Alejo vs. Spouses Cortez

A disposition or encumbrance of conjugal property by one spouse without the written consent of the other spouse is void, but such transaction constitutes a continuing offer on the part of the consenting spouse and the third person, which may be perfected as a binding contract upon acceptance by the other spouse or authorization by the court before the offer is withdrawn. A qualified acceptance that varies the terms of the offer on material points—such as the date of payment and the purchase price—constitutes a counter-offer and a rejection of the original offer, and cannot evidence consent to or acceptance of the sale.

The case involves a parcel of land measuring 255 square meters located at Cut-cot, Pulilan, Bulacan, covered by Transfer Certificate of Title No. T-118170, which belonged to the conjugal property/absolute community of property of respondent Spouses Jorge and Jacinta Leonardo, upon which their residential house was built. The date of marriage of the Spouses Leonardo was not alleged in the pleadings filed. The disposition of conjugal property during the effectivity of the Family Code is governed by Article 124, which requires the written consent of both spouses for any alienation or encumbrance of conjugal property.

At the heart of the controversy is a parcel of land measuring 255 square meters located at Cut-cot, Pulilan, Bulacan, covered by Transfer Certificate of Title No. T-118170, which belonged to the conjugal property/absolute community of property of respondent Spouses Jorge and Jacinta Leonardo, upon which their residential house was built. Sometime in March 1996, Jorge's father, Ricardo, approached his sister, petitioner Dolores Alejo, to negotiate the sale of the subject property. Accordingly, on March 29, 1996, Jacinta executed a Kasunduan with Dolores for the sale of the property for a purchase price of PhP500,000. Under the Kasunduan, Dolores was to pay PhP70,000 as down payment, while PhP230,000 was to be paid on April 30, 1996, and the remaining balance of PhP200,000 was to be paid before the end of the year 1996. The Kasunduan was signed by Jacinta and by Ricardo as witness. Jorge, however, did not sign the agreement.

The down payment of PhP70,000 and the PhP230,000 were paid by Dolores on the dates agreed upon, and thereafter Dolores was allowed to possess the property and introduce improvements thereon. However, on July 3, 1996, Jorge wrote a letter to Dolores denying knowledge and consent to the Kasunduan, and informing her that Jacinta was retracting her consent due to Dolores' failure to comply with her obligations. This was followed by another letter dated September 29, 1996 from Jorge to Dolores demanding that she pay the balance of PhP200,000 on or before October 5, 1996, otherwise the purchase price shall be increased to PhP700,000.

According to Dolores, she was being compelled by Jorge to sign an agreement but she refused to do so. As a result, Jorge went to her house, destroyed its water pump, and disconnected the electricity. Before the officials of the Barangay, Dolores tendered the balance of PhP200,000 but Jorge refused to accept the same. Instead, Jorge filed cases for ejectment (docketed as Civil Case No. 645) and annulment of sale, reconveyance and recovery of possession (docketed as Civil Case No. 663) against her. These cases were later dismissed by the trial court on technical grounds.

However, during the pendency of said cases, the subject property was sold by Jorge and Jacinta to respondents Spouses Ernesto Cortez and Priscilla San Pedro under a Deed of Absolute Sale dated September 4, 1998 for a purchase price of PhP700,000. A new transfer certificate of title was issued in the latter's names. At the time of said sale, Dolores was in possession of the subject property. Consequently, Dolores filed the case a quo for annulment of deed of sale and damages against the Spouses Cortez and the Spouses Leonardo.

• Technical Dismissal of Appeal: Dolores argued that the Spouses Leonardo's and Spouses Cortez' appeals ought to have been outrightly dismissed for failure to comply with the requirements of Section 13, Rule 44.
• Perfected Contract: Dolores maintained that the Kasunduan is a perfected and binding contract as it was accepted by Jorge through his overt acts.
• Res Judicata: Dolores argued that the dismissal of Jorge's complaint for annulment of sale constitutes res judicata, thus preventing Jorge from further questioning the validity of the Kasunduan.
• Buyers in Bad Faith: Dolores contended that the Spouses Cortez were not buyers in good faith as they knew that the property was being occupied by other persons.

