Alexander vs. Spouses Escalona

The applicable law for determining the status of a contract and the prescriptive period of an action involving alienation or encumbrance of conjugal property without the other spouse's consent is reckoned from the date of the alienation or encumbrance, not the date of marriage. Alienations made before the Family Code's effectivity are voidable under Articles 166 and 173 of the Civil Code, with a ten-year prescriptive period; alienations made after are void under Article 124 of the Family Code, without prejudice to vested rights acquired before August 3, 1988, and the action for declaration of nullity may be filed before the continuing offer becomes ineffective.

Spouses Jorge Escalona and Hilaria Escalona were married on November 14, 1960, during the effectivity of the Civil Code, and their default property regime was the conjugal partnership of gains under Article 119 thereof. The Family Code, which took effect on August 3, 1988, expressly repealed Title VI, Book I of the Civil Code on Property Relations Between Husband and Wife, and its provisions were made to apply retroactively to existing conjugal partnerships without prejudice to vested rights already acquired under the Civil Code or other laws, pursuant to Articles 105, 254, 255, and 256 of the Family Code. The controversy required the Court to determine which law governed transactions over conjugal property executed after the Family Code's effectivity by spouses married under the Civil Code, and to harmonize potentially conflicting lines of jurisprudence on whether such transactions are void or merely voidable.

Spouses Jorge Escalona and Hilaria Escalona were married on November 14, 1960, under the Civil Code, and thereafter acquired unregistered parcels of land identified as Lot Nos. 1 and 2, with a combined area of 100,375 square meters, in Barangay Sta. Rita, Olongapo City. On June 16, 1998, Jorge executed a Waiver and Quitclaim over Lot No. 1 in favor of his illegitimate son, respondent Reygan Escalona, without the written consent of Hilaria. On July 28, 2005, Reygan relinquished his right over Lot No. 1 to petitioner Belinda Alexander through another Waiver and Quitclaim. On August 8, 2005, Reygan likewise purported to transfer Lot No. 2 to Belinda through a Deed of Renunciation and Quitclaim, notwithstanding that no document had ever conveyed Lot No. 2 from Spouses Escalona to Reygan. Two days later, on August 10, 2005, Reygan and Belinda executed a Deed of Absolute Sale covering both Lot Nos. 1 and 2 for P1,600,000.00.

Prior to the sale, on August 5, 2005, Spouses Escalona referred the controversy to the barangay, where they informed Belinda that Reygan had no authority to sell the lots. When Spouses Escalona confronted Belinda and explained that Reygan could not validly sell the properties, Belinda nevertheless invoked the legitimacy of her contracts with Reygan and pushed through with the transaction. On September 5, 2005, Spouses Escalona filed a complaint for annulment of documents with damages against Belinda and Reygan before the Regional Trial Court of Olongapo City, Branch 72, docketed as Civil Case No. 342-0-2005. They averred that they never transferred Lot No. 2 to any third person, that Hilaria did not consent to the waiver of rights over Lot No. 1, and that the transaction was not meant to convey ownership to Reygan.

Belinda sought dismissal on the grounds of laches and prescription, argued she was a buyer in good faith, and contended that Jorge's waiver of rights in favor of Reygan was unconditional. She also filed a cross-claim against Reygan and a third-party complaint against his mother, Teodora Bognot. Reygan, for his part, denied any deception, asserted he was already the owner of Lot No. 1 when he transferred it, and countered that Belinda was in bad faith for inducing him to sell the lots despite prior knowledge of the nature and ownership of the properties.

The RTC, in its Decision dated February 20, 2017, upheld the transactions and dismissed the complaint as time-barred under Article 1391 of the Civil Code, applying the parol evidence rule to reject Jorge's claim of a different intention behind the waiver. The CA reversed, ruling that the lots were conjugal, that the contracts were void for lack of Hilaria's consent under Article 124 of the Family Code, that the action was imprescriptible under Article 1410 of the Civil Code, and that Belinda was not a buyer in good faith. The CA declared void all four instruments but did not order reimbursement of the purchase price, stating only that Belinda may file a separate action against Reygan for the amounts she paid.

