Cornelia MATABUENApla intiff-a ppella nt vPetronila CERVANTESdefendant-

appellee

[G.R. No. L-28771. March 31, 1971] [G.R. No. L-28771. March 31, 1971]

TOPIC: Nature and concept of statutory construction

FACTS:

The stipulated facts agreed upon by both the plaintiff and the defendant assisted

by their respective counsels, are:

1. The deceased Felix Matabuena owned the property in question;

2. Felix Matabuena executed a Deed of Donation inter vivos (referring to a transfer or gift made during one's

lifetime, as opposed to a testamentary transfer which is a gift that takes effect on death) in favor of defendant,

Petronila Cervantes over the parcel of land in question on February 20, 1956, which same donation was

accepted by defendant;

3. The donation of the land to Petronila (defendant) which took effect immediately was made during the

common law relationship as husband and wife, they were married on March 28, 1962;

4. The deceased Felix Matabuena died intestate on September 13, 1962;

5. The plaintiff claims the property by reason of being the only sister and nearestcollateral relative of the

deceased by virtue of an affidavit of self-adjudication executed by her in 1962 and had the land declared in her

name and paid the estate and inheritance taxes thereon. Cornelia (plaintiff-appellant), sister of Felix

Matabuena maintains that the donation made by Felix to Petronila Cervantes (defendant-appellee) was void

because they were living without the benefit of marriage (common law marriage). This is in pursuant to Article

133 of Civil Code which provides "Every donation between

the spouses during the marriage shall be void. On 23 November 1965, the lower court upheld the validity of

the donation as it was made before Cervantes’ marriage to the donor. Hence this appeal.

ISSUE:

WON the ban on a donation between the spouses during a marriage applies to a common-law relationship

HELD:

The lower court decision of November 23, 1965 dismissing the complaint with costs is REVERSED. The

questioned donation is declared void, with the rights of plaintiff and defendant as pro indiviso (for an undivided

part). The case is remanded to the lower court for its appropriate disposition in accordance with the above

opinion.

RATIO:

It is a principle of statutory construction that what is within the spirit of the law is as much a part of it as what is

written. If there is ever any occasion where the principle of statutory construction that what is within the spirit of

the law is as much a part of it as what is written, then such would be it. Otherwise the basic purpose discernible

in such codal provision would not be attained.

A 1954 Court of Appeals decision Buenaventura v. Bautista, interpreting a similar provision of the old Civil

Code says clearly that if the policy of the law is (in the language of the opinion of the then Justice J.B.L. Reyes

of that Court) "to prohibit donations in favor of the other consort and his descendants because of fear ofundue

and improper pressure and influence upon the donor, a prejudice deeply rooted in our ancient law then there is

every reason to apply the same prohibitive policy to persons living together as husband and wife without

benefit of nuptials.

CHING vs GOYANGKO

On December 30, 1947, Joseph Goyanko (Goyanko) and Epifania dela Cruz (Epifania) were married. [1] Out of the union were born respondents Joseph, Jr., Evelyn, Jerry, Imelda, Julius, Mary Ellen and Jess, all surnamed Goyanko.           Respondents claim that in 1961, their parents acquired a 661 square meter property located at 29 F. Cabahug St., Cebu City but that as they (the parents) were Chinese citizens at the time, the property was registered in the name of their aunt, Sulpicia Ventura (Sulpicia).           On May 1, 1993, Sulpicia executed a deed of sale [2] over the property in favor of respondents’ father Goyanko.   In turn, Goyanko executed on October 12, 1993 a deed of sale[3] over the property in favor of his common-law-wife-herein petitioner Maria B. Ching. Transfer Certificate of Title (TCT) No. 138405 was thus issued in petitioner’s name.           After Goyanko’s death on March 11, 1996, respondents discovered that ownership of the property had already been transferred in the name of petitioner. Respondents  thereupon had the purported signature of their father in the deed of sale verified by the Philippine National Police Crime Laboratory which found the same to be a forgery.[4]

           Respondents thus filed with the Regional Trial Court of Cebu City a complaint for recovery of property and damages against petitioner, praying for the nullification of the deed of sale and of TCT No. 138405 and the issuance of a new one in favor of their father Goyanko. 

In defense, petitioner claimed that she is the actual owner of the property as it was she who provided its purchase price.  To disprove that Goyanko’s signature in the questioned deed of sale is a forgery, she presented as witness the notary public who testified that Goyanko appeared and signed the document in his presence.

 By Decision of October 16, 1998,[5] the trial court dismissed the complaint against petitioner, the

pertinent portions of which decision read:                         There is no valid and sufficient ground to declare the sale as null and void, fictitious and simulated. The signature on the questioned Deed of   Sale   is genuine . The testimony of Atty. Salvador Barrameda who declared in court that Joseph Goyanko, Sr. and Maria Ching together with their witnesses appeared before him for notarization of Deed of Sale in question is more reliable than the conflicting testimonies of the two document examiners. Defendant Maria Ching asserted that the Deed of Sale executed by Joseph Goyanko, Sr. in her favor is valid and genuine. The signature of Joseph Goyanko, Sr. in the questioned Deed of Absolute Sale is genuine as it was duly executed and signed by Joseph Goyanko, Sr. himself.                                     The parcel of lands known as   Lot   No. 6 which is sought to be recovered in this case could never be considered as the conjugal property   of the original Spouses Joseph C. Goyanko and Epifania dela Cruz or the exclusive capital property of the husband. The acquisition of the said property by defendant Maria Ching is well-elicited

from the aforementioned testimonial and documentary evidence presented by the defendant. Although for a time being the property passed through Joseph Goyanko, Sr. as a buyer yet his ownership was only temporary and transitory for the reason that it was subsequently sold to herein defendant Maria Ching. Maria Ching claimed that it was even her money which was used by Joseph Goyanko, Sr. in the purchase of the land and so it was eventually sold to her. In her testimony, defendant Ching justified her financial capability  to buy the land for herself. The transaction undertaken was from the original owner Sulpicia Ventura to Joseph Goyanko, Sr. and then from Joesph Goyanko, Sr. to herein defendant Maria Ching.                          The land subject of the litigation is already registered in the name of defendant Maria Ching under TCT No. 138405.  By virtue of the Deed of Sale executed in favor of Maria Ching, Transfer  Certificate of  Title No. 138405 was issued in her favor. In recognition of the proverbial virtuality of a Torrens title, it has been repeatedly held that, unless bad faith can be established on the part of the person appearing as owner on the certificate of title, there is no other owner than that in whose favor it has been issued. A Torrens title is not subject to collateral attack. It is a well-known doctrine that a Torrens title, as a rule, is irrevocable and indefeasible, and the duty of the court is to see to it that this title is maintained and respected unless challenged in a direct proceedings [sic].[6] (Citations omitted; underscoring supplied) 

