naturally saw no
reason or necessity for ruling upon the other issues involved, such as the
legality of the proceedings in Civil Case No. 12860 for the dissolution of the
conjugal partnership, and whether or not the property covered by Transfer
Certificate of Title 27626 belongs to the conjugal partnership.
In conclusion, we hold that while the fruits of the paraphernal property of
Kalaw are not liable for the enforcement of the obligation contracts by

Katigbak, nevertheless, the conjugal properties are." (G.R. No. L-11418, pp.
16-18, Decision.) .
When the case was returned to the trial court for determination of the issues of facts
pointed out by Us in our decision, the judge, after trial, rendered the judgment
appealed from in this case, which is as follows: .
With the finding that this property is paraphernal, what only remains is to
apply as plaintiffs desire, the rule in National Bank v. Quintos, 46 Phil. 370
under that, it was held that the spouses are subsidiarily liable with their
private properties in the event of insolvency of the conjugal assets; there is
no showing why that rule should not apply here; we should therefore apply it
since the insolvency is clear; the result will be a judgment against Evelina for
one-half (1/2) of the credit already settled in the decision. 1wph1.t
IN VIEW WHEREOF, judgment is rendered condemning Evelina Kalaw to
pay unto plaintiffs the sum of one-half (1/2) of P14,000.00 with legal interest
from August 8, 1950 until fully paid, plus another one-half (1/2) of
P97,500.00 also with legal interest from August 8, 1950 until full payment.
(G.R. No. L-16951, R.O.A. pp. 95-96.)
Upon the appeal to Us the defendant-appellant assigned the following errors:
I
THE COURT A QUO ERRED IN CONDEMNING KALAW TO PAY ONE-HALF OF
THE CLAIMS OF THE LAPERALS, IT HAVING BEEN FINALLY AND
CONCLUSIVELY DECIDED BY THE SUPREME COURT IN DECISION 1-B (G.R.
NO. L-4299, January 31, 1952), AND DECISION III-A (G.R. No. L-11418, December
27, 1958) THAT KALAW, NOR HER PARAPHERNAL PROPERTY OR ITS FRUITS,
lS NOT LIABLE FOR KATIGBAK'S PERSONAL OBLIGATION IN FAVOR OF THE
LAPERALS.
II
THAT THE COURT A QUO ERRED IN APPLYING TO THIS CASE THE DOCTRINE
OF NATIONAL BANK VERSUS QUINTOS, 46 PHIL. 370, THE FACTS AND THE
LAW INVOLVED IN SAID CASE BEING ABSOLUTELY DIFFERENT FROM THOSE
IN THIS CASE.
III
THE COURT A QUO ERRED IN SENTENCING KALAW TO PAY ONE-HALF OF THE
LAPERALS, SAID PRONOUNCEMENT BEING NOT INCLUDED WITHIN THE

DIRECTIVE OF THE SUPREME COURT IN DECISION III-A REMANDING THE

CASE TO THE LOWER COURT FOR FURTHER PROCEEDINGS.
IV
THE LOWER COURT ERRED IN SENTENCING KALAW TO PAY ONE-HALF OF
THE CLAIMS OF THE LAPERALS FOR THE REASON THAT SAID REMEDY IS
NOT SOUGHT IN THIS ACTION NOR COVERED BY THE ALLEGATIONS OF
COMPLAINT.
V
THE COURT A QUO ERRED IN DECLARING THE DECISION IN CASE II AS "NOT
EFFECTIVE" INSOFAR AS THE LAPERALS ARE CONCERNED.
VI
THE COURT A QUO ERRED IN NOT ALLOWING KALAW TO ESTABLISH THAT
THE "AGREEMENT OF FACTS" IN CASE II WAS PROMPTED, NOT BY THE
DESIRE OF THE PARTIES, BUT BY THE SUCCESSION OF THE PRESIDING
JUDGE OF THE COURT. (Brief of Defendant-Appellant, pp. 1-2.) .
It will be seen that the first error assigned is the ruling of the trial court in its first
decision, which is that the present action, which is the second one, is barred by the
judgment rendered by Us in G.R. No. L-2499, entitled Roberto Laperal, Jr. and
Purificacion M. Laperal, plaintiffs-appellants versus Ramon L. Katigbak and Evelina
Katigbak, defendants-appellees. The legal provision involved in this supposed error is
known as the bar by former judgment or estoppel by former judgment, as set forth in
Section 44, Rule 39 of the Rules of Court. This section should be distinguished from
Section 45 of the same Rule, which is as follows: .
Section 45. That only is deemed to have been adjudged in a former
judgment which appears upon its face to have been so adjudged, or which
was actually and necessarily included therein or necessary thereto.
The distinction between the first rule, which is the rule of bar by former judgment, and
the second one which is the rule of conclusiveness of judgment, has been set forth by
Mr. Justice Carson in Pealosa vs. Tuason, 22 Phil. 303 thus
xxx

xxx

xxx

The subject of res judicata or estoppel by judgment as known to AngloAmerican jurisprudence is governed by two main rules uniformly recognized
by the authorities, which are very distinctly laid down and defined by Mr.

Justice Field in the following citation from his opinion in the case of Cromwell
vs. Sac County (94 U.S. 351): .
In considering the operation of this judgment, it should be borne in mind, as
stated by counsel, that there is a difference between the effect of a judgment
as a bar or estoppel against the prosecution of a second action upon the
same claim or demand, and its effect as an estoppel in another action
between the same parties upon a different claim or cause of action. In the
former case, the judgment, if rendered upon the merits, constitutes an
absolute bar to a subsequent action. It is a finality as to the claim or demand
in controversy, concluding parties and those in privity with them, not only as
to every matter which was offered and received to sustain or defeat the
claim or demand, but as to any other admissible matter which might have
been offered for that purpose. Thus for example; a judgment rendered upon
a promissory note is conclusive as to the validity of the instrument and the
amount due upon it, although it be subsequently alleged that perfect
defenses actually existed, of which no proof was offered, such as forgery,
want of consideration, or payment. If such defenses were not presented in
the action, and established by competent evidence, the subsequent
allegation of their existence is of no legal consequence. The judgment is as
conclusive, so far as future proceedings at law are concerned, as though the
defenses never existed. The language, therefore, which is so often used,
that a judgment estops not only as to every ground of recovery or defense
actually presented in the action, but also as to every ground which might
have been presented, is strictly accurate, when applied to the demand or
claim in controversy. Such demand or claim, having passed into judgment,
cannot again be brought into litigation between the parties in proceedings at
law upon any ground whatever.
But where the second action between the same parties is upon a different
claim or demand, the judgment in the prior action operates as an estoppel
only as to those matters in issue or points controverted upon the
determination of which the findings or verdict was rendered. In all cases,
therefore, where it is sought to apply the estoppel of a judgment rendered
upon one cause of action to matters arising in a suit upon a different cause
of action, the inquiry must always be as to the point or question actually
litigated and determined in the original action; not what might have been
thus litigated and determined. Only upon such matters is the judgment
conclusive in another action.
The rules thus referred to in the opinion of Mr. Justice Field may be
summarily stated as follows: .
1. A judgment rendered by a court of competent jurisdiction on the merits is a
bar to any future suit between the same parties or their privies upon the
same cause of action so long as it remains unreversed.

2. A point which was actually and directly in issue in a former suit and was
there judicially passed upon and determined by a domestic court of
competent jurisdiction cannot be again drawn in question in any future action
between the same parties or their privies, even when the causes of action in
the two suits are wholly different.
These two main rules mark a sharp distinction between the principles
governing the two typical cases in which a judgment may operate as
evidence. No intelligent discussion of the subject of res judicata or of the
multitude of authorities and varying statutes touching the subject can be
maintained without keeping clearly in mind the distinction between the
principles governing these two typical cases. Indeed, in speaking of these
cases the term 'bar by former judgment' is uniformly employed to indicate
the case governed by the first general rule above laid down; and the phrases
'conclusiveness of the judgment' in referring to the second. (Pealosa vs.
Tuason, 22 Phil. 303, 311-313.) .
As stated in the above-quoted decision the issue depends upon the following
question: Is the claim or demand made in the second action, Civil Case No. 25235,
the same as the demand made in the original case, Civil Case No. 11767. The trial
court held that the second cause of action is a different demand or claim, because
what was decided in the different case No. 11767 is whether or not Evelina KalawKatigbak could be held responsible with her paraphernal properties for the promissory
notes and the other obligation signed by Ramon Katigbak. We hold that the trial court
committed error in this respect; for the original claim or demand made upon the
spouses Katigbak and Kalaw was to hold them liable for the said promissory notes
and obligation. The prayer in the complaint of the original case No. 11767 demands
that a writ of attachment issue against the properties of the defendants, or of any of
them, and for any other relief is may be legal and equitable. In this previous case, No.
11767, the claim or demand was to make Evelina Kalaw-Katigbak liable in any
capacity whatsoever, whether personally or with her conjugal properties, or with the
fruits of her paraphernal property. If Evelina Kalaw-Katigbak was not responsible in
any manner under the cause of action, there is no cause or reason why she could still
be made responsible for the supposed fruits of her paraphernal property. As indicated
in the above quoted decision of ours in the case of Pealosa vs. Tuason, supra, the
previous case No. 11767, is final not only as to Evelina Kalaw-Katigbak's person
liability for the obligations sought to be enforced, but as to the liability of the properties
of the conjugal partnership or of the fruits of Evelina Kalaw-Katigbak's paraphernal
properties. In the language of that decision, the judgment in the previous case No.
11767 "estops not only as to every ground of recovery or defense actually presented
in the action, but also as to every ground which might have been presented." The
reason for the rule is because the demand or claim on the obligations having passed
into judgment, the said claim or demand "cannot again be brought into litigation
between the parties in proceedings at law upon any ground whatever.".
The trial court seems to have believed that the original action is limited to making
Evelina Kalaw-Katigbak person responsible for the obligations, and that the

subsequent suit, which is to make the conjugal properties or the fruits of the
paraphernal property responsible, is of a different nature. This view is incorrect. The
demand or claim has always been against both spouses, not only personally but also
to make their properties or the fruits thereof responsible. The prayer of the complaint
is to make all their properties liable. An action to make a wife personally responsible
is not different from one to make the paraphernal property of the wife subject to the
same obligation. But assuming that there is some difference, section 3 of Rule 2 of
the Rules of Court, prohibits multiplicity of suits, and any party is prohibited from
dividing the causes of action that he has upon the same claim or demand, or pursuing
the remedies to which he is entitled by virtue of the demand in one suit after another.
The first action was to make Evelina Kalaw-Katigbak and her properties responsible,
and the second, was to make the fruits of her paraphernal property responsible. Both
actions are against Evelina Kalaw-Katigbak on the same claim and demand. The rule
prohibiting multiplicity of suits prohibits Evelina Kalaw from being sued personally in
one suit then and making the fruits of her paraphernal property responsible
subsequently in another.

In view of our resolution on the defense of bar by former judgment against the action,
it is unnecessary to consider the other questions involved in the appeal.
FOR THE FOREGOING CONSIDERATIONS the order appealed from is hereby set
aside and defendant Evelina Kalaw-Katigbak, absolved from the action. Without
costs. So ordered.
G.R. No. 89667 October 20, 1993
JOSEPHINE B. BELCODERO, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, et al., respondents.
Jaime I. Infante and Joanes G. Caacbay for petitioners.
Lamberto C. Nanquil & Associates Law Office for private respondents.

It is argued on behalf of the plaintiffs-appellees that our decision in G.R. No. L-11418,
to the effect that the conjugal properties of Evelina Kalaw and her husband are
responsible
In conclusion, we hold that while the fruits of the paraphernal property of
Kalaw are not liable for the enforcement of the obligation contracted by
Katigbak, nevertheless, the conjugal properties are. (Record, p. 91;
emphasis ours; p. 4, Brief for Plaintiffs-Appellees.)
is the ratio decidendi of the case, evidently meaning, that the question of bar by
former judgment was passed upon by Us unfavorably. It is true that the court did not
consider the question of bar by former judgment raised by defendant Kalaw in the
case, but the reason why we did not pass upon the same was because there was no
occasion, no such question being raised on appeal; Evelina Kalaw having won the
suit in the court below, there was no necessity for her to raise that question in the
brief. Besides, our decision, by declaring that the conjugal partnership of the spouses
are responsible, decided the main issue raised in the appeal by the spouses
Laperals. We could not have passed upon the issue of bar by former judgment
because that was not the issue on appeal and we did not have to decide it any way,
because there was no need to do so, as the case was being returned to the lower
court for determination of certain facts arising from questions raised on the appeal,
which questions refer to those raised by the appellants Laperal in that case.
Furthermore, our decision in said case, G.R. No. L-11418, can not be considered in
deciding the question of bar by former judgment because, according to the rule of
conclusiveness of judgment, that which can be considered as decided is what was
actually decided in the case, in accordance with Section 45 of Rule 39, Rules of
Court. In other words, nothing having been stated by Us in our decision in L-11418 on
the matter of bar by former judgment, said decision can not be considered as having
ruled upon said rule adversely in the appeal of Evelina Kalaw in the present case.

VITUG, J.:
This case involves the question of ownership over a piece of land acquired by a
husband while living with a paramour and after having deserted his lawful wife and
children. The property had been bought by the husband on installment basis prior to
the effectivity of the Civil Code of 1950 but the final deed, as well as the questioned
conveyance by him to his common law spouse, has ensued during the latter Code's
regime. Now, of course, we have to likewise take note of the new Family Code which
took effect on 03 August 1988.
Let us begin by paraphrasing the factual findings of the appellate court below.
The husband, Alayo D. Bosing, married Juliana Oday on 27 July 1927, with whom he
had three children, namely, Flora, Teresita, and Gaido. In 1946, he left the conjugal
home, and he forthwith started to live instead with Josefa Rivera with whom he later
begot one child, named Josephine Bosing, now Josephine Balcobero.
On 23 August 1949, Alayo purchased a parcel of land on installment basis from the
Magdalena Estate, Inc. In the deed, he indicated his civil status as, "married to Josefa
R. Bosing," the common-law wife. In a letter, dated 06 October 1959, which he
addressed to Magdalena Estate, Inc., he authorized the latter to transfer the lot in the
name of his "wife Josefa R. Bosing." The final deed of sale was executed by
Magdalena Estate, Inc., on 24 October 1959. A few days later, or on 09 November
1959, Transfer Certificate of Title No. 48790 was issued in the name of "Josefa R.
Bosing, . . . married to Alayo Bosing, . . ."

On 06 June 1958, Alayo married Josefa even while his prior marriage with Juliana
was still subsisting. Alayo died on 11 march 1967. About three years later, or on 17
September 1970, Josefa and Josephine executed a document of extrajudicial
partition and sale of the lot in question, which was there described as "conjugal
property" of Josefa and deceased Alayo. In this deed, Josefa's supposed one-half
(1/2) interest as surviving spouse of Alayo, as well as her one-fourth (1/4) interest as
heir, was conveyed to Josephine for a P10,000.00 consideration, thereby completing
for herself, along with her one-fourth (1/4) interest as the surviving child of Alayo, a
full "ownership" of the property. The notice of extrajudicial partition was published on
04, 05 and 06 November 1970 in the Evening Post; the inheritance and estate taxes
were paid; and a new Transfer Certificate of Title No. 198840 was issued on 06 June
1974 in the name of Josephine.
On 30 October 1980, Juliana (deceased Alayo's real widow) and her three legitimate
children filed with the court a quo an action for reconveyance of the property. On the
basis of he above facts, the trial court ruled in favor of the plaintiffs, and it ordered
that
. . . Josephine Bosing executed a deed of reconveyance of the
property in question to the legal heirs of the deceased Alayo D.
Bosing, and that both defendants pay, jointly and severally, actual
damages by way of attorney's fees and expenses in litigation, TEN
THOUSAND (P10,000.00) PESOS as moral damages, pus TEN
THOUSAND (P10,000.00) PESOS exemplary damages to prevent
future frauds.
The defendants went to the Court of Appeals which affirmed the trial court's order for
reconveyance but reversed the decision on the award for damages, thus
WHEREFORE, the judgment appealed from is hereby AFFIRMED
insofar as defendant Josephine Bosing is ordered to execute a
deed of reconveyance of the property granting the same to the
legal heirs of the deceased Alayo D. Bosing, and REVERSED
insofar as it awards actual, moral and exemplary damages. 1
Hence, the instant petition for review 2 submitting that
1. THE RESPONDENT COURT ERRED IN NOT HOLDING THAT
THE ACTION FOR RECONVEYANCE HAD LONG PRESCRIBED.
2. THE RESPONDENT COURT ERRED IN FINDING THAT, THE
ACTION FOR RECONVEYANCE IS BASED UPON AN IMPLIED
OR CONSTRUCTIVE TRUST.

3. THE RESPONDENT COURT ERRED IN NOT HOLDING THAT,

THE PROPERTY IN QUESTION BELONGS EXCLUSIVELY TO
THE PETITIONERS.
4. THE RESPONDENT COURT ERRED IN NOT GRANTING
PETITIONER'S MOTION FOR NEW TRIAL BASED ON NEWLY
DISCOVERED EVIDENCE, AND LIKEWISE ERRED IN HOLDING
THAT EVEN IF A NEW TRIAL IS GRANTED THE SAME WOULD
NOT SERVE A USEFUL PURPOSE.
We rule for affirmance.
The first three issues are interrelated, and the same will thus be jointly discussed.
Whether the property in question was acquired by Alayo in 1949 when an agreement
for its purchase on installment basis was entered into between him and Magdalena
Estate, Inc., or in 1959 when a deed of sale was finally executed by Magdalena
Estate, Inc., the legal results would be the same. The property remained as belonging
to the conjugal partnership of Alayo and his legitimate wife Juliana. Under both the
new Civil Code (Article 160) and the old Civil Code (Article 1407), "all property of the
marriage is presumed to belong to the conjugal partnership, unless it be proved that it
pertains exclusively to the husband or to the wife." This presumption has not been
convincingly rebutted.
It cannot be seriously contended that, simply because the property was titled in the
name of Josefa at Alayo's request, she should thereby be deemed to be its owner.
The property unquestionably was acquired by Alayo. Alayo's letter, dated 06 October
1959, to Magdalena Estate, Inc., merely authorized the latter to have title to the
property transferred to her name. More importantly, she implicitly recognized Alayo's
ownership when, three years after the death of Alayo, she and Josephine executed
the deed of extrajudicial partition and sale in which she asserted a one-half (1/2)
interest in the property in what may be described as her share in the "conjugal
partnership" with Alayo, plus another one-fourth (1/4) interest as "surviving widow,"
the last one-fourth (1/4) going to Josephine as the issue of the deceased. Observe
that the above adjudication would have exactly conformed with a partition in intestacy
had they been the sole and legitimate heirs of the decedent.
The appellate court below, given the above circumstances, certainly cannot be said to
have been without valid basis in concluding that the property really belonged to the
lawful conjugal partnership between Alayo and his true spouse Juliana.
As regards the property relation between common-law spouses, Article 144 of the
Civil Code merely codified the law established through judicial precedents under the
old code (Margaret Maxey vs. Court of Appeals, G.R. No. L-45870, 11 May 1984). In
both regimes, the co-ownership rule had more than once been repudiated when
either or both spouses suffered from an impediment to marry (Jeroniza vs. Jose, 89

SCRA 306). The present provisions under Article 147 and Article 148 of the Family
Code did not much deviate from the old rules; in any case, its provisions cannot apply
to this case without interdicting prior vested rights (Article 256, Family Code).

The first ground is not meritorious. It is not newly discovered

evidence. As described in appellants' Motion the documents were
"not discovered or considered as necessary evidence during the
trial of the case below" by the former counsel; it is therefore more
properly considered as forgotten evidence, which the appellant
knew or should have known during the trial (Tesoro vs. Court of
Appeals, 54 SCRA 296; Republic vs. Vda. de Castelvi, 58 SCRA
336). Moreover, assuming the sale is proven, it does not follow that
the proceeds were used to pay the lot in question; the payments
were made in installments, not in one lump sum.

It was at the time that 'the adjudication of ownership was made following Alayo's
demise (not when Alayo merely allowed the property to be titled in Josefa's name
which clearly was not intended to be adversarial to Alayo's interest), that a
constructive trust was deemed to have been created by operation of law under the
provisions of Article 1456 of the Civil Code.
Article 1456. If the property is acquired through mistake or fraud,
the person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the property
comes.

Neither is the second ground deserving of merit. Assuming that the

marriage to Ballit in 1961 is duly proven, and that this provided a
cause for legal separation and consequent disqualification of the
guilty spouse to succeed to the husband's intestate estate under
Article 1002 of the Civil Code, the fact remains that no action for
legal separation was brought by the husband during his lifetime and
within the period provided by law. It is too late to raise the issue at
this time.

The applicable prescriptive period for an action seeking a reconveyance of the

property by the beneficiaries thereof is ten (10) years (Article 1144, Civil Code).
Ordinarily, that period starts from the establishment of the implied trust being the day
when the cause of action would be considered to have accrued (Article 1150, Civil
Code). Unfortunately for Josefa and Josephine, however, the property involved in this
case is a realty titled under the Torrens System. The prescriptive period is thus to be
counted from the time the transaction affecting the property is registered with the
corresponding issuance of a new certificate of title. 3 Between the time Transfer of
Certificate of Title No. 198840 was issued on 06 June 1974, and the filing of the
action for the reconveyance of the property with the court a quo on 30 October 1980,
barely a period of six (6) years and four (4) months had elapsed. The case has
accordingly been initiated seasonably.
The four-year prescriptive period, mentioned in passing by the petitioners, would have
had some value and relevance had the private respondents or their predecessor in
interest been parties to the extrajudicial partition and sale. In that event, the latter's
action could only then be predicated on a vitiation of consent 4 where the applicable
statutory limitation would be four years. 5
The last issue raises the supposed error in the rejection of a new trial on the basis of
newly discovered evidence. We concur with the resolution of the appellate court
below (on appellants' [petitioners herein] motion for reconsideration thereat), thus
Appellants' prayer for a new trial based upon what they claim is
newly discovered evidence deserves scant consideration.
Appellant proposes to prove (1) that Josefa Bosing sold certain
property for P8,000.00 in 1948 and was therefore in a financial
position to make the payments to Magdalena Estate Inc. and (2)
that appellee Juliana Bosing got married in 1961 to one Burayos
Ballit, and thus, "forfeited" her right to the conjugal partnership.

Accordingly, assuming that the Motion for New Trial complies with
the formal requisites for such motion (See Minister of Natural
Resources vs. Heirs of Orval Hughes, et al., G.R. No. 62662, prom.
November 12, 1987), a question We don't find necessary to decide,
a new trial would not serve a useful purpose in altering the result of
the questioned decision.
WHEREFORE, the decision appealed from in the instant petition for review
on certiorari is AFFIRMED.
SO ORDERED. G.R. No. 99357 January 27, 1992
MA. LOURDES VILLANUEVA, petitioner,
vs.
COURT OF APPEALS and BLUE CROSS INSURANCE, INC., respondents.
Aggabao, Fernandez, Arellano & Fule Law Offices for petitioner.
Samuel F. Baldado for private respondent.

REGALADO, J.:

This petition for review on certiorari seeks the nullification of the resolution of
respondent Court of Appeals dated May 8, 1991, reconsidering its preceding
resolution of March 15, 1991, in CA-G.R. SP No. 24120, entitled "Ma. Lourdes R.
Villanueva vs. Blue Cross Insurance, Inc."
Petitioner's plaint in her present recourse narrates that on October 12, 1989, she filed
a complaint with the Insurance Commission alleging, inter alia, that, in consideration
of the annual payment of P7,535.00, private respondent executed a policy of sickness
and accident insurance; that on August 12, 1989, petitioner was admitted to a hospital
where she was diagnosed and operated on for cholecystitis; that petitioner paid the
hospital and doctor's bills in the aggregate sum of P48,934.05, the same being the
actual hospital and professional fees charged to her; and that private respondent
wrongfully refused to pay petitioner the said amount which she is entitled to recover
under the policy.
Private respondent's answer raised the special and affirmative defenses that under
the insurance policy, definitions and exclusions were clearly specified and among the
exclusions are conditions which pre-existed before the effective date of the insurance
of which the insured was aware or should reasonably be aware; and that cholecystitis
was a pre-existing condition, hence petitioner's sickness is non-compensable.
On September 21, 1990, the Insurance Commission rendered its decision in I.C.
Case No. 3277 in favor of petitioner ordering private respondent to pay the latter the
amount of P48,934.05 with legal interest from the date of the filing of the complaint
until fully satisfied, plus P5,000.00 attorney's fees and costs. In the main, the
Insurance Commission, after a review of the evidence presented, concluded that
petitioner's illness, contrary to private respondent's defenses, was not a pre-existing
disease and therefore, is fully compensable. 1
According to respondent court, a copy of said decision was received by private
respondent on September 27, 1990. On October 15, 1990, or more than the fifteen
(15) days allowed by Section 2, Republic Act No. 5434, private respondent filed a
motion for reconsideration which petitioner opposed. On December 13, 1990, the
Insurance Commission denied said motion for reconsideration. 2 On December 17,
1990, private respondent filed a notice of appeal with the Insurance Commission. 3
On March 15, 1991, the Third Division of respondent Court of Appeals dismissed the
appeal on the ground that it was filed out of time and that private respondent did not
duly file a copy of its notice of appeal with respondent Court as mandated by Republic
Act No. 5434. 4
Respondent court noted that under the aforesaid Section 2 of Republic Act No. 5434,
private respondent had ten (10) days from its receipt on December 14, 1990 of the
aforesaid order denying its motion for reconsideration within which to appeal. While
respondent court, in its resolution of May 8, 1991, subsequently agreed that private
respondent filed its notice of appeal with the Insurance Commission within the said