• Exclusive Ownership of Jorge: Petitioner maintained that Lot Nos. 1 and 2 belonged exclusively to Jorge and that the contracts over these lots were valid.
• Prescription: Petitioner argued that the action to annul the transactions had prescribed and that laches barred the complaint.
• Good Faith of Buyer: Petitioner asserted that she was a buyer in good faith entitled to the ownership and possession of the lots, invoking the legitimacy of her contracts with Reygan.
• Unconditional Waiver: Petitioner contended that Jorge's waiver of rights in favor of Reygan was unconditional and could not be varied by verbal agreements under the parol evidence rule.
• Conspiracy with Spouses Escalona: Petitioner suggested that Reygan may have committed fraud in conspiracy with Spouses Escalona.
• Reimbursement: Petitioner claimed that she was entitled to reimbursement of the purchase price if the contracts were declared void.

• Conjugal Nature of Properties: Respondents Spouses Escalona asserted that Lot Nos. 1 and 2 were conjugal properties acquired during their marriage, and that Hilaria did not consent to the waiver of rights over Lot No. 1.
• No Transfer of Lot No. 2: Respondents averred that they never transferred Lot No. 2 to any third person and that Reygan fraudulently sold the lot to Belinda.
• No Intent to Convey Ownership: Respondents insisted that the waiver of rights over Lot No. 1 was not meant to convey ownership to Reygan.
• Prior Notice to Belinda: Respondents argued that they informed Belinda at the barangay level on August 5, 2005 that Reygan had no authority to sell the lots, but she still pushed through with the sale, demonstrating bad faith.
• Non-Prescription: Respondents contended that their action had not yet prescribed, reiterating the lack of intention to convey ownership and bad faith on the part of Belinda.
• Reygan's Position: Respondent Reygan denied any deception, asserted he was already the owner of Lot No. 1 when he transferred it, and countered that Belinda was in bad faith for inducing him to sell despite prior knowledge of the nature and ownership of the properties.

• Applicable Law: Whether the applicable law governing the status of a contract and the prescriptive period of an action involving alienation of conjugal property without the other spouse's consent is reckoned from the date of marriage or the date of alienation.
• Nature of Properties: Whether Lot Nos. 1 and 2 are conjugal properties of Spouses Escalona.
• Validity of Lot No. 1 Alienation: Whether the alienation of Lot No. 1 without Hilaria's written consent is void under Article 124 of the Family Code, and whether the action to nullify it is imprescriptible.
• Validity of Lot No. 2 Alienation: Whether the alienation of Lot No. 2 is void or inexistent for lack of consent of both spouses, and whether the action to nullify it is imprescriptible.
• Good Faith of Buyer: Whether Belinda is a buyer in good faith.
• Prescription and Laches: Whether the action is barred by prescription or laches.
• Reimbursement: Whether Belinda is entitled to reimbursement of the purchase price from Reygan.

• Applicable Law: The applicable law is reckoned from the date of alienation, not the date of marriage. Alienations before the Family Code's effectivity are voidable under Articles 166 and 173 of the Civil Code; alienations after are void under Article 124 of the Family Code, without prejudice to vested rights.
• Nature of Properties: Yes. Lot Nos. 1 and 2 are conjugal properties under Article 160 of the Civil Code, the presumption of conjugality not having been rebutted by clear and convincing evidence.
• Validity of Lot No. 1 Alienation: Void under Article 124 of the Family Code, but the action to nullify is not imprescriptible under Article 1410 of the Civil Code; rather, it may be filed before the continuing offer becomes ineffective.
• Validity of Lot No. 2 Alienation: Inexistent under Article 1318 of the Civil Code for total absence of consent of both spouses, and the action to nullify is imprescriptible pursuant to Article 1410 of the Civil Code.
• Good Faith of Buyer: No. Belinda was not a buyer in good faith because she had notice of Jorge's marital status and of Spouses Escalona's adverse claim, yet failed to investigate the required spousal consent.
• Prescription and Laches: No. The action was not barred by prescription or laches, Spouses Escalona never slept on their rights as lawful owners.
• Reimbursement: Yes. Belinda is entitled to reimbursement of the P1,600,000.00 purchase price from Reygan, ordered directly in this decision in the interest of judicial economy.