            Before the Court of Appeals where respondents appealed, they argued that the trial court erred: 

1.      . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject property between Joseph, Sr. and the defendant-appellee, despite the proliferation in the records and admissions by both parties that defendant-appellee was the ”mistress” or “common-law wife” of Joseph, Sr..

 2.      . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the

subject property between Joseph, Sr. and the defendant-appellee, despite the fact that the marriage of Joseph, Sr.  and Epifania was then still subsisting thereby rendering the subject property as conjugal property of Joseph, Sr. and Epifania.

 3.      . . . in dismissing the complaint a quo . . . , in effect, sustaining the validity of the sale

of the subject property between Joseph, Sr. and the defendant-appellee, despite the clear findings of forgery and the non-credible testimony of notary public.[7]

  

By Decision dated October 21, 2003,[8] the appellate court reversed that of the trial court and declared null and void the questioned deed of sale  and TCT No. 138405.  Held the appellate court:

                         . . . The subject property having been acquired during the existence of a valid marriage between Joseph Sr. and Epifania dela Cruz-Goyanko, is presumed to belong to the conjugal partnership. Moreover, while this presumption in favor of conjugality is rebuttable with clear and convincing proof to the contrary, we find no evidence on record to conclude otherwise. The record shows that while Joseph Sr. and his wife Epifania have been estranged for years and that he and defendant-appellant Maria Ching, have in fact been living together as common-law husband and wife, there has never been a judicial decree declaring the dissolution of his marriage to Epifania nor their conjugal partnership. It is therefore undeniable that the 661-square meter property located at No. 29 F. Cabahug Street, Cebu City belongs to the conjugal partnership.                         Even if we were to assume that the subject property was not conjugal, still we cannot sustain the validity of the sale of the property by Joseph, Sr. to defendant-appellant Maria Ching, there being overwhelming evidence on records that they have

been living together as common-law husband and wife. On this score, Art. 1352 of the Civil Code provides: 

     “Art. 1352. Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy.” 

                        We therefore find that the contract of sale in favor of the defendant-appellant Maria Ching was null and void   for being contrary to morals and public policy. The purported sale, having been made by Joseph Sr. in favor of his concubine, undermines the stability of the family, a basic social institution which public policy vigilantly protects. Furthermore, the law emphatically prohibits spouses from selling property to each other, subject to certain exceptions. And this is so because transfers or conveyances between spouses, if allowed during the marriage would destroy the system of conjugal partnership, a basic policy in civil law. The prohibition was designed to prevent the exercise of undue influence by one spouse over the other and is likewise applicable even to common-law relationships otherwise, “the condition of those who incurred guilt would turn out to be better than those in legal union.[9]  (Underscoring supplied)  

          Hence, the present petition, petitioners arguing that the appellate court gravely erred in:I.

. . . APPLYING THE STATE POLICY ON PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW SPOUSES ON THE SUBJECT PROPERTY, THE SAME BEING FOUND BY THE COURT A QUO, AS THE EXCLUSIVE PROPERTY OF PETITIONER, AND THAT THE SAME WAS NEVER PART OF THE CONJUGAL PROPERTY OF THE MARRIAGE BETWEEN RESPONDENTS’ MOTHER EPIFANIA GOYANKO AND PETITIONER’S COMMON LAW HUSBAND, JOSEPH GOYANKO, SR., NOR THE EXCLUSIVE OR CAPITAL PROPERTY OF THE LATTER AT ANYTIME BEFORE THE SAME WAS VALIDLY ACQUIRED BY PETITIONER. 

II.. . . NOT FINDING THAT A JURIDICAL RELATION OF TRUST AS PROVIDED FOR UNDER ARTICLES 1448 AND 1450 OF THE NEW CIVIL CODE CAN VALIDLY EXIST BETWEEN COMMON LAW SPOUSES. 

III.. . . NOT FINDING THAT A CONVEYANCE OVER A PROPERTY MADE BY A TRUSTEE, WHO BECAME AS SUCH IN CONTEMPLATION OF LAW, AND WHO HAPPENS TO BE A COMMON LAW HUSBAND OF THE BENEFICIARY, IS NOT A VIOLATION OF A STATE POLICY ON PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW SPOUSES. 

IV.. . . ALLOWING RESPONDENTS TO ABANDON THEIR ORIGINAL THEORY OF THEIR CASE DURING APPEAL.[10]

              The pertinent provisions of the Civil Code which apply to the present case read:                         ART. 1352.  Contracts without cause, or with unlawful cause, produce no effect

whatever.  The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy.

                            ART. 1409.  The following contracts are inexistent and void from the beginning:

                         (1)  Those whose cause, object or purpose is contrary to law, morals, good customs,

public order or public policy;(2)     Those which are absolutely simulated or fictitious;(3)      Those whose cause or object did not exist  at the time of the transaction;(4)      Those whose object is outside the commerce of men;(5)      Those which contemplate an impossible service;(6)      Those where the intention of the parties relative to the principal object of

the contract cannot be ascertained;(7)      Those expressly prohibited or declared void by law.

 These contracts cannot be ratified.  Neither can the right to set up the defense of

illegality be waived.   