10-day period, no such notice was filed with respondent court as required by Section
3, Republic Act No. 5434.
Private respondent then moved for the reconsideration of the dismissal of its appeal.
On May 8, 1991, the Special Third Division of respondent court resolved to reconsider
its original resolution and ordered the reinstatement of the appeal "in keeping with the
ends of substantial justice." 5
Hence, the petition at bar with the following assignment of errors:
1. The respondent court committed an error in reinstating the
appeal when it has no jurisdiction to do so, no notice of appeal
having been filed with it.
2. The manner of appeal from quasi-judicial bodies has been fixed
with the solemnity of a statute; the Court of Appeals erred in
ignoring it. 6
We agree with petitioner that the Court of Appeals erred in reconsidering its previous
resolution dismissing herein private respondent's appeal in CA-G.R. SP No. 24120.
The dismissal of said appeal is proper and fully justified by private respondent's
failure to file a notice of appeal with the Court of Appeals as required by Republic Act
No. 5434 for the perfection of its appeal from the decision of the Insurance
Commission.
The Court of Appeals has been vested with exclusive appellate jurisdiction over all
final judgments, decisions, resolutions, orders or awards of quasi-judicial agencies,
instrumentalities, boards or commissions, except those falling within the exclusive
appellate jurisdiction of the Supreme Court. During the period relevant to and involved
in the appeal from the Insurance Commission to respondent court in CA-G.R. SP No.
24120, subject of the present review, the appeal to the Court of Appeals from
said quasi-judicial body was governed by the provisions of Republic Act No. 5434
insofar as the same are not inconsistent with the provisions of Batas Pambansa Blg.
129. 7
As restated and clarified in the Lacsamana case, to perfect an appeal under Republic
Act No. 5434, the following rules must be observed:
In an appeal from quasi-judicial bodies to the Court of Appeals
under Republic Act No. 5434 and Section 22(c) of the Interim
Rules, the appeal shall be taken by filing a notice of appeal with the
Court of Appeals and with the quasi-judicial body within fifteen days
from notice of the ruling, award, order, decision or judgment; or in
case a motion for reconsideration is filed within said period, then
within ten days from notice of the resolution denying the motion for
reconsideration (Sections 2 and 3 of R.A. No. 5434). No extension

of time to file such a notice of appeal is needed, much less

allowed. 8
It is, therefore, indubitable that to perfect an appeal, notice must be filed both with the
Court of Appeals and with the board, commission or agency that made or rendered
the ruling, award, order, decision or judgment appealed from. In the instant case,
even assuming that a notice of appeal was seasonably filed with the Insurance
Commission, no such notice of appeal was filed with the Court of Appeals. The said
failure of petitioner to comply with the requirements of law for the perfection of its
appeal is fatal to its present remedial attempt. It renders the decision of the Insurance
Commission final and executory and the same can no longer be a subject of review. 9
This Court has invariably ruled that perfection of an appeal in the manner and within
the period laid down by law is not only mandatory but also jurisdictional. 10 The failure
to perfect an appeal as required by the rules has the effect of defeating the right of
appeal of a party and precluding the appellate court from acquiring jurisdiction over
the case. 11
The right to appeal is not a natural right nor a part of due process; it is merely a
statutory privilege, and may be exercised only in the manner and in accordance with
the provisions of the law. 12 The party who seeks to avail of the same must comply
with the requirements of the rules. Failing to do so, the right to appeal is lost. 13
It is true that in some cases the filing of an appeal was allowed where a stringent
application of the rules would have denied it, but only when it would serve the
demands of substantial justice and in the exercise of the court's equity
jurisdiction. 14 In the case at bar, however, the interests of justice would not be served
by a policy of liberality, nor has the private respondent advanced any compelling
reason to warrant the same. In fact, in its original resolution, 15respondent court itself
expounded at length on the very same doctrines enjoining strict compliance with the
rules governing appeals which we have set out herein and, on such considerations,
dismissed the appeal therein.
Moreover, relaxation of the rules is not called for since the issues raised are mainly
factual. The decision of the Insurance Commission was based on its findings that the
illness of private respondent, cholecystitis, was not a pre-existing ailment and is,
therefore, fully compensable. It further specifically found that private respondent failed
to prove petitioner's awareness of that pre-existing condition which is excluded under
the insurance policy. We find no reason to disturb the said findings which are
supported by the evidence on record and the conclusions of experts.
Settled is the rule that factual findings of administrative agencies are accorded not
only respect but finality, because of the special knowledge and expertise gained by
these quasi-judicial tribunals from handling specific matters falling under their
jurisdiction. 16 Courts cannot take cognizance of such factual issues. 17 In reviewing
administrative decisions, the reviewing court cannot re-examine the sufficiency of the

evidence. The findings of fact must be respected, so long as they are supported by
substantial evidence. 18
It has long been recognized that strict compliance with the Rules of Court is
indispensable for the prevention of needless ENDING delays and for the orderly and
expeditious dispatch of judicial business. 19 For a party to seek exception for its failure
to comply strictly with the statutory requirements for perfecting its appeal, strong
compelling reasons such as serving the ends of justice and preventing a grave
miscarriage thereof must be shown, in order to warrant the Court's suspension of the
rules. 20 Otherwise, the rules must strictly apply, as in this case.
WHEREFORE, the petition is granted. The challenged resolution of respondent court
dated May 8, 1991 is hereby ANNULLED and SET ASIDE and its resolution of March
15, 1991 is REINSTATED. The decision of the Insurance Commission in I.C. Case
No. 3277, dated September 21, 1990, is hereby declared FINAL and EXECUTORY.
SO ORDERED.
G.R. No. L-5586 December 10, 1910
CASIANA BISMORTE, Plaintiff-Appellant, vs. ALDECOA & CO., DefendantAppellee.
Ramon Salinas, for appellant.
Rosado, Sanz and Opisso, for appellee.
TRENT, J.:
The plaintiff, a married woman, brought this action in her own name, without joinder
her husband, to recover the possession of a steamboat, alleged to be her exclusive
property, and for damages for the wrongful detention of the same. The fact of
plaintiff's coverture does not appear on the face of the complaint but it was raised by
answer, and one of the special defenses in the answer was that plaintiff has no
capacity to sue, this special defense being based on the provisions of section 115 of
the Code of Civil Procedure.chanroblesvirtualawlibrary chanrobles virtual law library
Judgment was rendered in favor of the defendant company, dismissing the complaint,
with costs, on the ground that the plaintiff did not have the legal capacity to bring this
action without joining her husband. The plaintiff appealed and during the pendency of
the appeal this court, upon motion, allowed the plaintiff to amend her complaint by
striking out that part which refers to damages for the alleged illegal detention of the
steamer, leaving as the subject matter of the action the steamer only. Before the
amendment was made plaintiff's husband had an interest or right in the income from
this steamer. (Quison vs. Salud, 12 Phil. Rep., 109; arts. 1385, 1401, Civil
Code.)chanrobles virtual law library

Passing the question whether, under ordinary circumstances, the husband has such
right or interest in his wife's paraphernal property, aside from the products, so as to
make him a necessary part, we will proceed to determine whether or not defendant
company can raise the question of plaintiff's exclusive ownership, between herself
and husband, of the steamer in question.chanroblesvirtualawlibrary chanrobles virtual
law library
It appears from Exhibit A, the only evidence before us, and which is a public notarial
document, duly executed on the 2nd of July, 1907, that Manuel Veloso, in his own
name and as the legal representative, by the proper power of attorney, of his wife
Casiana Bismorte, and William Urquahart, the duly authorized agent and liquidator of
Aldecoa & Co., executed this Exhibit "A," which appears to have for its object at least
a partial settlement of Veloso's indebtedness to Aldecoa & Co; that Veloso, as the
legal representative of his wife, sold to the defendant company on the 19th of August,
1905, with the right to repurchase within ten years, various parcels of real estate for
the sum of P6,478, said amount to be applied on Veloso's debt to defendant
company; that on the same date and under the same conditions, Veloso, in his own
name, sold to the defendant company for the sum of P13,583, to be applied on his
debt, a number of parcels of real property; that in that same document, dated the 19th
of August, 1905, Veloso promised to pay P2,000 a month on his indebtedness,
guaranteeing this payment by, as he said, all of his property, credits, and interest
which constituted his business in Leyete; that in a notarial document duly executed on
the 3rd of August, 1904, Veloso acknowledged himself to be indebted to Aldecoa &
Co. in certain other specified sums, guaranteeing the payment of these amounts with
the steamer San Rafael, the said boat being his own property; that a final liquidation
of all the accounts was made, resulting in Veloso owing Aldecoa & Co. the sum of
P129,749.65; that after this liquidation, and by virtue of this document, Exhibit A,
Veloso, for himself and as the legal representative of his wife, by and with the consent
of the legal representative of the defendant company, modified the former sales of the
real property, with the right to repurchase, and converted the same into an absolute
sale in favor of the defendant company, together with other specified property
belonging to him, in payment of his indebtedness. Paragraphs (e) and (f) of this
document, Exhibit A, are as follows:
(e) There should be excluded from the foregoing assignment, cession, and transfer,
the steamer San Rafael, which will hereafter be the exclusive property of my wife,
Casiana Bismorte, in consideration of the property by her transferred and assigned in
payment of part of the aforesaid indebtedness.chanroblesvirtualawlibrary chanrobles
virtual law library
(f) It is further stipulated and agreed that Casiana Bismorte shall execute, within the
maximum period of two months, a notarial instrument, ratifying the present one,
otherwise Aldecoa & Co. can either insist upon the validity of this instrument or have
the same rescinded, leaving everything in the same condition in which it was prior to
the execution of the present agreement, demanding payment of all the amounts due
them from the said Manuel Veloso, and such interest as may have accrued thereon.

The defendant now insists that it has not been shown that the property transferred by
the plaintiff to the defendant in payment of a part of her husband's indebtedness was
acquired by her separate funds, nor even that it belonged to her. The defendant is
estopped from now raising this question, as it dealt with the plaintiff's husband on the
theory that the plaintiff was the owner of these lands. The parties to this contract
treated this fact as specifically settled. That the plaintiff was the owner of this real
property forms a part of the very basis of the contract itself; in fact it is the basis or
foundation of this contract as far as the plaintiff is concerned. That she was the
exclusive owner of the lands can not now be questioned by the defendant. It is
estopped by the contract itself. It accepted the lands as the property of the plaintiff,
and it would now be against the plainest principles of justice to allow it to deny that
the plaintiff was the exclusive owner of those
lands.chanroblesvirtualawlibrary chanrobles virtual law library
According to the contract, Exhibit A, plaintiff's husband obliged himself to do certain
things. He also, on behalf of his wife, obligated her to perform certain acts. The
defendant accepted these obligations with the corresponding reciprocation. The
obligations on the part of the plaintiff and her husband were distinct and separate.
She had nothing to do with the fulfillment of this contract, except to consent to the
conversation of the provincial sale of her lands to an absolute sale in favor of the
defendant and to ratify this sale within the period of two months. She consented to the
converting of the provincial sale into an absolute one, but the record does not show
whether or not she executed a document ratifying this absolute sale, as provided in
paragraph (f), supra. But this is immaterial, as the fact that she brought this action,
seeking the fulfillment of the contract, is conclusive proof of her ratification, and if she
never executed a document ratifying the same her conduct is a sufficient ratification.
She therefore complied en toto with her part of this obligation. She can not be held
responsible if her husband has failed to comply with his part of the contract, as no
stipulation to this effect was made. The defendant did not demand, neither does it
appear in the contract, that the fulfillment of same between it and the plaintiff would
be dependent upon the husband's compliance with his obligations. We can not
determine whether her husband has, in fact, complied with his part of the contract or
not, but his is immaterial in this case.chanroblesvirtualawlibrary chanrobles virtual law
library
It having been settled that the lands (which were mentioned in the contract as
belonging to the plaintiff) were the plaintiff's exclusive property, and these lands
having been exchanged, according to the contract, for the steamer in question, the
said steamer, under article 1396 of the Civil Code, became the paraphernal or
exclusive property of the plaintiff. The defendant specifically agreed in the contract
that the steamer should become the exclusive property of the plaintiff, the
consideration being the plaintiff's lands. Under the plain terms of this contract any
defense which the defendant might set up against the plaintiff's husband for his failure
to comply with his part of the contract can not interposed against the plaintiff, as she
has fulfilled her obligations. The defendant received from the plaintiff what it then
considered a valuable consideration when the contract was executed, in so far as the
contract affected the plaintiff. As to whether or not it has any meritorious defenses

which are not stated in the contract against the plaintiff must be left for future
determination. It was specifically agreed in the contract, as we have said, that the
plaintiff should be the exclusive owner of the steamer San Rafael. In the face of this
express agreement, the defendant seeks to avoid complying with its part of this
obligation, in so far as the plaintiff is concerned, by now claiming that the plaintiff's
husband has an interest in this steamer. We think that this is a clear case of estoppel
by contract. As the defendant had agreed that the plaintiff should be the exclusive
owner of the boat it should not now be permitted to say that her husband has an
interest in it. The estoppel of the defendant was fixed by the execution of the contract.
Nothing further need be shown where the fact in question, as in this case, has been
clearly agreed upon. This position was taken by the defendant when it executed the
contract in question. The plaintiff acted upon this theory. The defendant can not
change its position to the prejudice of the plaintiff. The defendant can not now deny
this fact in regard to its position, it having acted with full knowledge of its right and all
the material facts.
A party can not either in the course of litigation or in dealings in pais occupy
inconsistent positions. Upon that rule election is founded; "a man shall not be
allowed," in the language of the Scotch law, "to approbate and reprobate." And where
a man has an election between several inconsistent courses of action, he will be
confined to that which he first adopts; the election, if made with knowledge of the
facts, is in itself building; it can not been withdrawn without due consent; it can not be
withdrawn though it has not been acted upon by another by any change of position.
(Bigelow on Estoppel, p. 673.)
In the case of Daniel vs. Tearney (102 U.S., 415), the suit was brought by Tearney
and Wilson, executors of Collin C. Porter. The complaint set forth that the defendants
on the 1st day of June, 1861, made their joint and several bond whereby they bound
themselves to pay to the plaintiff a certain specified sum of money when requested,
and that there was a condition affixed to the bond which was "That, whereas on the
25th day of March, 1861, a writ fieri facias was issued from the clerk's office in the
name of Porter against one Daniels for a certain sum of money, with interest from the
2nd day of January, 1860, and costs; if, therefore, the said Daniels should pay the
debt, interest, and costs, when the operation of the ordinance before mentioned
should cease, then the obligation to be avoid, otherwise to be in full force." In April,
1861, a convention of the State of Virginia passed an ordinance of secession, and on
the 30th of that month a law entitled "An ordinance to provide against the sacrifice of
property and to suspend proceedings in certain cases." It was under this law or
ordinance that the bond sued upon was given. When this suit was brought the
defendants pleaded, among other things, the unconstitutionality of that statute and
ordinance. This law was held by the Supreme Court of the United States to be directly
repugnant to the constitutional provisions which forbid the impairment of contracts by
State laws. It also held that the bond sued upon, as a statutory instrument, was
likewise void, but held that the defendants were estopped from raising the question of
the validity of the statute and bond, the court saying:

The principle of estoppel thus applied has its foundation in a wise and salutary policy.
It is a means of response. It promotes fair dealing. It can not be made an instrument
of wrong or oppression, and it often gives triumph to right and justice, where nothing
else known to our jurisprudence can, by its operation, secure those ends. Like the
statute of limitations, it is a conservator, and without it society could not well go on.
The court in quoting from the case of Ferguson vs. Landram (5 Bush (Ky.), 230), cited
in the above case, said:
Upon what principle of exalted equity shall a man be permitted to receive a valuable
consideration through a statute, procured by his own consent or subsequently
sanctioned by him, or from which he derived an interest and consideration, and then
keep the consideration, and repudiate the statute?
In applying this principle to the case at bar we might likewise ask upon what principle
of exalted equity shall a man be permitted to receive a valuable consideration,
through a contract, procured by his own consent, with full knowledge of all of his
rights and of all the material facts, and then keep the consideration (the land in this
case) and repudiate the contract? Parties are precluded from contradicting their
solemn admissions or statements liberately made in their contracts under these
circumstances. The defendant company in this contract specifically agreed that the
steamer should be the exclusive property of the plaintiff. It was upon this agreement
that the plaintiff parted with her lands. It would not now be just to permit it to retain the
lands and question her exclusive ownership, between herself and her husband, of this
boat.
It is a principle of law of universal application (and as just as it is general) that
admissions, whether of law or of fact, which have been acted upon by others are
conclusive against the party making them, in all cases between him and the person
whose conduct he has thus influenced; and the principle is founded upon grounds of
public policy, that a man shall not be permitted to repudiate his own representations.
(Toppan vs. Cleveland, C. & C.R. Co., Fed. Cas. No. 14,099.)
Under all of the facts before us we are irresistibly led to the conclusion that the
defendant company is estopped from raising this
question.chanroblesvirtualawlibrary chanrobles virtual law library
The judgment is, therefore, reversed, and the record will be returned to the court
below for further proceedings in accordance with this decision, without special ruling
as to costs. So ordered.chan
G.R. No. 42551

September 4, 1935

ALEKO E. LILIUS, for himself and as guardian ad litem of his minor child, Brita
Marianne Lilius, and SONJA MARIA LILIUS, plaintiffs-appellees,
vs.

MANILA RAILROAD COMPANY, defendant.

LAURA LINDLEY SHUMAN, MANILA WINE MERCHANTS, LTD., BANK OF THE
PHILIPPINE ISLANDS AND MANILA MOTOR CO., INC., intervenors-appellants, and
W.H. WATEROUS, M. MARFORI, JOHN R. MCFIE, JR., ERLANGER & GALINGER,
INC., PHILIPPINE EDUCATION CO., INC., HAMILTON BROWN SHOE CO.,
ESTRELLA DEL NORTE and EASTERN & PHILIPPINE SHIPPING AGENCIES,
LTD., intervenors-appellees.

One-half of the claim of Dr. W.H. Waterous by virtue of a written

assignment of March 9, 1933, by the said Sonja Maria Lilius to
him

J.W. Ferrier for intervenor-appellant Shuman.

Franco and Reinoso for intervenor-appellant Manila Wine Merchants, Ltd.
Feria and La O for intervenor-appellant Bank of the Philippine Islands.
Gibbs and McDonough for intervenor-appellant Manila Motor Co.
Harvey and O'Brien for plaintiffs-appellees.
John R. Mcfie, Jr., in his behalf and for the intervenors-appellees.

One-third of the claim of the appellant Laura Lindley

Shuman by virtue of a joint judgement obtained by her on August
10, 1933, in the Case No. 44254 of the Court of First Instance of
Manila, against the said Sonja Maria Lilius, Aleko E. Lilius and
Brita Marianne Lilius

661.13

One-third of the claim of the St. Paul's Hospital by

virtue of a joint written assignment of September 21, 1933, by the
said Sonja Maria Lilius, Aleko E. Lilius and Brita Marianne Lilius to
it

518.19

P1,500.00

GODDARD, J.:
In this case Laura Lindley Shuman, the Manila Wine Merchants, Ltd., the Bank of the
Philippine Islands and the Manila Motor Co., Inc., have appealed from an order of the
Court of First Instance of Manila fixing the degree of preference of the claimants and
distributing the proceeds of the judgment of this court in the case of Lilius vs. Manila
Railroad Co. (59 Phil., 758), the amount of which judgment in the sum of P33,525.03,
including interest and costs, was deposited by the railroad company with the clerk of
the lower court in that case. After deducting the attorneys' fees in the sum of
P8,016.88, which is not questioned, the net amount in the hands of the clerk of the
lower court pertaining to each of the plaintiffs in the original action is follows:

Aleko E. Lilius

and the balance of the award was ordered paid to the said Brita Marianne Lilius, and
(b) As against the sum of P4,109.28, separately awarded to the plaintiff Brita Marriane
Lilius, the following claims or portions thereof in the order stated:

P13,181.33

Sonja Maria Lilius

8,218.54

Brita Marianne Lilius

4,109.28

One-third of the claim of Laura Lindley Shuman by virtue of a joint

judgment obtained by her on August 10, 1933, in Case No. 44254
of the Court of First Instance of Manila, against the said Brita
Marianne Lilius, Sonja Maria Lilius and Aleko E. Lilius

One-third of the claim of St. Paul's Hospital by virtue

of a joint written assignment of September 21, 1933, by the
said Brita Marianne Lilius, Sonia Maria Lilius and Aleko
E. Lilius

P661.13

518.18

There was a total of twenty-eight claimants to these funds, whose claims were
presented and decided without objection in the original case in the lower court.
The trial court in its order from which these appeals are taken, allowed:

and the balance of the award was ordered paid to the said Brita Marianne Lilius, and

(a) As against the sum of P8,218.54, separately awarded to the plaintiff Sonja Lilius,
the following claims or portions thereof in the order stated:

(c) As against the sum of P13,181.33, awarded to the plaintiff Aleko E. Lilius, the
following claims or portions thereof in the order stated:

The other half of the claim of Dr. W.H. Waterous by virtue of the
final judgement in the original case, G.R. No. 39587

The claim of Dr. M. Marfori, by virtue of the final judgment in the

original case, G.R. No. 39587

The claim of John R. McFie, Jr., by virtue of a written assignment

to him by the said Aleko E. Lilius of November 13, 1931

P1,500.00

250.00

500.00

First assignments of error: "The lower court erred in holding that Dr. W.H. Waterous
and Dr. M. Marfori had a claim against the plaintiff, Aleko E. Lilius superior to the
claim of the appellant, Laura Lindley Shuman, against him."
One of the contentions of this appellant under this assignment of error is that her
claim, having been made the basis of the plaintiffs' action and of the award for
damages, as shown in the original decision herein, should constitute, and does
constitute a superior lien against the funds awarded said plaintiffs, to those of any
other claimants, except the two doctors, the hospital and the other nurse, and that as
to the claims of the two doctors, the hospital and the other nurse the claim of this
appellant has equal preference with their claims.
The following items were made the basis of a part of the judgment for damages
awarded to the plaintiffs in the original action against the Manila Railroad Company:

Por honorarios del Dr. Waterous (Exhibit N-2)

The balance of P10, 931.33 of the judgment pertaining to the said
Aleko E. Lilius was allowed and distributed by the lower court
proportionately among the following claimants by virtue of their
written assignment of January 27, 1932:

Erlanger & Galinger, Inc.

3,374.50

Philippine Education Co., Inc.,

3,394.94

Hamilton Brown Shoe Co.

1,878.98

Estrella del Norte

Eastern & Philippine Shipping Agencies, Ltd.

APPEAL OF LAURA LINDLEY SHUMAN

P3,000.00

Por la primera cura hecha en el Hospital de Calauang (Exhibit N-5)

250.00

Por el alquiler de la ambulancia del Hospital General (Exhibit N-4)

10.00

Por la estancia en el Hospital Saint Paul (Exhibit N-3)

3,355.00

Por los servicios prestados por la enfermera Laura Shuman (Exhibit

N-6)

2,156.00

Por los servisios prestados por la enfermera Alejandra Alcayaga

(Exhibit N-9)

1,450.00

1,850.76

432.15
Porlos servicios prestados por la enfermera Carmen Villanueva
(Exhibit N-11)

240.00

Por la perdida de la camara fotografica, pluma fuente y lapiz (Exhibit

N-1)

Por trajes daados en el choque

Total

As there was no evidence offered in this case as to the amount of said costs, the
lower court was correct in disallowing that item. This assignment of error is overruled.
43.00
Under her third assignment of error this appellant contends (1) that the funds
separately awarded the wife, Sonja Maria Lilius, partake of the nature of conjugal
property, at least to the extent of the sum of P800 awarded to her as interest on the
principal award of P10,000 made in her favor by the trial court, and as such should
131.00respond for the support of the family, including medical expenses and (2) that even
assuming that the sums awarded separately to Sonja Maria Lilius are not conjugal
property, but her own paraphernal property, still under the provisions of the Civil Code
payment may be required out of said funds, her husband being insolvent, under her
liability for the medical expenses incurred by her husband, one of the obligations
10,635.00imposed by law upon the wife.

The trial court in that case directed the defendant Railroad Company to pay P3,000 to
Dr. Waterous and to pay to Dr. Marfori P250, but failed to direct the defendant to pay
the corresponding sums to the other persons and entities mentioned in the portion of
the decision copied above.
It must be admitted that the amounts due Dr. Waterous and the others mentioned is
the original decision, including the appellant Shuman, were all used as a basis for a
part of the judgment which plaintiffs secured against the defendants Railroad
Company.
From the foregoing it is clear that the claim of this appellant rests upon the same
ground as those of Doctors Waterous and Marfori. She was also among those who
rendered services to plaintiffs in aid of their recover from the injuries received by them
in the accident for which damages were awarded them in the case against the
Railroad Company. The fact that the trial court did not direct the defendant Railroad
Company to pay directly to this appellant the amount of her claim does not modify or
do away with her equitable right to the same status as that given to the two doctors
mentioned above. The inevitable conclusion is that the claims of Waterous and
Marfori have no preference over her claim for her services as a nurse. This
assignment of error should be and is hereby sustained.
This appellant in her second assignment of error contends that the trial court erred in
failing to allow her claim in the sum of P61.94 as costs in the case in which judgment
was rendered in her favor against the herein plaintiffs-appellees. The record shows
that the reason for the disallowance of this item was because no proof was offered as
to the amount of such costs. The only thing appearing in the transcript on this point is
the statement of counsel that the amount of costs in case No. 44254, as shown by the
bill of costs, was P6l.94. Rule 38 of the Revised Rules of Courts of First Instance
requires that ". . . costs shall be taxed by the clerk on five days' written notice given
by the prevailing party to the adverse party, with which notice given by the prevailing
party, verified by his oath or that of his attorney, shall be served. . . ." The proper
evidence, therefore, of the costs in that case would have been the bill of costs and the
taxation of such costs by the clerk. In order to recover such costs in a separate
proceeding, such as this, evidence must be presented as to the amount of the same.

The second contention under this assignment of error can be disposed of by calling
attention to the fact that there is no proof in this case that her husband is insolvent. It
has not been proved that Aleko E. Lilius had no other property outside of the sum
awarded to him in the case against the Railroad Company.
APPEAL OF THE MANILA WINE MERCHANTS, LTD., AND THE BANK OF THE
PHILIPPINE ISLANDS.
The appellants, the Manila Wine Merchants. Ltd., and the Bank of the Philippine
islands also contend that the sum separately awarded Sonja Maria Lilius is conjugal
property and therefore liable for the payment of the private debts of her husband,
Aleko E. Lilius, contracted during her marriage.
it is contended that the damages awarded for personal injury are not classified as
separate property of each of the spouses in article 1396 of the Civil Code and they
should therefore be resumed conjugal. In answer to this, article 1401 of the same
Code, in enumerating the property belonging to the conjugal partnership, does not
mention damages for personal injury.
The question raised by these appellants is one of first impression in this jurisdiction
and apparently has never been passed upon by the Supreme Court of Spain.
The following comment is found in Colin y Capitant, Vol. 6, pages 217 and 218:
"No esta resuelta expresamente en la legislacion espa__ola la cuestion de si las
indemnizaciones debidas por accidentes del trabajo tienen la consideracion de
gananciales o son bienes particulares de los conyuges.
"Inclinan a la solucion de que estas indemnizaciones deben ser consideradas como
gananciales, el hecho de que la sociedad pierde la capacidad de trabajo con el
accidente, que a ella le pertenece, puesto que de la sociedad son los frutos de ese
trabajo; en cambio, la consideracion de que de igual manera que los bienes que
sustituyen a los que cada conyuge lleva al matrimonio como propios tienen el
caracter de propios, hace pensar que las indemnizaciones que vengan a suplir la
capacidad de trabajo aportada por cada conyuge a la sociedad, deben ser

juridicamente reputadas como bienes propios del conyuge que haya sufrido el
accidente. Asi se Ilega a la misma solucion aportada por la jurisprudencia francesa.".
From the above it appears that there are two distinct theories as to whether damages
rising from an injury suffered by one of the spouses should be considered conjugal or
separate property of the injured spouse. The theory holding that such damages
should form part of the conjugal partnership property is based wholly on the
proposition, also advanced by the Manila Wine Merchants, Ltd., that by the injury the
earning capacity of the injured spouse is diminished to the consequent prejudice of
the conjugal partnership.

R. McFie, jr., whose claim is based on a deed of assignment dated November 13,
1931, and Erlanger & Galinger, Philippine Education Co., Inc., Hamilton Brown Shoe
Co., Estrella del Norte and Eastern & Philippine Shipping Agencies, Ltd., whose
claims are based on a deed of assignment dated November 17, 1931. As the record
shows that whatever was left of the judgment in favor of Aleko E. Lilius is not
sufficient to pay in full the credits of the above mentioned creditors and furthermore,
in view of the fact that strictly speaking, there was no existing credit in favor of Aleko
E. Lilius to be garnished on February 3, 1933, as it had been assigned, before that
date, to his creditors, this assignment of error, therefore, must be overruled.
APPEAL OF THE THE MANILA MOTOR CO., INC.

