Borja vs. Addison

A sheriff's execution sale conducted without the notice prescribed by the Code of Civil Procedure is absolutely void where the judgment creditor induced the defective publication and the purchaser is the judgment creditor; and a sale of community property by a surviving husband registered in his name is valid and effective as against third persons dealing in good faith, in the absence of fraud, collusion, or notice of the heirs' rights.

Eulalio Belisario acquired two parcels of land totaling over 326 hectares in the barrio of San Francisco, municipality of Umingan, Pangasinan, through informacion posesoria proceedings under articles 19–21 of the Royal Decree of February 13, 1894, recorded under the Mortgage Law. He occupied and began cultivating the smaller parcel in 1880 and the larger one in 1882. He was married to Paula Ira, who died on February 13, 1913, leaving their son Maximo Belisario as sole heir. After Paula's death, Eulalio and Maximo occupied and administered the lands in common. The lands were subject to a series of execution sales, tax forfeiture, and repurchase transactions involving the judgment creditor C. H. McClure, represented by Peter W. Addison, and a sale with right to repurchase from Eulalio Belisario to Basilio Borja. The case arose from Borja's petition for registration of the land under Act No. 496 (the Land Registration Act), opposed by Addison and by Adelina Ferrer (the widow of Maximo Belisario) and her three children.

Eulalio Belisario acquired two parcels of land in the barrio of San Francisco, Umingan, Pangasinan, totaling over 326 hectares, through informacion posesoria proceedings under the Royal Decree of February 13, 1894, recorded under the Mortgage Law. He occupied and began cultivating the smaller parcel in 1880 and the larger one in 1882. He was married to Paula Ira, and the lands were probably community property of the marriage, though this did not appear from the record of the informacion posesoria proceedings or any other document in evidence. On December 20, 1909, Belisario conveyed the two parcels to Jose Castillo, reserving the right to repurchase for ₱550 within five months and two days. Paula Ira died on February 13, 1913, leaving their son Maximo Belisario as sole heir. Thereafter, Eulalio and Maximo occupied and administered the lands in common.

On August 25, 1913, and on subsequent dates, the lands were forfeited to and confiscated by the Government for non-payment of taxes. Beginning in July 1916, a series of execution proceedings were initiated in the justice of the peace court of Dagupan in civil cases involving C. H. McClure as judgment creditor against Eulalio and Maximo Belisario. In civil case No. 435, an order of attachment was issued on July 5, 1916, and served on the Belisarios on July 31, 1916. On October 14, 1916, pursuant to a writ of execution, the attached lands were sold at public auction to McClure, represented by Addison. On the same date, in civil case No. 450, Eulalio Belisario's statutory right of redemption in case No. 435 was sold to McClure, again represented by Addison. Neither sale was recorded in the registry of deeds. On November 14, 1916, in civil case No. 454, levy was made upon Eulalio Belisario's undivided half of the two parcels. On February 10, 1917, pursuant to an alias writ of execution in case No. 454, McClure, represented by Addison, purchased at execution sale Eulalio Belisario's undivided half and all rights, title, and interests in both parcels; this sale was recorded in the registry on March 14, 1917.

Meanwhile, on December 13, 1916, pursuant to a decision of the Supreme Court in Castillo vs. Belisario (35 Phil., 89), Jose Castillo executed a deed of resale of the two parcels in favor of Eulalio Belisario. On January 19, 1917, Eulalio Belisario executed a deed of sale with right to repurchase in favor of Basilio Borja for ₱7,500, with an eighteen-month repurchase period. When this deed was presented for record on January 26, 1917, inscription was refused because Castillo's prior conveyance had not been cancelled on the record. The Castillo-to-Belisario resale was recorded on February 26, 1917. Borja's deed was eventually reinstated in the day-book on November 12, 1917, upon instructions from a judge of the Court of First Instance of Manila, and recorded in the registry.