ARTICLE 1490.  The husband and wife cannot sell property to each other, except:(1)   When a separation of property was agreed upon in the marriage settlements;

or(2)   When there has been a judicial separation of property under Article

191.  (Underscoring supplied)  

The proscription against sale of property between spouses applies even to common law relationships. So this Court ruled in Calimlim-Canullas v. Hon. Fortun, etc., et al.:[11]

             Anent the second issue, we find that the contract of sale was null and void for being contrary to morals and public policy. The sale was made by a husband in favor of a concubineafter he had abandoned his family and left the conjugal home where his wife and children lived and from whence they derived their support. The sale was subversive of the stability of the family, a basic social institution which public policy cherishes and protects.             Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purposes is contrary to law, morals, good customs, public order, or public policy are void andinexistent from the very beginning.             Article 1352 also provides that: “Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy.”             Additionally, the law emphatically prohibits the spouses from selling  property to each other subject to certain exceptions. Similarly,donations between spouses during marriage are prohibited. And this is so because if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, “the condition of those who incurred guilt would turn out to be better than those in legal union.” Those provisions are dictated by public interest and their criterion must be imposed upon the will of the parties. . . .[12] (Italics in the original; emphasis and underscoring supplied)           

                        As the conveyance in question was made by Goyangko in favor of his common- law-wife-herein petitioner, it was null and void.

 

Petitioner’s argument that a trust relationship was created between Goyanko as trustee and her as beneficiary as provided in Articles 1448 and 1450 of the Civil Code which read: 

                        ARTICLE 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.                         ARTICLE 1450. If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom it is paid. The latter may redeem the property and compel a conveyance thereof to him.

 does not persuade.           For petitioner’s testimony that it was she who provided the purchase price is uncorroborated. That she may have been considered the breadwinner of the family and that there was proof that she earned a living do not conclusively clinch her claim.           As to the change of theory by respondents from forgery of their father’s signature in the deed of sale to sale contrary to public policy, it too does not persuade. Generally, a party in a litigation is not permitted to freely and substantially change the theory of his case so as not to put the other party to undue disadvantage by not accurately and timely apprising him of what he is up against, [13] and to ensure that the latter is given the opportunity during trial to refute all allegations against him by presenting evidence to the contrary.  In the present case, petitioner cannot be said to have been put to undue disadvantage and to have been denied the chance to refute all the allegations against her.  For the nullification of the sale is anchored on its illegality per se, it being violative of the above-cited Articles 1352, 1409 and 1490 of the Civil Code.            WHEREFORE, the petition is DENIED for lack of merit. 

MILAGROS JOAQUINO a.k.a. MILAGROS J. REYES, petitioner, vs. LOURDES REYES, MERCEDES, MANUEL, MIRIAM and RODOLFO JR. -- all surnamed REYES, respondents.

Though registered in the paramour’s name, property acquired with the salaries and earnings of a husband belongs to his conjugal partnership with the legal spouse.  The filiation of the paramour’s 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 isMODIFIED 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] attorney’s fees in the sum of P20,000.00 and to pay the costs.’”[4]

The questioned Resolution, on the other hand, denied petitioner’s 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, Parañaque, 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 [petitioner’s] possession and that the real and personal properties in [petitioner’s] 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 [petitioner’s] possession be delivered to [respondents] and that [petitioner] be made to pay actual, compensatory and moral damages to [respondents] as well as attorney’s fees.’

x x x                               x x x                             x x x

“[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]ney’s fees and the costs of the suit. x x x.’

x x x                               x x x                             x x x

“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 onSeptember 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, Parañaque, 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 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 petitioner’s 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.

Ruling of the Court of Appeals

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 petitioner’s 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 Court’s consideration:

“I.

Whether or not it has been indubitably established in a court of law and trier of facts, the Regional Trial Court, that petitioner’s 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 father’s 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 Parañaque, Metro Manila); and 2) the propriety of ruling on the filiation and the successional rights of petitioner’s children.

The Court’s Ruling

The Petition is devoid of merit.

First Issue:The Conjugal Nature of the Disputed Property

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

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 petitioner’s name.

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]

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]

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

“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.

“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 petitioner’s 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 petitioner’s 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 petitioner’s 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 petitioner’s 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 petitioner’s name was clearly designed to deprive Rodolfo’s 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

Not Proper

It is petitioner’s 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 children’s illegitimate filiation was duly established in the trial court, she faults the CA for ruling that the issue was improper in the instant case.

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 decedent’s estate could not be adjudicated in an ordinary civil action which, as in this case, was for the recovery of property.

Considerations of due process should have likewise deterred the RTC from ruling on the status of petitioner’s 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 petitioner’s 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]

In view of the foregoing reasons, the CA cannot be faulted for tackling the propriety of the RTC’s 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.

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]

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

SO ORDERED

TERESITA C. FRANCISCO, petitioner, vs. HON. COURT OF APPEALS

This petition for review on certiorari seeks to reverse respondent appellate court’s decision[1] promulgated on October 7, 1991, affirming in toto the judgment of the Regional Trial Court which ruled,[2]thus:

“WHEREFORE, premises considered, this Court renders judgment in favor of the defendants and against the plaintiff, as follows:

1) Ordering the dismissal of the Complaint with costs against the plaintiff;

2) Declaring the defendant Eusebio Francisco the administrator of the properties described in paragraph eight (8) of the Complaint; and

3) Sentencing the plaintiff to pay the defendants the sum of P10,000.00 as and for attorney’s fees.

SO ORDERED.”

Petitioner is the legal wife of private respondent Eusebio Francisco (Eusebio) by his second marriage.  Private respondents Conchita Evangelista, Araceli F. Marilla and Antonio Francisco are children of Eusebio by his first marriage.