Assuming the correctness of this theory, a reading of the decision of this court in G.
R. No. 39587 will show that the sum of P10,000 was awarded to Sonja Maria Lilius
"by way of indemnity for patrimonial and moral damages." The pertinent part of that
decision on this point reads:
"Taking into consideration the fact that the plaintiff Sonja Maria Lilius, wife of the
plaintiff Aleko E. Lilius is-in the language of the court, which saw her at the trial
"young and beautiful and the big scar, which she has on her forehead caused by the
lacerated wound received by her from the accident, disfigures her face and that the
fracture of her left leg has caused a permanent deformity which renders it very difficult
for her to walk', and taking into further consideration her social standing, neither is the
sum of P10,000, adjudicated to her by the said trial court by way, of indemnity for
patrimonial and moral damages, excessive.".
It should be added that the interest on that sum is part of the damages "patrimonial
and moral" awarded to Sonja Maria Lilius.
Furthermore it appears in the decision of the trial court in G. R. No. 39587 that Aleko
E. Lilius claimed the sum of P10,000 as damages on account of the loss of the
services of Sonja Maria Lilius as secretary and translator, her particular work as a
member of the conjugal partnership. The trial court disallowed this claim and neither
of the plaintiffs in that case appealed to this court.
In view of the foregoing it is held that the sum of P10,000 with interest thereon
awarded to Sonja Maria Lilius as damages is paraphernal property.
The third assignment of error of the appellant Shuman, the second assignment of
error of the appellant Bank of the Philippine Islands and the sole assignment of error
of the appellant Manila Wine Merchants, Ltd., are overruled.
In its first assignment of error it is contended by the Bank of the Philippines Islands
that by virtue of its writ of garnishment served on the Manila Railroad Company of
February 8, 1933, it acquired a lilen superior to the preference granted by article 1924
of the Civil Code to prior judgments. This error, if at all, is however non-prejudicial as
the record shows that all the creditors declared by the court as having a right to
participate in the proceeds of the judgment in favor of Aleko E. Lilius were so held by
virtue of deeds of assignment executed prior to the date of the service of notice of the
bank's writ of garnishment on the Manila Railroad Company. These creditors are John

The two error assigned by this appellant read as follows:

"I. The lower court erred in considering the date of the date judgment, Exhibit A,
Manila Motor Co., Inc., instead of the date of the public document upon which it was
based in determining the preference among the several claims filed and litigated in
this proceeding.
"ll. The lower court erred in not holding the claim of the claimant-appellant, Manila
Motor Co., Inc., preferred over all other claims against Aleko E. Lilius evidenced by
public instruments and final judgments.".
The claimant has not proven that its credit is evidenced by a public document within
the meaning of article 1924 of the Civil Code. The only evidence offered by the Manila
Motor Co., Inc., in support of its claim of preference against the fund of Aleko E. Lilius
was a certified copy of its judgment against him in civil case No. 41159 of the Court of
First Instance of Manila, together with a certified copy of the writ of execution and the
garnishment issued by virtue of said judgment. These documents appear in the
record as Exhibits A, B and C. The alleged public document evidencing its claim was
not offered in evidence and counsel of the Manila Motor Co., Inc., merely stated at the
hearing in the lower court that its judgment was based on a public document dated
May 10, 1931. There is no explanation as to why it was not presented as evidence
along with Exhibits A, B, and C. In their brief in this court, counsel for the Motor Co.,
Inc., merely assume that its credit is evidenced by a public document dated may 10,
1931, because the court, in its judgment in said civil case No. 41159, refers to a
mortgage appearing in the evidence as Exhibit A, as the basis of its judgment, without
mentioning the date of the execution of the exhibit. This reference in said judgment to
a mortgage is not competent or satisfactory evidence as against third persons upon
which to base a finding that the Manila Motor Company's credit evidenced by a public
document within the meaning of article 1924 of the Civil Code. This court is not
authorized to make use of that judgment as a basis for its findings of fact in this
proceeding. This is shown by the decision of this court in the case of Martinez vs.
Diza 920 Phil., 498). In that syllabus of that decision it is stated:
"1. COURTS OF FIRST INSTANCE; JUDGMENT IN FORMER CIVIL ACTION AS
BASIC FOR FINDINGS OF FACT; ERROR.-A person who was not a party to a former
civil action, or who did not acquire his rights from one of the parties thereto after the
entry of judgment therein, is not bound by such judgment; nor can it be used against

him as a basis for the findings of fact in a judgment rendered in a subsequent

action.".
But even if the court is authorized to accept the statement in that judgment as a basis
for its finding of fact in relation to this claim, still it would not establish the claim of
preference of the Manila Motor Co., Inc. Granting that a mortgage existed between
the Manila Motor Co., Inc., and Aleko E. Lilius, this does not warrant the conclusion
that the instrument evidencing that mortgage is a public document entitled to
preference under article 1924 of the Civil Code. Under section 5 of Act No. 1507 as
amended by Act No. 2496, a chattel does not have to be acknowledge before a
notary public. As against creditors and subsequent encumbrances, the law does
require an affidavit of good faith appended to the mortgage and recorded with it. (See
Giberson vs. A. N. Jureidini Bros., 44 Phil., 216, and Betita vs. Ganzon, 49 Phil., 87.)
A chattel mortgage may, however, be valid as between the parties without such an
affidavit of good faith. In 11 Corpus Juris, 482, the rule is expressly stated that as
between the parties and as to third persons who have no rights against the
mortgagor, no affidavit of good faith is necessary. It will thus be seen that under the
law, a valid mortgage may exist between the parties without its being evidenced by a
public document. This court would not be justified, merely from the reference by the
lower court in that case to a mortgage, in assuming that its date appears in a public
document. if the Manila motor Co., Inc., desired to rely upon a public document in the
form of a mortgagor as establishing its preference in this case, it should have offered
that document in evidence, so that the court might satisfy itself as to its nature and
unquestionably fix the date of its execution. There is nothing either in the judgment
relied upon or in the evidence to show the date of said mortgage. The burden was
upon the claimant to prove that it actually had a public Code. It is essential that the
nature and the date of the document be established by competent evidence before
the court can allow a preference as against the other parties to this proceeding.
Inasmuch as the claimant failed to establish its preference, based on a public
document, the lower court properly held that its claim against the said Aleko E. Lilius
was based on the final judgment in civil case No. 41159 of the Court of First Instance
of Manila of May 3, 1932. The court, therefore, committed no error in holding that the
claim of the Manila Motor Co., Inc., was inferior in preference to those of the
appellees in this case.

Paul's Hospital, quinientos diez y ocho pesos con diez y ocho centavos (P518.18)y, y
el sado de dos mil ochocientos sesenta y siete pesos con noventa y siete centavos
(P2,867.97), a Brita Marianne Lilius, por conducto de su tutor;".
The remaining portion of the dispositive part of the decision of the trial court is
modified as follows:
"That from the sum of P13,181.33 pertaining to Aleko E. Lilius, which is deposited
with the clerk of the trial court, the following claims shall first be paid:

Dr. W.H. Waterous

P1,500.00

Dr. M. Marfori

250.00

Laura Lindley Shuman

661.13

John R. McFie, Jr.

500.00

and the balance of the sum pertaining to Aleko E. Lilius shall be divided among the
following entities in proportion to their respective claims:

This appellant's assignments of error are overulled.

Amount of claim

In view of the foregoing the following portion of the dispositive part of the decision of
the trial court is affirmed.
"Por estas consideraciones, se ordena y se decreta (a) que del saldo de P8,219.54,
que pertenece a Sonja Maria LIllius y que se halla depositado en la Escribana del
Juzgado, se pague po el Escribano al Dr. W. H. Waterous la suma de mil quinientos
pesos (P1,500), a Laura L. Shuman, seiscientos sesenta y un pesos con trece
centavos (P661.13, y al St. Paul's Hospital, quinientos diez y ocho pesos con diez y
ocho centavos (P518.18), y el remanente de cinco mil cuatrocientos setenta y siete
pesos con veinticuatro centavos (P5,477.24), a Sonja Maria Lililus, o su apoderado;
(b) que del saldo de P4,109.28 que pretence a Brita Marianne Lilius y que se halla
deposito en la Escribania del Juzgado, se pague por el Escribano a Laura Shuman,
la suma de seicientos sesenta y un pesos con trece centavos (P661.13); y al St.

Erlanger & Galinger, Inc.

P3,672.76

Philippine Education Co., Inc.

3,695.20

Hamilton-Brown Shoe Co.

2045.00

The facts of the case as found by the Court of Appeals are as follows:

Estrella del Norte

Eastern and Philippine Shipping Agencies, Ltd.

2,014.45

470.38

So ordered without special pronouncement as to costs.

G.R. No. L-4085

July 30, 1952

AGAPITO LORENZO, ET AL., petitioners,

vs.
FLORENCIO NICOLAS ET AL., respondents.
Engracio F. Clemena and Senon S. Ceniza for petitioners.
Bustos and De Guzman for respondents.
PADILLA, J.:
This is a petition for a writ of certiorari to review a judgment of the Court of Appeals
the dispositive part of which reads, as follows:
IN VIEW HEREOF, the Court reverses the judgement appealed from, with
respects to Parcels Nos. 5 and 6, declares the same to be paraphernal
properties of the deceased Magdalena Clemente; declares the sale (Exhibit
D) made by Magdalena Clemente in favor of the Defendants-Appellants of
said Parcel of Land No. 6, on June 26, 1916, binding lawful and effective;
orders the partition by and among the plaintiffs and defendants of Parcels of
Land Nos. 2, 3 and 4, in the proportion of one-half () for the Plaintiffs and
the other half () for the Defendants; dismisses the complaint, with respect
to Parcels of land Nos. 1, 5, 6 and 7, without special pronouncement as to
costs; orders the Defendants to pay to the conjugal partnership one-half of
the whole amount paid to the Bureau of Lands, with legal interest thereon,
from the date of the filing of the complaint, after deducting from said amount
the initial payments made on the said lots Nos. 5 and 6; and further orders
the Plaintiffs to pay to pay the Defendants the sum of P50.00, representing
of the attorneys' fees paid by said Defendants in connection with parcel
No. 2.

Prior to 1910, Magdalena Clemente was the surviving widow of the

deceased Gregorio Nicolas, Manuel Lorenzo, former husband of the
deceased Carlosa Santamaria, was also at that time a widower. On January
16, 1910, Magdalena Clemente and Manuel Lorenzo contracted marriage.
Manuel Lorenzo died on January 7, 1929, while Magdalena died on January
31, 1934. During their coverture, the two had no children. In his first
marriage, however, Manuel Lorenzo left, as heirs, the plaintiffs Agapito and
Marcela Lorenzo and Policarpio Lorenzo, deceased, who had been
succeeded by his children, the plaintiffs Faustina, Federico, Guillermo and
Manuel all surnamed Lorenzo; while Magdalena Clemente, in her first
marriage, left as heirs, the deceased Gerardo Nicholas, father of the
defendants Florencio, Elena, Felix, Trinidad, Cecilia and Basilisa, all
surnamed Nicolas. . . . .
xxx

xxx

xxx

As to Parcel of land No. 6. This parcel of land which is lot No. 72 of the
Friars Land Subdivision in Guiguinto, Bulacan, was purchased in her own
name by Magdalena Clemente, for her own exclusive benefit on October 17,
1908 (Exhibit 7), prior to her marriage with Manuel Lorenzo. She had paid
the sum of P169.16 on account of the purchase price before her marriage
with Lorenzo and, according to the terms of the contract of the sale, the
balance of P833.32 was payable on installments, namely: P25.32 on June 1,
1909, and the balance in annual payment of P42.00 each, payable on the
first day of June of each year, plus interest of 4% per annum.
The receipts, evidencing the payments of these installments (Exhibits I-A to
I-M), presented by Plaintiffs themselves, demonstrate that they were paid in
her own name. On August 21, 1928, the deed of final conveyance was
executed in the sole favor of Magdalena Clemente, notwithstanding the fact
that Manuel Lorenzo was then alive. This parcel of land was registered
under the Torrens System, in the exclusive name of Magdalena Clemente.
The real estate tax receipts, covering this particular parcel, are under the
exclusive name of Magdalena Clemente. The presumption of continuity of
condition is also in favor of Magdalena Clemente. The status of the land
from the time she acquired it and before her marriage to Lorenzo, contained
until it is otherwise changed, for it is presumed that a thing once proved to
exist continues as long as is usual with things of that nature. All the acts just
mentioned are also acts of ownership. And again, it is to be presumed that a
person is the owner of a property from exercising acts of ownership over it
[Sec. 69 (j) (dd), Rule 123; Heirs of Junero vs. Lizares, 17 Phil., 112]. These
are presumptions which the plaintiffs should but failed to rebut. And Manuel
Lorenzo, indoubtedly recognizing that Magdalena Clemente had the right of
ownership over the land, did not even as much as care to place the title to
the land in the name of the conjugal partnership, even after the payment of

the installments paid by Magdalena Clemente during the marriage. However,

the evidence is not clear as to the source of the money with which the
payment of the installments was made, except the advanced payment,
which was admittedly paid from her own purse. "Any useful
expenditures made for the benefit of the separate property of either one of
the spouses by means of the advances made by the partnership or by the
industry of the husband or wife, are partnership property." (Art. 1404, Civil
Code). The amount spent for the payments of installments due during the
marriage, or obligations affecting the separate property of Magdalena
Clemente, is certainly a useful expenditures because it preserves her right to
the ownership of the land, and is, therefore, a credit which belongs to the
conjugal partnership, and must be reimbursed to it by her. (9 Manresa, 606;
5 Sanchez Roman, 840.) In other words, while the ownership of the land
remains with Magdalena Clemente, the conjugal partnership is entitled to the
reimbursement of paid installments. (Ona vs. Regala, 58 Phil. 881.)
The learned trial court sustained plaintiffs pretension on the strength of
Article 1407 of the Civil Code which declares that "all the property of the
spouses shall be deemed partnership property, in the absence of proof that it
belongs exclusively to the husband or to the wife", thereby establishing a
presumption which may be "overcome by the introduction of competent
evidence to the contrary" (Casino vs. Samaniego, 30 Phil., 135). We hold
that the evidence adduced to rebut this presumption, is not only most
competent but also convincing, as has heretofore been discussed.
As to Parcel of land No. 5. This parcel was also purchased by Magdalena
Clemente from the Bureau of Lands on October 17, 1908 (Exhibit E), for
P967.16, of which amount P116.84 had previously been paid by her, before
her marriage to Manuel Lorenzo. According to the terms of the sale, the
balance of P850.32 was payable by installments: namely, P52.32 on June 1,
1909, and P42.00 annually on June 1, of each succeeding year. Payments
on account of the installments were made by her, the receipts therefor were
issued in her own name by the Bureau of Lands (Exhibits I-A to I-M). On
October 7, 1933 or 4 years after the death of Manuel Lorenzo, the final,
certificate of sale was executed by the Director of Lands in her favor and in
her name. By virtue thereof, Transfer Certificate of Title No. 13269 was
issued in the sole name of Magdalena Clemente. The legal principles
hereinabove discussed apply with equal force to this parcel of land No. 5.
On October 12, 1932, parcel of land No. 6, together with lots Nos. 226 and
216 of the Friars Lands Subdivision in Guiguinto, were conveyed in absolute
sale for valuable consideration by Magdalena Clemente in favor of herein
Defendants (Exhibit J). The trial court considered the sale as having been
made in bad faith and consequently annulled the same. In view of our
conclusion, that parcels Nos. 5 and 6 are paraphernal properties of
Magdalena Clemente, further discussion of this assignment of error would
be deemed unnecessary. However, we propose to pass upon this point in

order to settle, once and for all, the validity of the sale which is precisely one
of the basis of Defendant's title to the lands under litigation. The sale took
place about 3 years after Manuel Lorenzo's death on January 7, 1921 it
was duly registered in the Registry of Deeds of Bulacan, and the
corresponding T.C.T. No. 17786 was issued in their favor, Aside from the
presumption of good faith, connection with this transaction (Art. 434, Civil
Code), there is no evidence at all showing that defendants were aware of the
flaw in the title of their immediate transferor, Magdalena Clemente. At the
time of the purchase of this parcel of land, Defendants did not have any
notice of the claim or interest of the herein Plaintiffs over the said property.
The price was paid. During the lifetime of Magdalena Clemente, Plaintiffs did
not dispute at all her exclusive right over said land, and it was only two years
after her death that they filed the claim against the Defendants. Fraud in the
transaction should be proven clearly; it should not solely be predicated upon
a mere presumption arising from the relationship of the vendor and the
vendees. Defendants took possession of the land completely relying upon
the fact that it was the sole property of Magdalena Clemente. Furthermore,
every purchaser of registered land should take and hold the same free and
clear from any and all prior claims, liens and encumbrances, except those
set forth in the decree of registration and those expressly mentioned in the
Land Registration Act as having been preserved against it. (Sec. 39, Act No.
496; De Jesus vs. City of Manila, 29 Phil., 73; Anderson & Co. vs. Garcia, 64
Phil., 506.) No such claim, liens or encumbrances are set forth on the
certificate of title.
Plaintiffs tried to prove fraud by the presentation of Exhibit 1, the deed of
sale in 1934, in favor of Martina Rodrigo of the parcel of land No. 7. This
deed does not in any way prove fraud in the sale of parcels of land Nos. 1
and 6, for this deed refers only to parcel No. 7, as to which, Plaintiffs'
complaint had been dismissed by the trial court. The imputation of fraud is
belied by the statement in Exhibit J that lot No. 216 was sold to Martina
Rodrigo for the purpose only of defraying the expenses of the last illness of
Magdalena Clemente. The court below, by dismissing the complaint as to
parcel No. 7 covered by the deed of sale, Exhibit J, impliedly recognized the
validity of the said deed of sale, Exhibit J.
It is, therefore, evident that the annullment of the deed of sale, Exhibit J, by
the court a quo, is an error. In view of this conclusion, the query posed by
Defendants, whether in an action for partition, the question of the nullity of
Exhibit J. on the ground of fraud, can be drawn collaterally, need not to be
determined. The same thing may be said with respect to the question of
estoppel by laches raised by the Defendants.
In support of the petition for review the petitioners claim that:

(a) That the Honorable Court of Appeals in declaring parcels of land Nos. 5
and 6 paraphernal properties of the deceased Magdalena Clemente has
committed an error of law.
(b) That the Honorable Court of Appeals has committed an error which
amounts to serious abuse of discretion by declaring that parcels of land Nos.
5 and 6 were acquired by Magdalena Clemente before her marriage to
Manuel Lorenzo..
(c) That the Honorable Court of Appeals has committed an error which
amounts to a grave abuse of discretion by not declaring the deed of sale
Exhibit "J" null and void.
So the petitioners question only the correctness of the judgment of the Court of
Appeals as to parcels Nos. 5 and 6 held to be paraphernal properties of the late
Magdalena Clemente reversing the judgment of the Court of First Instance of Bulacan
which held that they were conjugal, The third assignment of error involves a question
of fact.
Upon the presumption that the parcels of land Nos. 5 and 6 continued to be the
exclusive properties of Magdalena Clemente until shown otherwise and because she
had paid the sum of P116.84 for parcel No. 5 and P169.16 for parcel No. 6 before her
marriage to the late Manuel Lorenzo, the ancestor of the petitioners, from whom they
claim the deprive their rights to one-half of the parcels of land, the Court of Appeals is
of the opinion that they were paraphernal properties of the late Magdalena Clemente.
What she had paid during coverture for said parcels of land was declared conjugal
and deemed useful expenditures for which the conjugal partnership is entitled to
reimbursement.
The two parcel of land in question were part of the Friar Lands the alienation of which
is provided for in Act No. 1120.
Section 11 of Act No, 1120 provides:
Should any person who is the actual and bona fide settler upon and
occupant of any portion of said land . . . desire to purchase the land so
occupied by him, he shall be entitled to do so at the actual cost thereof to the
Government, and shall be allowed ten years from the date of purchase
within which to pay for the same in equal annual installments, if he so
desires, all deferred payments to bear interest at the rate of four per centum
per annum.
Section 12 of the same Act partly provides:
. . . When the cost thereof shall have been thus ascertained the Chief of the
Bureau of Public Lands shall give the said settler and occupant a certificate

which shall set forth in detail that the Government has agreed to sell to such
settler and occupant the amount of land so held by him, at the prize so fixed,
payable as provided in this Act ... and that upon the payment of the final
installment together with all accrued interest the Government will convey to
such settler and occupant the said land so held by him by proper instrument
of conveyance, which shall be issued and become effective in the manner
provide in section one hundred and twenty-two of the Land Registration
Act. . . . .
Section 16 thereof in part provides:
In the event of the death of a holder of a certificate the issuance of which is
provided for in section twelve hereof, prior to the execution of a deed by the
Government to any purchaser, his window shall be entitled to received a
deed of the land stated in the certificate upon showing that she has complied
with the requirements of law for the purchase of the same. In case a holder
of a certificate dies before the giving of the deed and does not leave a
widow, then the interest of the holder of the certificate shall descend and
deed shall issue to the persons who under the laws of the Philippine Islands
would have taken had the title been perfected before the death of the holder
of the certificate, upon proof of the holders thus entitled of compliance with
all the requirements of the certificate. . . .
From these provision it is apparent that the pervading legislative intent is to sell the
friar lands acquired by the Government to actual settlers and occupants of the same.
In case of death of a holder of a certificate which is only an agreement to sell it is not
the heirs but the widow who succeeds in the parcels of land to be sold by the
Government. Only do the heirs succeed in the rights of the deceased holder of a
certificate if no widow survives him. The fact that all receipts for installments paid
even during the lifetime of the late husband Manuel Lorenzo were issued in the name
of Magdalena Clemente and that the deed of sale or conveyance of parcel No. 6 was
made in her name in spite of the fact that Manuel Lorenzo was still alive shows that
the two parcels of land belonged to Magdalena Clemente. The petitioner, the heirs of
the late Manuel Lorenzo, are not entitled to one-half of the two parcels of land. But
the installments paid during coverture are deemed conjugal, there being no evidence
that they were paid out of funds belonging exclusively to the late Magdalena
Clemente.
Upon these grounds and reasons the judgment of the Court of Appeals under review
is affirmed, without cost.
G.R. No. 100728 June 18, 1992
WILHELMINA JOVELLANOS, MERCY JOVELLANOS-MARTINEZ and JOSE
HERMILO JOVELLANOS, petitioners,
vs.

THE COURT OF APPEALS, and ANNETTE H. JOVELLANOS, for and in her

behalf, and in representation of her two minor daughters as natural guardian,
ANA MARIA and MA. JENNETTE, both surnamed JOVELLANOS, respondents.

On December 28, 1989, the court a quo rendered judgment 3 with the following
dispositions:
WHEREFORE, premises considered, judgment is hereby rendered
as follows

REGALADO, J.:
This petition for review on certiorari seeks to reverse and set aside the
decision 1 promulgated by respondent court on June 26, 1991 in CA-G.R. CV No.
27556 affirming with some modifications the earlier decision of the Regional Trial
Court of Quezon City, Branch 85, which, inter alia, awarded one-half (1/2) of the
property subject of Civil Case No. Q-52058 therein to private respondent Annette H.
Jovellanos and one-sixth (1/6) each of the other half of said property to the three
private respondents. all as pro indiviso owners of their aforesaid respective portions.
As found by respondent court, 2 on September 2, 1955, Daniel Jovellanos and
Philippine American Life Insurance Company (Philamlife) entered into a contract
denominated as a lease and conditional sale agreement over Lot 8, Block 3 of the
latter's Quezon City Community Development Project, including a bungalow thereon,
located at and known as No. 55 South Maya Drive, Philamlife Homes, Quezon City.
At that time, Daniel Jovellanos was married to Leonor Dizon, with whom he had three
children, the petitioners herein. Leonor Dizon died on January 2, 1959. On May 30,
1967, Daniel married private respondent Annette H. Jovellanos with whom he begot
two children, her herein co-respondents.
On December 18, 1971, petitioner Mercy Jovellanos married Gil Martinez and, at the
behest of Daniel Jovellanos, they built a house on the back portion of the premises.
On January 8, 1975, with the lease amounts having been paid, Philamlife executed to
Daniel Jovellanos a deed of absolute sale and, on the next day, the latter donated to
herein petitioners all his rights, title and interests over the lot and bungalow thereon.
On September 8, 1985, Daniel Jovellanos died and his death spawned the present
controversy, resulting in the filing by private respondents of Civil Case No. Q-52058 in
the court below.
Private respondent Annette H. Jovellanos claimed in the lower court that the
aforestated property was acquired by her deceased husband while their marriage was
still subsisting, by virtue of the deed of absolute sale dated January 8, 1975 executed
by Philamlife in favor of her husband, Daniel Jovellanos. who was issued Transfer
Certificate of Title No. 212286 of the Register of Deeds of Quezon City and which
forms part of the conjugal partnership of the second marriage. Petitioners, on the
other hand, contend that the property, specifically the lot and the bungalow erected
thereon, as well as the beneficial and equitable title thereto, were acquired by their
parents during the existence of the first marriage under their lease and conditional
sale agreement with Philamlife of September 2, 1955.