On March 30, 1917, Addison purchased at sheriff's sale in civil case No. 499 the undivided half belonging to Maximo Belisario and all rights of both defendants in both parcels; this sale was recorded on April 18, 1917. On January 21, 1919, the Director of Lands authorized Addison to repurchase the forfeited lands under section 19 of Act No. 1791, and a certificate of repurchase was issued on June 4, 1919. On March 12, 1919, Eulalio Belisario not having exercised his right of repurchase, Borja's affidavit for consolidacion de dominio was recorded. Addison obtained final sheriff's deeds and quit-claim from McClure, and possession was delivered to him on June 25, 1918. In all the execution sales, Addison prepared the notices and arranged for publication, and in none of the sales was the notice published more than twice in a newspaper. The newspaper was a weekly periodical published every Saturday afternoon.

Borja filed a petition for registration of the two parcels under Act No. 496. Addison opposed, resting his title on the execution sales and their priority of inscription, and on the repurchase from the Director of Lands. Adelina Ferrer, the widow of Maximo Belisario, opposed on behalf of herself and her three minor children, contending that the lands were community property of the marriage of Eulalio Belisario and Paula Ira, and that Eulalio could not validly convey more than his own undivided share. The Court of First Instance of Pangasinan ordered the registration in Borja's name, and Addison and Ferrer appealed.

• Title Through Execution Sales: Addison argued that his title rested on the sheriff's execution sales in civil cases Nos. 435, 450, 454, and 499, with the priority of inscription of the last two sales in the registry of deeds prevailing over the sale from Belisario to Borja.
• Title Through Repurchase from the Government: Addison alternatively argued that he validly repurchased the forfeited lands from the Director of Lands under the final proviso of section 19 of Act No. 1791, as the successor in interest of the original owner through the execution sales.
• Community Property and Lack of Authority to Sell: Ferrer maintained that the lands were community property of the marriage of Eulalio Belisario and Paula Ira; that upon Paula's death, the joint administration by Eulalio and Maximo formed a new community of property that extinguished the prior conjugal community; that Eulalio's special rights as liquidator terminated; and that Eulalio could not dispose of more than his own undivided share, leaving Maximo's half unaffected by the sale to Borja.

• Validity of Execution Sales: Whether the sheriff's execution sales in favor of Addison were valid notwithstanding insufficient publication of the notices of sale.
• Validity of Repurchase from the Director of Lands: Whether Addison's repurchase of the forfeited lands from the Director of Lands under Act No. 1791 was valid.
• Effect of Priority of Inscription: Whether the priority of inscription of the sheriff's sales in the registry of deeds prevailed over the sale from Belisario to Borja.
• Validity of Sale of Community Property by Surviving Husband: Whether the sale by Eulalio Belisario to Basilio Borja validly conveyed the entire fee, including the share belonging to the heirs of the deceased wife Paula Ira.

• Validity of Execution Sales: No. The sheriff's sales were absolutely void for want of sufficient publication of the notices of sale as required by section 454 of the Code of Civil Procedure, the defect being compounded by Addison's role as judgment creditor or his agent in preparing and publishing the notices.
• Validity of Repurchase from the Director of Lands: No. Addison acquired no rights under the void execution sales and was therefore not a successor in interest of the original owner; a valid conveyance from the Government required following the procedure prescribed by the Public Land Act for the sale of public lands.
• Effect of Priority of Inscription: No. Void sheriff's or execution sales cannot be validated through inscription in the Mortgage Law registry; the priority of record was of no importance.
• Validity of Sale of Community Property by Surviving Husband: Yes. The sale from Eulalio Belisario to Borja conveyed the whole fee, the land being registered in Belisario's name and Borja having no notice of Maximo Belisario's participation in administration or claim of ownership.

• Validity of Execution Sales: Section 454 of the Code of Civil Procedure requires, for the sale of real property, posting of notice for twenty days in three public places and publication once a week for the same period in a newspaper published or having general circulation in the province, provided the assessed valuation exceeds ₱400. In the present case, there was a newspaper published in the province and the assessed valuation of the property at each sale exceeded ₱400. In cases Nos. 435 and 450, the notice was published only twice—on October 7 and October 14, the date of sale itself—in a weekly newspaper published every Saturday afternoon. In case No. 454, only two publications were made, the first only fourteen days before the sale. In case No. 499, only two publications were made, the first thirteen days before the sale, and the sale was advertised for hours (8:30 a.m. to 4:30 p.m.) violating section 457 of the Code of Civil Procedure. Addison prepared the notices and took charge of publication, and was either the judgment creditor or occupied an analogous position. Under the doctrine in Campomanes vs. Bartolome and Germann & Co. (38 Phil., 808), where a sheriff sells without the prescribed notice, induced thereto by the judgment creditor, and the purchaser is the judgment creditor, the sale is absolutely void and no title passes. This was regarded as settled doctrine.

