Aliguyon vs. Dummang

An oral sale of conjugal real property by the husband without the wife's consent is not void but merely voidable under Articles 166 and 173 of the New Civil Code, and becomes binding if the wife fails to seek annulment within ten years from the transaction; the sale is further removed from the Statute of Frauds when it has been partially executed through delivery and payment, and novation is validly effected when a father assumes his son's debt with the creditor's consent, substituting the object and debtor of the original obligation.

Buyayo Aliguyon is the registered owner of a 31,850-square-meter parcel of land in Didipio, Kasibu, Nueva Vizcaya, covered by OCT No. P-10995. The respondents — Jeffrey, Donato, Johnny, and Minda Dummang — are the children and daughter-in-law of Kiligge Dummang, whom Buyayo had allowed to occupy a portion of the subject land in 1968. The marriage of Buyayo and Maria Aliguyon was celebrated prior to the effectivity of the Family Code on August 3, 1988, placing their property relationship under the conjugal partnership of gains regime of the New Civil Code. The dispute arose from an alleged indebtedness of Buyayo's son, Robert, to Jeffrey involving 72 grams of gold borrowed in 1983, and the subsequent purported settlement of that debt through the conveyance of a one-hectare portion of the subject land in 1986.

Buyayo Aliguyon is the registered owner of a 31,850-square-meter parcel of land located in Didipio, Kasibu, Nueva Vizcaya, covered by Original Certificate of Title No. P-10995. In 1968, he allowed Kiligge Dummang, the father of respondents Jeffrey, Donato, and Johnny Dummang, to occupy a portion of the land. After some time, the Dummang family left the property, but they later returned and asked Buyayo's son, Robert Aliguyon, for permission to occupy a one-hectare portion. Robert permitted them to stay, but Buyayo claimed he was not present and did not consent to the arrangement. Buyayo asserted that he only learned of the purported agreement when the Dummangs sued Robert for breach of contract to convey a one-hectare portion as payment for Robert's alleged indebtedness.

The Dummang et al. presented a different account. According to their verified answer, in 1983, Robert received 72 grams of gold from Jeffrey with a promise to return the same quantity and quality within a reasonable time. Despite repeated demands, Robert failed to return the gold. When Jeffrey went to collect, Buyayo allegedly offered to give a one-hectare portion of the subject land as payment for his son's debt, provided Jeffrey would pay an additional PHP 8,000.00. Jeffrey agreed but asked for time to produce the amount. In April or May 1986, the agreement was settled in the presence of elders of the Twali-Ifugao tribe, the metes and bounds of the area were established, and the Dummangs took possession of the one-hectare portion. A written agreement was prepared by a council member, Josephine Ansibey, and the PHP 8,000.00 was handed to Buyayo. The document evidencing the agreement was allegedly lost. Jeffrey, who is illiterate, occupied the land in the concept of an owner together with his siblings Donato, Johnny, and Johnny's wife, Minda. Jeffrey thereafter filed a complaint with the barangay to compel segregation of the one-hectare portion, but conciliation proceedings failed.

Buyayo instituted a complaint for recovery of possession with damages. In their answer, the Dummangs pleaded a counterclaim that Buyayo be ordered to execute a deed of sale over the one-hectare portion and to pay damages and litigation costs. The RTC found that Buyayo himself sold the property to extinguish his son's debt, that Buyayo slept on his rights by allowing the Dummangs to possess the property exclusively, peacefully, and publicly in the concept of an owner since 1986, and that alienation of conjugal property without the wife's consent is not void under Article 166 of the New Civil Code. The CA affirmed, finding that novation occurred when the loan was modified into a sale, that the Statute of Frauds did not apply because the oral sale was partially executed through delivery and payment, and that the sale without Maria's consent was merely voidable and had not been annulled within ten years.

• Ownership Admitted: Petitioner argued that his ownership over the one-hectare portion of the subject property was admitted by the parties, thereby shifting the burden to Dummang et al. to prove their claim.
• Lack of Valid Novation: Petitioner maintained that there was no novation because the consent of Buyayo and Maria was not obtained.

• Valid Novation: Respondent reiterated that there was a valid novation when Buyayo sold the one-hectare portion in exchange for the extinguishment of Robert's debt and PHP 8,000.00.
• Statute of Frauds Inapplicable: Respondent argued that the Statute of Frauds does not apply to completed, executed, or partially executed contracts.
• Sale Merely Voidable: Respondent contended that the sale of conjugal property without the wife's consent is voidable pursuant to Articles 166 and 173 of the New Civil Code, not void.