1. Ordering the liquidation of the partnership of the second

marriage and directing the reimbursement of the amount advanced
by the partnership of the first marriage as well (as) by the late
Daniel Jovellanos and the defendants spouses Gil and Mercia * J.
Martinez in the acquisition of the lot and bungalow described in the
Lease and Conditional Sale Agreement (Exhs. D and 1);
2. After such liquidation and reimbursement, declaring the plaintiff
Annette Jovellanos as pro-indiviso owner of 1/2 of the property
described in TCT No. 212268 (sic) and the bungalow erected
therein;
3. Declaring the plaintiff Annette Jovellanos, as well as the minors
Anna Marie and Ma. Jeannette (sic) both surnamed Jovellanos and
the herein defendants, as owners pro indiviso of 1/6 each of the
other half of said property;
4. Declaring the defendants spouses Gil and Mercia Martinez as
exclusive owners of the two-storey house erected on the property
at the back of the said bungalow, with all the rights vested in them
as builders in good faith under Article 448 of the New Civil Code;
5. Ordering the parties to make a partition among themselves by
proper instruments of conveyances, subject to the confirmation of
this Court, and if they are unable to agree upon the partition,
ordering that the partition should be made by not more than three
(3) competent and disinterested persons as commissioners who
shall make the partition in accordance with Sec. 5, Rule 69 of the
Revised Rules of Court;
6. Ordering the defendant(s) to pay plaintiffs, jointly and severally,
the sum of P5,000.00 as attorney's fees, plus costs.
SO ORDERED. 4
Respondent Court of Appeals, in its challenged decision, held that the lease and
conditional sale agreement executed by and between Daniel Jovellanos and
Philamlife is a lease contract and, in support of its conclusion, reproduced as its own
the following findings of the trial court:

It is therefore incumbent upon the vendee to comply with all his

obligations, i.e., the payment of the stipulated rentals and
adherence to the limitations set forth in the contract before the legal
title over the property is conveyed to the lessee-vendee. This, in
effect. is a pactum reservati dominii which is common in sales on
installment plan of real estate whereby ownership is retained by the
vendor and payment of the agreed price being a condition
precedent before full ownership could be transferred (Wells vs.
Samonte, 38768-R, March 23, 1973; Perez vs. Erlanger and
Galinger Inc., CA 54 OG 6088). The dominion or full ownership of
the subject property was only transferred to Daniel Jovellanos upon
full payment of the stipulated price giving rise to the execution of
the Deed of Absolute Sale on January 8, 1975 (Exh. 2) when the
marriage between the plaintiff and Daniel Jovellanos was already in
existence.
The contention of the defendants that the jus in re aliena or right in
the property of another person (Gabuya vs. Cruz, 38 SCRA 98) or
beneficial use and enjoyment of the property or the equitable title
has long been vested in the vendee-lessee Daniel Jovellanos upon
execution of Exh. "1" is true, But the instant case should be
differentiated from the cited cases of Pugeda v. Trias, et al., 4
SCRA 849; and Alvarez vs. Espiritu, G.R. L-18833, August 14,
1965, which cannot be applied herein even by analogy. In Pugeda.
the subject property refers solely to friar lands and is governed by
Act 1120 wherein the certificate of sale is considered a conveyance
of ownership subject only to the resolutory condition that the sale
may be rescinded if the agreed price has not been paid in full; in
the case at bar, however, payment of the stipulated price is a
condition precedent before ownership could be transferred to the
vendee. 5
With the modification that private respondents should also reimburse to petitioners
their proportionate shares on the proven hospitalization and burial expenses of the
late Daniel Jovellanos, respondent Court of Appeals affirmed the judgment of the trial
court. applying Article 118 of the Family Code which provides:
Art. 118. Property bought on installment paid partly from exclusive
funds of either or both spouses and partly from conjugal funds
belongs to the buyer or buyers if full ownership was vested before
the marriage and to the conjugal partnership if such ownership was
vested during the marriage. In either case, any amount advanced
by the partnership or by either or both spouses shall be reimbursed
by the owner or owners upon liquidation of the partnership.
Petitioners now seek this review, invoking their assignment of errors raised before the
respondent court and which may be capsulized into two contentions, namely, that (1)

the lower court erred in holding that the lot and bungalow covered by the lease and
conditional sale agreement (Exhibit 1) is conjugal property of the second marriage of
the late Daniel Jovellanos: and (2) the lower court erred in holding that the provisions
of the Family Code are applicable in resolving the rights of the parties herein. 6
It is petitioners' position that the Family Code should not be applied in determining the
successional rights of the party litigants to the estate of Daniel Jovellanos. for to do so
would be to impair their vested property rights over the property in litigation which
they have acquired long before the Family Code took effect. 7
To arrive at the applicable law, it would accordingly be best to look into the nature of
the contract entered into by the contracting parties. As appositely observed by
respondent court, the so-called lease agreement is, therefore, very much in issue.
Preliminarily, we do not lose sight of the basic rule that a contract which is not
contrary to law, morals, good customs, public order or public policy has the force of
law between the contracting parties and should be complied with in good faith. 8 Its
provisions are binding not only upon them but also upon their heirs and assigns. 9
The contract entered into by the late Daniel Jovellanos and Philamlife is specifically
denominated as a "Lease and Conditional Sale Agreement" over the property
involved with a lease period of twenty years at a monthly rental of P288.87, by virtue
of which the former, as lessee-vendee, had only the right of possession over the
property. 10 In a lease agreement, the lessor transfers merely the temporary use and
enjoyment of the thing leased. 11 In fact, Daniel Jovellanos bound himself therein,
among other things, to use the property solely as a residence, take care thereof like a
good father of a family, permit inspection thereof by representatives of Philamlife in
regard to the use and preservation of the property. 12
It is specifically provided, however, that "(i)f, at the expiration of the lease period
herein agreed upon, the LESSEE-VENDEE shall have fully faithfully complied with all
his obligations herein stipulated, the LESSOR-VENDOR shall immediately sell,
transfer and convey to the LESSEE-VENDEE the property which is the subject matter
of this agreement; . . . 13
The conditional sale agreement in said contract is, therefore, also in the nature of a
contract to sell, as contrdistinguished from a contract of sale. In a contract to sell or a
conditional sale, ownership is not transferred upon delivery of the property but upon
full payment of the purchase price. 14 Generally, ownership is transferred upon
delivery, but even if delivered, the ownership may still be with the seller until full
payment of the price is made, if there is stipulation to this effect. The stipulation is
usually known as a pactum reservati dominii, or contractual reservation of title, and is
common in sales on the installment plan. 15 Compliance with the stipulated payments
is a suspensive condition. 16 the failure of which prevents the obligation of the vendor
to convey title from acquiring binding force. 17

Hornbook lore from civilists clearly lays down the distinctions between a contract of
sale in which the title passes to the buyer upon delivery of the thing sold, and a
contract to sell where, by agreement, the ownership is reserved in the seller and is
not to pass until full payment of the purchase price: In the former, non-payment of the
price is a negative resolutory condition; in the latter, full payment is a positive
suspensive condition. In the former, the vendor loses and cannot recover the
ownership of the thing sold until and unless the contract of sale is rescinded or set
aside; in the latter, the title remains in the vendor if the vendee does not comply with
the condition precedent of making full payment as specified in the contract.
Accordingly, viewed either as a lease contract or a contract to sell, or as a contractual
amalgam with facets of both, what was vested by the aforestated contract in
petitioners' predecessor in interest was merely the beneficial title to the property in
question. His monthly payments were made in the concept of rentals, but with the
agreement that if he faithfully complied with all the stipulations in the contract the
same would in effect be considered as amortization payments to be applied to the
predetermined price of the said property. He consequently acquired ownership
thereof only upon full payment of the said amount hence, although he had been in
possession of the premises since September 2, 1955, it was only on January 8, 1975
that Philamlife executed the deed of absolute sale thereof in his favor.
The conditions of the aforesaid agreement also bear notice, considering the
stipulations therein that Daniel Jovellanos, as lessee-vendee, shall not
xxx xxx xxx
(b) Sublease said property to a third party;
(c) Engage in business or practice any profession within the
property;
xxx xxx xxx
(f) Make any alteration or improvement on the property without the
prior written consent of the LESSOR-VENDOR;
(g) Cut down, damage, or remove any tree or shrub, or remove or
quarry any stone, rock or earth within the property, without the prior
written consent of the LESSOR-VENDOR;
(h) Assign to another his right, title and interest under and by virtue
of this Agreement, without the prior written consent and approval of
the LESSOR-VENDOR. 18

The above restrictions further bolster the conclusion that Daniel Jovellanos did not
enjoy the full attributes of ownership until the execution of the deed of sale in his
favor. The law recognizes in the owner the right to enjoy and dispose of a thing,
without other limitations than those established by law, 19 and, under the contract,
Daniel Jovellanos evidently did not possess or enjoy such rights of ownership.
We find no legal impediment to the application in this case of the rule of retroactivity
provided in the Family Code to the effect that
Art. 256. This Code shall have retroactive effect insofar as it does
not prejudice or impair vested or acquired nights in accordance with
the Civil Code or other laws.
The right of Daniel Jovellanos to the property under the contract with Philamlife was
merely an inchoate and expectant right which would ripen into a vested right only
upon his acquisition of ownership which, as aforestated, was contingent upon his full
payment of the rentals and compliance with all his contractual obligations thereunder.
A vested right as an immediate fixed right of present and future enjoyment. It is to be
distinguished from a right that is expectant or contingent. 20 It is a right which is fixed,
unalterable, absolute, complete and unconditional to the exercise of which no
obstacle exists, 21 and which is perfect in itself and not dependent upon a
contingency. 22 Thus, for a property right to be vested, there must be a transition from
the potential or contingent to the actual, and the proprietary interest must have
attached to a thing; it must have become fixed or established and is no longer open to
doubt or controversy. 23
The trial court which was upheld by respondent court, correctly ruled that the cases
cited by petitioners are inapplicable to the case at bar since said cases involved friar
lands which are governed by a special law, Act 1120, which was specifically enacted
for the purpose. In the sale of friar lands, upon execution of the contract to sell, a
certificate of sale is delivered to the vendee and such act is considered as a
conveyance of ownership, subject only to the resolutory condition that the sale may
be rescinded if the agreed price shall not be paid in full. In the instant case, no
certificate of sale was delivered and full payment of the rentals was a condition
precedent before ownership could be transferred to the vendee. 24
We have earlier underscored that the deed of absolute sale was executed in 1975 by
Philamlife, pursuant to the basic contract between the parties, only after full payment
of the rentals. Upon the execution of said deed of absolute sale, full ownership was
vested in Daniel Jovellanos. Since. as early as 1967, he was already married to
Annette H. Jovellanos, this property necessarily belonged to his conjugal partnership
with his said second wife.
As found by the trial court, the parties stipulated during the pre-trial conference in the
case below that the rentals/installments under the lease and conditional sale
agreement were paid as follows (a) from September 2, 1955 to January 2, 1959, by

conjugal funds of the first marriage; (b) from January 3, 1959 to May 29, 1967, by
capital of Daniel Jovellanos; (c) from May 30, 1967 to 1971, by conjugal funds of the
second marriage; and (d) from 1972 to January 8, 1975, by conjugal funds of the
spouses Gil and Mercy Jovellanos
Martinez. 25 Both courts, therefore, ordered that reimbursements should be made in
line with the pertinent provision of Article 118 of the Family Code that "any amount
advanced by the partnership or by either or both spouses shall be reimbursed by the
owner or owners upon liquidation of the partnership."
ACCORDINGLY, finding no reversible error in the judgment of respondent court, the
same is hereby AFFIRMED.
SO ORDERED.
G.R. No. L-16857

May 29, 1964

MARCELO CASTILLO, JR., FELICISIMO CASTILLO, ENCARNACION CASTILLO,

AMELIA CASTILLO, JAIME CASTILLO, RONALDO CASTILLO, VICTORIA
CASTILLO, LETICIA CINCO, LEVI CINCO and DANIEL CINCO,petitioners,
vs.
MACARIA PASCO, respondent.
Tomas Yumol for petitioners.
Mariano G. Bustos and Associates for respondent.

deed recited a higher amount), payable in three installments: P1,000 upon execution
of the deed (Exh. 1) ; P2,000 on January 25, 1933 without interest; and P3,000 within
one year thereafter, with 11% interest from February 1, 1933, but extendible for
another year.
Against the contention of petitioners-appellants that the fishpond thus bought should
be considered conjugal for its having been acquired during coverture, the Court of
Appeals declared it to be paraphernalia because it was purchased with exclusive
funds of the wife, Macaria Pasco. She was admittedly a woman of means even before
she married Marcelo Castillo, Sr. and the latter's principal source of income was only
his P80 a month salary, as provincial treasurer (as found by the Court of First
Instance), besides two small residential lots and fishponds, which were encumbered
and later transferred to his five children by his first wife and whom he was then
supporting in medical and high school. Actually, Marcelo Castillo, Sr. died without
enough assets to pay his debts. .
In point of fact, the Court of Appeals found that the initial payment of P1,000 for the
fishpond now in litigation was made up of P600, that one of the vendors (Gabriel
Gonzales) owed to appellee Pasco, and P400 in cash, which the latter paid out of the
proceeds of the sale of one of her nipa lands. The second installment of P2,000
appears to have been paid with the proceeds of the loan from Dr. Nicanor Jacinto, to
whom the fishpond was mortgaged by both spouses. Dr. Jacinto later assigned his
interest to Dr. Antonio Pasco. The last payment of P3,000 was derived from a loan
secured by a mortgage (Exh. 2) on 2 parcels of land assessed in the name of Macaria
Pasco, and one of which she had inherited from a former husband, Justo S. Pascual,
while the other lot encumbered was assessed in her exclusive name.

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

The legitimate children and descendants of the late Marcelo Castillo, Sr. pray for the
review and reversal of the decision of the Court of Appeals, in its Case CA G.R. No.
19377-R, that affirmed the decision of the Court of First Instance of Bulacan,
declaring that the fishpond in San Roque, Paombong, Bulacan (covered by TCT No.
9928 of the Registry of Deeds of said province), was the exclusive paraphernal
property of respondent Macaria Pasco, surviving spouse of the deceased Marcelo
Castillo, Sr., and dismissing the complaint for partition and accounting filed by
petitioners in said Court of First Instance.

It was also found by the Court of Appeals that upon the death of Marcelo Castillo, Sr.,
the loan and mortgage in favor of Dr. Jacinto (later assigned by him to Dr. Antonio
Pasco) was still outstanding. Unable to collect the loan, Dr. Pasco foreclosed the
mortgaged, and the encumbered fishpond was sold to him; but the sale was
subsequently annulled. Later, on September 7, 1949, respondent Macaria Pasco
judicially consigned P12,300 on account of the mortgage debt and its interest, and
completed payment by a second consignation of P752.43 made on April 24, 1950. As
the estate of Castillo had no assets adequate to pay off the claims against it, the
Court of Appeals concluded that the amounts consigned belonged to the widow
Macaria Pasco, respondent herein.1wph1.t

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

It is not gain said that under the Spanish Civil Code of 1889, that was the applicable
law in 1932, the property acquired for onerous consideration during the marriage was
deemed conjugal or separate property depending on the source of the funds
employed for its acquisition. Thus, Article 1396 of said Code provided:
ART. 1396. The following is separate property spouse:

On December 22, 1932, Gabriel and Purificacion Gonzales, as co-owners of the

litigated fishpond, executed a deed of sale (Exh. 1) conveying said property to the
spouses Marcelo Castillo and Macaria Pasco for the sum of P6,000.00 (although the

1. ...

2. ...
3. ...
4. That bought with money belonging exclusively to the wife or to the
husband.
On the other hand, Article 1401, prescribed that:
ART. 1401. To the conjugal property belong:
1. Property acquired for valuable consideration during the marriage at the
expense of the common fund, whether the acquisition is made for the
partnership or for one of the spouses only.
The last clause in Article 1401 (par. 1) indicates that the circumstance of the sale of
the fishpond in question being made by the original owners in favor of both spouses,
Marcelo Castillo, Sr. and Macaria Pasco, is indifferent for the determination of
whether the property should be deemed paraphernal or conjugal. As remarked by
Manresa in his Commentaries to the Civil Code, Vol. IX (5th Ed), p. 549, "la ley
atiende no a la persona encuyo nombre o a favor del cual se realize la compra, sino a
la procedenciadel dinero."
As above-noted, the Court of Appeals determined that the initial payment of P1,000
for the fishpond now disputed was made out of private funds of Macaria Pasco.
Appellants, however, argue that since there is no express finding that the P600 debt
owed by Gabriel Gonzales came exclusively from private funds of Pasco, they should
be presumed conjugal funds, in accordance with Article 1407 of the Civil Code of
1889. The argument is untenable. Since the wife, under Article 1418, can not bind the
conjugal partnership without the consent of the husband, her private transactions are
presumed to be for her own account, and not for the account of the partnership. The
finding of the Court of Appeals is that Gabriel Gonzales owed this particular
indebtedness to Macaria Pasco alone, and in the absence of proof that the husband
authorized her to use community funds therefor, the appellate Court's finding can not
be disturbed by us. Whether the evidence adverted to should be credited is for the
Court of Appeals to decide.
Appellants next assail the conclusion of the Court of Appeals that the other two
installments of the purchase price should be, like the first one, deemed to have been
paid with exclusive funds of the wife because the money was raised by loans
guaranteed by mortgage on paraphernalia property of the wife. The position thus
taken by appellants is meritorious, for the reason that the deeds show the loans to
have been made by Dr. Nicanor Jacinto, and by Gabriel and Purificacion Gonzales, to
both spouses Marcelo Castillo and Macaria Pasco, as joint borrowers. The loans thus
became obligations of the conjugal partnership of both debtor spouses, and the
money loaned is logically conjugal property. While the securing mortgage is on the

wife's paraphernalia the mortgage is a purely accessory obligation that the lenders
could, waive if they so chose, without affecting the principal debt which was owned by
the conjugal partnership, and which the creditors could enforce exclusively against
the latter it they so desired.
In Palanca vs. Smith Bell & Co., 9 Phil. 131., this Court ruled as follows (cas cit. at p.
133,) .
This P14,000, borrowed by said Emiliano Boncan upon the credit of the
property of his wife became conjugal property (par. 3, Art. 1401, Civil Code)
and when that same was reinvented in the construction of a house, the
house became e conjugal property and was liable for the payment of the
debts of the husband (Art 1408, Civ. Code).
If money borrowed by the husband alone on the security of his wife's property is
conjugal in character, a fortiorishould it be conjugal when borrowed by both spouses.
The reason obviously is that the loan becomes an obligation of the conjugal
partnership which is the one primarily bound for its repayment.
The case of Lim Queco vs. Cartagena, 71 Phil. 162, is clearly distinguishable from the
Palanca case in that in the Lim Queco case the wife alone borrowed the money from
"El Ahorro Insular" although she guaranteed repayment with a mortgage on her
parapherna executed with her husband's consent. Since the wife does not have the
management or representation of the conjugal partnership where the husband is
qualified therefor, the loan to her constituted a transaction that did not involve the
community, and the creditor could seek repayment exclusively from her properties.
Logically, as this Court then held, the money loaned to the wife, as well as the
property acquired thereby, should be deemed to be the wife's exclusive property.
The analogy between the case now before us and the Palanca vs. Smith Bell case is
undeniable, and the Palanca ruling applies. We, therefore, find that the two
installments, totalling P5,000, of the price of the fishpond were paid with conjugal
funds, unlike the first installment of P1,000 that was paid exclusively with money
belonging to the wife Macaria Pasco, appellee herein.
As the litigated fishpond was purchased partly with paraphernal funds and partly with
money of the conjugal partnership, justice requires that the property be held to belong
to both patrimonies in common, in proportion to the contributions of each to the total
purchase price of P6,000. An undivided one-sixth (1/6) should be deemed
paraphernalia and the remaining five-sixths (5/6) held property of the conjugal
partnership of spouses Marcelo Castillo and Macaria Pasco (9 Manresa, Com. al
Codigo Civil [5th Ed.], p. 549).
Puesto que la ley atiende no a la persona en cuyo nombre o a favor del
cualse realize la compra sino a la procedencia del dinero, considerando el
hecho como una verdadera substitution o conversion del dinero en otros

objetos, debemos deduce que cuando una finca por ejemplo, se compra con
dinero del marido y de la mujer, o de la mujer y de la Sociedad, pertenece a
aquellos de quienes precede el precio y en la proporcion entregada por
cada cual. Si pues marido y mujer compran una casa entregando el primero
de su capital propio 10,000 pesetas, y la segunda 5,000, la casa
pertenecera a losdos conyuges pro indiviso, en la proportion de los terceras
partes al marido y una tercera a la mujer. (Manresa. op. cit)
The payment by the widow, after her husband's death, of the mortgage debt due to
Dr. Pasco, the assignee of the original mortgagee, Dr. Nicanor Jacinto, does not
result in increasing her share in the property in question but in creating a lien in her
favor over the undivided share of the conjugal partnership, for the repayment of the
amount she has advanced, should it be ultimately shown that the money thus
delivered to the creditor was exclusively owned by her.
It follows from the foregoing that, as the fishpond was undivided property of the widow
and the conjugal partnership with her late husband, the heirs of the latter, appellants
herein, were entitled to ask for partition thereof and liquidation of its proceeds. The
ultimate interest of each party must be resolved after due hearing, taking into account
(a) the widow's one-sixth direct share; (b) her half of the community property; (e) her
successional rights to a part of the husband's share pursuant to the governing law of
succession when the husband died; and (d) the widow's right to reimbursement for
any amounts advanced by her in paying the mortgage debt as aforesaid. All these
details must be settled after proper trial.
WHEREFORE, the dismissal of the original complaint is hereby revoked and set
aside, and the records are ordered remanded to the court of origin for further
proceedings conformable to this opinion.

In criminal case No. 2897 for murder of the Court of First Instance of Zambales,
Epifanio Fularon was convicted and sentenced to indemnify the heirs of the victim in
the amount of P2,000.
On February 10, 1949, to satisfy said indemnity, a writ of execution was issued and
the sheriff levied upon four parcels of land belonging to the conjugal partnership of
Epifanio Fularon and Gliceria Rosete. These parcels of land were sold at public
auction as required by the rules for the sum of P1,385.00, leaving an unsatisfied
balance of P739.34.
On March 8, 1950, Gliceria Rosete redeemed two of the four parcels of land which
were sold at public auction for the sum of P879.20, the sheriff having executed in her
favor the corresponding deed of repurchase.
On April 10, 1950, an alias execution was issued to satisfy the balance of the
indemnity and the sheriff levied upon the two parcels of land which were redeemed by
Gliceria Rosete and set a date for their sale. Prior to the arrival of this date, however,
Gliceria Rosete filed a case for conjunction to restrain the sheriff from carrying out the
sale praying at the same time for a writ of preliminary injunction. This writ was issued
upon the filing of the requisite bond but was later dissolved upon a motion filed by
defendants who put up counter-bond.
The dissolution of the injunction enabled the sheriff to carry out the sale as originally
scheduled and the property was sold to one Raymundo de Jesus for the sum of
P970. This development prompted the plaintiff to amend her complaint by praying
therein, among other things, that the sale carried out by the sheriff be declared null
and void. After due trial, wherein the parties practically agreed on the material facts
pertinent to the issue, the court rendered decision declaring the sale null and void.
The defendants appealed, and the case was certified to this court on the plea that the
appeal involves purely questions of law.
The question to be decided is whether the sale made by the sheriff on May 9, 1950 of
the two parcels of land which were redeemed by Gliceria Rosete in the exercise of
her right of redemption is valid it appearing that they formed part of the four parcels of
land belonging to the conjugal partnership which were originally sold to satisfy the
same judgment of indemnity awarded in the criminal case. The lower court declared
the sale null and void on the strength of the ruling laid down in the case of Lichauco
vs. Olegario, 43 Phil., 540, and this finding is now disputed by the appellants.

G.R. No. L-6335

July 31, 1954

GLICERIA ROSETE, plaintiff-appellee,

vs.
PROVINCIAL SHERIFF OF ZAMBALES, SIMPLICIO YAP and CORAZON
YAP, defendants-appellants.
Ricardo N. Agbunag for appellants.
Jorge A. Pascua for appellee.
BAUTISTA ANGELO, J.:

In the case above adverted to, Lichauco obtained a judgment against Olegario for the
sum of P72,766.37. To satisfy this judgment, certain real estate belonging to Olegario
was levied in execution and at the sale Lichauco bid for it for the sum of P10,000.
Olegario, on the same day, sold his right of redemption to his cousin Dalmacio. Later,
Lichauco asked for an alias writ of execution and the sheriff proceeded with the sale
of the right of redemption of Olegario whereat Lichauco himself bid for the sum of
P10,000. As Lichauco failed to register the sale owing to the fact that the sale
executed by Olegario in favor of his cousin was already recorded, Lichauco brought
the matter to court to test the validity of the latter sale. One of the issues raised was,
"Whether or not Faustino Lichauco, as an execution creditor and purchaser at the
auction in question was entitled, after his judgment had thus been executed but not

wholly satisfied, to have it executed again by levying upon the right of redemption
over said properties." The court ruled that this cannot be done for it would render
nugatory and means secured by law to an execution debtor to avoid the sale of his
property made at an auction under execution. Said this Court:
We, therefore, find that the plaintiff, as a judgment creditor, was not, and is not,
entitled, after an execution has been levied upon the real properties in question by
virtue of the judgment in his favor, to have another execution levied upon the same
properties by virtue of the same judgment to reach the right of redemption which the
execution debtor and his privies retained over them.
Inasmuch as the Lichauco case refers to the levy and sale of the right of redemption
belonging to a judgment debtor and not to the levy of the very property which has
been the subject of execution for the satisfaction of the same judgment, it is now
contended that it cannot be considered as a precedent in the present case for here
the second levy was effected on the same property subject of the original execution.
But this argument falls on its own weight when we consider the following conclusion
of the court, "... what we wish to declare is that a judgment by virtue of which a
property is sold at public auction can have no further effect on such property."
(Emphasis supplied)
Nevertheless, when this case came up for discussion some members of the Court
expressed doubt as to the applicability of the Lichauco case considering that it does
not decide squarely whether the same property may be levied on an alias execution if
it is reacquired by the judgment debtor in the exercise of his right of redemption and
as on this matter the requisite majority could not be obtained the injury turned to
another issue which for purposes of this case is sufficient to decide the controversy.
The issue is: Since it appears that plaintiff redeemed the two parcels of land in
question with money obtained by her from her father, has the property become
paraphernal and as such is beyond the reach of further execution?
We are of the opinion that the question should be answered in the affirmative for the
following reasons:
(a) Gliceria Rosete, the wife, redeemed the property, not in behalf of her husband, but
as successor in interest in the whole or part of the property, it being then conjugal.
The term "successor in interest" appearing in subdivision (a), Section 25, Rule 39,
includes, according to Chief Justice Moran, "one who succeeds to the interest of the
debtor by operation of law" or "the wife as regards her husband's homestead by
reason of the fact that some portion of her husband's title passes to her (Comments
on the Rules of Court, 1952 ed., Vol. 1, pp. 841-842); and (b) a property is G.R. No.
L-28589 January 8, 1973
RAFAEL ZULUETA, ET AL., plaintiffs-appellees,
vs.
PAN AMERICAN WORLD AIRWAYS, INC., defendant-appellant.
Alfredo L. Benipayo for plaintiffs-appellee Rafael Zulueta and Carolina Zulueta.
Justo L. Albert for plaintiff-appellee Telly Albert Zulueta.