N/A — The decision does not recount the specific arguments raised by the respondents in their own words.

• Dismissal of Appeal: Whether the Court of Appeals gravely abused its discretion in not dismissing the appeal for failure to comply with the requirements of Section 13, Rule 44.
• Validity of the Kasunduan: Whether the Kasunduan for the sale of a conjugal real property between Jacinta and Dolores as a continuing offer has been converted to a perfected and binding contract through Jorge's acceptance.
• Possessor in Good Faith: Whether Dolores is a possessor in good faith entitled to reimbursement and indemnity for improvements.

• Dismissal of Appeal: No. The dismissal of an appeal for failure to comply with Section 13, Rule 44 is directory, not mandatory, and the CA enjoys ample discretion to dismiss or not to dismiss the appeal. The exercise of such discretion is presumed sound and regular, and the records did not show grave abuse of discretion.
• Validity of the Kasunduan: No. The Kasunduan is void for lack of Jorge's written consent under Article 124 of the Family Code. Jorge's first letter was an outright and express repudiation, and his second letter, which varied the terms on material points, constituted a counter-offer and rejection, not acceptance, of the continuing offer.
• Possessor in Good Faith: Yes. Dolores is a possessor in good faith under Article 526 of the Civil Code, entitled to reimbursement of PhP300,000 with legal interest and to indemnity for useful improvements under Articles 448 and 546, with a right of retention until reimbursement is made.

• Dismissal of Appeal: Section 1, Rule 50 provides that an appeal may be dismissed by the Court of Appeals upon the ground, among others, of absence of specific assignment of errors in the appellant's brief, or of page references to the record. However, it has been consistently held that such provision confers a power, not a duty, on the appellate court. The dismissal is directory, not mandatory, and as such, not a ministerial duty of the appellate court. The CA enjoys ample discretion to dismiss or not to dismiss the appeal, and the exercise of such discretion is presumed to have been sound and regular. The records did not satisfactorily show that the CA gravely abused its discretion in not dismissing the appeals. The ends of justice are better served if the case is determined on the merits, after full opportunity to ventilate respective claims and defenses is afforded to all parties, as it is far better to decide a case on the merits rather on a technicality.

• Validity of the Kasunduan: Article 124 of the Family Code provides that 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, but these powers do not include disposition or encumbrance without 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. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. The law is unequivocal that the disposition of conjugal property of one spouse without the written consent of the other is void. Here, it is an established fact that the Kasunduan was entered into solely by Jacinta and signed by her alone. By plain terms of the law, the Kasunduan is void. Nevertheless, the void Kasunduan constitutes a continuing offer from Jacinta and Dolores, and Jorge had the option of either accepting or rejecting the offer before it was withdrawn. The point of contention is whether Jorge accepted such continuing offer. It is undisputed that after the execution of the Kasunduan, Jorge sent two letters to Dolores: one informing her that he did not consent to the sale, and the other demanding that Dolores pay the balance of the purchase price on or before October 5, 1996, failing which the purchase price shall be increased to PhP700,000. Jorge's first letter was an outright and express repudiation of the Kasunduan. The second letter, while ostensibly a demand for compliance with Dolores' obligation under the Kasunduan, varied its terms on material points, i.e., the date of payment of the balance and the purchase price. Consequently, such counter-offer cannot be construed as evidencing Jorge's consent to or acceptance of the Kasunduan, for it is settled that where the other spouse's putative consent to the sale of the conjugal property appears in a separate document which does not contain the same terms and conditions as in the first document signed by the other spouse, a valid transaction could not have arisen. Neither can Jorge's subsequent letters be treated as a ratification of the Kasunduan, for a void contract is not susceptible to ratification. Nor can Jorge's alleged participation in the negotiation for the sale of the property or his acquiescence to Dolores' transfer to and possession of the subject property be treated as converting such continuing offer into a binding contract, as the law distinctly requires nothing less than a written consent to the sale for its validity. Participation in or awareness of the negotiations is not consent. A determination that the Kasunduan is void renders the other issues raised by Dolores academic, i.e., whether the doctrine of res judicata applies and whether the Spouses Cortez are buyers in bad faith.

