Aggabao vs. Parulan

The sale of conjugal partnership property by one spouse without the written consent of the other spouse is void, not merely voidable, under Article 124 of the Family Code; furthermore, a buyer dealing with a seller acting through an agent or a spouse with restricted capacity must exercise due diligence not only in verifying the title but also in inquiring into the agent's authority to sell, failing which they cannot be considered buyers in good faith.

The dispute centers on two parcels of registered land in Parañaque City owned by the respondents, Spouses Parulan, who were estranged. In 1991, the wife, Ma. Elena, sold the properties to the petitioners, Spouses Aggabao, presenting an SPA allegedly executed by her husband, Dionisio. Dionisio, who was out of the country at the time of the alleged execution of the SPA, later discovered the sale and filed a suit to annul the deed of sale, claiming his signature was forged and he never consented to the transaction.

• The subject properties are two parcels of land in BF Homes, Parañaque, registered under TCT Nos. 63376 and 63377 in the name of Spouses Dionisio and Ma. Elena Parulan.
• In January 1991, a real estate broker offered the property to Spouses Aggabao (petitioners).
• On February 2, 1991, the petitioners met Ma. Elena, who presented the owner's duplicate of TCT No. 63376, a certified copy of TCT No. 63377, and an SPA dated January 7, 1991, purportedly executed by Dionisio authorizing her to sell the lands.
• The petitioners paid earnest money and later verified the titles with the Registry of Deeds and the Assessor's Office.
• During verification, the petitioners discovered an existing mortgage on TCT No. 63377 in favor of Los Baños Rural Bank; upon inquiry at the bank, the bank's counsel informed them that the bank had required a court order to approve the mortgage because the property was conjugal.
• Despite this information, the petitioners proceeded to pay off the bank loan to release the title and paid the balance of the purchase price to Ma. Elena on March 18, 1991.
• Ma. Elena executed a Deed of Absolute Sale but failed to deliver the owner's duplicate of TCT No. 63376, claiming it was with a relative in Hong Kong.
• The petitioners later discovered that the missing TCT was actually with Dionisio's brother, Atty. Jeremy Parulan, who held a different SPA from Dionisio.
• Dionisio, who was in the United States, returned and filed a case to annul the sale, proving via passport entries that he was out of the country when the SPA presented by Ma. Elena was allegedly executed and notarized.
• Evidence showed the notary public who notarized Ma. Elena's SPA was not commissioned for that year in Manila.

• The petitioners argued they were buyers in good faith because they exercised due diligence by verifying the titles with the Register of Deeds and inquiring with the mortgagee bank.
• They contended that Article 173 of the Civil Code (which makes unauthorized sales voidable) should apply instead of Article 124 of the Family Code (which makes them void), as the marriage predated the Family Code.
• They claimed that even if the SPA was a forgery, the ruling in Veloso v. Court of Appeals should protect them as innocent purchasers for value who relied on a notarized document.
• They argued that Dionisio ratified the sale through his brother, Atty. Parulan, who made a counter-offer during negotiations.

• Dionisio Parulan argued that the sale was void ab initio because he never consented to it and his signature on the SPA was forged.
• He maintained that the petitioners were not buyers in good faith because they failed to exercise proper prudence given the circumstances.
• He presented evidence that he was abroad during the alleged execution of the SPA and that the notary public was not authorized.

• Procedural Issues:
  • N/A
• Substantive Issues:
  • Which law governs the validity of the sale of conjugal property executed without the husband's consent: Article 173 of the Civil Code or Article 124 of the Family Code?
  • Were the petitioners buyers in good faith who can claim protection despite the forged SPA?
  • Does the ruling in Veloso v. Court of Appeals apply to validate the sale?

• Procedural:
  • N/A
• Substantive:
  • The Court ruled that Article 124 of the Family Code applies because the sale took place on March 18, 1991, after the Family Code took effect on August 3, 1988. Under Article 124, the disposition of conjugal property without the written consent of the other spouse is void, not merely voidable. The Court noted that the Family Code applies retroactively provided no vested rights are impaired, and the petitioners failed to show any vested right existed prior to the Code's effectivity.
  • The Court held that the petitioners were not buyers in good faith. While they verified the titles, they failed to exercise the second requisite diligence: inquiring into the seller's capacity to sell. The petitioners ignored red flags, such as the bank's prior requirement of a court order for a mortgage on the same property and the fact that the spouses were estranged. A prudent buyer should have investigated the authenticity of the SPA and the husband's consent.
  • The Court ruled that Veloso v. Court of Appeals is inapplicable because that case involved exclusive property, whereas the subject land here is conjugal property governed specifically by the strict requirements of Article 124 of the Family Code. Furthermore, in Veloso, the forgery was not clearly proven, whereas in this case, the forgery was established by clear evidence (passport entries and lack of notarial commission).

• Article 124 of the Family Code — This provision governs the administration of conjugal partnership property. It establishes that if one spouse is unable to participate in administration, the other may assume powers but cannot dispose of or encumber property without court authority or the other spouse's written consent. In this case, the Court applied this doctrine to declare the sale void due to the lack of the husband's written consent.
• Buyer in Good Faith (Standard of Diligence) — A buyer in good faith is one who buys property without notice of another's claim and pays a fair price. However, when dealing with a seller whose capacity is restricted (like a spouse selling conjugal property), the buyer must show diligence in verifying not only the title but also the seller's authority. The Court used this to rule against the petitioners, noting they failed to investigate the validity of the wife's authority despite suspicious circumstances.
• Void Contracts cannot be Ratified — Under Article 1409 of the Civil Code, void contracts are inexistent from the beginning and cannot be ratified. The Court applied this to reject the argument that the husband ratified the sale through his brother's counter-offer, as the initial sale was void under the Family Code.

• "We hold that the sale of conjugal property without the consent of the husband was not merely voidable but void; hence, it could not be ratified."
• "Thus, the buyers of conjugal property must observe two kinds of requisite diligence, namely: (a) the diligence in verifying the validity of the title covering the property; and (b) the diligence in inquiring into the authority of the transacting spouse to sell conjugal property in behalf of the other spouse."
• "He [the buyer] cannot close his eyes to facts that should put a reasonable man on his guard and still claim he acted in good faith."

• Veloso v. Court of Appeals — Cited by petitioners to argue for protection as innocent purchasers relying on a notarized SPA. The Court distinguished this case, stating it involved exclusive property (not conjugal) and the forgery therein was not substantiated, unlike in the present case where the property is conjugal and forgery was proven.
• Bautista v. Silva — Cited by the Court to establish the standard of "two kinds of requisite diligence" for buyers of conjugal property: verifying the title and verifying the selling spouse's capacity/authority.
• Tumlos v. Fernandez — Cited to support the retroactive application of the Family Code provided no vested rights are impaired.
• Domingo v. Reed — Cited to emphasize that a prudent vendee must investigate the authority of a spouse to sell property and bind the partnership.

• Article 124, Family Code — Applied as the governing law for the sale of conjugal property after August 3, 1988, declaring such sales void without spousal consent or court authority.
• Article 254, Family Code — Cited to affirm the repeal of Title VI of the Civil Code (including Article 173) regarding property relations between husband and wife.
• Article 256, Family Code — Cited to justify the retroactive application of the Family Code to the marriage of the respondents.
• Article 173, Civil Code — Cited by petitioners as the law they wished to apply (which makes sales voidable), but rejected by the Court as repealed/inapplicable.
• Article 1878, Civil Code — Cited to emphasize that a special power of attorney is required for acts of strict dominion like the sale of real property.