V.E. del Rosario and Associates and Salcedo, Del Rosario, Bito, Misa and Lozada for
defendant-appellant.
RESOLUTION

CONCEPCION, C.J.:
Both parties in this case have moved for the reconsideration of the decision of this
Court promulgated on February 29, 1972. Plaintiffs maintain that the decision
appealed from should be affirmed in toto. The defendant, in turn, prays that the
decision of this Court be "set aside ... with or without a new trial, ... and that the
complaint be dismissed, with costs; or, in the alternative, that the amount of the award
embodied therein be considerably reduced." .
Subsequently to the filing of its motion for reconsideration, the defendant filed a
"petition to annul proceedings and/or to order the dismissal of plaintiffs-appellees'
complaint" upon the ground that "appellees' complaint actually seeks the recovery of
only P5,502.85 as actual damages, because, for the purpose of determining the
jurisdiction of the lower court, the unspecified sums representing items of alleged
damages, may not be considered, under the settled doctrines of this Honorable
Court," and "the jurisdiction of courts of first instance when the complaint in the
present case was filed on Sept. 30, 1965" was limited to cases "in which the demand,
exclusive of interest, or the value of the property in controversy amounts to more than
ten thousand pesos" and "the mere fact that the complaint also prays for unspecified
moral damages and attorney's fees, does not bring the action within the jurisdiction of
the lower court."
We find no merit in this contention. To begin with, it is not true that "the unspecified
sums representing items or other alleged damages, may not be considered" for the
purpose of determining the jurisdiction of the court "under the settled doctrines of
this Honorable Court." In fact, not a single case has been cited in support of this
allegation.
Secondly, it has been held that a clam for moral damages is one not susceptible of
pecuniary estimation. 1 In fact, Article 2217 of the Civil Code of the Philippines
explicitly provides that "(t)hough incapable of pecuniary computation, moral damages
may be recovered if they are the proximate result of the defendant's wrongful act or
omission." Hence, "(n)o proof pecuniary loss necessary" pursuant to Article 2216
of the same Code "in order that moral ... damages may be adjudicated." And "(t)he
assessment of such damages ... is left to the discretion of the court" - said article
adds - "according to the circumstances of each case." Appellees' complaint is,
therefore, within the original jurisdiction of courts of first instance, which includes "all
civil actions in which the subject of the litigation is not capable of pecuniary
estimation." 2
Thirdly, in its answer to plaintiffs' original and amended complainants, defendant had
set up a counterclaim in the aggregate sum of P12,000, which is, also, within the

original jurisdiction of said courts, thereby curing the alleged defect if any, in plaintiffs'
complaint. 3
We need not consider the jurisdictional controversy as to the amount the appellant
sues to recover because the counterclaim interposed establishes the jurisdiction of
the District Court. Merchants' Heat & Light Co. v. James B. Clow & Sons, 204 U.S.
286, 27 S. Ct. 285, 51 L. Ed. 488; O. J. Lewis Mercantile Co. v. Klepner, 176 F. 343
(C.C.A. 2), certiorari denied 216 U.S. 620, 30 S Ct. 575, 54 L. Ed. 641. ... . 4
... courts have said that "when the jurisdictional amount is in question, the tendering
of a counterclaim in an amount which in itself, or added to the amount claimed in the
petition, makes up a sum equal to the amount necessary to the jurisdiction of this
court, jurisdiction is established, whatever may be the state of the plaintiff's
complaint." American Sheet & Tin Plate Co. v. Winzeler (D.C.) 227 F. 321, 324. 5
Thus, in Ago v. Buslon, 6 We held:
... . Then, too, petitioner's counterclaim for P37,000.00 was, also, within the exclusive
original jurisdiction of the latter courts, and there are ample precedents to the effect
that "although the original claim involves less than the jurisdictional amount, ...
jurisdiction can be sustained if the counterclaim (of the compulsory type)" such as
the one set up by petitioner herein, based upon the damages allegedly suffered by
him in consequence of the filing of said complaint "exceeds the jurisdictional
amount." (Moore Federal Practice, 2nd ed. [1948], Vol. 3, p. 41; Ginsburg vs. Pacific
Mutual Life Ins. Co. of California, 69 Fed. [2d] 97; Home Life Ins. Co. vs. Sipp., 11
Fed. [2d]474; American Sheet & Tin Plate Co. vs. Winzeler [D.C.], 227 Fed. 321, 324;
Brix vs. People's Mutual Life Ins. Co., 41 P. 2d. 537, 2 Cal. 2d. 446; Emery vs. Pacific
Employees Ins. Co., 67 P. 2d. 1046, 8 Cal. 2d. 663).
Needless to say, having not only failed to question the jurisdiction of the trial court
either in that court or in this Court, before the rendition of the latter's decision, and
even subsequently thereto, by filing the aforementioned motion for reconsideration
and seeking the reliefs therein prayed for but, also, urged both courts to exercise
jurisdiction over the merits of the case, defendant is now estopped from impugning
said jurisdiction. 7
Before taking up the specific questions raised in defendant's motion for
reconsideration, it should be noted that the same is mainly predicated upon the
premise that plaintiffs' version is inherently incredible, and that this Court should
accept the theory of the defense to the effect that petitioner was off-loaded because
of a bomb-scare allegedly arising from his delay in boarding the aircraft and
subsequent refusal to open his bags for inspection. We need not repeat here the
reasons given in Our decision for rejecting defendant's contention and not disturbing
the findings of fact of His Honor, the Trial Judge, who had the decided advantage
denied to Us of observing the behaviour of the witnesses in the course of the trial
and found those of the plaintiffs worthy of credence, not the evidence for the defense.
It may not be amiss however, to stress the fact that, in his written report, made in
transit from Wake to Manila or immediately after the occurrence and before the
legal implications or consequences thereof could have been the object of mature

deliberation, so that it could, in a way, be considered as part of the res gestae

Capt. Zentner stated that Zulueta had been off-loaded "due to drinking" and
"belligerent attitude," thereby belying the story of the defense about said alleged
bomb-scare, and confirming the view that said agent of the defendant had acted out
of resentment because his ego had been hurt by Mr. Zulueta's adamant refusal to be
bullied by him. Indeed, had there been an iota of truth in said story of the defense,
Capt. Zentner would have caused every one of the passengers to be frisked or
searched and the luggage of all of them examined as it is done now before
resuming the flight from Wake Island. His failure to do so merely makes the artificious
nature of defendant's version more manifest. Indeed, the fact that Mrs. Zulueta and
Miss Zulueta were on board the plane shows beyond doubt that Mr. Zulueta could not
possibly have intended to blow it up.
The defense tries to explain its failure to introduce any evidence to contradict the
testimony of Mr. Zulueta as to why he had gone to the beach and what he did there,
alleging that, in the very nature of things, nobody else could have witnessed it.
Moreover, the defense insists, inter alia, that the testimony of Mr. Zulueta is inherently
incredible because he had no idea as to how many toilets the plane had; it could not
have taken him an hour to relieve himself in the beach; there were eight (8)
commodes at the terminal toilet for men ; if he felt the need of relieving himself, he
would have seen to it that the soldiers did not beat him to the terminal toilets; he did
not tell anybody about the reason for going to the beach, until after the plane had
taken off from Wake.
We find this pretense devoid of merit. Although Mr. Zulueta had to look for a secluded
place in the beach to relieve himself, beyond the view of others, defendant's airport
manager, whom Mr. Zulueta informed about it, soon after the departure of the
plane, could have forthwith checked the veracity of Mr. Zulueta's statement by asking
him to indicate the specific place where he had been in the beach and then
proceeding thereto for purposes of verification.
Then, again, the passenger of a plane seldom knows how many toilets it has. As a
general rule, his knowledge is limited to the toilets for the class first class or tourist
class in which he is. Then, too, it takes several minutes for the passengers of big
aircrafts, like those flying from the U.S. to the Philippines, to deplane. Besides, the
speed with which a given passenger may do so depends, largely, upon the location of
his seat in relation to the exit door. He cannot go over the heads of those nearer than
he thereto. Again, Mr. Zulueta may have stayed in the toilet terminal for some time,
expecting one of the commodes therein to be vacated soon enough, before deciding
to go elsewhere to look for a place suitable to his purpose. But he had to walk, first,
from the plane to the terminal building and, then, after vainly waiting therein for a
while, cover a distance of about 400 yards therefrom to the beach, and seek there a
place not visible by the people in the plane and in the terminal, inasmuch as the
terrain at Wake Island is flat. What is more, he must have had to takeoff part, at least,
of his clothing, because, without the facilities of a toilet, he had to wash himself and,
then, dry himself up before he could be properly attired and walk back the 400 yards
that separated him from the terminal building and/or the plane. Considering, in
addition to the foregoing, the fact that he was not feeling well, at that time, We are not

prepared to hold that it could not have taken him around an hour to perform the acts
narrated by him.
But, why asks the defendant did he not reveal the same before the plane took
off? The record shows that, even before Mr. Zulueta had reached the ramp leading to
the plane, Capt. Zentner was already demonstrating at him in an intemperate and
arrogant tone and attitude ("What do you think you are?), thereby impelling Mr.
Zulueta to answer back in the same vein. As a consequence, there immediately
ensued an altercation in the course of which each apparently tried to show that he
could not be cowed by the other. Then came the order of Capt. Zentner to off-load all
of the Zuluetas, including Mrs. Zulueta and the minor Miss Zulueta, as well as their
luggage, their overcoats and other effects handcarried by them; but, Mr. Zulueta
requested that the ladies be allowed to continue the trip. Meanwhile, it had taken time
to locate his four (4) pieces of luggage. As a matter of fact, only three (3) of them
were found, and the fourth eventually remained in the plane. In short, the issue
between Capt. Zentner and Mr. Zulueta had been limited to determining whether the
latter would allow himself to be browbeaten by the former. In the heat of the
altercation, nobody had inquired about the cause of Mr. Zulueta's delay in returning to
the plane, apart from the fact that it was rather embarrassing for him to explain, in the
presence and within the hearing of the passengers and the crew, then assembled
around them, why he had gone to the beach and why it had taken him some time to
answer there a call of nature, instead of doing so in the terminal building.
Defendant's motion for reconsideration assails: (1) the amount of damages awarded
as excessive; (2) the propriety of accepting as credible plaintiffs' theory; (3) plaintiffs'
right to recover either moral or exemplary damages; (4) plaintiffs' right to recover
attorney's fees; and (5) the non-enforcement of the compromise agreement between
the defendant and plaintiff's wife, Mrs. Zulueta. Upon the other hand, plaintiffs' motion
for reconsideration contests the decision of this Court reducing the amount of
damages awarded by the trial court to approximately one-half thereof, upon the
ground, not only that, contrary to the findings of this Court, in said decision, plaintiff
had not contributed to the aggravation of his altercation or incident with Capt. Zentner
by reacting to his provocation with extreme belligerency thereby allowing himself to
be dragged down to the level on which said agent of the defendant had placed
himself, but, also, because the purchasing power of our local currency is now much
lower than when the trial court rendered its appealed decision, over five (5) years
ago, on July 5, 1967, which is an undeniable and undisputed fact. Precisely, for this
reason, defendant's characterization as exorbitant of the aggregate award of over
P700,000 by way of damages, apart from attorney's fees in the sum of P75,000, is
untenable. Indeed, said award is now barely equivalent to around 100,000 U. S.
dollars.
It further support of its contention, defendant cites the damages awarded in previous
cases to passengers of airlines, 8 as well as in several criminal cases, and some
cases for libel and slander. None of these cases is, however, in point. Said cases
against airlines referred to passengers who were merely constrained to take a tourist
class accommodation, despite the fact that they had first class tickets, and that
although, in one of such cases, there was proof that the airline involved had acted as
it did to give preference to a "white" passenger, this motive was not disclosed until the

trial in court. In the case at bar, plaintiff Rafael Zulueta was "off-loaded" at Wake
Island, for having dared to retort to defendant's agent in a tone and manner matching,
if not befitting his intemperate language and arrogant attitude. As a consequence,
Capt. Zentner's attempt to humiliate Rafael Zulueta had boomeranged against him
(Zentner), in the presence of the other passengers and the crew. It was, also, in their
presence that defendant's agent had referred to the plaintiffs as "monkeys," a racial
insult not made openly and publicly in the abovementioned previous cases against
airlines.
In other words, Mr. Zulueta was off-loaded, not to protect the safety of the aircraft and
its passengers, but to retaliate and punish him for the embarrassment and loss of
face thus suffered by defendant's agent. This vindictive motive is made more manifest
by the note delivered to Mr. Zulueta by defendant's airport manager at Wake Island,
Mr. Sitton, stating that the former's stay therein would be "for a minimum of one
week," during which he would be charged $13.30 per day. This reference to a
"minimum of one week" revealed the intention to keep him there stranded that long,
for no other plane, headed for Manila, was expected within said period of time,
although Mr. Zulueta managed to board, days later, a plane that brought him to
Hawaii, whence he flew back to the Philippines, via Japan.
Neither may criminal cases, nor the cases for libel and slander cited in the
defendant's motion for reconsideration, be equated with the present case. Indeed, in
ordinary criminal cases, the award for damages is, in actual practice, of purely
academic value, for the convicts generally belong to the poorest class of society.
There is, moreover, a fundamental difference between said cases and the one at bar.
The Zuluetas had a contract of carriage with the defendant, as a common carrier,
pursuant to which the latter was bound, for a substantial monetary considerationpaid
by the former, not merely to transport them to Manila, but, also, to do so with
"extraordinary diligence" or "utmost diligence." 9 The responsibility of the common
carrier, under said contract, as regards the passenger's safety, is of such a nature,
affecting as it does public interest, that it "cannot be dispensed with" or even
"lessened by stipulation, by the posting of notices, by statements on tickets, or
otherwise." 10 In the present case, the defendant did not only fail to comply with its
obligation to transport Mr. Zulueta to Manila, but, also, acted in a
manner calculated to humiliate him, to chastise him, to make him suffer, to cause to
him the greatest possible inconvenience, by leaving him in a desolate island, in the
expectation that he would be stranded there for a "minimum of one week" and, in
addition thereto, charged therefor $13.30 a day.
It is urged by the defendant that exemplary damages are not recoverable in quasidelicts, pursuant to Article 2231 of our Civil Code, except when the defendant has
acted with "gross negligence," and that there is no specific finding that it had so
acted. It is obvious, however, that in off-loading plaintiff at Wake Island, under the
circumstances heretofore adverted to, defendant's agents had acted with malice
aforethought and evident bad faith. If "gross negligence" warrants the award of
exemplary damages, with more reason is its imposition justified when the act
performed is deliberate, malicious and tainted with bad faith. Thus, in Lopez v.
PANAM, 11 We held:

The rationale behind exemplary or corrective damages is, as the name implies, to
provide an example or correction for public good. Defendant having breached its
contracts in bad faith, the court, as stated earlier, may award exemplary damages in
addition to moral damages (Articles 2229, 2232, New Civil Code.)
Similarly, in NWA v. Cuenca, 12 this Court declared that an award for exemplary
damages was justified by the fact that the airline's "agent had acted in a wanton,
reckless and oppressive manner" in compelling Cuenca, upon arrival at Okinawa, to
transfer, over his objection, from the first class, where he was accommodated from
Manila to Okinawa, to the tourist class, in his trip to Japan, "under threat of otherwise
leaving him in Okinawa," despite the fact that he had paid in full the first class fare
and was issued in Manila a first class ticket.
Defendant cites Rotea v. Halili, 13 in support of the proposition that a principal is not
liable for exemplary damages owing to acts of his agent unless the former has
participated in said acts or ratified the same. Said case involved, however, the
subsidiary civil liability of an employer arising from criminal acts of his employee, and
"exemplary damages ... may be imposed when the crime was committed with one or
more aggravating circumstances." 14 Accordingly, the Rotea case is not in point, for
the case at bar involves a breach of contract, as well as a quasi-delict.
Neither may the case of Palisoc v. Brillantes, 15 invoked by the defendant, be
equated with the case at bar. The Palisoc case dealt with the liability of school officials
for damages arising from the death of a student (Palisoc) due to fist blows given by
another student (Daffon), in the course of a quarrel between them, while in a
laboratory room of the Manila Technical Institute. In an action for damages, the head
thereof and the teacher in charge of said laboratory were held jointly and severally
liable with the student who caused said death, for failure of the school to provide
"adequate supervision over the activities of the students in the school premises," to
protect them "from harm, whether at the hands of fellow students or other parties."
Such liability was predicated upon Article 2180 of our Civil Code, the pertinent part of
which reads:
ART. 2180. The obligation imposed by Article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible.
xxx xxx xxx
Lastly, teachers or heads of establishments of arts and trades shall be liable for
damages caused by their pupils and students or apprentices, so long as they remain
in their custody.
xxx xxx xxx
Obviously, the amount of damages warded in the Palisoc case is not and cannot
serve as the measure of the damages recoverable in the present case, the latter
having been caused directly and intentionally by an employee or agent of the
defendant, whereas the student who killed the young Palisoc was in no wise an agent
of the school. Moreover, upon her arrival in the Philippines, Mrs. Zulueta reported her
husband's predicament to defendant's local manager and asked him to forthwith have

him (Mr. Zulueta) brought to Manila, which defendant's aforementioned manager

refused to do, thereby impliedly ratifying the off-loading of Mr. Zulueta at Wake Island.
It is next urged that, under the contract of carriage with the defendant, Mr. Zulueta
was bound to be present at the time scheduled for the departure of defendant's plane
and that he had, consequently, violated said contract when he did not show up at
such time. This argument might have had some weight had defendant's plane taken
off before Mr. Zulueta had shown up. But the fact is that he was ready, willing and
able to board the plane about two hours before it actually took off, and that he was
deliberately and maliciously off-loaded on account of his altercation with Capt.
Zentner. It should, also, be noted that, although Mr. Zulueta was delayed some 20 to
30 minutes, the arrival or departure of planes is often delayed for much longer periods
of time. Followed to its logical conclusion, the argument adduced by the defense
suggests that airlines should be held liable for damages due to the inconvenience and
anxiety, aside from actual damages, suffered by many passengers either in their
haste to arrive at the airport on scheduled time just to find that their plane will not take
off until later, or by reason of the late arrival of the aircraft at its destination.
PANAM impugns the award of attorney's fees upon the ground that no penalty should
be imposed upon the right to litigate; that, by law, it may be awarded only in
exceptional cases; that the claim for attorney's fees has not been proven; and that
said defendant was justified in resisting plaintiff's claim "because it was patently
exorbitant."
Nothing, however, can be farther from the truth. Indeed apart from plaintiff's claim for
actual damages, the amount of which is not contested, plaintiffs did not ask any
specific sum by way of exemplary and moral damages, as well as attorney's fees, and
left the amount thereof to the "sound discretion" of the lower court. This, precisely, is
the reason why PANAM, now, alleges without justification that the lower court had
no jurisdiction over the subject matter of the present case.
Moreover, Article 2208 of our Civil Code expressly authorizes the award of attorney's
fees "when exemplary damages are awarded," as they are in this case as well
as "in any other case where the court deems it just and equitable that attorney's
fees ... be recovered," and We so deem it just and equitable in the present case,
considering the "exceptional" circumstances obtaining therein, particularly the bad
faith with which defendant's agent had acted, the place where and the conditions
under which Rafael Zulueta was left at Wake Island, the absolute refusal of
defendant's manager in Manila to take any step whatsoever to alleviate Mr. Zulueta's
predicament at Wake and have him brought to Manila which, under their contract
of carriage, was defendant's obligation to discharge with "extra-ordinary" or "utmost"
diligence and, the "racial" factor that had, likewise, tainted the decision of
defendant's agent, Capt. Zentner, to off-load him at Wake Island.
As regards the evidence necessary to justify the sum of P75,000 awarded as
attorney's fees in this case, suffice it to say that the quantity and quality of the
services rendered by plaintiffs' counsel appearing on record, apart from the nature of
the case and the amount involved therein, as well as his prestige as one of the most
distinguished members of the legal profession in the Philippines, of which judicial

cognizance may be taken, amply justify said award, which is a little over 10% of the
damages (P700,000) collectible by plaintiffs herein. Indeed, the attorney's fees in this
case is proportionally much less than that adjudged in Lopez v. PANAM 16 in which
the judgment rendered for attorney's fees (P50,000) was almost 20% of the damages
(P275,000) recovered by the plaintiffs therein.
The defense assails the last part of the decision sought to be reconsidered, in which
relying upon Article 172 of our Civil Code, which provides that "(t)he wife cannot
bind the conjugal partnership without the husband's consent, except in cases
provided by law," and it is not claimed that this is one of such cases We denied a
motion, filed by Mrs. Zulueta, for the dismissal of this case, insofar as she is
concerned - she having settled all her differences with the defendant, which appears
to have paid her the sum of P50,000 therefor - "without prejudice to this sum being
deducted from the award made in said decision." Defendant now alleges that this is
tantamount to holding that said compromise agreement is both effective and
ineffective.
This, of course, is not true. The payment is effective, insofar as it is deductible from
the award, and, because it is due (or part of the amount due) from the defendant, with
or without its compromise agreement with Mrs. Zulueta. What is ineffective is the
compromise agreement, insofar as the conjugal partnership is concerned. Mrs.
Zulueta's motion was for the dismissal of the case insofar as she was concerned, and
the defense cited in support thereof Article 113 of said Code, pursuant to which "(t)he
husband must be joined in all suits by or against the wife except: ... (2) If they have in
fact been separated for at least one year." This provision, We held, however, refers to
suits in which the wife is the principal or real party in interest, not to the case at bar,
"in which the husband is the main party in interest, both as the person principally
aggrieved and as administrator of the conjugal partnership ... he having acted in this
capacity in entering into the contract of carriage with PANAM and paid the amount
due to the latter, under the contract, with funds of the conjugal partnership," to which
the amounts recoverable for breach of said contract, accordingly, belong. The
damages suffered by Mrs. Zulueta were mainly an in accident of the humiliation to
which her husband had been subjected. The Court ordered that said sum of P50,00
paid by PANAM to Mrs. Zulueta be deducted from the aggregate award in favor of the
plaintiffs herein for the simple reason that upon liquidation of the conjugal partnership,
as provided by law, said amount would have to be reckoned with, either as part of her
share in the partnership, or as part of the support which might have been or may be
due to her as wife of Rafael Zulueta. It would surely be inane to sentence the
defendant to pay the P700,000 due to the plaintiffs and to direct Mrs. Zulueta to return
said P50,000 to the defendant.
In this connection, it is noteworthy that, for obvious reasons of public policy, she is not
allowed by law to waive her share in the conjugal partnership, before the dissolution
thereof. 17 She cannot even acquire any property by gratuitous title, without the
husband's consent, except from her ascendants, descendants, parents-in-law, and
collateral relatives within the fourth degree. 18
It is true that the law favors and encourages the settlement of litigations by
compromise agreement between the contending parties, but, it certainly does not

favor a settlement with one of the spouses, both of whom are plaintiffs or defendants
in a common cause, such as the defense of the rights of the conjugal partnership,
when the effect, even if indirect, of the compromise is to jeopardize "the solidarity of
the family" which the
law 19 seeks to protect by creating an additional cause for the misunderstanding
that had arisen between such spouses during the litigation, and thus rendering more
difficult a reconciliation between them.
It is urged that there is no proof as to the purpose of the trip of the plaintiffs, that
neither is there any evidence that the money used to pay the plane tickets came from
the conjugal funds and that the award to Mrs. Zulueta was for her personal suffering
or injuries. There was, however, no individual or specific award in favor of Mrs.
Zulueta or any of the plaintiffs. The award was made in their favor collectively. Again,
in the absence of said proof, the presumption is that the purpose of the trip was for
the common benefit of the plaintiffs and that the money had come from the conjugal
funds, for, unless there is proof to the contrary, it is presumed "(t)hat things have
happened according to the ordinary course of nature and the ordinary habits of
life." 20 In fact Manresa maintains 21 that they are deemed conjugal, when the
source of the money used therefor is not established, even if the purchase had been
made by the wife. 22 And this is the rule obtaining in the Philippines. Even property
registered, under the Torrens system, in the name of one of the spouses, or in that of
the wife only, if acquired during the marriage, is presumed to belong to the conjugal
partnership, unless there is competent proof to the contrary. 23
PANAM maintains that the damages involved in the case at bar are not among those
forming part of the conjugal partnership pursuant to Article 153 of the Civil Code,
reading:
ART. 153. The following are conjugal partnership property:
(1) That which is acquired by onerous title during the marriage at the expense of the
common fund, whether the acquisition be for the partnership, or for only one of the
spouses;
(2) That which is obtained by the industry, or work, or as salary of the spouses, or of
either of them;
(3) The fruits, rents or interests received or due during the marriage, coming from the
common property or from the exclusive property of each spouse.
Considering that the damages in question have arisen from, inter alia, a breach of
plaintiffs' contract of carriage with the defendant, for which plaintiffs paid their fare
with funds presumably belonging to the conjugal partnership, We hold that said
damages fall under paragraph (1) of said Article 153, the right thereto having been
"acquired by onerous title during the marriage ... ." This conclusion is bolstered up by
Article 148 of our Civil Code, according to which:
ART. 148. The following shall be the exclusive property of each spouse:
(1) That which is brought to the marriage as his or her own;

(2) That which each acquires, during the marriage, by lucrative title;
(3) That which is acquired by right of redemption or by exchange with other property
belonging to only one of the spouses;
(4) That which is purchased with exclusive money of the wife or of the husband.
The damages involved in the case at bar do not come under any of these provisions
or of the other provisions forming part of Chapter 3, Title VI, of Book I of the Civil
Code, which chapter is entitled "Paraphernal Property." What is more, if "(t)hat which
is acquired by right of redemption or by exchange with other property belonging to
only one of the spouses," and "(t)hat which is purchased with exclusive money of the
wife or of the husband," 24belong exclusively to such wife or husband, it follows
necessarily that that which is acquired with money of the conjugal partnership
belongs thereto or forms part thereof. The rulings in Maramba v.
Lozano 25 and Perez v. Lantin, 26 cited in defendant's motion for reconsideration,
are, in effect, adverse thereto. In both cases, it was merely held that the presumption
under Article 160 of our Civil Code to the effect that all property of the
marriage belong to the conjugal partnership does not apply unless it is shown that
it was acquired during marriage. In the present case, the contract of carriage was
concededly entered into, and the damages claimed by the plaintiffs were
incurred, during marriage. Hence, the rights accruing from said contract, including
those resulting from breach thereof by the defendant, are presumed to belong to the
conjugal partnership of Mr. and Mrs. Zulueta. The fact that such breach of contract
was coupled, also, with a quasi-delict constitutes an aggravating circumstance and
can not possibly have the effect of depriving the conjugal partnership of such property
rights.
Defendant insists that the use of conjugal funds to redeem property does not make
the property redeemed conjugal if the right of redemption pertained to the wife. In the
absence, however, of proof that such right of redemption pertains to the wife and
there is no proof that the contract of carriage with PANAM or the money paid therefor
belongs to Mrs. Zulueta the property involved, or the rights arising therefrom, must
be presumed, therefore, to form part of the conjugal partnership.
It is true that in Lilius v. Manila Railroad Co., 27 it was held that the "patrimonial and
moral damages" awarded to a young and beautiful woman by reason of a scar in
consequence of an injury resulting from an automobile accident which disfigured
her face and fractured her left leg, as well as caused a permanent deformity, are her
paraphernal property. Defendant cites, also, in support of its contention the following
passage from Colin y Capitant:
No esta resuelta expresamente en la legislacion espaola la cuestion de si las
indemnizaciones debidas por accidentes del trabaho tienen la consideracion de
gananciales, o son bienes particulares de los conyuges.
Inclinan a la solucion de que estas indemnizaciones deben ser consideradas como
gananciales, el hecho de que la sociedad pierde la capacidad de trabajocon el
accidente, que a ella le pertenece, puesto que de la sociedad son losfrutos de ese
trabajo; en cambio, la consideracion de que igual manera que losbienes que

sustituyen a los que cada conyuge lleva al matrimonio como propiostienen el caracter
de propios, hace pensar que las indemnizaciones que vengana suplir la capacidad de
trabajo aportada por cada conyuge a la sociedad, debenser juridicamente reputadas
como bienes propios del conyuge que haya sufrido elaccidente. Asi se llega a la
misma solucion aportada por la jurisprudencia francesca. 28
This opinion is, however, undecisive, to say the least. It should be noted that Colin y
Capitant were commenting on the French Civil Code; that their comment referred to
indemnities due in consequence of "accidentes del trabajo "resulting
in physical injuries sustained by one of the spouses (which Mrs. Zulueta
has not suffered); and that said commentators admit that the question whether or not
said damages are paraphernal property or belong to the conjugal partnership is not
settled under the Spanish law. 29 Besides, the French law and jurisprudence to
which the comments of Planiol and Ripert, likewise, refer are inapposite to the
question under consideration, because they differ basically from the Spanish law in
the treatment of the property relations between husband and wife. Indeed, our Civil
Code, like the Spanish Civil Code, favors the system of conjugal partnership of gains.
Accordingly, the former provides that, "(i)n the absence of marriage settlements, or
when the same are void, the system of relative community or conjugal partnership of
gains ... shall govern the property relations between" the spouses. 30 Hence, "(a)ll
property of the marriage is presumed to belong to the conjugal partnership, unless it
be proved that it pertains exclusively to the husband or to the wife." 31
No similar rules are found in the French Civil Code. What is more, under the
provisions thereof, the conjugal partnership exists only when so stipulated in the
"capitulaciones matrimoniales" or by way of exception. In the language of Manresa
Prescindimos de los preceptos de los Condigos de Francia, Italia, Holanda, Portugal,
Alemania y Suiza, porsue solo excepcionalmente, o cuando asi se pacta en las
capitulaciones, admiten el sistema de gananciales. 32
Again, Colin y Capitant, as well as the Lilius case, refer to damages recovered
for physical injuries suffered by the wife. In the case at bar, the party mainly injured,
although not physically, is the husband.
Accordingly, the other Philippine cases 33 and those from Louisiana whose civil
law is based upon the French Civil Code cited by the defendant, which similarly
refer to moral damages due to physical injuries suffered by the wife, are, likewise,
inapplicable to the case at bar.
We find, therefore, no plausible reason to disturb the views expressed in Our decision
promulgated on February 29, 1972.
WHEREFORE, the motions for reconsideration above-referred to should be, as they
are hereby denied.
deemed to belong exclusively to the wife (1) when acquired by her by-right of
redemption, and (2) with money belonging exclusively to her (Article 1396, old Civil
Code).