• Possessor in Good Faith: While the Kasunduan was void from the beginning, Dolores is entitled to recover from the Spouses Leonardo the amount of PhP300,000 with legal interest until fully paid. Dolores acted in good faith in entering the subject property and building improvements on it. Ricardo represented that Jacinta and Jorge wanted to sell the subject property, and Dolores had no reason to believe that Ricardo and Jacinta were lying. Upon her own brother's prodding, Dolores willingly parted with her money and paid the down payment and later a portion of the remaining balance. The signatures of Jacinta and of Ricardo (as witness) as well as her successful entry to the property appear to have comforted Dolores that everything was in order. Article 526 of the Civil Code provides that she is deemed a possessor in good faith, who is not aware that there exists in her title or mode of acquisition any flaw that invalidates it. As possessor in good faith, Dolores is under no obligation to pay for her stay on the property prior to its legal interruption by a final judgment. She is further entitled under Article 448 to indemnity for the improvements introduced on the property with a right of retention until reimbursement is made. The Spouses Leonardo have the option under Article 546 of the Civil Code of indemnifying Dolores for the cost of the improvements or paying the increase in value which the property may have acquired by reason of such improvements.

• Void Disposition of Conjugal Property Without Written Consent — Under Article 124 of the Family Code, any alienation or encumbrance of conjugal property made by one spouse without the written consent of the other spouse or authority of the court is void. However, the transaction is construed as a continuing offer on the part of the consenting spouse and the third person, which may be perfected as a binding contract upon acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. In this case, the Kasunduan was void because Jorge did not sign it, and his subsequent letters constituted repudiation and counter-offer, not acceptance.

• Continuing Offer and Counter-Offer — A qualified acceptance that varies the terms of an offer on material points—such as the date of payment and the purchase price—constitutes a counter-offer and is a rejection of the original offer. Where the other spouse's putative consent to the sale of the conjugal property appears in a separate document which does not contain the same terms and conditions as in the first document signed by the other spouse, a valid transaction could not have arisen. In this case, Jorge's second letter varying the payment date and increasing the purchase price to PhP700,000 was a counter-offer, not acceptance.

• Void Contracts Not Susceptible to Ratification — A void contract is not susceptible to ratification. Jorge's subsequent letters could not be treated as ratification of the Kasunduan because the contract was void from the beginning for lack of written consent.

• Participation in Negotiations is Not Consent — Participation in or awareness of the negotiations for the sale of conjugal property is not the written consent required by law for its validity. Jorge's alleged participation in the negotiation or his acquiescence to Dolores' transfer to and possession of the subject property could not convert the continuing offer into a binding contract.

• Possessor in Good Faith — Under Article 526 of the Civil Code, a possessor in good faith is one who is not aware that there exists in his title or mode of acquisition any flaw that invalidates it. A possessor in good faith is under no obligation to pay for his stay on the property prior to its legal interruption by a final judgment, and is entitled under Article 448 to indemnity for improvements introduced on the property with a right of retention until reimbursement is made. The owner has the option under Article 546 of indemnifying the possessor for the cost of the improvements or paying the increase in value which the property may have acquired by reason of such improvements.

• "The law is therefore unequivocal when it states that the disposition of conjugal property of one spouse sans the written consent of the other is void. Here, it is an established fact that the Kasunduan was entered into solely by Jacinta and signed by her alone. By plain terms of the law therefore, the Kasunduan is void." — This passage states the core ratio decidendi: the Kasunduan is void for lack of Jorge's written consent under Article 124 of the Family Code.