• Novation: Whether there was a valid novation when Buyayo assumed the debt of the original debtor, Robert.
• Statute of Frauds: Whether the oral sale of the subject land is covered by the Statute of Frauds.
• Conjugal Property: Whether the sale of the subject land, a conjugal property of Buyayo and Maria, is void due to the absence of the consent of Maria.

• Novation: Yes. Novation was validly effected when Buyayo, with the creditor Jeffrey's consent, substituted Robert as debtor and changed the object of the obligation from the return of gold to the conveyance of a one-hectare portion of land plus PHP 8,000.00, the new obligation being incompatible with the original.

• Statute of Frauds: No, the oral sale is not covered by the Statute of Frauds. The agreement had already been partially executed — the land was delivered to and possessed by the Dummangs, and Jeffrey had already paid the PHP 8,000.00 consideration — removing it from the ambit of the Statute of Frauds, which applies only to executory contracts.

• Conjugal Property: No, the sale is not void. Under Articles 166 and 173 of the New Civil Code, the sale of conjugal property by the husband without the wife's consent is merely voidable, and since Maria did not institute an action for annulment within ten years from the 1986 transaction, the sale remains binding between the parties.

• Novation: Novation is a mode of extinguishing an obligation through its modification and replacement by a subsequent one, achievable by changing the object or principal conditions, substituting the debtor, or subrogating a third person in the rights of the creditor. Under Article 1293, substitution of the debtor requires the creditor's consent but may be made without the debtor's knowledge. While novation is never presumed and must be clearly shown by express agreement or acts of equal import, the subsequent acts and conduct of the parties here demonstrated the objective of novation: Jeffrey gave additional payment accepted by Buyayo, and the Dummangs were allowed to take possession and introduce improvements. The new agreement — Buyayo conveying a one-hectare portion in exchange for extinguishment of Robert's obligation and PHP 8,000.00 — is incompatible and inconsistent with Robert's original obligation to return the gold, thus establishing novation.

• Statute of Frauds: Article 1358 of the New Civil Code requires acts and contracts involving real rights over immovable property to appear in a public document, and Article 1403(2)(e) provides that agreements for the sale of real property are unenforceable unless in writing. However, the Statute of Frauds applies only to executory contracts and not to those fully or partially executed. As the CA determined, the subject land was already delivered to the Dummangs and Jeffrey had already performed his obligation by paying the PHP 8,000.00 consideration. Taking possession of the property and making improvements thereon serve as indicators that an oral sale of land had already been executed, thus removing the agreement from the coverage of the Statute of Frauds.

• Conjugal Property: The marriage of Buyayo and Maria was celebrated prior to the effectivity of the Family Code on August 3, 1988, so the conjugal partnership of gains under the New Civil Code governs their property regime. Under Article 166, the husband cannot alienate conjugal real property without the wife's consent. Read with Article 173, which gives the wife the right to seek annulment of any contract entered into by the husband without her consent within ten years from the transaction, a sale of conjugal property without the wife's consent is voidable, not void. Voidable contracts are binding unless annulled through proper court action and are susceptible of ratification. Since Maria neither questioned nor sought annulment of the transfer within ten years from the 1986 sale, the sale remains binding between the parties.

• Novation; Substitution of Debtor — Novation through substitution of the debtor requires the creditor's consent under Article 1293 of the New Civil Code, but may be effected without the debtor's knowledge (expromision) or with the debtor's offer and creditor's acceptance of a third party who assumes the obligation (delegacion). Novation is never presumed and must be clearly shown by express agreement or acts of equal import; the old and new obligations must be incompatible on every point for novation to be implied. In this case, the incompatibility between Robert's original obligation to return gold and the new obligation of Buyayo to convey land extinguished the former.

• Statute of Frauds; Partially Executed Contracts — The Statute of Frauds under Articles 1403(2) and 1405 of the New Civil Code requires agreements for the sale of real property to be in writing, but applies only to executory contracts and not to those fully or partially executed. Delivery of the property and payment of the consideration constitute partial execution, removing the oral sale from the Statute's coverage. Possession and improvement of the land serve as indicators that an oral sale has been performed or executed.

