De Mesa vs. Acero

The exemption of a family home from execution under Article 153 of the Family Code is a personal privilege of the judgment debtor that must be claimed and proved to the sheriff before the sale of the property at public auction, and failure to do so within a reasonable time estops the debtor from later asserting the exemption.

The petitioners, Spouses Araceli Oliva-De Mesa and Ernesto S. De Mesa, jointly purchased a parcel of land in Meycauayan, Bulacan on April 17, 1984, while still cohabiting before their marriage. After their marriage in January 1987, they occupied the house constructed thereon as their family home. The respondents Spouses Claudio D. Acero, Jr. and Ma. Rufina D. Acero were creditors of Araceli, who had obtained a ₱100,000 loan from Claudio secured by a mortgage over the subject property. Sheriff Felixberto L. Samonte and Registrar Alfredo Santos were impleaded for their roles in the levy, auction sale, and transfer of title. The dispute arose from the intersection of the Family Code provisions on family home exemption and the execution of a judgment award arising from a dishonored check.

Petitioners Spouses Araceli Oliva-De Mesa and Ernesto S. De Mesa jointly purchased a parcel of land at No. 3 Forbes Street, Mount Carmel Homes Subdivision, Iba, Meycauayan, Bulacan on April 17, 1984, while still cohabiting before their marriage. The property was covered by TCT No. T-76.725 (M) registered in Araceli's name. After their marriage in January 1987, a house was constructed on the property and the petitioners occupied it as their family home.

Sometime in September 1988, Araceli obtained a ₱100,000 loan from Claudio D. Acero, Jr., secured by a mortgage over the subject property. As payment, Araceli issued a check drawn against China Banking Corporation, but when presented for payment, the check was dishonored because the account had already been closed. The petitioners failed to heed Claudio's subsequent demand for payment. On April 26, 1990, Claudio filed a complaint for violation of Batas Pambansa Blg. 22 against the petitioners with the Prosecutor's Office of Malolos, Bulacan, and an information was thereafter filed with the RTC. On October 21, 1992, the RTC acquitted the petitioners but ordered them to pay Claudio ₱100,000 with legal interest from the date of demand until fully paid.

A writ of execution was issued on March 15, 1993, and Sheriff Felixberto L. Samonte levied upon the subject property. On March 9, 1994, the property was sold at public auction, with Claudio as the highest bidder, and a certificate of sale was issued to him. Sometime in February 1995, Claudio leased the property back to the petitioners and a certain Juanito Oliva for ₱5,500 monthly, but they defaulted on rent, accumulating ₱170,500 in accountabilities as of October 3, 1998. On March 24, 1995, a Final Deed of Sale was issued to Claudio, and on April 4, 1995, the Register of Deeds cancelled TCT No. T-76.725 (M) and issued TCT No. T-221755 (M) in Claudio's favor.

Unable to collect the unpaid rentals, Spouses Acero filed a complaint for ejectment with the MTC of Meycauayan against the petitioners and Juanito. The petitioners defended by claiming ownership of the property and denying Spouses Acero's right thereto. The MTC, in its July 22, 1999 Decision, ruled in favor of Spouses Acero, ordering the petitioners to vacate and dismissing their claim of ownership based on Claudio's Torrens title. The MTC noted that the petitioners never assailed the validity of the levy, the regularity of the public sale, or the legitimacy of Claudio's title. The petitioners' appeal to the RTC was dismissed on November 22, 1999 for failure to submit their Memorandum, and their motion for reconsideration was denied on January 31, 2000. The CA subsequently denied their petition for review on December 21, 2006, which became final on July 25, 2007.

In the interregnum, on October 29, 1999, the petitioners filed a complaint to nullify TCT No. T-221755 (M) and other documents with damages with the RTC of Malolos, asserting that the subject property is a family home exempt from execution under the Family Code. The RTC dismissed the complaint on September 3, 2002, citing Article 155(3) of the Family Code, ruling that even assuming the property was a family home, the exemption did not apply because a mortgage had been constituted over the property to secure the loan. On appeal, the CA affirmed the RTC's dismissal on June 6, 2008, ratiocinating that the exemption is not automatic and should be raised and proved to the sheriff prior to execution, noting that the petitioners never raised the exemption at any time. The petitioners' motion for reconsideration was denied on October 23, 2008.

• Family Home Exemption: Petitioner insisted that the execution sale was a nullity because the subject property is a family home, and that contrary to the CA's disposition, a prior demonstration that the property is a family home is not required before it can be exempted from execution.
• Nullification of Title: Petitioner prayed for the cancellation of TCT No. T-221755 (M), arguing that the levy and auction sale were invalid for having been conducted on property exempt from execution.