• Validity of Repurchase from the Director of Lands: Section 19 of Act No. 1791 provides that upon forfeiture for non-payment of taxes, the Director of Lands shall have control and custody of the property to lease or sell it in the same manner as other public lands, with the proviso that the original owner or his legal representative may repurchase before a sale or contract of sale to a third party. Addison repurchased under this proviso as the supposed successor in interest of the original owner through the execution sales. Because the execution sales were void, Addison acquired no rights thereunder and was not the successor of the original owner. He could have obtained a valid conveyance only by following the procedure prescribed by the Public Land Act (Act No. 926) for the sale of public lands, which he did not do. He was entitled to reimbursement for the money paid for redemption, with interest, but acquired no title.

• Effect of Priority of Inscription: The question of whether the priority of inscription of the sheriff's sales prevailed over the sale from Belisario to Borja was rendered immaterial. Void execution sales cannot be validated through inscription in the Mortgage Law registry, regardless of the order or timing of recordation.

• Validity of Sale of Community Property by Surviving Husband: In Nable Jose vs. Nable Jose (41 Phil., 713) and Manuel and Laxamana vs. Losano (41 Phil., 855), the Court held that in the absence of fraud and collusion, sales or mortgages of community property made by a husband-administrator clothed with the insignia of ownership and in whose name the property is held, after the death of his spouse, are valid and effective, the purchaser being entitled to presume that the sale is executed for a proper purpose and that the vendor has authority to dispose of the property. While heirs of the deceased wife may form a partnership or community with the surviving husband for management of community property, in the absence of the formalities prescribed by the Code of Commerce or articles 1667 and 1668 of the Civil Code, knowledge of the existence of such a community must be brought home to third persons dealing with the surviving husband in order to bind them. Here, the land was recorded in the registry in the name of Eulalio Belisario alone, and there was not a scintilla of evidence that Borja had notice of Maximo Belisario's participation in administration or claim of ownership. The case fell squarely within the rule in the cited decisions, and the deed from Eulalio Belisario to Borja conveyed the whole fee.

• Absolute Nullity of Execution Sales for Lack of Statutory Notice — Where a sheriff sells real property without the notice prescribed by section 454 of the Code of Civil Procedure (posting for twenty days in three public places and publication once a week for the same period in a newspaper of general circulation in the province, where assessed valuation exceeds ₱400), and the judgment creditor induced the defective publication and is the purchaser, the sale is absolutely void and no title passes. This doctrine, established in Campomanes vs. Bartolome and Germann & Co. (38 Phil., 808), was applied to invalidate all four execution sales in favor of Addison, who prepared and controlled publication of the notices and was either the judgment creditor or occupied an analogous position.

• Validity of Surviving Husband's Sale of Community Property to Good-Faith Purchasers — In the absence of fraud and collusion, sales or mortgages of community property made by a husband-administrator clothed with the insignia of ownership and in whose name the property is held, after the death of his spouse, are valid and effective. The purchaser is entitled to presume that such sales are executed for the purpose of securing money to pay community debts and that the vendor has authority to dispose of the property. This rule, supported by decisions of the Supreme Court of Spain, was applied because the land was registered in Eulalio Belisario's name and Borja had no notice of Maximo Belisario's rights or participation in administration.

• Inscription Cannot Validate Void Sales — Void sheriff's or execution sales cannot be validated through inscription in the Mortgage Law registry. Priority of record is immaterial where the underlying sale is void.

• "if a sheriff sells without the notice prescribe by the Code of Civil Procedure induced thereto by the judgment creditor and the purchaser at the sale is the judgment creditor, the sale is absolutely void and not title passes. This must now be regarded as the settled doctrine in this jurisdiction whatever the rule may be elsewhere." — This passage states the ratio decidendi for invalidating the execution sales and confirms the Campomanes doctrine as settled law in the Philippines.