• Conjugal Partnership of Gains; Alienation Without Wife's Consent — Under the New Civil Code, which governs marriages celebrated before August 3, 1988, the sale of conjugal real property by the husband without the wife's consent is voidable, not void, pursuant to Articles 166 and 173. The wife may seek annulment during the marriage and within ten years from the transaction. Failure to institute such action renders the sale binding. Voidable contracts are susceptible of ratification and remain binding unless annulled through proper court action.

• "Novation must be stated in clear and unequivocal terms to extinguish an obligation. It cannot be presumed and may be implied only if the old and new contracts are incompatible on every point." — This passage, quoting Arco Pulp and Paper Co., Inc. vs. Lim, articulates the standard for implying novation and was applied to find that the incompatibility between the gold-loan obligation and the land-sale obligation established novation.

• "The Statute of Frauds applies only to executory contracts and not to those which have been executed either fully or partially." — This formulation, cited from Heirs of Alido vs. Campano, defines the scope of the Statute of Frauds and was the basis for excluding the partially executed oral sale from its coverage.

• "Reconciling Articles 166 and 173 of the New Civil Code, it is settled that a sale of real property of the conjugal partnership made by the husband without the consent of his wife is voidable and the wife is given the right to have the sale annulled during the marriage within 10 years from the date of the sale." — This passage synthesizes the interplay between Articles 166 and 173, establishing that alienation of conjugal property without the wife's consent is voidable rather than void, a distinction critical to the validity of the 1986 sale.

• Food Fest Land, Inc. vs. Siapno, 848 Phil. 55 (2019) — Cited for the definition of novation as a mode of extinguishing an obligation through modification and replacement, and the principle that the obligation ceases to exist as a new one bearing the agreed modifications takes its place.

• Ajax Marketing Development Corporation vs. Court of Appeals, 318 Phil. 268 (1995) — Cited for the doctrine that novation is never presumed and will not be allowed unless clearly shown by express agreement or acts of equal import.

• Arco Pulp and Paper Co., Inc. vs. Lim, 737 Phil. 133 (2014) — Cited for the principle that novation must be stated in clear and unequivocal terms and may be implied only if the old and new contracts are incompatible on every point.

• Heirs of Alido vs. Campano, 858 Phil. 209 (2019) — Cited for the rule that the Statute of Frauds applies only to executory contracts and not to those fully or partially executed.

• Spouses Cueno vs. Spouses Bautista, G.R. No. 246445, March 2, 2021 — Cited for the settled doctrine reconciling Articles 166 and 173 of the New Civil Code, holding that a sale of conjugal real property by the husband without the wife's consent is voidable.

• Article 1291, New Civil Code — Defines novation as a mode of extinguishing an obligation through modification, listing three modes: changing the object or principal conditions, substituting the debtor, or subrogating a third person in the rights of the creditor.

• Article 1293, New Civil Code — Provides that novation by substituting a new debtor may be made without the knowledge of or against the will of the original debtor, but not without the consent of the creditor. Applied to validate the substitution of Buyayo as debtor with Jeffrey's consent.

• Article 1356, New Civil Code — States that contracts are obligatory in whatever form entered into provided all essential requisites are present, but when the law requires a certain form, such requirement is absolute and indispensable.

• Article 1358, New Civil Code — Enumerates acts and contracts that must appear in a public document, including those involving the creation, transmission, modification, or extinguishment of real rights over immovable property.

• Article 1403(2)(e), New Civil Code — Provides that agreements for the sale of real property or an interest therein are unenforceable unless in writing, constituting the Statute of Frauds provision on real property sales.

• Article 1405, New Civil Code — Provides that contracts infringing the Statute of Frauds are ratified by failure to object to oral evidence or by acceptance of benefits under them.

• Article 166, New Civil Code — Provides that the husband cannot alienate or encumber conjugal real property without the wife's consent, unless the wife has been declared non compos mentis, a spendthrift, under civil interdiction, or confined in a leprosarium.

• Article 173, New Civil Code — Gives the wife the right to seek annulment of any contract of the husband entered into without her consent during the marriage and within ten years from the transaction, providing the prescriptive period for challenging such alienation.

• Article 1390, Civil Code of the Philippines — Classifies voidable contracts, which are susceptible of ratification and binding unless annulled through proper court action.

Leonen, SAJ., Lazaro-Javier, and Kho, Jr., JJ., concurred.