• Applicable Law: The Court identified a recurring conflict in jurisprudence regarding whether alienations of conjugal property without spousal consent are void or voidable. In Spouses Cueno vs. Spouses Bautista, the En Banc Court adopted the view that a sale failing to comply with Article 166 of the Civil Code is merely voidable under Article 173, and abandoned contrary cases. However, the Court observed that Cueno and all cases it cited and overturned shared an identical factual setting: both the marriage and the alienation transpired before the Family Code's effectivity. Cases such as Spouses Aggabao vs. Parulan, Jr., Spouses Fuentes vs. Roca, and Guiang vs. CA, where the marriage was under the Civil Code but the alienation occurred after the Family Code, were never discussed or mentioned in Cueno and were not overturned. The Family Code expressly repealed Title VI, Book I of the Civil Code (Article 254) and applies retroactively to existing conjugal partnerships without prejudice to vested rights (Articles 105 and 256). Accordingly, the Court held that the date of alienation—not the date of marriage—is the determinative factor: alienations before August 3, 1988 are voidable under Articles 166 and 173 of the Civil Code with a ten-year prescriptive period; alienations after are void under Article 124 of the Family Code, and the action for declaration of nullity may be filed before the continuing offer contemplated in Article 124 becomes ineffective.

• Nature of Properties: Article 119 of the Civil Code establishes conjugal partnership of gains as the default property regime for spouses married without marriage settlements. Article 160 of the Civil Code presumes all property of the marriage to belong to the conjugal partnership unless proved to pertain exclusively to one spouse. The burden of proof rests on the party asserting exclusive ownership. Belinda failed to substantiate her claim that Jorge exclusively owned the lots; bare assertion has no probative value and mere allegation is not evidence. The presumption of conjugality thus stands unrebutted.

• Validity of Lot No. 1 Alienation: The Waiver and Quitclaim dated June 16, 1998, executed by Jorge in favor of Reygan, was made after the Family Code's effectivity and without Hilaria's written consent. Article 124 of the Family Code provides that disposition or encumbrance of conjugal property without court authority or the written consent of the other spouse is void. The waiver was akin to a sale or disposition, as Jorge renounced all rights and interests over Lot No. 1. Because the transaction occurred in 1998—after August 3, 1988—Article 124 governs, not Articles 166 and 173 of the Civil Code. No vested right was acquired before the Family Code took effect, as the transactions occurred in 1998 and 2005. Moreover, the interest of each spouse in conjugal assets is inchoate, a mere expectancy that does not ripen into title until liquidation and settlement of the conjugal partnership; Jorge's marriage to Hilaria was still subsisting in 1998, so it could not yet be determined which conjugal assets belonged to him. The inchoate interest is incompatible with the concept of vested rights. However, the action to nullify is not imprescriptible under Article 1410, because the nature and remedy of Article 124 transactions are distinct from void and inexistent contracts under Article 1409. Article 124 provides that the void transaction is construed as a continuing offer that may be perfected upon acceptance by the non-consenting spouse or court authorization before withdrawal; under Article 1323 of the Civil Code, the offer becomes ineffective upon the death of either party before acceptance. Thus, the action for declaration of nullity may be filed before the continuing offer becomes ineffective.