• "in the absence of fraud and collusion, sales or mortgages of community property, either real or personal, made by a husband-administrator clothed with the insignia of ownership and in whose name the property is held, after the death of his spouse, are valid and effective. the purchaser being entitled to presume that such sales or mortgages are executed for the purpose of securing money to pay community debts and that the vendor has authority to dispose of the property thus administered by him and held in his name." — This is the canonical formulation of the doctrine on surviving husband's authority to sell community property, drawn from Nable Jose vs. Nable Jose and Manuel and Laxamana vs. Losano, as applied to uphold the sale to Borja.

• "void sheriff's or execution sales cannot be validated through inscription in the Mortgage Law registry." — This succinct statement disposes of the priority-of-inscription argument and establishes that the Torrens registry cannot cure a fundamentally void conveyance.

• "such sales are not void and that until set aside in a rescissory action they are legally effective, convey title, and cannot be attacked collaterally upon the aforementioned ground in a land registration proceeding." — From the resolution on motion for reconsideration, this passage clarifies that a sale by a judgment debtor to a third party, while presumed fraudulent as to the judgment creditor, is not void but merely voidable and remains effective until set aside in a rescissory action.

• Campomanes vs. Bartolome and Germann & Co., 38 Phil., 808 — Controlling precedent. Held that a sheriff's sale without the notice prescribed by the Code of Civil Procedure, induced by the judgment creditor who is also the purchaser, is absolutely void. Applied directly to invalidate all execution sales in favor of Addison.

• Nable Jose vs. Nable Jose, 41 Phil., 713 — Controlling precedent. Established the doctrine that sales of community property by a surviving husband-administrator clothed with the insignia of ownership are valid as against good-faith purchasers. Applied to uphold the sale from Eulalio Belisario to Borja.

• Manuel and Laxamana vs. Losano, 41 Phil., 855 — Followed. Reiterated the same doctrine on surviving husband's authority to sell community property. Applied alongside Nable Jose to the facts of the case.

• Castillo vs. Belisario, 35 Phil., 89 — Cited for procedural context. A prior Supreme Court decision pursuant to which Jose Castillo executed the deed of resale in favor of Eulalio Belisario on December 13, 1916.

• Section 454, Code of Civil Procedure — Requires, before the sale of real property on execution, posting of notice for twenty days in three public places in the municipality where the property is situated and where the sale is to take place, and publication once a week for the same period in a newspaper published or having general circulation in the province (where assessed valuation exceeds ₱400). Applied to determine that the notices in all four execution sales were insufficient, rendering the sales void.

• Section 457, Code of Civil Procedure — Regulates the hours during which execution sales may be conducted. Violated in civil case No. 499, where the sale was advertised for hours from 8:30 a.m. to 4:30 p.m.

• Section 19, Act No. 1791 — Governs forfeiture and repurchase of real property confiscated for non-payment of taxes. Provides that upon forfeiture, the Director of Lands shall have control and custody to lease or sell the property as other public lands, with the proviso that the original owner or his legal representative may repurchase before a sale to a third party. Applied to determine that Addison's repurchase was invalid because he was not a successor in interest of the original owner.

• Act No. 926 (Public Land Act) — Prescribes the formalities for the sale of public lands. Addison's failure to follow this procedure in obtaining conveyance from the Government rendered his title invalid.

• Articles 1667 and 1668, Civil Code — Prescribe formalities for the formation of a partnership or community of property. Applied to hold that in the absence of such formalities, knowledge of a community agreement between the surviving husband and heirs must be brought home to third persons to bind them.

• Article 1927, Civil Code — Concerns sales presumed fraudulent as to creditors. Addressed in the resolution on motion for reconsideration: such sales are not void but voidable, effective until set aside in a rescissory action, and cannot be collaterally attacked in a land registration proceeding.

• Section 49, Code of Civil Procedure — Prescribes the period within which a rescissory action must be commenced. Addison's right to such action was reserved subject to this limitation period.

Araullo, C. J., Malcolm, Avanceña, Villamor, Johns, and Romualdez, JJ., concurred.