Petitioner alleges that since their marriage on February 10, 1962, she and Eusebio have acquired the following:  (1) a sari-sari store, a residential house and lot, and an apartment house, all situated at Col. S. Cruz St., Barangay Balite, Rodriguez (formerly Montalban), Rizal, and; (2) a house and lot at Barrio San Isidro, Rodriguez, Rizal.  Petitioner further avers that these properties were administered by Eusebio until he was invalidated on account of tuberculosis, heart disease and cancer, thereby, rendering him unfit to administer them.  Petitioner also claims that private respondents succeeded in convincing their father to sign a general power of attorney which authorized Conchita Evangelista to administer the house and lot together with the apartments situated in Rodriguez, Rizal.

On August 31, 1988, petitioner filed a suit for damages and for annulment of said general power of attorney, and thereby enjoining its enforcement.  Petitioner also sought to be declared as the administratrix of the properties in dispute.  In due course, the trial court rendered judgment in favor of private respondents.  It held that the petitioner failed to adduce proof that said properties were acquired during the existence of the second conjugal partnership, or that they pertained exclusively to the petitioner.  Hence, the court ruled that those properties belong exclusively to Eusebio, and that he has the capacity to administer them.

On appeal, the Court of Appeals affirmed in toto the decision of the trial court.  Hence, this petition.

Petitioner raised the following errors allegedly committed by the appellate court:

“FIRST ASSIGNMENT OF ERROR

RESPONDENT COURT ERRED IN APPLYING ARTICLES 160 AND 158, UNDER TITLE VI OF THE (NEW) CIVIL CODE BECAUSE SAID TITLE, TOGETHER WITH THE OTHERS, HAVE (SIC) ALREADY BEEN REPEALED BY ARTICLE 253 OF THE FAMILY CODE.

SECOND ASSIGNMENT OF ERROR

RESPONDENT COURT FURTHER ERRED IN NOT APPLYING ARTICLE 124 OF THE FAMILY CODE.”[3]

But in her reply, petitioner posed the sole issue “whether or not Article 116 of the Family Code applies to this case because Article 253 of the same Code [which] expressly repeals Arts. 158 and 160 of the Civil Code”.[4]

To our mind, the crucial issue in this petition is whether or not the appellate court committed reversible error in affirming the trial court’s ruling that the properties, subject matter of controversy, are not conjugal but the capital properties of Eusebio exclusively.

Indeed, Articles 158[5] and 160[6] of the New Civil Code have been repealed by the Family Code of the Philippines which took effect on August 3, 1988.  The aforecited articles fall under Title VI, Book I of the New Civil Code which was expressly repealed by Article 254[7] (not Article 253 as  alleged by petitioner in her petition and reply) of the Family Code. Nonetheless, we cannot invoke the new law in this case without impairing prior vested rights pursuant to Article 256[8] in relation to Article 105[9] (second paragraph) of the Family Code.  Accordingly, the repeal of Articles 158 and 160 of the New Civil Code does not operate to prejudice or otherwise affect rights which have become vested or accrued while the said provisions were in force.[10] Hence, the rights accrued and vested while the cited articles were in effect survive their repeal.[11] We shall therefore resolve the issue of the nature of the contested properties based on the provisions of the New Civil Code.

Petitioner contends that the subject properties are conjugal, thus, she should administer these on account of the incapacity of her husband.  On the other hand, private respondents maintain that the assets in controversy claimed by petitioner as “conjugal” are capital properties of Eusebio exclusively as these were acquired by the latter either through inheritance or  through his industry prior to his second marriage.  Moreover, they stress that Eusebio is not incapacitated contrary to petitioner’s allegation.

We find petitioner’s contention lacks merit, as hereafter elucidated.

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”.  However, the party who invokes this presumption must first prove that the property in controversy was acquired during the marriage.[12] Proof of acquisition during   the coverture is a condition sine qua non for

the operation of the presumption in favor of the conjugal partnership. [13] The party who asserts this presumption must first prove said time element.  Needless to say, the presumption refers only to the property acquired during the marriage and does not operate when there is no showing as to when property alleged to be conjugal was acquired.[14] Moreover, this presumption in favor of conjugality is rebuttable, but only with strong, clear and convincing evidence; there must be a strict proof of exclusive ownership of one of the spouses.[15]

In this case, petitioner failed to adduce ample evidence to show that the properties which she claimed to be conjugal were acquired during her marriage with Eusebio.

With respect to the land at Col. Cruz St., Balite, Rodriguez, Rizal, petitioner failed to refute the testimony of Eusebio that he inherited the same from his parents.  Interestingly, petitioner even admitted that Eusebio brought into their marriage the said land, albeit in the concept of a possessor only as it was not yet registered in his name.

Whether Eusebio succeeded to the property prior or subsequent to his second marriage is inconsequential.  The property should be regarded as his own exclusively, as a matter of law, pursuant to Article 148[16] of the New Civil Code.

Essentially, property already owned by a spouse prior to the marriage, and brought to the marriage, is considered his or her separate property.[17] Acquisitions by lucrative title refers to properties acquired gratuitously and include those acquired by either spouse during the marriage by inheritance, devise, legacy, or donation.[18] Hence, even if it be assumed that Eusebio’s acquisition by succession of the land took place during his second marriage, the land would still be his “exclusive property” because it was acquired by him, “during the marriage, by lucrative title.”[19]

As regards the house, apartment and sari-sari store, private respondents aver that these properties were either constructed or established by their father during his first marriage.   On the other hand, petitioner insists that the said assets belong to conjugal partnership.  In support of her claim, petitioner relied on the building permits for the house and the apartment, with her as the applicant although in the name of Eusebio.  She also invoked the business license for the sari-sari store issued in her name alone.

It must be emphasized that the aforementioned documents in no way prove that the improvements were acquired during the second marriage.  And the fact that one is the applicant or licensee is not determinative of the issue as to whether or not the property is conjugal or not.   As the appellate court aptly noted:

“x x x.  And the mere fact that plaintiff-appellant [petitioner herein] is the licensee of the sari-sari store (Exhibit ‘F-3’; Exhibit ‘G’, pp. 44-47, Record) or is the supposed applicant for a building permit does not establish that these improvements were acquired during her marriage with Eusebio Francisco, especially so when her exhibits (‘D-1’, ‘E’, ‘E-1’, ‘T’, ‘T-1’, ‘T-2’, ‘U’, ‘U-1’ and ‘U-2’; pp. 38-40; 285-290, Record; TSN, January 17, 1989, page 6-7) are diametrically opposed to her pretense as they all described Eusebio Francisco as the owner of the structures (Article 1431, New Civil Code; Section 4, Rule 129, Revised Rules on Evidence).