• "Clearly, Jorge's first letter was an outright and express repudiation of the Kasunduan. The second letter, while ostensibly a demand for compliance with Dolores' obligation under the Kasunduan, varied its terms on material points, i.e., the date of payment of the balance and the purchase price. Consequently, such counter-offer cannot be construed as evidencing Jorge's consent to or acceptance of the Kasunduan." — This passage defines the continuing offer doctrine and explains why Jorge's letters constituted rejection and counter-offer, not acceptance.

• "Suffice to say that participation in or awareness of the negotiations is not consent." — This passage articulates the principle that mere participation in or awareness of negotiations does not satisfy the written consent requirement for the disposition of conjugal property.

• "Article 526 of the Civil Code provides that she is deemed a possessor in good faith, who is not aware that there exists in her title or mode of acquisition any flaw that invalidates it." — This passage establishes the basis for Dolores' status as a possessor in good faith and her entitlement to reimbursement and indemnity.

• Philippine National Bank vs. Philippine Milling Co., Inc., 136 Phil. 212 (1969) — Cited for the proposition that the provision on dismissal of appeal confers a power, not a duty, on the appellate court; the dismissal is directory, not mandatory.
• Natonton vs. Magaway, G.R. No. 147011, March 31, 2006, 486 SCRA 199 — Cited for the same proposition that dismissal of an appeal for technical non-compliance is directory, not mandatory, and not a ministerial duty of the appellate court.
• Abalos vs. Macatagay, Jr., G.R. No. 155043, September 30, 2004 — Cited for the rule that where the other spouse's putative consent to the sale of conjugal property appears in a separate document which does not contain the same terms and conditions as in the first document signed by the other spouse, a valid transaction could not have arisen.
• Jader-Manalo vs. Camaisa, et al., G.R. No. 147978, January 23, 2002, citing Tinitigan vs. Tinitigan, 100 SCRA 619 (1980) — Cited for the principle that participation in or awareness of the negotiations is not consent to the sale of conjugal property.
• Fuentes vs. Roca, et al., G.R. No. 178902, April 21, 2010 — Cited in support of the ruling that a possessor in good faith is entitled to indemnity for improvements with a right of retention, and the owner has the option under Article 546 of the Civil Code.

• Article 124, Family Code — Governs the administration and enjoyment of conjugal partnership property, requiring the written consent of both spouses for disposition or encumbrance of conjugal property. The Court applied this provision to declare the Kasunduan void for lack of Jorge's written consent, while recognizing the transaction as a continuing offer that could be perfected upon acceptance by the other spouse.
• Section 13, Rule 44, Rules of Court — Requires specific assignment of errors and page references in the appellant's brief. The Court held that dismissal for non-compliance is directory, not mandatory, and within the sound discretion of the appellate court.
• Section 1, Rule 50, Rules of Court — Provides that an appeal may be dismissed by the Court of Appeals upon the ground, among others, of absence of specific assignment of errors in the appellant's brief, or of page references to the record. The Court held that this provision confers a power, not a duty, on the appellate court.
• Article 526, Civil Code — Defines a possessor in good faith as one who is not aware that there exists in his title or mode of acquisition any flaw that invalidates it. The Court applied this to declare Dolores a possessor in good faith.
• Article 448, Civil Code — Entitles a possessor in good faith to indemnity for useful improvements introduced on the property with a right of retention until reimbursement is made. The Court applied this to grant Dolores the right to indemnity and retention.
• Article 546, Civil Code — Gives the owner the option of indemnifying the possessor in good faith for the cost of the improvements or paying the increase in value which the property may have acquired by reason of such improvements. The Court applied this to give the Spouses Leonardo the option of indemnity.

• Justice Velasco, Jr. (Chairperson)
• Justice Bersamin
• Justice Reyes
• Justice Jardeleza

N/A — The decision does not indicate any dissenting opinion.