• Forum-Shopping: Respondent Spouses Acero claimed that the petition ought to be denied on the ground of forum-shopping, as the issues raised had already been determined by the MTC in its July 22, 1999 Decision in the ejectment case, which had become final and executory following the petitioners' failure to appeal the CA's December 21, 2006 Decision.

• Forum-Shopping: Whether the petitioners are guilty of forum-shopping in filing the action to nullify TCT No. T-221755 (M) while the ejectment case was pending or had been resolved.
• Nullification of Title: Whether the lower courts erred in refusing to cancel Claudio's Torrens title TCT No. T-221755 (M) over the subject property on the ground that it is a family home exempt from execution.

• Forum-Shopping: No. There was no forum-shopping because the ejectment case and the action to annul the Torrens title involve different issues—possession versus ownership—and a judgment in one does not amount to res judicata in the other.
• Nullification of Title: No. The CA did not err in dismissing the complaint. Although the subject property was a family home by operation of law under the Family Code, the exemption from execution is a personal privilege that must be set up and proved to the sheriff before the sale at public auction; the petitioners' failure to do so estopped them from later claiming the exemption.

• Forum-Shopping: Forum-shopping exists when the elements of litis pendentia are present and a final judgment in one case would amount to res judicata in the other, requiring identity of parties, identity of rights asserted and reliefs prayed for founded on the same facts, and identity such that any judgment would amount to res judicata in the other action. While the parties were the same in both the ejectment and annulment cases, and the issue of ownership was contended in both with the same evidence, the critical element of res judicata was absent. The primordial issue in an ejectment case is who has the better right of physical or material possession, and any determination of ownership therein is merely provisional, made solely for the purpose of determining who is entitled to possession de facto. A judgment in an ejectment case does not bar an action between the same parties respecting title to the land, nor is it conclusive as to the facts therein found. This principle was reaffirmed in Malabanan vs. Rural Bank of Cabuyao, Inc., where the Court clarified that a decision in an ejectment case is not res judicata in an annulment of title case and vice-versa. Accordingly, the provisional determination of ownership in the ejectment case cannot be clothed with finality, and the filing of the annulment case did not constitute forum-shopping.

• Nullification of Title: The Court first confirmed that the subject property was indeed a family home. Applying the framework from Ramos vs. Pangilinan and Kelley, Jr. vs. Planters Products, Inc., family residences constructed before the effectivity of the Family Code on August 3, 1988 must have been constituted as a family home either judicially or extrajudicially under the Civil Code to be exempt from execution; family residences constructed after August 3, 1988 are automatically deemed family homes by operation of law; and family residences existing as of August 3, 1988 but not previously constituted are prospectively considered family homes entitled to the benefits under the Family Code. The subject property became a family residence in January 1987, and although there was no showing it was judicially or extrajudicially constituted under the Civil Code, it became a family home by operation of law when the Family Code took effect on August 3, 1988. However, the exemption from execution is a personal privilege granted to the judgment debtor that must be claimed not by the sheriff but by the debtor himself at the time of the levy or within a reasonable time thereafter, and must be set up and proved to the sheriff before the sale of the property at public auction. Relying on Honrado vs. Court of Appeals and Spouses Versola vs. Court of Appeals, the Court held that failure to do so estops the party from later claiming the exemption. The petitioners allowed the property to be levied, the public sale to proceed, one year to lapse until a Final Deed of Sale was issued, and the title to be cancelled and transferred, all without asserting the exemption. It was only after the respondents filed the ejectment complaint—approximately four years from the auction sale—that the petitioners claimed the property was a family home. This negligence or omission gave rise to the presumption that they had abandoned, waived, or declined to assert the right. Since the exemption under Article 153 is a personal right, it was incumbent upon the petitioners to invoke and prove it within the prescribed period, and it was not the sheriff's duty to presume or raise the status of the property as a family home. The Court found that the petitioners' assertion appeared to be a mere afterthought and artifice, and equitable considerations demanded that Claudio's title be respected.

• Family Home Exemption from Execution — Under the Family Code, a family home is constituted on a house and lot from the time it is occupied as a family residence and is exempt from execution, forced sale, or attachment under Article 153. There is no need to constitute the family home judicially or extrajudicially for residences existing as of August 3, 1988 or constructed thereafter; they are deemed family homes by operation of law and prospectively entitled to the benefits of the Family Code. However, the exemption is a personal privilege of the judgment debtor that must be set up and proved to the sheriff before the sale of the property at public auction. Failure to do so estops the debtor from later claiming the exemption. The claim must be made at the time of the levy or within a reasonable time thereafter, and reasonable time does not extend beyond the one-year redemption period under Section 30 of Rule 39. In this case, the petitioners' failure to assert the exemption for approximately four years after the auction sale barred them from claiming it.