The interest which a wife has in conjugal property in this jurisdiction may be likened to
that of a wife in a homestead in American jurisdiction. That interest is known as
"inchoate right of dower", or a "contingent interest." By virtue of this inchoate right, a
wife has a right of redemption of a homestead as successor in interest of her
husband. Thus, in Hepfner vs. Urton, 12 Pac., 486, it was held that by the declaration
of homestead by the husband of the property sold a portion of his title passed to his
wife, and "she had the right of residence thereon with him and the family during their
joint lives, with some rights in case she should survive him. She had a right of
redemption as his successor in interest." (Emphasis supplied) In Taylor vs. Taylor, 92
So., 109, where a mortgage was executed on a homestead and the husband refused
to pay the indebtedness, it was held that "the wife's "inchoate right of dower", which is
more than a possibility and may well be denominated a contingent interest, was a
sufficient interest in the lands to confer the right of equitable redemption under the
mortgage." And in Malone vs. Nelson, et al., 167 So., 714, it was declared that "the
right of the wife of redeem is rested upon her interest inchoate right of dower a
right subject to a monetary valuation." These authorities have persuasive effect
considering the source of our rule on the matter.
The property in question has therefore become the exclusive property of the plaintiff.
She has acquired it by right of redemption as successor in interest of her husband. It
has ceased to be the property of the judgment debtor. It can no longer therefore be
the subject of execution under a judgment exclusively affecting the personal liability of
the latter. The conclusion reached by the lower court on this matter is therefore not
warranted by law.
Wherefore, the decision appealed from is modified as follows: the sale of the two
parcels of land executed by the sheriff on May 9, 1950 in favor of Raymundo de
Jesus for P970 is hereby declared null and void, and the deed of repurchase
executed by the sheriff in favor of the plaintiff on March 8, 1950 is hereby revived and
maintained. The rest of the decision is declared without effect. No pronouncement as
to costs.

G.R. No. L-38052

December 23, 1933

CONCEPCION ABELLA DE DIAZ, Plaintiff-Appellee, vs. ERLANGER &

GALINGER, INC., ET AL., defendants.
ERLANGER & GALINGER, INC., Appellant.
Vicente Ribaya and J.A. Wolfson for appellant.
Manly and Reyes and Norberto Romualdez for appellee.
HULL, J.:
Erlanger & Galinger, Inc., secured a judgment in civil case No. 3722 of the Court of
First Instance of Albay against Domingo Diaz, the husband of the plaintiff herein, and
on an execution issued to enforce the above-mentioned judgment, the sheriff levied
on certain properties.chanroblesvirtualawlibrary chanrobles virtual law library

Plaintiff thereupon brought this action in the Court of First Instance of Camarines Sur
alleging that the properties which had been levied upon were her own paraphernal
property.chanroblesvirtualawlibrary chanrobles virtual law library
The court issued a temporary injunction and after hearing, declared that the
properties levied upon were paraphernal, that the obligation which was the basis of
the judgment was a personal obligation of the husband, and that under article 1386 of
the Civil Code, the fruits of the paraphernal property of the wife were exempt from
execution in this case. The court held that all the property was unlawfully levied upon
and made the preliminary injunction permanent.chanroblesvirtualawlibrary chanrobles
virtual law library
Defendant appeals, and the first question for consideration is whether buildings
erected on paraphernal property of the wife with the private funds of the wife are
exempt from execution for the debts contracted by the husband. Article 1404 of the
Civil Code provides:
ART. 1404. Any useful expenditures made for the benefit of the separate property or
either one of the spouses by means of advances made by the partnership, or by the
industry of the husband or wife, are partnership
property.chanroblesvirtualawlibrary chanrobles virtual law library
Buildings constructed during the marriage on land belonging to one of the spouses
shall also belong to the partnership, but the value of the land shall be paid to the
spouse owning the same.
We shall not disturb the findings of fact of the trial court that a commercial building,
thecamarin, and the granary, the buildings in dispute, were build on the lands of
appellee with the appellee's own personal money. At first view there is no limitation on
the second paragraph of the above-quoted article, but Manresa in his Commentaries,
volume 9, page 608, holds that if the building is constructed by the owner of the land
with her private money, the building does not belong to the partnership but to the
owner of the land, and no reason occurs to us why such holding is not a correct and
just interpretation of this section. We therefore concur with the trial court that these
buildings are not subject to levy and sale in this
case.chanroblesvirtualawlibrary chanrobles virtual law library
As to the items of palay and lumber, we are not convinced from the evidence that they
belong exclusively to appellee, but on then contrary, we believe that they are part of
the conjugal property (article 1407, Civil Code). Likewise, as to the Buick automobile.
While it may be true that at the time of their marriage, the wife had an automobile,
that automobile has long since passed out of existence, and the mere fact that each
successive car was turned in as part of the purchase price of a new car, would not
make every automobile in the future paraphernal, but on the contrary, it becomes
conjugal and responsible for the debts of the
partnership.chanroblesvirtualawlibrary chanrobles virtual law library
As above stated, the trial court relied to a great extent in its judgment on article 1386
of the Civil Code which reads:

ART. 1386. The fruits of the paraphernal property cannot be subject to the payment of
personal obligations of the husband, unless it be proved that such obligations were
productive of some benefit to the family.
It will therefore be necessary to consider briefly the transaction out of which arose the
judgment, the basis of the existing writ of execution. The husband, Domingo Diaz,
while a member of the Legislature, secured the passage of Act. No. 2644 granting to
his brother a franchise to construct and operate an electric light plant at Tabaco,
Albay. Domingo Diaz purchased from Erlanger & Galinger, Inc., machinery and
equipment for the construction and installation of the plant, and judgment was
obtained by Erlanger & Galinger, Inc., against Diaz for the balance of the purchase
price.chanroblesvirtualawlibrary chanrobles virtual law library
Appellee contends that she was opposed to her husband's going into the electric light
business and that therefore the business was a personal one of his and not an
enterprise of the conjugal partnership. Such contention is fundamentally erroneous.
The husband, as the manager of the partnership (article 1412, Civil Code), has the
right to embark the partnership in an ordinary commercial enterprise for gain, and the
fact that the wife may not approve of a venture does not make it a private and
personal one of the husband.chanroblesvirtualawlibrary chanrobles virtual law library
The obligation, not being a personal one of the husband, article 1386 has no
application, and any property belonging to the conjugal partnership must be held
liable to seizure.chanroblesvirtualawlibrary chanrobles virtual law library
In the preliminary injunction which was made permanent by the trial court, appellant
and the sheriff were forbidden to attempt to collect by legal process any of the rents
or fruits of the paraphernal property. As the fruits of the paraphernal property
belonged to the conjugal partnership, they are responsible for the debts of that
partnership. The injunction is too broad and must be
modified.chanroblesvirtualawlibrary chanrobles virtual law library
The judgment of the Court of First Instance of Camarines Sur is affirmed so far as it
relates to the ownership of the buildings. As to the other items, including the rents of
the paraphernal property, it is reversed. The case will be remanded to the Court of
First Instance of Camarines Sur for action in conformity with this opinion. No
expression as to costs. So ordered.chanroblesvirtualawlibrary chanrobles virtual law
library

the complaint instituted by the petitioner and ordering it to pay damages on the basis
of the private respondent's counterclaim.
On July 1, 1975, private respondent Augusto Yulo secured a loan from the petitioner
in the amount of P591,003.59 as evidenced by a promissory note he signed in his
own behalf and as representative of the A & L Industries. Respondent Yulo presented
an alleged special power of attorney executed by his wife, respondent Lily Yulo, who
manages A & L Industries and under whose name the said business is registered,
purportedly authorizing Augusto Yulo to procure the loan and sign the promissory
note. About two months prior to the loan, however, Augusto Yulo had already left Lily
Yulo and their children and had abandoned their conjugal home. When the obligation
became due and demandable, Augusto Yulo failed to pay the same.
On October 7, 1975, the petitioner filed its amended complaint against the spouses
Augusto and Lily Yulo on the basis of the promissory note. It also prayed for the
issuance of a writ of attatchment alleging that the said spouses were guilty of fraud in
contracting the debt upon which the action was brought and that the fraud consisted
of the spouses' inducing the petitioner to enter into a contract with them by executing
a Deed of Assignment in favor of the petitioner, assigning all their rights, titles and
interests over a construction contract executed by and between the spouses and A.
Soriano Corporation on June 19, 1974 for a consideration of P615,732.50 when, in
truth, the spouses did not have any intention of remitting the proceeds of the said
construction contract to the petitioner because despite the provisions in the Deed of
Assignment that the spouses shall, without compensation or costs, collect and
receive in trust for the petitioner all payments made upon the construction contract
and shall remit to the petitioner all collections therefrom, the said spouses failed and
refuse to remit the collections and instead, misappropriated the proceeds for their
own use and benefit, without the knowledge or consent of the petitioner.
The trial court issued the writ of attachment prayed for thereby enabling the petitioner
to attach the properties of A & L Industries. Apparently not contented with the order,
the petitioner filed another motion for the examination of attachment debtor, alleging
that the properties attached by the sheriff were not sufficient to secure the satisfaction
of any judgment that may be recovered by it in the case. This was likewise granted by
the court.

GUTIERREZ, JR., J.:

Private respondent Lily Yulo filed her answer with counterclaim, alleging that although
Augusta Yulo and she are husband and wife, the former had abandoned her and their
children five (5) months before the filing of the complaint; that they were already
separated when the promissory note was executed; that her signature in the special
power of attorney was forged because she had never authorized Augusto Yulo in any
capacity to transact any business for and in behalf of A & L Industries, which is owned
by her as a single proprietor, that she never got a single centavo from the proceeds of
the loan mentioned in the promissory note; and that as a result of the illegal
attachment of her properties, which constituted the assets of the A & L Industries, the
latter closed its business and was taken over by the new owner.

This is a petition for review seeking to set aside the decision of the Court of Appeals
which affirmed the decision of the then Court of First Instance of Manila, dismissing

After hearing, the trial court rendered judgment dismissing the petitioner's complaint
against the private respondent Lily Yulo and A & L Industries and ordering the

G.R. No. L-61464 May 28, 1988

BA FINANCE CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, AUGUSTO YULO, LILY YULO (doing
business under the name and style of A & L INDUSTRIES), respondents.

petitioner to pay the respondent Lily Yulo P660,000.00 as actual damages;

P500,000.00 as unrealized profits; P300,000.00 as exemplary damages; P30,000.00
as and for attorney's fees; and to pay the costs.
The petitioner appealed. The Court of Appeals affirmed the trial court's decision
except for the exemplary damages which it reduced from P300,000.00 to
P150,000.00 and the attorney's fees which were reduced from P30,000.00 to
P20,000.00.
In resolving the question of whether or not the trial court erred in holding that the
signature of respondent Lily Yulo in the special power of attorney was forged, the
Court of Appeals said:
The crucial issue to be determined is whether or not the signatures of the appellee
Lily Yulo in Exhibits B and B-1 are forged. Atty. Crispin Ordoa, the Notary Public,
admitted in open court that the parties in the subject documents did not sign their
signatures in his presence. The same were already signed by the supposed parties
and their supposed witnesses at the time they were brought to him for ratification. We
quote from the records the pertinent testimony of Atty. Ordoa, thus:
Q. This document marked as Exhibit B-1, when this was presented to you by that
common friend, June Enriquez, it was already typewritten, it was already
accomplished, all typewritten.?
A. Yes, sir.
Q And the parties had already affixed their signatures in this document?
A. Yes, sir.
Q. In this document marked as Exhibit B although it appears here that this is an
acknowledgment, you have not stated here that the principal actually acknowledged
this document to be her voluntary act and deed?
A This in one of those things that escaped my attention. Actually I have not gone over
the second page. I believed it was in order I signed it. (TSN pp. 13-14, Hearing of
Nov. 26, 1976).
The glaring admission by the Notary Public that he failed to state in the
acknowledgment portion of Exhibit B-1 that the appellee Lily Yulo acknowledged the
said document to be her own voluntary act and deed, is a very strong and
commanding circumstance to show that she did not appear personally before the said
Notary Public and did not sign the document.
Additionally, the Notary Public admitted that, while June Enriquez is admittedly a
mutual friend of his and the defendant Augusta Yulo, and who is also an instrumental
witness in said Exhibit B-1., he could not recognize or tell which of the two signatures
appearing therein, was the signature of this June Enriquez.
Furthermore, as the issue is one of credibility of a witness, the findings and
conclusions of the trial court before whom said witness, Atty. Crispin Ordoa, the

Notary Public before whom the questioned document was supposedly ratified and
acknowledged, deserve great respect and are seldom disturbed on appeal by
appellate tribunals, since it is in the best and peculiar advantage of determining and
observing the conduct, demeanor and deportment of a particular witness while he is
testifying in court, an opportunity not enjoyed by the appellate courts who merely
have to rely on the recorded proceedings which transpired in the court below, and the
records are bare of any circumstance of weight, which the trial court had overlooked
and which if duly considered, may radically affect the outcome of the case.
On the other hand, the appellee Lily Yulo, to back up her claim of forgery of her
signature in Exhibit B-1, presented in court a handwriting expert witness in the person
of Police Captain Yakal Giron of the Integrated National Police Training Command,
and who is also a Document Examiner of the same Command's Crime Laboratory at
Fort Bonifacio, Metro Manila. His experience as an examiner of questioned and
disputed documents, in our mind, is quite impressive. To qualify him as a handwriting
expert, he declared that he underwent extensive and actual studies and examination
of disputed or questioned document, both at the National Bureau of Investigation
Academy and National Bureau of Investigation Questioned Document Laboratory,
respectively, from July 1964, up to his appointment as Document Examiner in June,
1975, and, to further his experience along this line, he attended the 297th Annual
Conference of the American Society of Questioned Docurnent Examiners held at
Seattle, Washington, in August 1971, as a representative of the Philippines, and
likewise conducted an observation of the present and modern trends of crime
laboratories in the West Coast, U.S.A., in 1971; that he likewise had conducted actual
tests and examination of about 100,000 documents, as requested by the different
courts, administrative, and governmental agencies of the Government, substantial
portions of which relate to actual court cases.
In concluding that the signatures of the appellee Lily Yulo, in the disputed document
in question (Exh. B-1), were all forgeries, and not her genuine signature, the expert
witness categorically recited and specified in open court what he observed to be
about twelve (12) glaring and material significant differences, in his comparison of the
signatures appearing in the genuine specimen signatures of the said appellee and
with those appearing in the questioned document (Exhibit B-1). Indeed, we have
likewise seen the supposed notable differences, found in the standard or genuine
signatures of the appellee which were lifted and obtained in the official files of the
government, such as the Bureau of Internal Revenue on her income tax returns, as
compared to the pretended signature of the appellee appearing in Exhibits B, B-1. It is
also noteworthy to mention that the appellant did not even bother to conduct a crossexamination of the handwriting expert witness, Capt. Giron, neither did the appellant
present another handwriting expert, at least to counter-act or balance the appellee's
handwriting expert.
Prescinding from the foregoing facts, we subscribe fully to the lower court's
observations that the signatures of the appellee Lily Yulo in the questioned document
(Exh. B-1) were forged. Hence, we find no factual basis to disagree. (pp. 28-30, Rollo)
As to the petitioner's contention that even if the signature of Lily Yulo was forged or
even if the attached properties were her exclusive property, the same can be made

answerable to the obligation because the said properties form part of the conjugal
partnership of the spouses Yulo, the appellate court held that these contentions are
without merit because there is strong preponderant evidence to show that A & L
Industries belongs exclusively to respondent Lily Yulo, namely: a) The Certificate of
Registration of A & L Industries, issued by the Bureau of Commerce, showing that
said business is a single proprietorship, and that the registered owner thereof is only
Lily Yulo; b) The Mayor's Permit issued in favor of A & L Industries, by the Caloocan
City Mayor's Office showing compliance by said single proprietorship company with
the City Ordinance governing business establishments; and c) The Special Power of
Attorney itself, assuming but without admitting its due execution, is tangible proof that
Augusto Yulo has no interest whatsoever in the A & L Industries, otherwise, there
would have been no necessity for the Special Power of Attorney if he is a part owner
of said single proprietorship.

establish the element of bad faith and malice on the part of plaintiff which may
warrant the award of damages in favor of defendant Lily Yulo. (Ibid., pp. 102103).<re||an1w>

With regard to the award of damages, the Court of Appeals affirmed the findings of
the trial court that there was bad faith on the part of the petitioner as to entitle the
private respondent to damages as shown not only by the fact that the petitioner did
not present the Deed of Assignment or the construction agreement or any evidence
whatsoever to support its claim of fraud on the part of the private respondent and to
justify the issuance of a preliminary attachment, but also by the following findings:

Concerning the actual damages, the appellate court ruled that the petitioner should
have presented evidence to disprove or rebut the private respondent's claim but it
remained quiet and chose not to disturb the testimony and the evidence presented by
the private respondent to prove her claim.

Continuing and elaborating further on the appellant's mala fide actuations in securing
the writ of attachment, the lower court stated as follows:
Plaintiff not satisfied with the instant case where an order for attachment has already
been issued and enforced, on the strength of the same Promissory Note (Exhibit"A"),
utilizing the Deed of Chattel Mortgage (Exhibit "4"), filed a foreclosure proceedings
before the Office of the Sheriff of Caloocan (Exhibit"6") foreclosing the remaining
properties found inside the premises formerly occupied by the A & L Industries. A
minute examination of Exhibit "4" will show that the contracting parties thereto, as
appearing in par. 1 thereof, are Augusto Yulo, doing business under the style of A & L
Industries (should be A & L Glass Industries Corporation), as mortgagor and BA
Finance Corporation as mortgagee, thus the enforcement of the Chattel Mortgage
against the property of A & L Industries exclusively owned by Lily T. Yulo appears to
be without any factual or legal basis whatsoever. The chattel mortgage, Exhibit "4"
and the Promissory Note, Exhibit A, are based on one and the same obligation.
Plaintiff tried to enforce as it did enforce its claim into two different modes a single
obligation.
Aware that defendant Lily Yulo, filed a Motion to Suspend Proceedings by virtue of a
complaint she filed with the Court of First Instance of Caloocan, seeking annulment of
the Promissory Note, the very basis of the plaintiff in filing this complaint, immediately
after the day it filed a Motion for the Issuance of an Alias Writ of Preliminary
Attachment . . .Yet, inspite of the knowledge and the filing of this Motion to Suspend
Proceedings, the Plaintiff still filed a Motion for the Issuance of a Writ of Attachment
dated February 6, 1976 before this court. To add insult to injury, plaintiff even filed a
Motion for Examination of the Attachment Debtor, although aware that Lily Yulo had
already denied participation in the execution of Exhibits "A" and "B". These incidents
and actions taken by plaintiff, to the thinking of the court, are sufficient to prove and

Indeed, the existence of evident bad faith on the appellant's part in proceeding
against the appellee Lily Yulo in the present case, may likewise be distressed on the
fact that its officer Mr. Abraham Co, did not even bother to demand the production of
at least the duplicate original of the Special Power of Attorney (Exhibit B) and merely
contended himself with a mere xerox copy thereof, neither did he require a more
specific authority from the A & L Industries to contract the loan in question, since from
the very content and recitals of the disputed document, no authority, express or
implied, has been delegated or granted to August Yulo to contract a loan, especially
with the appellant. (pp. 33-34, Rollo)

In this petition for certiorari, the petitioner raises three issues. The first issue deals
with the appellate court's affirmance of the trial court's findings that the signature of
the private respondent on the Special Power of Attorney was forged. According to the
petitioner, the Court of Appeals disregarded the direct mandate of Section 23, Rule
132 of the Rules of Court which states in part that evidence of handwriting by
comparison may be made "with writings admitted or treated as genuine by the party
against whom the evidence is offered, or proved to be genuine to the satisfaction of
the judge," and that there is no evidence on record which proves or tends to prove the
genuineness of the standards used.
There is no merit in this contention.
The records show that the signatures which were used as "standards" for comparison
with the alleged signature of the private respondent in the Special Power of Attorney
were those from the latter's residence certificates in the years 1973, 1974 and 1975,
her income tax returns for the years 1973 and 1975 and from a document on long
bond paper dated May 18, 1977. Not only were the signatures in the foregoing
documents admitted by the private respondent as hers but most of the said
documents were used by the private respondent in her transactions with the
government. As was held in the case of Plymouth Saving & Loan Assn. No. 2 v.
Kassing (125 NE 488, 494):
We believe the true rule deduced from the authorities to be that the genuineness of a
"standard" writing may be established (1) by the admission of the person sought to be
charged with the disputed writing made at or for the purposes of the trial or by his
testimony; (2) by witnesses who saw the standards written or to whom or in whose
hearing the person sought to be charged acknowledged the writing thereof; (3) by
evidence showing that the reputed writer of the standard has acquiesced in or
recognized the same, or that it has been adopted and acted upon by him his business
transactions or other concerns....

Furthermore, the judge found such signatures to be sufficient as standards. In the

case of Taylor-Wharton Iron & Steel Co. v. Earnshaw (156 N.E. 855, 856), it was held:

the Civil Code. As we have ruled in Luzon Surety Co., Inc. v. De Gracia (30 SCRA
111, 115-117):

When a writing is offered as a standard of comparison it is for the presiding judge to

decide whether it is the handwriting of the party to be charged. Unless his finding is
founded upon error of law, or upon evidence which is, as matter of law, insufficient to
justify the finding, this court will not revise it upon exceptions." (Costelo v. Crowell,
139 Mass. 588, 590, 2 N.E. 648; Nuez v. Perry, 113 Mass, 274, 276.)

As explained in the decision now under review: "It is true that the husband is the
administrator of the conjugal property pursuant to the provisions of Art. 163 of the new
Civil Code. However, as such administrator the only obligations incurred by the
husband that are chargeable against the conjugal property are those incurred in the
legitimate pursuit of his career, profession or business with the honest belief that he is
doing right for the benefit of the family. This is not true in the case at bar for we
believe that the husband in acting as guarantor or surety for another in an indemnity
agreement as that involved in this case did not act for the benefit of the conjugal
partnership. Such inference is more emphatic in this case, when no proof is
presented that Vicente Garcia in acting as surety or guarantor received consideration
therefore, which may redound to the benefit of the conjugal partnership.(Ibid, pp. 4647).

We cannot find any error on the part of the trial judge in using the above documents
as standards and also in giving credence to the expert witness presented by the
private respondent whose testimony the petitioner failed to rebut and whose credibility
it likewise failed to impeach. But more important is the fact that the unrebutted
handwriting expert's testimony noted twelve (12) glaring and material differences in
the alleged signature of the private respondent in the Special Power of Attorney as
compared with the specimen signatures, something which the appellate court also
took into account. In Cesar v. Sandiganbayan (134 SCRA 105, 132), we ruled:
Mr. Maniwang pointed to other significant divergences and distinctive characteristics
between the sample signatures and the signatures on the questioned checks in his
report which the court's Presiding Justice kept mentioning during Maniwang's
testimony.
In the course of his cross-examination, NBI expert Tabayoyong admitted that he saw
the differences between the exemplars used and the questioned signatures but he
dismissed the differences because he did not consider them fundamental. We rule
that significant differences are more fundamental than a few similarities. A forger
always strives to master some similarities.
The second issue raised by the petitioner is that while it is true that A & L Industries is
a single proprietorship and the registered owner thereof is private respondent Lily
Yulo, the said proprietorship was established during the marriage and its assets were
also acquired during the same. Therefore, it is presumed that this property forms part
of the conjugal partnership of the spouses Augusto and Lily Yulo and thus, could be
held liable for the obligations contracted by Augusto Yulo, as administrator of the
partnership.
There is no dispute that A & L Industries was established during the marriage of
Augusta and Lily Yulo and therefore the same is presumed conjugal and the fact that
it was registered in the name of only one of the spouses does not destroy its conjugal
nature (See Mendoza v. Reyes, 124 SCRA 161, 165). However, for the said property
to be held liable, the obligation contracted by the husband must have redounded to
the benefit of the conjugal partnership under Article 161 of the Civil Code. In the
present case, the obligation which the petitioner is seeking to enforce against the
conjugal property managed by the private respondent Lily Yulo was undoubtedly
contracted by Augusto Yulo for his own benefit because at the time he incurred the
obligation he had already abandoned his family and had left their conjugal home.
Worse, he made it appear that he was duly authorized by his wife in behalf of A & L
Industries, to procure such loan from the petitioner. Clearly, to make A & L Industries
liable now for the said loan would be unjust and contrary to the express provision of

xxx xxx xxx

xxx xxx xxx
In the most categorical language, a conjugal partnership under that provision 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. There is none in this case.
xxx xxx xxx
Moreover, it would negate the plain object of the additional requirement in the present
Civil Code that a debt contracted by the husband to bind a conjugal partnership must
redound to its benefit. That is still another provision indicative of the solicitude and
tender regard that the law manifests for the family as a unit. Its interest is paramount;
its welfare uppermost in the minds of the codifiers and legislators.
We, therefore, rule that the petitioner cannot enforce the obligation contracted by
Augusto Yulo against his conjugal properties with respondent Lily Yulo. Thus, it
follows that the writ of attachment cannot issue against the said properties.
Finally, the third issue assails the award of actual damages according to the
petitioner, both the lower court and the appellate court overlooked the fact that the
properties referred to are still subject to a levy on attachment. They are, therefore, still
under custodia legis and thus, the assailed decision should have included a
declaration as to who is entitled to the attached properties and that assuming
arguendo that the attachment was erroneous, the lower court should have ordered
the sheriff to return to the private respondent the attached properties instead of
condemning the petitioner to pay the value thereof by way of actual damages.
In the case of Lazatin v. Twao (2 SCRA 842, 847), we ruled:
xxx xxx xxx

... It should be observed that Sec. 4 of Rule 59, does not prescribed the remedies
available to the attachment defendant in case of a wrongful attachment, but merely
provides an action for recovery upon the bond, based on the undertaking therein
made and not upon the liability arising from a tortuous act, like the malicious suing out
of an attachment. Under the first, where malice is not essential, the attachment
defendant, is entitled to recover only the actual damages sustained by him by reason
of the attachment. Under the second, where the attachment is maliciously sued out,
the damages recoverable may include a compensation for every injury to his credit,
business or feed (Tyler v. Mahoney, 168 NC 237, 84 SE 362; Pittsburg etc. 5
Wakefield, etc., 135 NC 73, 47 SE 234). ...
The question before us, therefore, is whether the attachment of the properties of A &
L Industries was wrongful so as to entitle the petitioner to actual damages only or
whether the said attachment was made in bad faith and with malice to warrant the
award of other kinds of damages. Moreover, if the private respondent is entitled only
to actual damages, was the court justified in ordering the petitioner to pay for the
value of the attached properties instead of ordering the return of the said properties to
the private respondent Yulo ?
Both the trial and appellate courts found that there was bad faith on the part of the
petitioner in securing the writ of attachment. We do not think so. "An attachment may
be said to be wrongful when, for instance, the plaintiff has no cause of action, or that
there is no true ground therefore, or that the plaintiff has a sufficient security other
than the property attached, which is tantamout to saying that the plaintiff is not
entitled to attachment because the requirements of entitling him to the writ are
wanting. (7 C.J.S., 664)" (p. 48, Section 4, Rule 57, Francisco, Revised Rules of
Court).
Although the petitioner failed to prove the ground relied upon for the issuance of the
writ of attachment, this failure cannot be equated with bad faith or malicious intent.
The steps which were taken by the petitioner to ensure the security of its claim were
premised, on the firm belief that the properties involved could be made answerable
for the unpaid obligation due it. There is no question that a loan in the amount of
P591,003.59 was borrowed from the bank.
We, thus, find that the petitioner is liable only for actual damages and not for
exemplary damages and attorney's fees. Respondent Lily Yulo has manifested before
this Court that she no longer desires the return of the attached properties since the
said attachment caused her to close down the business. From that time she has
become a mere employee of the new owner of the premises. She has grave doubts
as to the running condition of the attached machineries and equipments considering
that the attachment was effected way back in 1975. She states as a matter of fact that
the petitioner has already caused the sale of the machineries for fear that they might
be destroyed due to prolonged litigation. We, therefore, deem it just and equitable to
allow private respondent Lily Yulo to recover actual damages based on the value of
the attached properties as proven in the trial court, in the amount of P660,000.00. In
turn, if there are any remaining attached properties, they should be permanently
released to herein petitioner.