Neither is it plausible to argue that the sari-sari store constructed on the land of Eusebio Francisco has thereby become conjugal for want of evidence to sustain the proposition that it was constructed at the expense of their partnership (second paragraph, Article 158, New Civil Code).  Normally, this absence of evidence on the source of funding will call for the application of the presumption under Article 160 of the New Civil Code that the store is really conjugal but it cannot be so in this particular case again, by reason of the dearth in proof that it was erected during the alleged second marriage (5 Sanchez Roman 840-841; 9 Manresa; cited in Civil Code of the Philippines by Tolentino, Volume 1, 1983 Edition, page 421).”[20]

Regarding the property at San Isidro, Rodriguez, Rizal, private respondents assert that  their father purchased it during the lifetime of their mother.  In contrast, petitioner claims ownership over said property inasmuch as the title thereto is registered in the name of  “Eusebio Francisco, married to Teresita Francisco.”

It must be stressed that the certificate of title upon which petitioner anchors her claim is inadequate.  The fact that the land was registered in the name of “Eusebio Francisco, married to Teresita Francisco”, is no proof that the property was acquired during the spouses coverture.  Acquisition of title and registration thereof are two different acts.[21] It is well settled that registration does not confer title but merely confirms one already existing.[22] The phrase “married to” preceding “Teresita Francisco” is merely descriptive of the civil status of Eusebio Francisco.[23]

In the light of the foregoing circumstances, the appellate court cannot be said to have been without valid basis in affirming the lower court’s ruling that the properties in controversy belong exclusively to Eusebio.

Now, insofar as the administration of the subject properties is concerned, it follows that Eusebio shall retain control thereof considering that the assets are exclusively his capital. [24] Even assuming for the sake of argument that the properties are conjugal, petitioner cannot administer them inasmuch as Eusebio is not incapacitated.  Contrary to the allegation of petitioner, Eusebio, as found by the lower court, is not suffering from serious illness so as to impair his fitness to administer his properties. That he is handicapped due to a leg injury sustained in a bicycle accident, allegedly aggravated when petitioner pushed him to the ground in one of their occasional quarrels, did not render him, in the Court’s view, incapacitated to perform acts of administration over his own properties.

WHEREFORE, petition is hereby DENIED.  The Decision of the Court of Appeals is AFFIRMED.

Villegas vs LinganBefore the Cour t i s a Pe t i t i on fo r Rev iew on  Cer t io ra r i   under Ru le 45 o f the

Ru les o f Cour t assa i l i ng the Dec is ion [ 1 ]   da ted November 28 , 2001 p romulga ted by the Cour t o f Appea ls (CA) in CA-G.R. CV No. 55837 , wh ich a f f i rmed   i n to to   t he Dec is ion da ted December 19 , 1996 o f the Reg iona l T r ia l Cour t (RTC) , B ranch 4 , Tuguegarao , Cagayan in C iv i l Case No. 5036 ; and the CA Reso lu t ion [ 2 ]   da ted June 10 , 2002 , deny ing the Mot ion fo r Recons idera t ion f i l ed by I saac V i l l egas (pe t i t i oner ) .

 Th is case o r ig ina ted f rom a Compla in t fo r Annu lment o f T i t l e and Ins t rument

w i th Damages f i l ed by the pe t i t i oner aga ins t V ic to r L ingan ( respondent ) and A t ty . E rnes to Car reon as the Reg is te r o f Deeds o f Cagayan .    The respondent f i l ed h is Answer and p re - t r ia l ensued .    The RTC issued a Pre -Tr ia l Order where in i t dec la red tha t no fac tua l i ssue ex is ts and tha t the so le lega l i ssue to be reso lved i s : 

Whether o r no t the power o f a t to rney i s a genera l power o f a t to rney o r a spec ia l power o f a t to rney .    Cor ro la r i l y , whe ther upon the te rms thereo f , the a t to rney- in - fac t G lo r ia Roa Cat ra l , had au thor i t y , o r none a t a l l , t o execu te the deed o f sa le in favor o f [ respondent ] V ic to r L ingan . [ 3 ]

  On the bas is o f the p re - t r ia l o rder and upon mot ion o f counse l fo r pe t i t i oner , w i thou t any ob jec t ions f rom respondent , the case was submi t ted fo r summary judgment .                As found by the RTC and con f i rmed by the CA, the und ispu ted fac ts a re as fo l lows :

 

                    [Pe t i t i oner ] I saac V i l l egas was the reg is te red owner o f a parce l o f l and in Tuguegarao , Cagayan , known as  Lo t  2637-C o f the Subd iv is ion p lan Psd .2 -01-019664, be ing a por t ion o f  Lo t  2637 , Cad. 151 , con ta in ing an a rea o f 1 ,267 square mete rs , more o r less , s i tua ted a t Bgy . Pengue, Tuguegarao , Cagayan , covered by Trans fe r Cer t i f i ca te o f T i t l e No . T -63809 o f the Reg is te r o f Deeds o f Cagayan .     In o rder to secure the payment o f a loan f rom the Deve lopment Bank o f the Ph i l i pp ines (DBP) the [pe t i t i oner ] cons t i tu ted a rea l es ta te mor tgage over the sa id parce l o f l and in favor o f DBP.    The sa id loan and mor tgage was subsequent l y t rans fe r red by the DBP to the Home Mutua l Deve lopment Fund (HMDF) .    When the [pe t i t i oner ] fa i led to se t t le h is loan , the rea l es ta te mor tgage he cons t i tu ted over the p roper ty was fo rec losed , the p roper ty was so ld a t pub l i c auc t ion and , as the HMDF was i t se l f the h ighes t b idder a t such pub l i c auc t ion , a ce r t i f i ca te o f sher i f f ’ s sa le was i ssued and , therea f te r , reg is te red w i th the Reg is te r o f Deeds on March 8 , 1996 .    By v i r tue o f a power o f a t to rney execu ted by [pe t i t i oner ’ s ] w i fe , Mar i lou C. V i l l egas in favor o f G lo r ia Roa Cat ra l , the la t te r redeemed the p roper ty f rom the HMDF. x x x [ 4 ]