• Validity of Lot No. 2 Alienation: It is undisputed that Spouses Escalona never transferred Lot No. 2 to Reygan; Jorge's waiver pertained only to Lot No. 1. Neither Jorge nor Hilaria consented to any transfer of Lot No. 2. Article 1318 of the Civil Code requires consent of the contracting parties as an essential requisite of a valid contract; the absence of consent renders the contract void and inexistent. Reygan never acquired ownership of Lot No. 2 and could convey nothing to Belinda—nemo dat quod non habet. The transfer was made without the consent of both spouses, so neither Articles 166 and 173 of the Civil Code nor Article 124 of the Family Code need be applied; the contract is simply inexistent for lack of an essential element. The action to nullify is imprescriptible under Article 1410 of the Civil Code, as the contract has no force and effect from the very beginning and cannot be validated by ratification or prescription.

• Good Faith of Buyer: Belinda could not qualify as a buyer in good faith. She merely stepped into the shoes of Reygan, whose rights were anchored on ineffective instruments. The Waiver and Quitclaim dated June 16, 1998 described Jorge as "married," but the conformity of his wife did not appear in the deed, which should have placed Belinda on guard and prompted inquiry into whether Jorge's wife had consented. Belinda also pushed through with the sale notwithstanding prior knowledge of Spouses Escalona's adverse claim, conveyed at the barangay level on August 5, 2005. The rule on good faith of a buyer of realty is relevant only where the subject is registered land sold by the registered owner with clean title; this case involves unregistered land. Even assuming Hilaria knew of the contracts, mere awareness is insufficient—the congruence of the wills of the spouses, manifested through written consent, is essential for valid disposition.

• Prescription and Laches: There is no reason for laches to apply, as Spouses Escalona never slept on their rights as lawful owners of the lots. As an equitable doctrine, laches cannot work to defeat justice or perpetrate fraud. The action to nullify the void alienation of Lot No. 1 under Article 124 may be filed before the continuing offer becomes ineffective; the action to nullify the inexistent transfer of Lot No. 2 is imprescriptible under Article 1410.

• Reimbursement: The duty of restitution arises when the ground justifying retention of payment ceases, pursuant to Article 22 of the Civil Code. The objective is to prevent unjust enrichment. It would be inequitable for Reygan to retain the P1,600,000.00 received from Belinda. Rather than requiring Belinda to file a separate suit, the Court ordered the reimbursement directly, in view of Reygan's admission of receipt of the purchase price, consistent with judicial economy to avoid further delay and circuitous litigation.

• Determinative Date for Applicable Law in Conjugal Property Alienations — The applicable law governing the status of a contract and the prescriptive period for actions involving alienation or encumbrance of conjugal property without the other spouse's consent is reckoned from the date of alienation, not the date of marriage. Two rules were established: (1) Alienation before the Family Code's effectivity (August 3, 1988) without the wife's consent is not void but merely voidable under Articles 166 and 173 of the Civil Code; the wife may file an action for annulment within ten years from the transaction. (2) Alienation after the Family Code's effectivity without court authority or the written consent of the other spouse is void under Article 124 of the Family Code, without prejudice to vested rights acquired before August 3, 1988; unless accepted by the non-consenting spouse or authorized by the court, an action for declaration of nullity may be filed before the continuing offer becomes ineffective.

• Presumption of Conjugality — Under Article 160 of the Civil Code, all property of the marriage is presumed to belong to the conjugal partnership unless proved to pertain exclusively to one spouse. The presumption may be rebutted only by clear and convincing evidence, and the burden rests on the party asserting exclusive ownership. Bare assertion has no probative value; mere allegation is not evidence.

• Inchoate Interest of Spouses in Conjugal Assets — Before liquidation of the conjugal partnership, the interest of each spouse in conjugal assets is inchoate, a mere expectancy constituting neither a legal nor an equitable estate, which does not ripen into a title until it appears that there are net assets after liquidation and settlement. The right to one-half of conjugal assets does not vest until dissolution and liquidation. This inchoate interest is incompatible with the concept of vested rights.