We cannot, however, sustain the award of P500,000.00 representing unrealized

profits because this amount was not proved or justified before the trial court. The
basis of the alleged unearned profits is too speculative and conjectural to show actual
damages for a future period. The private respondent failed to present reports on the
average actual profits earned by her business and other evidence of profitability
which are necessary to prove her claim for the said amount (See G. A. Machineries,
Inc. v. Yaptinchay, 126 SCRA 78, 88).
The judgment is therefore set aside insofar as it holds the petitioner liable for
P500,000.00 actual damages representing unrealized profits, P150,000.00 for
exemplary damages and P20,000.00 for attorney's fees. As stated earlier, the
attached properties, should be released in favor of the petitioner.
WHEREFORE, the decision of the Court of Appeals is hereby SET ASIDE and the
petitioner is ordered to pay the private respondent Lily Yulo the amount of SIX
HUNDRED SIXTY THOUSAND PESOS (P660,000.00) as actual damages. The
remaining properties subject of the attachment are ordered released in favor of the
petitioner.
SO ORDERED.
G.R. No. 79734 December 8, 1988
MARMONT RESORT HOTEL ENTERPRISES, petitioner,
vs.
FEDERICO GUIANG, AURORA GUIANG, and COURT OF
APPEALS, respondents.
Isagani M. Jungco for petitioner.

FELICIANO, J.:
The present Petition for Review seeks to set aside the Decision dated 9 December
1986 of the Court of Appeals in CA-G.R. CV 03299. The appellate court affirmed a
Decision dated 31 May 1983 of Branch 83 of the Regional Trial Court of Olongapo
City dismissing the complaint in Civil Case No. 2896-C filed by petitioner company
against private respondent spouses.
On 2 May 1975, a Memorandum of Agreement was executed between Maris Trading
and petitioner Marmont Resort Hotel Enterprises, Inc. ("Marmont"), a corporation
engaged in the hotel and resort business with office and establishment at Olongapo
City. Under the agreement, Maris Trading undertook to drill for water and to provide
all equipment necessary to install and complete a water supply facility to service the
Marmont Resort Hotel in Olongapo, for a stipulated fee of P40,000.00. In fulfillment of
its contract, Maris Trading drilled a well and installed a water pump on a portion of a
parcel of land situated in Olongapo City, then occupied by respondent spouses
Federico and Aurora Guiang.

Five (5) months later, a second Memorandum of Agreement was executed between
Maris Trading and Aurora Guiang, with Federico Guiang signing as witness. This
second agreement in essential part read: 1
That the First Party [Maris Trading] has dug, drilled and tapped water source for
Marmont Resort, located at Bo. Barretto, Olongapo City in accordance with their
agreement executed on May 2, 1975 and notarized before Isagani M. Jungco, Notary
Public and entered as Doc. No. 166; Page No. 135; Book No. XV; Series of 1975.
That the First Party has erected, built and drilled for the water source of Marmont
Resort on the land owned by the Second Party [Aurora Guiang] at the corner of J.
Montelibano Street and Maquinaya Drive (Provincial Road) with the latter's
permission.
That for and in consideration of the sum of P1,500.00 the Second Party hereby Sell,
Transfer and Cede all possessory rights, interest and claims over that portion of the
lot wherein the water source of Marmont Resort is located unto and in favor of Maris
Trading.
After some time, the water supply of the Marmont Resort Hotel became inadequate to
meet the hotel's water requirements. Petitioner Marmont secured the services of
another contractor (the name of which was not disclosed), which suggested that in
addition to the existing water pump, a submersible pump be installed to increase the
pressure and improve the flow of water to the hotel. Accordingly, Juan Montelibano,
Jr., manager of the Marmont Resort Hotel, sought permission from the Guiang
spouses to inspect the water pump which had been installed on the portion of the
land previously occupied by the spouses and to make the necessary additional
installations thereon. No such permission, however, was granted.
On 13 May 1980, petitioner Marmont filed a Complaint 2 against the Guiang spouses
for damages resulting from their refusal to allow representatives of petitioner and the
second contractor firm entry into the water facility site. The claimed damages were
broken down as follows: (a) P10,000.00 representing the amount advanced in
payment to the second contractor; (b) P40,000.00 representing the total project cost
of the installation made by Maris Trading: (c) P50,000.00 representing additional
expenses incurred and incidental losses resulting from failure of the original pump to
cope with the water requirements of the Marmont Resort Hotel; and (d) P10,000.00
for Attorney's fees.
In their Answer, 3 the Guiang spouses (defendants below) denied having had any
previous knowledge of the first Memorandum of Agreement and asserted that the
second Memorandum of Agreement was invalid for not having been executed in
accordance with law. The spouses added a counterclaim for damages in the amount
of P200,000.00.
On 2 October 1980, at the pre-trial conference, the parties agreed on the following
stipulation of facts and issues embodied in a Pre-Trial Order: 4
III

In addition to the admission made elsewhere in their respective pleadings, the parties
entered into the following stipulation of facts:
1. Plaintiff is a corporation duly organized and existing under the laws of the
Philippines with office at Montelibano Street, Barrio Barretto, Olongapo City;
2. The contract referred to in paragraph 2 of the complaint between the plaintiff and
Maris Trading is contained in a document captioned Memorandum Agreement
executed on May 2, 1975, a xerox copy of which is Annex 'A' of plaintiffs complaint;
3. On October 7, 1975, the Maris Trading represented by Ceferino Cabral and
defendant Aurora Guiang entered into a memorandum agreement;
4. The portion sold under Annex 'A' is still a part of the public domain.
IV
The plaintiff marked the following exhibits in evidence:
Exhibit 'A'-Memorandum Agreement dated May 2, 1975
Exhibit 'B-Memorandum Agreement dated October 7, 1975
V
The issues left to be ventilated during the trial are the following:
1. Whether defendants has actually prohibited the plaintiff [from) making repairs, [on]
the pump constructed by Maris Trading for the plaintiff under the agreement Exhibit
'A,' if so;
2. Whether defendants [have] the right to prohibit the Maris Trading from performing
the repairs and if not
3. Whether defendants are liable for damages under the human relations provision of
the Civil Code.
On I January 1980, the Guiang spouses moved to dismiss the Complaint. 5 The
spouses there assailed the validity of the second Memorandum of Agreement,
alleging that the subject matter thereof involved conjugal property alienated by Aurora
Guiang without the marital consent of her husband, Federico Guiang. Further, it was
alleged that the land upon which the hotel's water supply facility was installed-and
which the Guiang spouses occupied-formed part of the public domain and was then
still the subject of a Miscellaneous Sales Application submitted by Federico Guiang.
The Motion to Dismiss, however, was denied by the trial court.
No evidence having been adduced by the Guiang spouses on their behalf, the case
was submitted for derision. On 31 May 1983, the trial court rendered a
decision, 6 dismissing the complaint. The trial court found that Aurora Guiang had
validly alienated her rights over the disputed portion of land to Maris Trading, but held
that the evidence failed to show that Maris Trading, in turn, had transferred such
rights to petitioner Marmont.

Petitioner Marmont appealed to the Court of Appeals which affirmed the decision of
the trial court and dismissed the appeal for lack of merit. 7 The appellate court, citing
Section 55, Rule 132 of the Revised Rules of Court, held that the first and second
Memoranda of Agreement could not legally be considered by the court as included in
the body of evidence of the case, as neither document had been formally offered in
evidence by either party. It also held that, in any event, neither document showed that
Marmont had in fact acquired from Maris Trading whatever rights the latter had over
the land in dispute.
In the instant Petition for Review, petitioner assigns the following errors: 8
1. The Court of Appeals erred in not considering the Memorandum of Agreement of
May 2, 1975 and 7 October 1975 as the same were already admitted in the pre-trial
order; and
2. The Court of Appeals erred in deciding that ownership belongs to Maris Trading
hence, private respondent Guiang can prohibit Marmont Resort from entering the
land.
We find for the petitioner.
Both the trial and appellate courts held that the first and second Memoranda of
Agreement are not properly considered as forming part of the record of this case,
because neither had been formally presented and offered in evidence at the trial of
Civil Case No. 2896-C. The record shows, however, as noted earlier, that at the pretrial conference held on 2 October 1980, both petitioner Marmont and respondent
spouses had agreed upon a stipulation of facts and issues recognizing the existence
of those same two (2) agreements. Such stipulation of facts constitutes a judicial
admission, the veracity of which requires no further proof and which may be
controverted only upon a clear showing that such stipulation had been entered into
through "palpable mistake." On this point, Section 2, Rule 129 of the Revised Rules of
Court provides:
Section 2. Judicial Admissions.--Admission made by the parties in the pleadings, or in
the course of the trial or other proceedings do not require proof and cannot be
contradicted unless previously shown to have been made through palpable mistake.
(emphasis supplied)
There has been no showing and respondent spouses do not claim that "palpable
mistake" had intervened here, in respect of the formulation of the facts stipulated by
the parties at the pre-trial conference. Absent any such showing, that stipulation of
facts is incontrovertible, 9 and may be relied upon by the courts. 10 Respondent
spouses are estopped from raising as an issue in this case the existence and
admissibility in evidence of both the first and second Memoranda of Agreement
which, having been marked as exhibits during pre-trial, properly form part of the
record of this case, even though not formally offered in evidence after trial. 11
We consider briefly respondent spouses' argument that the second Memorandum of
Agreement was invalid for having been executed by Aurora Guiang without the
marital consent of Federico, contrary to Articles 165 and 172 of the Civil Code.

Article 165 and 172 state the general principle under our civil law, that the wife may
not validly bind the conjugal partnership without the consent of the husband, who is
legally the administrator of the conjugal partnership. In this particular case, however,
as noted earlier, the second Memorandum of Agreement, although ostensibly
contracted solely by Aurora Guiang with Maris Trading, was also signed by her
husband Federico, as one of the witnesses thereto. This circumstance indicates not
only that Federico was present during the execution of the agreement but also that he
had, in fact, given his consent to the execution thereof by his wife Aurora. Otherwise,
he should not have appended his signature to the document as witness. Respondent
spouses cannot now disown the second Memorandum of Agreement as their effective
consent thereto is sufficiently manifested in the document itself.
That the land in dispute was, at the time of execution of the second Memorandum of
Agreement, public land, is of no consequence here. Pending approval of Federico's
Miscellaneous Sales Application over said land, respondent spouses enjoyed
possessory and other rights over the same which could validly be assigned or
transferred in favor of third persons. In this case, respondent spouses chose to
transfer such rights (over the portion upon which the water pump was installed) to
Maris Trading, as evidenced by the fourth paragraph of the second Memorandum of
Agreement, quoted earlier. Furthermore, assuming (though only for the sake of
argument) that the alienation to Maris Trading was legally objectionable, respondent
spouses are not the proper parties to raise the issue of invalidity, they and Maris
Trading being in pari delicto. Only the government may raise that issue.
Finally, respondent spouses allege that dismissal of the complaint by the trial court
was not improper as petitioner Marmont was not privy to the second Memorandum of
Agreement, and that accordingly, petitioner had no valid cause of action against
respondents.
A closer scrutiny of the second and third paragraphs of the second Memorandum of
Agreement discloses that the first Memorandum of Agreement, including the
obligations imposed thereunder upon Maris Trading, had been acknowledged therein:
That the First Party (i.e., Maris Trading) has dug, drilled and tapped water source for
Marmont Resort, located at Bo. Barretto, Olongapo City in accordance with their
agreement executed on May 2, 1975 and notarized before Isagani M. Jungco, Notary
Public and entered as Doc. No. 166; Page No. 135; Book No. XV; Series of 1975.
That the First Party has erected, built and drilled for the water source of Marmont
Resort on the land owned by the Second Party [respondent spouses] at the corner of
J. Montelibano Street and Maquinaya Drive (Provincial Road) with the latter's
permission;... (Emphasis supplied)
The above paragraphs establish, among other things, that construction work had
been performed by Maris Trading on the land occupied by respondent spouses; that
such construction work had been performed in accordance with terms and conditions
stipulated in the first Memorandum of Agreement and that the purpose of the work
was to build a water supply facility for petitioner Marmont. The same excerpts also
show that the work so performed was with the knowledge and consent of the Guiang
spouses, who were then occupying the land.

It is clear from the foregoing stipulations that petitioner Marmont was to benefit from
the second Memorandum of Agreement. In fact, said stipulations appear to have been
designed precisely to benefit petitioner and, thus, partake of the nature of
stipulations pour autrui, contemplated in Article 1311 of the Civil Code.
A stipulation pour autrui is a stipulation in favor of a third person conferring a clear
and deliberate favor upon him, which stipulation is found in a contract entered into by
parties neither of whom acted as agent of the beneficiary. 12 We believe and so hold
that the purpose and intent of the stipulating parties (Maris Trading and respondent
spouses) to benefit the third person (petitioner Marmont) is sufficiently clear in the
second Memorandum of Agreement. Marmont was not of course a party to that
second Agreement but, as correctly pointed out by the trial court and the appellate
court, the respondent spouses could not have prevented Maris Trading from entering
the property possessory rights over which had thus been acquired by Maris Trading.
That respondent t spouses remained in physical possession of that particular bit of
land, is of no moment; they did so simply upon the sufferance of Maris Trading. Had
Maris Trading, and not the respondent spouses, been in physical possession, we
believe that Marmont would have been similarly entitled to compel Maris Trading to
give it (Marmont) access to the site involved. The two (2) courts below failed to take
adequate account of the fact that the sole purpose of Maris Trading in acquiring
possessory rights over that specific portion of the land where well and pump and
piping had been installed, was to supply the water requirements of petitioner's hotel.
That said purpose was known by respondent spouses, is made explicit by the second
Memorandum of Agreement. Maris Trading itself had no need for a water supply
facility; neither did the respondent spouses. The water facility was intended solely for
Marmont Resort Hotel. The interest of Marmont cannot therefore be regarded as
merely "incidental ." 13 Finally, even if it be assumed (for purposes of argument
merely) that the second Memorandum of Agreement did not constitute a
stipulation pour autrui, still respondent spouses, in the circumstances of this case,
must be regarded as having acted contrary to the principles of honesty, good faith
and fair dealing embodied in Articles 19 and 21 of the Civil Code when they refused
petitioner Marmont access to the water facility to inspect and repair the same and to
increase its capacity and thereby to benefit from it. In so doing, respondent spouses
forced petitioner Marmont to locate an alternative source of water for its hotel which of
course involved expenditure of money and perhaps loss of hotel revenues. We
believe they should respond in damages.
The evidence on record, however, appears insufficient for determination of the
amount of damages for which respondent spouses should be liable. For this reason,
the Court is compelled to remand this case to the trial court for determination of such
damages in appropriate further proceedings.
WHEREFORE, the Petition for Review on certiorari is hereby GRANTED. The
Decision dated 9 December 1986 of the Court of Appeals in C.A. G.R. CV No.
03299, as well as the Decision dated 31 May 1983 of the Regional Trial Court of
Olongapo City in Civil Case No. 2896-C, are REVERSED. This case is REMANDED
to the trial court for determination, in further proceedings consistent with this decision,
of the amount of petitioner is entitled to receive from respondent spouses.

No pronouncement as to costs.
SO ORDERED.
SECURITY BANK and TRUST G.R. No. 143382
COMPANY,
Petitioner, Present:
PUNO, J., Chairperson,
SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
AZCUNA and
GARCIA, JJ.
MAR TIERRA CORPORATION,
WILFRIDO C. MARTINEZ,
MIGUEL J. LACSON and
RICARDO A. LOPA,
Respondents. Promulgated:
November 29, 2006
x--------------------------------------------------x
DECISION
CORONA, J.:
May the conjugal partnership be held liable for an indemnity agreement entered into
by the husband to accommodate a third party?
This issue confronts us in this petition for review on certiorari assailing the November
9, 1999 decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 48107.
On May 7, 1980, respondent Mar Tierra Corporation, through its
president, Wilfrido C. Martinez, applied for a P12,000,000 credit accommodation with
petitioner Security Bank and Trust Company. Petitioner approved the application and
entered into a credit line agreement with respondent corporation. It was secured by
an indemnity agreement executed by individual respondents Wilfrido C. Martinez,
Miguel J. Lacson and Ricardo A. Lopa who bound themselves jointly and severally
with respondent corporation for the payment of the loan.

On July 2, 1980, the credit line agreement was amended and increased
to P14,000,000. Individual respondents correspondingly executed a new indemnity
agreement in favor of the bank to secure the increased credit line.

On September 25, 1981, respondent corporation availed of its credit line and
received the sum of P9,952,000 which it undertook to pay on or before November 30,
1981. It was able to pay P4,648,000 for the principal loan and P2,729,195.56 for the
interest and other charges. However, respondent corporation was not able to pay the
balance as it suffered business reversals, eventually ceasing operations in 1984.
Unable to collect the balance of the loan, petitioner filed a complaint for a sum of
money with a prayer for preliminary attachment against respondent corporation and
individual respondents in the Regional Trial Court (RTC) of Makati, Branch 66. It was
docketed as Civil Case No. 3947.
Subsequently, however, petitioner had the case dismissed with respect to individual
respondents Lacson and Lopa,[2] leaving Martinez as the remaining individual
respondent.
On August 10, 1982, the RTC issued a writ of attachment on all real and personal
properties of respondent corporation and individual respondent Martinez. As a
consequence, the conjugal house and lot of the spouses Wilfrido and Josefina
Martinez in Barrio Calaanan, Caloocan City covered by Transfer Certificate of Title
(TCT) No. 49158 was levied on.

finding of the appellate and trial courts, as well as by its own judicial admission, on
this particular point.
At any rate, the issue of the amount actually availed of by respondent corporation is
factual. It is not within the ambit of this Courts discretionary power of judicial review
under Rule 45 of the Rules of Court which is concerned solely with questions of law.
[7]
We now move on to the principal issue in this case.
Under Article 161(1) of the Civil Code,[8] the conjugal partnership is liable for all
debts and obligations contracted by the husband for the benefit of the conjugal
partnership. But when are debts and obligations contracted by the husband alone
considered for the benefit of and therefore 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?
We ruled as early as 1969 in Luzon Surety Co., Inc. v. de Garcia[9] that, in acting as
a guarantor or surety for another, the husband does not act for the benefit of the
conjugal partnership as the benefit is clearly intended for a third party.

The RTC rendered its decision[3] on June 20, 1994. It held respondent corporation
and individual respondent Martinez jointly and severally liable to petitioner
for P5,304,000 plus 12% interest per annum and 5% penalty commencing on June
21, 1982 until fully paid, plus P10,000 as attorneys fees. It, however, found that the
obligation contracted by individual respondent Martinez did not redound to the benefit
of his family, hence, it ordered the lifting of the attachment on the conjugal house and
lot of the spouses Martinez.

In Ayala Investment and Development Corporation v. Court of Appeals,[10] we ruled

that, if the husband himself is the principal obligor in the contract, i.e., the direct
recipient of the money and services to be used in or for his own business or
profession, the transaction falls within the term obligations for the benefit of the
conjugal partnership. In other words, where the husband contracts an obligation on
behalf of the family business, there is a legal presumption that such obligation
redounds to the benefit of the conjugal partnership.[11]

Dissatisfied with the RTC decision, petitioner appealed to the CA but the appellate
court affirmed the trial courts decision in toto. Petitioner sought reconsideration but it
was denied. Hence, this petition.

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, the transaction cannot by itself be
deemed an obligation for the benefit of the conjugal partnership.[12] It is for the
benefit of the principal debtor and not for the surety or his family. No presumption is
raised 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 the benefit redounding to the conjugal partnership.[13] In the absence of
any showing of benefit received by it, the conjugal partnership cannot be held liable
on an indemnity agreement executed by the husband to accommodate a third party.
[14]

Petitioner makes two basic assertions: (1) the RTC and CA erred in finding that
respondent corporation availed of P9,952,000 only from its credit line and not the
entire P14,000,000 and (2) the RTC and CA were wrong in ruling that the conjugal
partnership of the Martinez spouses could not be held liable for the obligation incurred
by individual respondent Martinez.
We uphold the CA.
Factual findings of the CA, affirming those of the trial court, will not be disturbed on
appeal but must be accorded great weight.[4] These findings are conclusive not only
on the parties but on this Court as well.[5]
The CA affirmed the finding of the RTC that the amount availed of by respondent
corporation from its credit line with petitioner was only P9,952,000. Both courts
correctly pointed out that petitioner itself admitted this amount when it alleged in
paragraph seven of its complaint that respondent corporation borrowed and received
the principal sum of P9,952,000.[6] Petitioner was therefore bound by the factual

In this case, the principal contract, the credit line agreement between petitioner and
respondent corporation, was solely for the benefit of the latter. The accessory contract
(the indemnity agreement) under which individual respondent Martinez assumed the
obligation of a surety for respondent corporation was similarly for the latters benefit.
Petitioner had the burden of proving that the conjugal partnership of the spouses
Martinez benefited from the transaction. It failed to discharge that burden.
To hold the conjugal partnership liable for an obligation pertaining to the husband
alone defeats the objective of the Civil Code to protect the solidarity and well being of
the family as a unit.[15] The underlying concern of the law is the conservation of the

conjugal partnership.[16] Hence, it limits the liability of the conjugal partnership only to
debts and obligations contracted by the husband for the benefit of the conjugal
partnership.
WHEREFORE, the petition is hereby DENIED.
G.R. No. L-22320