  

               On  May 17 , 1996 , G lo r ia R . Ca t ra l (Ca t ra l ) , by v i r tue o f the same power o f a t to rney , execu ted a Deed o f Sa le in favor o f respondent . [ 5 ]

 Pe t i t i oner c la ims tha t the power o f a t to rney execu ted in favor o f Ca t ra l ,

pe t i t i oner ’ s mother - in - law, c rea ted a p r inc ipa l -agen t re la t ionsh ip on ly be tween h is w i fe , Mar i lou Cat ra l -V i l l egas (Mar i lou ) as p r inc ipa l , and Cat ra l , as agen t , and then on ly fo r the la t te r to admin is te r the p roper t ies o f the fo rmer ; tha t he never au thor i zed Cat ra l to admin is te r h is p roper t ies , par t i cu la r l y , here in sub jec t p roper ty ; and tha t Ca t ra l had no au thor i t y to execu te the Deed o f Abso lu te Sa le in favor o f the respondent , s ince f rom the very word ings o f the power o f a t to rney , she had no spec ia l au thor i t y to se l l o r convey any spec i f i c rea l p roper ty . [ 6 ]                  On December 19 , 1996 , the RTC d ismissed the Compla in t , ru l ing tha t the tenor o f the power o f a t to rney in ques t ion i s b road enough to inc lude the au thor i t y to se l l any p roper ty o f the p r inc ipa l , who , in th is case , i s the pe t i t i oner ; tha t the ac t o f the agen t , Ca t ra l , i n execu t ing the Deed o f Abso lu te Sa le in favor o f respondent was w i th in her power o r au thor i t y ; tha t the power “ to en te r in to any and a l l con t rac ts and agreements ” qua l i f i ed the sa id power o f a t to rney as a spec ia l power o f a t to rney ; tha t the Deed o f Abso lu te Sa le i s va l id and b inds the p r inc ipa l , he re in pe t i t i oner ; tha t the au thor i t y to se l l came f rom bo th the pe t i t i oner and h is w i fe , Mar i lou , s ince the pe t i t i oner h imse l f s igned the power o f a t to rney a f f i rm ing the au thor i t y o f the agen t , Ca t ra l ; and tha t even i f Ca t ra l i n fac t exceeded her au thor i t y , the ac t i s deemed to have been per fo rmed w i th in the scope o f the agen t ’ s au thor i t y i f such i s w i th in the te rms o f the power o f a t to rney as wr i t ten .                    D issa t i s f ied , the pe t i t i oner appea led the adverse judgment to the CA c la im ing tha t the t r ia l cour t e r red in f i nd ing tha t the re was a p r inc ipa l -agen t re la t ionsh ip be tween pe t i t i oner and Cat ra l ; and tha t the t r ia l cour t e r red in conc lud ing tha t the power o f a t to rney i s a spec ia l power o f a t to rney w i th an au thor i t y to se l l . [ 7 ]

 On  November 28 , 2001 , the CA rendered the here in assa i led Dec is ion ,

a f f i rm ing   i n to to   t he RTC Judgment and d ismiss ing the appea l fo r lack o f mer i t . [ 8 ]

                The CA he ld tha t when the redempt ion o f the p roper ty had been made by Cat ra l by v i r tue o f a Genera l Power o f A t to rney execu ted in her favor by Mar i lou , i t f o l l ows tha t the pe t i t i oner i s no longer the owner o f the sub jec t p roper ty bu t h is w i fe , Mar i lou ; tha t the i ssue as to whether the power o f a t to rney was a spec ia l o r genera l one i s o f no moment , because the pe t i t i oner was no longer the owner o f the p roper ty when i t was so ld ; in o ther words , any d ispos i t ion o f the p roper ty needs no power o f a t to rney

f rom the pe t i t i oner h imse l f ; tha t the pe t i t i oner s igned the Genera l Power o f A t to rney above the word “con fo rme, ” conno t ing an imp l ied admiss ion tha t he was no t anymore the owner o f the sa id p roper ty ; and , f i na l l y , tha t the Deed o f Sa le be tween Mar i lou ( th rough Cat ra l ) and respondent i s va l id .                Hence , here in Pe t i t i on , on the fo l low ing g rounds : 

I . 

IT IS SUBMITTED THAT THE COURT OF APPEALS DISREGARDED THE LAW AND APPLICABLE DECISIONS OF THE HONORABLE COURT WHEN IT DISMISSED THE COMPLAINT ON THE GROUND THAT PETIT IONER WAS NO LONGER THE OWNER OF THE PROPERTY SUBJECT OF THE CASE.    AS A CONSEQUENCE, IT D ID NOT MATTER WHETHER OR NOT THE GENERAL POWER OF ATTORNEY OR A SPECIAL POWER OF ATTORNEY WAS ISSUED IN THIS INSTANT CASE. 

I I . 