• Continuing Offer Doctrine under Article 124 of the Family Code — A void disposition or encumbrance of conjugal property under Article 124 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 court authorization before the offer is withdrawn. Under Article 1323 of the Civil Code, the offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed. The nature, effect, and availability of the remedy under Article 124 are distinct from void and inexistent contracts under Article 1409 in relation to Article 1410 of the Civil Code.

• Nemo Dat Quod Non Habet — A person can sell only what he owns or is authorized to sell; the buyer acquires no more than what the seller can legally transfer. Contracts involving the sale or mortgage of unregistered property by a person who was not the owner or by an unauthorized person are void.

• Vested Rights Exception to Retroactive Application of the Family Code — A vested right is a present fixed interest that is immediate, absolute, and unconditional, whose existence, effectivity, and extent do not depend upon events foreign to the will of the holder. The retroactive application of the Family Code to existing conjugal partnerships is without prejudice to vested rights acquired before August 3, 1988. A new law cannot be invoked to prejudice or affect a right which has become vested while the old law was still in force.

• "At this juncture, the Court holds that more than the date of the marriage of the spouses, the applicable law must be reckoned on the date of the alienation or encumbrance of the conjugal property made without the consent of the other spouse." — This is the Court's definitive ruling establishing the controlling principle for determining the applicable law in cases involving alienation of conjugal property without spousal consent, resolving the conflict between the Civil Code and Family Code regimes.

• "The alienation or encumbrance of the conjugal property, without the authority of the court or the written consent of the other spouse, made after the effectivity of the Family Code is void. The applicable law is Article 124 of the Family Code without prejudice to vested rights in the property acquired before August 3, 1988. Unless the transaction is accepted by the non-consenting spouse or is authorized by the court, an action for declaration of nullity of the contract may be filed before the continuing offer on the part of the consenting spouse and the third person becomes ineffective." — This passage articulates the second prong of the two-part test established by the Court, defining the status, remedy, and prescriptive framework for post–Family Code alienations of conjugal property.

• "The inchoate interest of either spouse before the dissolution of the conjugal partnership is incompatible to the concept of vested rights." — This statement establishes that a spouse's expectancy in conjugal assets cannot constitute a vested right exempt from the retroactive application of the Family Code, a principle central to the Court's rejection of Belinda's vested-rights argument.

• "The nature, effect, and availability of the remedy in transactions under Article 124 of the Family Code are distinct from void and inexistent contracts under Article 1409 in relation to Article 1410 of the Civil Code." — This passage distinguishes the prescriptive framework for Article 124 void transactions from that of inexistent contracts, clarifying that the action to nullify an Article 124 void alienation is not imprescriptible under Article 1410 but may be filed before the continuing offer becomes ineffective.

• Spouses Cueno vs. Spouses Bautista, G.R. No. 246445, March 2, 2021 — En Banc decision that settled the conflict on whether alienations of conjugal property without the wife's consent under Article 166 of the Civil Code are void or voidable, adopting the view that such transactions are merely voidable under Article 173. The present case clarified that Cueno applied only where both the marriage and the alienation transpired before the Family Code's effectivity, and did not abandon cases applying Article 124 of the Family Code to post-effectivity alienations.

• Spouses Aggabao vs. Parulan, Jr., 644 Phil. 26 (2010) — Followed. Held that Article 124 of the Family Code, not Article 173 of the Civil Code, governs when the alienation of conjugal property transpired after the Family Code's effectivity even if the spouses were married under the Civil Code, because the Family Code applies retroactively to existing conjugal partnerships without prejudice to vested rights.

• Spouses Fuentes vs. Roca, 633 Phil. 9 (2010) — Followed. The ratio decidendi remains that any alienation of conjugal property made after the Family Code's effectivity is void under Article 124, although the spouses were married under the Civil Code. The Cueno decision merely discussed an obiter dictum from Fuentes regarding Article 173; it did not overturn Fuentes.