July 29, 1968

MERCEDES RUTH COBB-PEREZ and DAMASO P. PEREZ, petitioners,

vs.
HON. GREGORIO LANTIN, Judge of the Court of First Instance of Manila,
RICARDO P. HERMOSO and the CITY SHERIFF OF MANILA, respondents.
Crispin D. Baizas and Associates for petitioners.
Isidro T. Almeda for respondents.
CASTRO, J.:
This is a motion for partial reconsideration of this Court's decision of May 22, 1968,
specifically directed against the following observation therein made:
We feel compelled to observe that during the protracted litigation below, the
petitioners resorted to a series of actions and petitions, at some stages alternatingly,
abetted by their counsel, for the sole purpose of thwarting the execution of a simple
money judgment which has long become final and executory. Some of the actions
were filed, only to be abandoned or withdrawn. The petitioners and their counsel, far
from viewing courts as sanctuaries for those who seek justice, have tried to use them
to subvert the very ends of justice.
Corollarily, this Court assessed treble costs against the petitioners, to "be paid by
their counsel.".
The herein movants, Attys. Crispin D. Baizas and A. N. Bolinas, counsels for the
petitioners, while submitting to the judgment on the merits, seek reconsideration of
the decision in so far as it reflects adversely upon their "professional conduct" and
condemns them to pay the treble costs adjudged against their clients.
At first blush, the motion for reconsideration presents a semblance of merit. After
mature deliberation and patient reprobing into the records of the case, however, we
are of the firmer conviction that the protracted litigation, alluded to in the abovequoted portion of our decision, was designed to cause delay, and the active
participation of the petitioners' counsels in this adventure is patent.
After November 15, 1962 when the Court of Appeals rendered judgment sustaining
Damaso Perez' position with respect to the extent of the levy, the subsequent
proceedings interposed alternatingly by the petitioner spouses were obviously
quixotic maneuvers expected to be overthrown by the courts but calculated to delay
an execution long overdue.
Had the petitioners and their counsels seriously believed that the levied shares of
stock were conjugal property, why did they not adopt this position from the very start,

or, at the latest, in CA-G.R. 29962-R, wherein Damaso Perez challenged the legality
of the levy's coverage, in order to end the litigation with reasonable dispatch? They
chose, however, to attack the execution in a piecemeal fashion, causing the
postponement of the projected execution sale six times. More than eight years after
the finality of the judgment have passed, and the same has yet to be satisfied.
In a determined effort to prolong the litigation, the Perez spouses, as represented by
their counsels, sought the issuance of preliminary injunctions to restrain the execution
of the final judgment in civil case 39407 from courts which did not have jurisdiction
and which would, as expected, initially or ultimately deny their prayer. For instance,
after Damaso Perez bowed out temporarily from the scene following the rendition of
the aforementioned Court of Appeals decision, his wife, Mercedez, Ruth Cobb-Perez,
intruded into the controversy and asked for an ex parte writ of preliminary injunction
from the Court of First Instance of Rizal in connection with civil case 7532 which she
filed with the said court, knowing fully well that the basic civil case 39407 was decided
by the Court of First Instance of Manila (Branch VII presided by the respondent Judge
Lantin), which latter court was the proper forum for any action relative to the
execution. Judge Eulogio Mencias of the Court of First Instance of Rizal, looking to
Acosta vs. Alvendia (L-14598, October 31, 1960), which held that courts of first
instance have no power to restrain acts outside their territorial jurisdictions, lifted on
October 4, 1963 the ex parte writ which he previously issued enjoining the respondent
sheriff from carrying out the execution sale. It is clear, however, that Mrs. Perez and
her counsels, the movants, knew or ought to have known beforehand that the Court
of First Instance of Rizal did not have jurisdiction to issue the writ which Mrs. Perez
herself sought, and, anticipating the recall of the writ improvidently issued, on
September 3, 1963, a month before the said writ was actually lifted, filed in the basic
civil case 39407 an urgent motion to lift the writ of execution issued on August 15,
1961, alleging as justification the conjugal nature of the levied shares of stock and the
personal nature of Damaso Perez' judgment debt, the very same reasons advanced
in civil case 7532 which was then still pending in the Court of First Instance of Rizal.
Incidentally, Mrs. Perez failed to adduce any evidence in support of her aforesaid
urgent motion, as in fact neither she nor her counsels appeared during the scheduled
hearing, prompting the respondent judge to issue the following order:
When the urgent motion to recall or lift writ of execution was called this morning for
hearing, counsel for the movant did not appear despite the fact that he had been duly
notified of the motion for hearing. In view thereof the court assumes that he is waiving
his right to present evidence in support of his urgent motion to recall or lift writ of
execution. Said urgent motion is therefore deemed submitted for resolution.
Despite the recall of the aforementioned writ of injunction by Judge Mencias on a
disclaimer of jurisdiction (since the execution sought to be enjoined was ordered by
another tribunal), Mrs. Perez, now assisted by her husband who had staged a
comeback, prayed for the issuance of another injunction, this time from Branch XXII
of the Court of First Instance of Manila (not the same Branch which issued the
controverted writ of execution), in connection with civil case 7532, then still pending in
the Court of First Instance of Rizal. As most probably anticipated anew by the Perez
spouses and their counsels, Judge Alikpala, presiding judge of Branch XXII, on
November 8, 1963 denied the preliminary injunction sought, on the ground, among

others, that he had no power to interfere by injunction with the judgment or decree of
a court of concurrent or coordinate jurisdiction. On the very day the injunction was
denied, Damaso Perez, as if expecting the reversal from Judge Alikpala, was already
prepared with another "remedy," as in fact on that day, November 8, 1963, he filed in
the basic civil case 39407 an "Urgent Motion for Reconsideration" of the order of
October 19, 1963, which denied his wife's above-mentioned motion to recall the
controverted writ of execution.
The foregoing motion, far from seriously seeking the reconsideration of the order of
October 19, 1963, which in the first place Damaso Perez could not legally do for he
was not even a party to the denied "Urgent Motion to Recall Writ of Execution" (filed
by his wife alone), was merely an offer to replace the levied stocks with supposed
cash dividends due to the Perez spouses as stockholders in the Republic Bank.1 As
a matter of fact, when the motion was set for hearing on December 21, 1963, the
counsels for Damaso Perez promised to produce the said cash dividends within five
days, but the promise was never fulfilled.2 Consequently, the respondent Judge on
January 4, 1964, denied the said motion for reconsideration.
The above exposition of the circumstances relative to the protracted litigation clearly
negates the avowal of the movants that "in none of the various incidents in the case
at bar has any particular counsel of petitioners acted with deliberate aforethought to
delay the enforcement of the judgment in Civil Case No. 39407." From the chronology
of antecedent events, the fact becomes inescapable that the Perez spouses, coached
by their counsels, had sallied forth on a strategem of "remedies" projected to foil the
lawful execution of a simple money judgment. It is equally obvious that they
foreshadowed their own reversals in the "remedies" they ventured to adopt, such that
even before, one remedy had been exhausted, they interposed another until the case
reached this Court for the second time. 3 Meanwhile, justice was delayed, and more
than one member of this Court are persuaded that justice was practically waylaid.
The movants also contend that even this Court sanctions the aforesaid civil cases
7532 and 55292 as the "proper remedy" when we said that.
In reality, what they attacked is not the writ of execution, the validity and regularity of
which are unchallenged, but the levy made by the respondent Sheriff. In this regard,
the remedy is not the recall of the writ, but an independent action to enjoin the Sheriff
from proceeding with the projected sale, in which action the conjugal nature of the
levied stocks should be established as a basis for the subsequent issuance of a
permanent injunction, in the event of a successful claim. Incidentally, in the course of
the protracted litigation, the petitioners had already availed of this remedy in civil
cases 7532 and 55292, only to abandon it as they incessantly sought other, and often
simultaneous, devices of thwarting satisfaction of the judgment debt. (Emphasis
supplied) .
And because of this statement, they now counter that the said cases could not be
branded as having been instituted for delay.
The reference we made to civil cases 7532 and 55292 in the above-quoted statement
must not be considered out of context. We said that the petitioners incidentally had
already availed of the suggested remedy only in the sense that said civil cases 7532

and 55292 were apparently instituted to prove the conjugal nature of the levied
shares of stocks in question. We used the word incidentally advisedly to show that in
their incessant search for devices to thwart the controverted execution, they
accidentally stumbled on the suggested remedy. But the said civil cases were
definitely not the "proper remedy" in so far as they sought the issuance of writs of
preliminary injunction from the Court of First Instance of Rizal and the Court of First
Instance of Manila (Branch XXII) where civil cases 7532 and 55292 were filed
respectively, for the said courts did not have jurisdiction to restrain the enforcement of
the writ of execution issued by the Court of First Instance of Manila (Branch VII) under
the settled doctrines that Courts are without power to restrain acts outside of their
territorial jurisdiction 4 or interfere with the judgment or decree of a court of
concurrent or coordinate jurisdiction. 5 However, the recall and the denial of the writs
of preliminary injunction in civil cases 7532 and 55292 did not amount to the
termination or dismissal of the principal action in each case. Had the Perez spouses
desired in earnest to continue with the said cases they could have done so. But the
fact is that Mrs. Perez practically abandoned civil case 7532 when she instituted the
above mentioned urgent motion to recall writ of execution in the basic civil case
39407, anchored on the same grounds which she advanced in the former case, until
the said civil case 7532 was dismissed on November 9, 1963, upon her own
motion. Anent civil case 55292, the Perez spouses virtually deserted the same when
they instituted the herein petition for certiorari with urgent writ of preliminary injunction
based on the same grounds proffered in the said civil case until the latter was also
dismissed on March 20, 1964, with the consent of the parties because of the
pendency then of the aforesaid petition for certiorari.
The movants further contend that "If there was delay, it was because petitioners'
counsel happened to be more assertive ... a quality of the lawyers (which) is not to be
condemned."
A counsel's assertiveness in espousing with candour and honesty his client's cause
must be encouraged and is to be commended; what we do not and cannot
countenance is a lawyer's insistence despite the patent futility of his client's position,
as in the case at bar.
It is the duty of a counsel to advise his client, ordinarily a layman to the intricacies and
vagaries of the law, on the merit or lack of merit of his case. If he finds that his client's
cause is defenseless, then it is his bounden duty to advise the latter to acquiesce and
submit, rather than traverse the incontrovertible. A lawyer must resist the whims and
caprices of his client, and temper his client's propensity to litigate. A lawyer's oath to
uphold the cause of justice is superior to his duty to his client; its primacy is
indisputable.
The movants finally state that the "Petitioners have several counsel in this case but
the participation of each counsel was rather limited implying that the decision of this
Court ordering that "treble costs are assessed against the petitioners, which shall be
paid by their counsel" is not clear. The word "counsel" may be either singular or plural
in construction, so that when we said "counsel" we meant the counsels on record of
the petitioners who were responsible for the inordinate delay in the execution of the
final judgment in the basic civil case 39407, after the Court of Appeals had rendered

its aforementioned decision of November 15, 1962. And it is on record that the
movants are such counsels. Atty. Bolinas, upon his own admission, "entered his
appearance in the case at bar about the time the Court of First Instance of Manila
dismissed the petitioners' Petition for Relief in Civil Case No. 39407," or about August
3, 1961 and even prior to the Court of Appeals decision above-mentioned. Atty.
Baizas claims that he "became petitioners' counsel only in October, 1963 when he
filed, with Atty. A.N. Bolinao, Jr. Civil Case No. 55292 before the Court of First
Instance of Manila presided by the Hon. Judge Alikpala although it appears on record
that the urgent motion to recall writ of execution filed by Mrs. Perez in the basic civil
case 39407 on September 3, 1963, was over the signature of one Ruby Zaida of the
law firm of "Crispin Baizas & Associates" as counsel for Mrs. Perez. It is to be recalled
that the said urgent motion is the same motion discussed above, which, curiously
enough, antedated by at least one month the lifting of the writ of preliminary injunction
issued in civil case 7532.
ACCORDINGLY, the motion for partial reconsideration is denied. Our decision of May
22, 1968 is hereby modified in the sense that Attys. Crispin D. Baizas and A.N.
Bolinao, Jr. shall pay jointly and severally the treble costs assessed against the
petitioners.
DAVID V. PELAYO and LORENZA* B. PELAYO,

G.R. No. 141323

Petitioners,

Present:

PUNO, Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
- versus -

TINGA, and
CHICO-NAZARIO, JJ.

Promulgated:
MELKI E. PEREZ,
Respondent.

June 8, 2005

D E C I S I O N AUSTRIA-MARTINEZ, J.:
This resolves the petition for review on certiorari seeking the reversal of the
Decision[1] of the Court of Appeals (CA) promulgated on April 20, 1999 which
reversed the Decision of the Regional Trial Court (RTC) of Panabo, Davao, Branch
34, in Civil Case No. 91-46; and the CA Resolution dated December 17, 1999
denying petitioners motion for reconsideration.

The antecedent facts as aptly narrated by the CA are as follows:

David Pelayo (Pelayo),by a Deed of Absolute Sale executed on January 11, 1988,
conveyed to Melki Perez (Perez) two parcels of agricultural land (the lots) situated in
Panabo, Davao which are portions of Lot 4192, Cad. 276 covered by OCT P-16873.
Loreza Pelayo (Loreza), wife of Pelayo, and another one whose signature is illegible
witnessed the execution of the deed.
Loreza, however, signed only on the third page in the space provided for witnesses
on account of which Perez application for registration of the deed with the Office of
the Register of Deeds in Tagum, Davao was denied.
Perez thereupon asked Loreza to sign on the first and second pages of the deed but
she refused, hence, he instituted on August 8, 1991 the instant complaint for specific
performance against her and her husband Pelayo (defendants).
The defendants moved to dismiss the complaint on the ground that it stated no cause
of action, citing Section 6 of RA 6656 otherwise known as the Comprehensive
Agrarian Reform Law which took effect on June 10, 1988 and which provides that
contracts executed prior thereto shall be valid only when registered with the Register
of Deeds within a period of three (3) months after the effectivity of this Act.
The questioned deed having been executed on January 10, 1988, the defendants
claimed that Perez had at least up to September 10, 1988 within which to register the
same, but as they failed to, it is not valid and, therefore, unenforceable.
The trial court thus dismissed the complaint. On appeal to this Court, the dismissal
was set aside and the case was remanded to the lower court for further proceedings.
In their Answer, the defendants claimed that as the lots were occupied illegally by
some persons against whom they filed an ejectment case, they and Perez who is
their friend and known at the time as an activist/leftist, hence feared by many, just
made it appear in the deed that the lots were sold to him in order to frighten said
illegal occupants, with the intentional omission of Lorezas signature so that the deed
could not be registered; and that the deed being simulated and bereft of consideration
is void/inexistent.
Perez countered that the lots were given to him by defendant Pelayo in consideration
of his services as his attorney-in-fact to make the necessary representation and
negotiation with the illegal occupants-defendants in the ejectment suit; and that after
his relationship with defendant Pelayo became sour, the latter sent a letter to the
Register of Deeds of Tagum requesting him not to entertain any transaction
concerning the lots title to which was entrusted to Perez who misplaced and could
[not] locate it.
Defendant Pelayo claimed in any event, in his Pre-trial brief filed on March 19, 1996,
that the deed was without his wife Lorezas consent, hence, in light of Art. 166 of the
Civil Code which provides:

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 wifes consent . . .
it is null and void. The trial court, finding, among others, that Perez did not possess,
nor pay the taxes on the lots, that defendant Pelayo was indebted to Perez for
services rendered and, therefore, the deed could only be considered as evidence of
debt, and that in any event, there was no marital consent to nor actual consideration
for the deed, held that the deed was null and void and accordingly rendered judgment
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering and directing the defendants
to pay plaintiff Melki Perez the sum of TEN THOUSAND (P10,000.00) Pesos as
principal with 12% interest per annum starting from the date of filing of the complaint
on August 1, 1991 until plaintiff is fully paid.
The defendants shall likewise pay to plaintiff the sum of THREE THOUSAND
(P3,000.00) as attorneys fees.
The court further orders that the Deed of Absolute Sale, (Annex A) of the complaint
and (Annex C) of the plaintiffs Motion for Summary Judgment is declared null and
void and without force and it is likewise removed as a cloud over defendants title and
property in suit. . . .[2]
The RTC Decision was appealed by herein respondent Perez to the CA. Petitioners
failed to file their appellees brief. The CA then promulgated its Decision on April 20,
1999 whereby it ruled that by Lorenzas signing as witness to the execution of the
deed, she had knowledge of the transaction and is deemed to have given her consent
to the same; that herein petitioners failed to adduce sufficient proof to overthrow the
presumption that there was consideration for the deed, and that petitioner David
Pelayo, being a lawyer, is presumed to have acted with due care and to have signed
the deed with full knowledge of its contents and import. The CA reversed and set
aside the RTC Decision, declaring as valid and enforceable the questioned deed of
sale and ordering herein petitioner Lorenza Pelayo to affix her signature on all pages
of said document.
Petitioners moved for reconsideration of the decision but the same was denied per
Resolution dated December 17, 1999. The CA found said motion to have been filed
out of time and ruled that even putting aside technicality, petitioners failed to present
any ground bearing on the merits of the case to justify a reversal or setting aside of
the decision.
Hence, this petition for review on certiorari on the following grounds:
1. The CA erred in ignoring the specific provision of Section 6, in relation to Section 4
of R.A. No. 6657 otherwise known as the Comprehensive Agrarian Reform Law of
1988 which took effect on June 15, 1988 and which provides that contracts executed
prior thereto shall be valid only when registered with the Register of Deeds within a
period of three (3) months after the effectivity of this Act.

2. The CA erred in holding that the deed of sale was valid and considering
the P10,000.00 adjudged by the trial court as Perezs remuneration as the
consideration for the deed of sale, instead of declaring the same as null and void for
being fictitious or simulated and on the basis of Art. 491, Par. 2 of the New Civil Code
which prohibits agents from acquiring by purchase properties from his principal under
his charge.
3. The CA made a novel ruling that there was implied marital consent of the wife of
petitioner David Pelayo.
4. Petitioners should have been allowed to file their appellees brief to ventilate their
side, considering the existence of peculiar circumstances which prevented petitioners
from filing said brief.
On the other hand, respondent points out that the CA, in resolving the first appeal
docketed as CA-G.R. SP No. 38700[3] brought by respondent assailing the RTC
Order granting herein petitioners motion to dismiss, already ruled that under R.A. No.
6657, the sale or transfer of private agricultural land is allowed only when the area of
the land being conveyed constitutes or is a part of, the landowner-seller retained area
and when the total landholding of the purchaser-transferee, including the property
sold, does not exceed five (5) hectares; that in this case, the land in dispute is only
1.3 hectares and there is no proof that the transferees (herein respondent) total
landholding inclusive of the subject land will exceed 5 hectares, the landholding
ceiling prescribed by R.A. No. 6657; that the failure of respondent to register the
instrument was not due to his fault or negligence but can be attributed to Lorenzas
unjustified refusal to sign two pages of the deed despite several requests of
respondent; and that therefore, the CA ruled that the deed of sale subject of this case
is valid under R.A. No. 6657.
Respondent further maintains that the CA correctly held in its assailed Decision that
there was consideration for the contract and that Lorenza is deemed to have given
her consent to the deed of sale.
Respondent likewise opines that the CA was right in denying petitioners motion for
reconsideration where they prayed that they be allowed to file their appellees brief as
their counsel failed to file the same on account of said counsels failing health due to
cancer of the liver. Respondent emphasized that in petitioners motion for
reconsideration, they did not even cite any errors made by the CA in its Decision.
The issues boil down to the question of whether or not the deed of sale was null and
void on the following grounds: (a) for not complying with the provision in R.A. No.
6657 that such document must be registered with the Register of Deeds within three
months after the effectivity of said law; (b) for lack of marital consent; (c) for being
prohibited under Article 1491 (2) of the Civil Code; and (d) for lack of consideration.
We rule against petitioners.
The issue of whether or not the deed of sale is null and void under R.A. No. 6657, for
respondents failure to register said document with the Register of Deeds within three
months after the effectivity of R.A. No. 6657, had been resolved with finality by the CA

in its Decision dated November 24, 1994 in CA-G.R. SP No. 38700.[4] Herein
petitioners no longer elevated said CA Decision to this Court and the same became
final and executory on January 7, 1995.[5]
In said decision, the CA interpreted Section 4, in relation to Section 70 of R.A. No.
6657, to mean thus:
. . . the proper interpretation of both sections is that under R.A. No. 6657, the sale or
transfer of a private agricultural land is allowed only when said land area constitutes
or is a part of the landowner-seller retained area and only when the total landholdings
of the purchaser-transferee, including the property sold does not exceed five (5)
hectares.
Aside from declaring that the failure of respondent to register the deed was not of his
own fault or negligence, the CA ruled that respondents failure to register the deed of
sale within three months after effectivity of The Comprehensive Agrarian Reform Law
did not invalidate the deed of sale as the transaction over said property is not
proscribed by R.A. No. 6657.
Thus, under the principle of law of the case, said ruling of the CA is now binding on
petitioners. Such principle was elucidated in Cucueco vs. Court of Appeals,[6] to wit:
Law of the case has been defined as the opinion delivered on a former appeal. It is a
term applied to an established rule that when an appellate court passes on a question
and remands the case to the lower court for further proceedings, the question there
settled becomes the law of the case upon subsequent appeal. It means that whatever
is once irrevocably established as the controlling legal rule or decision between the
same parties in the same case continues to be the law of the case, whether correct
on general principles or not, so long as the facts on which such decision was
predicated continue to be the facts of the case before the court.
Petitioners not having questioned the Decision of the CA dated November 24, 1994
which then attained finality, the ruling that the deed of sale subject of this case is not
among the transactions deemed as invalid under R.A. No. 6657, is now immutable.
We agree with the CA ruling that petitioner Lorenza, by affixing her signature to the
Deed of Sale on the space provided for witnesses, is deemed to have given her
implied consent to the contract of sale.
Sale is a consensual contract that is perfected by mere consent, which may either be
express or implied.[7] A wifes consent to the husbands disposition of conjugal
property does not always have to be explicit or set forth in any particular document,
so long as it is shown by acts of the wife that such consent or approval was indeed
given.[8] In the present case, although it appears on the face of the deed of sale that
Lorenza signed only as an instrumental witness, circumstances leading to the
execution of said document point to the fact that Lorenza was fully aware of the sale
of their conjugal property and consented to the sale.
In their Pre-Trial Brief,[9] petitioners admitted that even prior to 1988, they have been
having serious problems, including threats to the life of petitioner David Pelayo, due
to conflicts with the illegal occupants of the property in question, so that respondent,

whom many feared for being a leftist/activist, offered his help in driving out said illegal
occupants.
Human experience tells us that a wife would surely be aware of serious problems
such as threats to her husbands life and the reasons for such threats. As they
themselves stated, petitioners problems over the subject property had been going on
for quite some time, so it is highly improbable for Lorenza not to be aware of what her
husband was doing to remedy such problems. Petitioners do not deny that Lorenza
Pelayo was present during the execution of the deed of sale as her signature appears
thereon. Neither do they claim that Lorenza Pelayo had no knowledge whatsoever
about the contents of the subject document. Thus, it is quite certain that she knew of
the sale of their conjugal property between her husband and respondent.
Under the rules of evidence, it is presumed that a person takes ordinary care of his
concerns.[10] Petitioners did not even attempt to overcome the aforementioned
presumption as no evidence was ever presented to show that Lorenza was in any
way lacking in her mental faculties and, hence, could not have fully understood the
ramifications of signing the deed of sale. Neither did petitioners present any evidence
that Lorenza had been defrauded, forced, intimidated or threatened either by her own
husband or by respondent into affixing her signature on the subject document. If
Lorenza had any objections over the conveyance of the disputed property, she could
have totally refrained from having any part in the execution of the deed of sale.
Instead, Lorenza even affixed her signature thereto.
Moreover, under Article 173, in relation to Article 166, both of the New Civil Code,
which was still in effect on January 11, 1988 when the deed in question was
executed, the lack of marital consent to the disposition of conjugal property does not
make the contract void ab initio but merely voidable. Said provisions of law 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 property without the wifes 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.
Hence, it has been held that the contract is valid until the court annuls the same and
only upon an action brought by the wife whose consent was not obtained.[11] In the
present case, despite respondents repeated demands for Lorenza to affix her
signature on all the pages of the deed of sale, showing respondents insistence on
enforcing said contract, Lorenza still did not file a case for annulment of the deed of
sale. It was only when respondent filed a complaint for specific performance on
August 8, 1991 when petitioners brought up Lorenzas alleged lack of consent as an

affirmative defense. Thus, if the transaction was indeed entered into without Lorenzas
consent, we find it quite puzzling why for more than three and a half years, Lorenza
did absolutely nothing to seek the nullification of the assailed contract.

The foregoing circumstances lead the Court to believe that Lorenza knew of the full
import of the transaction between respondent and her husband; and, by affixing her
signature on the deed of sale, she, in effect, signified her consent to the disposition of
their conjugal property. With regard to petitioners asseveration that the deed of sale is
invalid under Article 1491, paragraph 2 of the New Civil Code, we find such argument
unmeritorious. Article 1491 (2) provides:
Art. 1491. The following persons cannot acquire by purchase, even at a public or
judicial auction, either in person or through the mediation of another:
(2) Agents, the property whose administration or sale may have been entrusted to
them, unless the consent of the principal has been given;
In Distajo vs. Court of Appeals,[12] a landowner, Iluminada Abiertas, designated one
of her sons as the administrator of several parcels of her land. The landowner
subsequently executed a Deed of Certification of Sale of Unregistered Land,
conveying some of said land to her son/administrator. Therein, we held that:
Under paragraph (2) of the above article, the prohibition against agents purchasing
property in their hands for sale or management is not absolute. It does not apply if the
principal consents to the sale of the property in the hands of the agent or
administrator. In this case, the deeds of sale signed by Iluminada Abiertas shows that
she gave consent to the sale of the properties in favor of her son, Rufo, who was the
administrator of the properties. Thus, the consent of the principal Iluminada Abiertas
removes the transaction out of the prohibition contained in Article 1491(2).[13]
The above-quoted ruling is exactly in point with this case before us. Petitioners, by
signing the Deed of Sale in favor of respondent, are also deemed to have given their
consent to the sale of the subject property in favor of respondent, thereby making the
transaction an exception to the general rule that agents are prohibited from
purchasing the property of their principals.
Petitioners also argue that the CA erred in ruling that there was consideration for the
sale. We find no error in said appellate courts ruling. The element of consideration for
the sale is indeed present. Petitioners, in adopting the trial courts narration of
antecedent facts in their petition,[14] thereby admitted that they authorized
respondent to represent them in negotiations with the squatters occupying the
disputed property and, in consideration of respondents services, they executed the
subject deed of sale. Aside from such services rendered by respondent, petitioners
also acknowledged in the deed of sale that they received in full the amount of Ten
Thousand Pesos. Evidently, the consideration for the sale is respondents services
plus the aforementioned cash money.

Petitioners contend that the consideration stated in the deed of sale is excessively
inadequate, indicating that the deed of sale was merely simulated. We are not
persuaded. Our ruling in Buenaventura vs. Court of Appeals[15] is pertinent, to wit:
. . . Indeed, there is no requirement that the price be equal to the exact value of the
subject matter of sale. . . . As we stated in Vales vs. Villa:
Courts cannot follow one every step of his life and extricate him from bad bargains,
protect him from unwise investments, relieve him from one-sided contracts, or annul
the effects of foolish acts. Courts cannot constitute themselves guardians of persons
who are not legally incompetent. Courts operate not because one person has been
defeated or overcome by another, but because he has been defeated or
overcome illegally. Men may do foolish things, make ridiculous contracts, use
miserable judgment, and lose money by them indeed, all they have in the world; but
not for that alone can the law intervene and restore. There must be, in addition,
a violation of the law, the commission of what the law knows as an actionable wrong,
before the courts are authorized to lay hold of the situation and remedy it.[16]
Verily, in the present case, petitioners have not presented proof that there has been
fraud, mistake or undue influence exercised upon them by respondent. It is highly
unlikely and contrary to human experience that a layman like respondent would be
able to defraud, exert undue influence, or in any way vitiate the consent of a lawyer
like petitioner David Pelayo who is expected to be more knowledgeable in the ways of
drafting contracts and other legal transactions.
Furthermore, in their Reply to Respondents Memorandum,[17] petitioners adopted
the CAs narration of fact that petitioners stated in a letter they sent to the Register of
Deeds of Tagum that they have entrusted the titles over subject lots to herein
respondent. Such act is a clear indication that they intended to convey the subject
property to herein respondent and the deed of sale was not merely simulated or
fictitious.
Lastly, petitioners claim that they were not able to fully ventilate their defense before
the CA as their lawyer, who was then suffering from cancer of the liver, failed to file
their appellees brief. Thus, in their motion for reconsideration of the CA Decision, they
prayed that they be allowed to submit such appellees brief. The CA, in its Resolution
dated December 17, 1999, stated thus:
By movant-defendant-appellees own information, his counsel received a copy of the
decision on May 5, 1999. He, therefore, had fifteen (15) days from said date or up to
May 20, 1999 to file the motion. The motion, however, was sent through a private
courier and, therefore, considered to have been filed on the date of actual receipt on
June 17, 1999 by the addressee Court of Appeals, was filed beyond the reglementary
period.
Technicality aside, movant has not proffered any ground bearing on the merits of the
case why the decision should be set aside.
Petitioners never denied the CA finding that their motion for reconsideration was filed
beyond the fifteen-day reglementary period. On that point alone, the CA is correct in

denying due course to said motion. The motion having been belatedly filed, the CA
Decision had then attained finality. Thus, in Abalos vs. Philex Mining Corporation,
[18] we held that: Nothing is more settled in law than that once a judgment attains
finality it thereby becomes immutable and unalterable. It may no longer be modified in
any respect, even if the modification is meant to correct what is perceived to be an
erroneous conclusion of fact or law, and regardless of whether the modification is
attempted to be made by the court rendering it or by the highest court of the land.
Moreover, it is pointed out by the CA that said motion did not present any defense or
argument on the merits of the case that could have convinced the CA to reverse or
modify its Decision.
We have consistently held that a petitioners right to due process is not violated where
he was able to move for reconsideration of the order or decision in question.[19] In
this case, petitioners had the opportunity to fully expound on their defenses through a

motion for reconsideration. Petitioners did file such motion but they wasted such
opportunity by failing to present therein whatever errors they believed the CA had
committed in its Decision. Definitely, therefore, the denial of petitioners motion for
reconsideration, praying that they be allowed to file appellees brief, did not infringe
petitioners right to due process as any issue that petitioners wanted to raise could
and should have been contained in said motion for reconsideration.
IN VIEW OF THE FOREGOING, the petition is DENIED and the Decision of the
Court of Appeals dated April 20, 1999 and its Resolution dated December 17, 1999
are hereby AFFIRMED.

SO ORDERED.