• Forum-Shopping: Distinction Between Ejectment and Annulment of Title — Forum-shopping requires identity of parties, identity of rights asserted and reliefs prayed for founded on the same facts, and identity such that any judgment would amount to res judicata in the other action. A judgment in an ejectment case is not res judicata in an annulment of title case and vice-versa, because the determination of ownership in an ejectment suit is merely provisional and inconclusive, made solely to determine who has the better right of physical possession. The filing of an action for annulment of title does not constitute forum-shopping even if an ejectment case involving the same property and parties has been filed or resolved.

• "claims for exemption from execution of properties under Section 12 of Rule 39 of the Rules of Court must be presented before its sale on execution by the sheriff." — This passage, quoted from Honrado vs. Court of Appeals, articulates the controlling rule that the family home exemption must be invoked and proved before the sheriff prior to the public auction sale, and failure to do so estops the debtor.

• "While it is true that the family home is constituted on a house and lot from the time it is occupied as a family residence and is exempt from execution or forced sale under Article 153 of the Family Code, such claim for exemption should be set up and proved to the Sheriff before the sale of the property at public auction. Failure to do so would estop the party from later claiming the exemption." — This passage from Honrado vs. Court of Appeals, as reiterated in the decision, establishes the canonical formulation of the rule on when and how the family home exemption must be claimed.

• "a decision in an ejectment case is not res judicata in an annulment of title case and vice-versa given the provisional and inconclusive nature of the determination of the issue of ownership in the former." — This passage, citing Malabanan vs. Rural Bank of Cabuyao, Inc., defines the principle that distinguishes ejectment from annulment of title for forum-shopping purposes.

• Malabanan vs. Rural Bank of Cabuyao, Inc., G.R. No. 163495, May 8, 2009 — Followed. Clarified that a decision in an ejectment case is not res judicata in an annulment of title case and vice-versa, given the provisional and inconclusive nature of ownership determinations in ejectment proceedings.
• Ramos vs. Pangilinan, G.R. No. 185920, July 20, 2010 — Followed. Laid down the rules on exemption of family homes from execution, distinguishing between family homes constituted before and after the effectivity of the Family Code.
• Kelley, Jr. vs. Planters Products, Inc., G.R. No. 172263, July 9, 2008 — Followed. Stressed that under the Family Code, there is no need to constitute the family home judicially or extrajudicially; all family homes constructed after August 3, 1988 are constituted as such by operation of law, and existing family residences as of that date are prospectively entitled to the benefits.
• Honrado vs. Court of Appeals, 512 Phil. 657 (2005) — Followed. Categorically stated that the status of a residential house as a family home and its exemption from execution must be set up and proved to the sheriff before the sale at public auction, and failure to do so estops the party from later claiming the exemption.
• Spouses Versola vs. Court of Appeals, 529 Phil. 377 (2006) — Followed. Reiterated that the right to exemption from forced sale under Article 153 of the Family Code is a personal privilege that must be claimed by the debtor, not the sheriff, before the sale at public auction, and that mere allegation of family home status is insufficient—it must be set up and proved.
• Gomez vs. Gealone — Cited within Honrado for the proposition that the claim for exemption must be made at the time of the levy or within a reasonable time thereafter, and that the right of exemption is a personal privilege of the judgment debtor.

• Article 153, Family Code — Provides that the family home is deemed constituted on a house and lot from the time it is occupied as a family residence and is exempt from execution, forced sale, or attachment, except as otherwise provided. The Court applied this provision to confirm that the subject property was a family home by operation of law, but held that the exemption is a personal privilege that must be timely asserted.
• Article 155(3), Family Code — Provides that the family home is not exempt from execution for debts incurred prior to or resulting from the constitution of the family home, or for debts secured by mortgages on the premises. The RTC cited this provision in dismissing the petitioners' complaint, noting that a mortgage had been constituted over the property to secure the loan.
• Section 30, Rule 39, Rules of Court — Provides the one-year redemption period for judgment debtors whose properties have been sold on execution. The Court held that reasonable time for claiming the family home exemption does not extend beyond this one-year period.
• Section 12, Rule 39, Rules of Court — Referenced in Honrado as the provision under which claims for exemption from execution must be presented before the sale on execution by the sheriff.

Justice Antonio T. Carpio (Chairperson, Second Division), Justice Jose Portugal Perez, Justice Maria Lourdes P. A. Sereno, and Justice Estela M. Perlas-Bernabe (additional member in lieu of Associate Justice Arturo D. Brion per Special Order No. 1174 dated January 9, 2012).