IT IS FURTHER SUBMITTED THAT THE COURT OF APPEALS DISREGARDED THE LAW AND THE APPLICABLE DECISIONS OF THE HONORABLE COURT WHEN IT UPHELD THE VALIDITY OF THE DEED OF ABSOLUTE SALE EXECUTED IN FAVOR OF VICTOR L INGAN. [ 9 ]

 I n h is Memorandum, pe t i t i oner a rgues tha t the genera l power o f a t to rney o f

Ca t ra l d id no t c lo the her w i th au thor i t y to se l l the p roper ty o f pe t i t i oner ; and tha t the Deed o f Abso lu te Sa le execu ted be tween the respondent and Cat ra l was no t va l id . [ 1 0 ]

                 On the o ther hand , respondent , i n h is Memoranda, con tends tha t the pe t i t i oner

has no cause o f ac t ion aga ins t h im.    He ma in ta ins tha t pe t i t i oner los t h is ownersh ip o f the p roper ty a f te r i t was ex t ra - jud ic ia l l y fo rec losed and so ld to HMDF;     tha t wha t was le f t fo r pe t i t i oner was on ly the r igh t o f redempt ion , a r igh t he shared w i th h is w i fe ;     tha t i f t he re was rea l l y a lega l de fec t in the sa le , the person who has the lega l s tand ing and the r igh t to ques t ion the va l id i t y o f the sa le in h is name is Mar i lou , the person who exerc ised the r igh t o f redempt ion and the person in whom the r igh t to d ispose lega l l y res ides ; and tha t Mar i lou has a l l th i s t ime rema ined pass ive . [ 1 1 ]

                The pe t i t i on mus t fa i l .                            There a re two p r inc ipa l i ssues ra ised by the p lead ings in the p resen t pe t i t i on tha t mus t be reso lved :  Fi rs t ,  whether Mar i lou , the w i fe o f the pe t i t i oner , as successor - in -in te res t , may va l id l y redeem the p roper ty in ques t ion ; and  second,  whether the pe t i t i oner has a cause o f ac t ion aga ins t the respondent . 

Was there a va l id redempt ion e f fec ted by Mar i lou? The answer i s in the a f f i rmat i ve . Sec t ion 6 o f Ac t No . 3135 p rov ides :

 Sec . 6 . In a l l cases in wh ich an ex t ra jud ic ia l sa le i s made

under the spec ia l power here inbe fo re re fe r red to ,   the debtor , h is successors- in - in terest  or any jud ic ia l c red i to r o r judgment c red i to r o f sa id deb to r , o r any person hav ing a l i en on the p roper ty subsequent to the mor tgage o r deed o f t rus t under wh ich the p roper ty i s so ld , may redeem the same a t any t ime w i th in the te rm o f one year f rom and a f te r the da te o f sa le ; and  such redempt ion shal l be governed by the prov is ions of sect ion four hundred and s ix ty - four to four hundred

and s ix ty -s ix , inc lus ive , o f the Code of C iv i l Procedure , in so far as these are not inconsis tent wi th the prov is ions of th is Act .   (emphas is supp l ied )

                             Sec t ion 27 , Ru le 39 o f the 1997 Ru les o f C iv i l P rocedure , p rov ides : 

SEC. 27 .    Who may redeem rea l p roper ty so so ld .   –Rea l p roper ty so ld as p rov ided in the las t p reced ing sec t ion , o r any par t the reo f so ld separa te ly , may be redeemed in the manner here ina f te r p rov ided , by the fo l low ing persons : 

(a )    The judgment ob l igo r , o r h is successor - in - in te res t in the who le o r any par t o f the p roper ty ;

 x x x x

 The “successor - in - in te res t ” o f the judgment deb to r re fe r red to in the above

p rov is ion inc ludes a person who succeeds to h is p roper ty by opera t ion o f law, o r a person w i th a jo in t i n te res t in the p roper ty , o r h is spouse o r he i rs . [ 1 2 ]  

 Sec t ion 33 , Ru le 39 , Ru les o f Cour t , s ta tes : 

SEC. 33 .    Deed and possess ion to be g iven a t exp i ra t ion o f redempt ion per iod ; by whom execu ted o r g iven .   – I f no redempt ion be made w i th in one (1 ) year f rom the da te o f the reg is t ra t ion o f the cer t i f i ca te o f sa le , the purchaser i s en t i t l ed to a conveyance and possess ion o f the p roper ty ;  or , i f so redeemed whenever s ix ty (60) days have e lapsed and no other redempt ion has been made, and not ice thereof g iven, and the t ime for redempt ion has expi red , the last redempt ioner is ent i t led to the conveyance and possession; but in a l l cases the judgment obl igor sha l l have the ent i re per iod of one (1 ) year f rom the date of the reg is t ra t ion of the sa le to redeem the proper ty .    The deed sha l l be execu ted by the o f f i ce r mak ing the sa le o r by h is successor in o f f i ce , and in the la t te r case sha l l have the same va l id i t y as though the o f f i ce r mak ing the sa le had con t inued in o f f i ce and execu ted i t .

 Upon the expi ra t ion of the r ight o f redempt ion, the

purchaser or redempt ioner sha l l be subst i tu ted to and acqui re a l l the r ights , t i t le , in terest and c la im of the judgment obl igor to the proper ty a t the t ime of the levy . The possession of the proper ty sha l l be g iven to the purchaser or last redempt ioner by the same of f icer un less a th i rd par ty is actua l ly ho ld ing the proper ty adverse ly to the judgment obl igor .   (emphas is supp l ied ) 

               Under the above p rov is ion , pe t i t i oner cou ld have redeemed the p roper ty f rom Mar i lou a f te r she had redeemed i t . The p lead ings f i l ed and the records o f th i s case do no t show tha t pe t i t i oner exerc ised sa id r igh t .    Consequent l y , as cor rec t l y he ld by the CA, Mar i lou acqu i red ownersh ip o f the sub jec t p roper ty . A l l r i gh ts and t i t l e o f the judgment ob l igo r a re t rans fe r red upon the exp i ra t ion o f the r igh t o f redempt ion . [ 1 3 ]                  And where the redempt ion i s made under a p roper ty reg ime governed by the con juga l par tnersh ip o f ga ins , A r t i c le 109 o f the Fami ly Code p rov ides tha t p roper ty acqu i red by r igh t o f redempt ion i s the exc lus ive p roper ty o f the spouses redeeming the p roper ty .                  C lear l y , the re fo re , Mar i lou , as owner , had the r igh t to se l l the p roper ty to ano ther .

                Th is b r ings us to the reso lu t ion o f the second i ssue - - whe ther pe t i t i oner has a cause o f ac t ion aga ins t respondent - - and the answer i s in the nega t i ve . 