• Guiang vs. CA, 353 Phil. 578 (1998) — Followed. Held that the sale of conjugal property requires the consent of both spouses and that the absence of one spouse's consent renders the entire sale null and void under Article 124 of the Family Code. Cueno cited Guiang only to stress that the remedies under Article 173 were not carried over to the Family Code.

• Esteban vs. Campano, G.R. No. 235364, April 26, 2021 — Harmonized. Although Esteban discussed Cueno in a case where the alienation occurred after the Family Code, it explicitly held that Articles 166 and 173 do not apply and declared the transactions void for being sham transfers lacking consideration. The present case clarified that Esteban's discussion of Cueno did not abandon Fuentes and allied cases applying Article 124.

• Spouses Anastacio, Sr. vs. Heirs of Coloma, G.R. No. 224572, August 27, 2020 — Cited on the continuing offer doctrine under Article 124, where the Court rendered the continuing offer impossible due to the death of the non-consenting spouse, applying Article 1323 of the Civil Code on the ineffectiveness of an offer upon death before acceptance.

• Article 124, Family Code — Provides that administration and enjoyment of conjugal partnership property belong to both spouses jointly, and that disposition or encumbrance without court authority or the written consent of the other spouse is void, though construed as a continuing offer. Applied as the governing law for the alienation of Lot No. 1, which occurred in 1998—after the Family Code's effectivity—without Hilaria's written consent.

• Articles 166 and 173, Civil Code — Article 166 prohibits the husband from alienating or encumbering conjugal real property without the wife's consent; Article 173 gives the wife ten years from the transaction to seek annulment. Applied to alienations made before the Family Code's effectivity, rendering such transactions voidable, not void. Held inapplicable to the present case because the alienation of Lot No. 1 occurred after August 3, 1988.

• Article 119, Civil Code — Establishes conjugal partnership of gains as the default property regime absent marriage settlements. Applied to determine that the default property relations of Spouses Escalona, married in 1960, was the conjugal partnership of gains.

• Article 160, Civil Code — Presumes all property of the marriage to belong to the conjugal partnership unless proved to pertain exclusively to one spouse. Applied to establish the conjugal nature of Lot Nos. 1 and 2, the presumption not having been rebutted by Belinda.

• Article 1318, Civil Code — Requires consent of the contracting parties, object certain, and cause of obligation as essential requisites of a valid contract. Applied to declare the alienation of Lot No. 2 inexistent, as neither spouse consented to any transfer of Lot No. 2 to Reygan.

• Article 1410, Civil Code — Provides that an action or defense for declaration of the inexistence of a contract does not prescribe. Applied to the alienation of Lot No. 2, which was inexistent for total absence of consent; held inapplicable to the Article 124 void alienation of Lot No. 1, whose remedy is distinct.

• Articles 105, 254, 255, and 256, Family Code — Article 254 repeals the Civil Code provisions on property relations between spouses; Articles 105 and 256 provide for retroactive application to existing conjugal partnerships without prejudice to vested rights. Applied to establish the Family Code's retroactive effect over Spouses Escalona's conjugal partnership, subject to vested rights, which Reygan and Belinda failed to demonstrate.

• Article 22, Civil Code — Provides that every person who acquires or comes into possession of something at the expense of another without just or legal ground shall return the same. Applied as the basis for ordering Reygan to reimburse Belinda the P1,600,000.00 purchase price to prevent unjust enrichment.

Gesmundo, C.J., Leonen, SAJ., Hernando, Inting, Zalameda, Gaerlan, Rosario, J. Lopez, Dimaampao, Marquez, Kho, Jr., and Singh, JJ., concurred. Caguioa, J., filed a concurring opinion. Lazaro-Javier, J., filed a concurring opinion.