Dewara vs. Spouses Lamela and Alvero

Property acquired during marriage under the conjugal partnership of gains is presumed conjugal unless exclusive ownership is proved by strong, clear, categorical, and convincing evidence; even if conjugal, fines and pecuniary indemnities imposed on one spouse may be enforced against partnership assets only after the obligations in Article 161 of the Civil Code have been covered, and only if the spouse bound has no exclusive property or it is insufficient.

Elenita M. Dewara and Eduardo Dewara were married before the enactment of the Family Code, so their marital relations were governed by the Civil Code; they did not execute any prenuptial agreement as to their property relations and were separated in fact, with Elenita working in California, United States of America, and Eduardo staying in Bacolod City. Lot No. 234-C of the Bacolod Cadastre, covered by TCT No. T-80054, was registered in Elenita’s name during the marriage.

Eduardo Dewara and petitioner Elenita Magallanes Dewara were married before the enactment of the Family Code, so their marital relations were governed by the Civil Code. They had no prenuptial agreement and were separated in fact: Elenita worked in California, United States of America, while Eduardo stayed in Bacolod City. On January 20, 1985, Eduardo, while driving a private jeep registered in Elenita’s name, hit respondent Ronnie Lamela. Ronnie filed a criminal case for serious physical injuries through reckless imprudence against Eduardo before the Municipal Trial Court in Cities, Branch IV, Bacolod City. The MTCC found Eduardo guilty and sentenced him to imprisonment of two months and one day to three months and to pay P62,598.70 as actual damages and P10,000.00 as moral damages. On appeal, the RTC affirmed the MTCC decision, and it became final and executory.

The writ of execution on the civil liability was served on Eduardo, but it was returned unsatisfied because he had no property in his name. Ronnie requested the City Sheriff, respondent Stenile Alvero, to levy on Lot No. 234-C, Psd. 26667 of the Bacolod Cadastre, with an area of 1,440 square meters, under TCT No. T-80054, in the name of “ELENITA M. DEWARA, of legal age, Filipino, married to Eduardo Dewara, and resident of Bacolod City,” to satisfy the judgment on Eduardo’s civil liability. The City Sheriff served a notice of embargo on the title and subsequently sold the lot at public auction. There were no interested buyers other than Ronnie. The City Sheriff issued a certificate of sale to spouses Ronnie and Gina Lamela. Ronnie then caused the consolidation of title in a Cadastral Proceeding before the RTC, which ordered the cancellation of TCT No. T-80054 in Elenita’s name and the issuance of a new certificate of title in the name of respondent spouses. The levy, public auction, issuance of certificate of sale, and cancellation of Elenita’s title were all done while Elenita was working in California.

Elenita, represented by her attorney-in-fact Ferdinand Magallanes, filed a case for annulment of sale and damages against respondent spouses and ex-officio sheriff Stenile Alvero before the RTC of Bacolod City. She claimed that the levy on execution of Lot No. 234-C was illegal because the property was her paraphernal or exclusive property and could not be made to answer for the personal liability of her husband. She also asserted that, as the registered owner, she received no notice of the execution sale. She sought annulment of the sale and of the issuance of the new TCT in the name of respondent spouses. Respondent spouses averred that the subject lot was the conjugal property of Elenita and Eduardo. They asserted that the property was acquired by Elenita during her marriage to Eduardo; that it was acquired with Eduardo’s money because, at the time of acquisition, Elenita was a plain housewife; that the jeep involved in the accident was registered in Elenita’s name; and that Elenita did not interpose any objection pending the levy on execution.

The RTC traced how Elenita acquired the property. Elenita’s grandfather, Exequiel Magallanes, originally owned Lot No. 234-C. Upon his demise, his children Jesus (Elenita’s father), Salud, and Concepcion inherited the property, each entitled to a one-third share. They were issued a new title, TCT No. T-17541. On July 6, 1966, Elenita’s aunt Salud executed a waiver of rights duly registered under Entry No. 76392, waiving her rights and participation over her one-third share in favor of her siblings Jesus and Concepcion. Jesus and Concepcion then became owners, each owning one-half of the property. Jesus subsequently sold his share to his daughter Elenita for P5,000.00 based on a deed of sale dated March 26, 1975, registered under Entry No. 76393. Concepcion also sold her share to her niece Elenita for P10,000.00 based on a deed of sale dated April 29, 1975, registered under Entry No. 76394. By virtue of these sales, TCT No. T-17541 was cancelled and TCT No. T-80054 was issued in Elenita’s name.

The RTC gave credence to Elenita’s testimony that the property was sold to her by her father and aunt so that the family would remain on the lot, and that the minimal and inadequate consideration for the 1,440-square-meter property was intended to help her expand her capital in her business at the time. The RTC thus found the sale essentially a donation and gratuitous in character.