A cause o f ac t ion i s an ac t o r omiss ion o f the de fendant in v io la t ion o f the lega l r igh t o f the p la in t i f f . A compla in t s ta tes a cause o f ac t ion when i t con ta ins th ree essen t ia l e lements :     (1 ) a r igh t in favor o f the p la in t i f f by whatever means and under whatever law i t a r i ses ; (2 ) an ob l iga t ion o f the de fendant to respec t such r igh t ; and (3 ) the ac t o r omiss ion o f the de fendant v io la tes the r igh t o f the p la in t i f f . [ 1 4 ]

                 I n the p resen t case , there i s no p roper ty r igh t tha t ex is ts in favor o f the pe t i t i oner , and , w i th more reason , no such ob l iga t ion a r i ses in beha l f o f the de fendant , here in respondent , to respec t such r igh t .    There was no v io la t ion o f a lega l r igh t o f the pe t i t i oner .                   I t mus t be s t ressed tha t the re i s no a l lega t ion o r p roo f tha t Mar i lou redeemed the p roper ty in beha l f o f the pe t i t i oner—Mar i lou d id no t ac t as agen t o f the pe t i t i oner . Ra ther , she exerc ised the r igh t o f redempt ion in her own r igh t as successor - in - in te res t o f the pe t i t i oner .  Under the c i rcumstances, should there be any r ight v io la ted , the aggr ieved par ty is Mar i lou , pet i t ioner ’s wi fe . The proper ty in quest ion was the exc lus ive proper ty of Mar i lou by v i r tue of her redempt ion.  Thus , pe t i t i oner has no va l id cause o f ac t ion aga ins t the respondent .                Consequent l y , the ques t ion whether Ca t ra l had va l id l y so ld the sub jec t p roper ty to respondent by v i r tue o f the Genera l Power o f A t to rney execu ted by Mar i lou , i s no t w i th in the rea lm o f the Cour t ’ s ju r i sd ic t ion to reso lve in th is case as sa id i ssue i s no t p roper ly ra ised by the r igh t person , Mar i lou .                  D ives ted o f a l l i n te res t over the p roper ty , the pe t i t i oner has ceased to be the p roper par ty who may cha l lenge the va l id i t y o f the sa le . Moreover , s ince , as a ru le , the agency , as a con t rac t , i s b ind ing on ly be tween the con t rac t ing par t ies , [ 1 5 ]   t hen on ly the par t ies , as we l l as the th i rd person who t ransac ts w i th the par t ies themse lves , may ques t ion the va l id i t y o f the agency o r the v io la t ion o f the te rms and cond i t ions found there in .    Th is ru le i s a co ro l la ry o f the fo rego ing doc t r ine on the r igh ts o f rea l par t ies in in te res t . 

The Cour t canno t g ran t the re l ie f p rayed fo r in pe t i t i oner ’ s Compla in t as to damages , cons ider ing tha t the i ssue on damages was deemed wa ived when the par t ies l im i ted themse lves to the lega l i ssue a r r i ved a t dur ing the p re - t r ia l i n the RTC. [ 1 6 ]

 WHEREFORE , t he pe t i t i on i s  DENIED .   The Dec is ion and Reso lu t ion o f the

Cour t o f Appea ls a re  AFFIRMED.       

Costs aga ins t the pe t i t i oner .

Carlos vs. Abelardo

GR No. 146504, April 4, 2002

Honorio Carlos filed a petition against Manuel Abelardo, his son-in-law for recovery of the $25,000 loan used to

purchase a house and lot located at Paranaque.  It was in October 1989 when the petitioner issued a check

worth as such to assist the spouses in conducting their married life independently.  The seller of the property

acknowledged receipt of the full payment.  In July 1991, the petitioner inquired from spouses status of the

amount loaned from him, the spouses pleaded that they were not yet in position to make a definite settlement. 

Thereafter, respondent expressed violent resistance to the extent of making various death threats against

petitioner.  In 1994, petitioner made a formal demand but the spouses failed to comply with the obligation.  The

spouses were separated in fact for more than a year prior the filing of the complaint hence spouses filed

separate answers.  Abelardo contended that the amount was never intended as a loan but his share of income

on contracts obtained by him in the construction firm and that the petitoner could have easily deducted the debt

from his share in the profits.  RTC decision was in favor of the petitioner, however CA reversed and set aside

trial court’s decision for insufficiency of evidence.  Evidently, there was a check issued worth $25,000 paid to

the owner of the Paranaque property which became the conjugal dwelling of the spouses.  The wife executed

an instrument acknowledging the loan but Abelardo did not sign.

ISSUE: WON a loan obtained to purchase the conjugal dwelling can be charged against the conjugal

partnership.

HELD:

Yes, as it has redounded to the benefit of the family.  They did not deny that the same served as their conjugal

home thus benefiting the family.  Hence, the spouses are jointly and severally liable in the payment of the loan. 

Abelardo’s contention that it is not a loan rather a profit share in the construction firm is untenable since there

was no proof that he was part of the stockholders that will entitle him to the profits and income of the company.

Hence, the petition was granted and Abelardo is ordered to pay the petitioner in the amount of $25,000 plus

legal interest including moral and exemplary damages and attorney’s fees.

HOMEOWNERS SAVINGS & LOAN BANK, petitioner, vs. MIGUELA C. DAILO, respondent.

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 Dailo’s house and lot in San Pablo City. Pursuant to the SPA, Gesmundo obtained a loan in the amount ofP300,000.00 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 latter’s 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 attorney’s 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 court’s 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 court’s order to reconvey the subject property to respondent. [8] With respect to the damage to respondent’s 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 court’s Decision, but deleted the award for damages and attorney’s fees for lack of basis.[10]

Hence, this petition, raising the following issues for this Court’s 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 co-owners, 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 Gains in 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 co-ownership 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 onConjugal 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 respondent’s 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] Petitioner’s 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 petitioner’s 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.[2