On appeal, the CA reversed the RTC. It explained that gross inadequacy of the price alone does not affect a contract of sale, except that it may indicate a defect in consent or that the parties really intended a donation or some other act or contract. Except for Elenita’s assertions, there was nothing in the records indicating a defect in Jesus and Concepcion Magallanes’ consent to the sale. The CA ruled that Elenita and Eduardo acquired the property by onerous title during their marriage through their common fund, so it belonged to the conjugal partnership of gains and might be levied upon to answer for civil liabilities adjudged against Eduardo. Elenita then filed the present petition.

• Paraphernal Character: Petitioner claimed that the levy on execution of Lot No. 234-C was illegal because the property was her paraphernal or exclusive property and could not be made to answer for the personal liability of her husband.
• Lack of Notice: Petitioner asserted that, as the registered owner of the property, she received no notice of the execution sale.
• Relief Sought: Petitioner sought the annulment of the sale and the annulment of the issuance of the new TCT in the name of respondent spouses.

• Conjugal Property: Respondent spouses averred that the subject lot was the conjugal property of petitioner Elenita and Eduardo.
• Acquisition with Eduardo’s Funds: Respondent spouses asserted that the property was acquired by Elenita during her marriage to Eduardo and was acquired with Eduardo’s money because, at the time of acquisition, Elenita was a plain housewife.
• Registration of Jeep and No Objection: Respondent spouses asserted that the jeep involved in the accident was registered in petitioner’s name and that Elenita did not interpose any objection pending the levy on execution of the property.

• Nature of the Subject Property: Whether the subject property is the paraphernal or exclusive property of Elenita or the conjugal property of spouses Elenita and Eduardo.
• Levy and Execution: Whether the property may be subject to levy and execution sale to answer for the civil liability adjudged against Eduardo in the criminal case for serious physical injuries, which judgment had already attained finality.

• Nature of the Subject Property: Conjugal. The property was acquired during marriage under the Civil Code regime without a prenuptial agreement, and Elenita failed to rebut the presumption of conjugal ownership by strong, clear, categorical, and convincing evidence.
• Levy and Execution: Not automatically. Even if conjugal, fines and pecuniary indemnities imposed on one spouse may be enforced against partnership assets only after the obligations in Article 161 of the Civil Code are covered and only if the spouse bound has no exclusive property or it is insufficient.

• Nature of the Subject Property: Article 160 of the Civil Code provides that all property of the marriage is presumed to belong to the conjugal partnership unless proved to pertain exclusively to the husband or wife. Registration in the name of one spouse alone does not destroy this presumption, and separation in fact without judicial approval does not affect the conjugal partnership. The presumption applies even when the manner of acquisition does not appear; use of conjugal funds is not essential. The property was undisputedly acquired during the marriage of Elenita and Eduardo, whose marital relations were governed by the conjugal partnership of gains under the Civil Code because they married before the Family Code and executed no prenuptial agreement. Elenita therefore bore the burden to rebut the presumption by strong, clear, categorical, and convincing evidence—strict proof of exclusive ownership. She relied only on her assertion that the sales by her father and aunt were donations because the prices were grossly inadequate, but she presented no evidence of the property’s market or assessed value in 1975. Gross inadequacy of price does not affect a sale except as it may indicate a defect in consent or that the parties intended a donation or other contract; the records contained no proof that the consent of Jesus and Concepcion was vitiated or that they intended a donation. Inadequacy of price per se does not rule out a sale; the price must be grossly inadequate or shocking to the conscience. Thus, Elenita failed to prove the property was paraphernal, and the lot retained its conjugal character.

• Levy and Execution: Even if the lot is conjugal, it does not automatically follow that it may be levied upon to answer debts, obligations, fines, or indemnities of one spouse. Before debts and obligations may be charged against the conjugal partnership, it must be shown that they were contracted for, or redounded to, the benefit of the partnership. Fines and pecuniary indemnities imposed upon the husband or wife, as a rule, may not be charged to the partnership. Under Article 163 of the Civil Code, however, if the spouse bound has no exclusive property or if it is insufficient, fines and indemnities may be enforced against partnership assets after the responsibilities enumerated in Article 161 have been covered; at liquidation, the spouse is charged for what was paid. Here, Ronnie was entitled to compensation for the serious physical injuries he suffered. Elenita was not made a party in the criminal case, so she may not be compelled to answer Eduardo’s liability. But because Eduardo had no property in his name, the conjugal partnership property may be held accountable for the indemnity adjudged in Criminal Case No. 7155, after compliance with Article 161. Article 161 lists the obligations for which the conjugal partnership is liable, including debts contracted for the benefit of the partnership, arrears or income due during marriage, repairs, family maintenance and education, and expenses for professional or vocational courses. These must first be covered. The indemnity also earns 12% interest per annum from finality of the RTC decision in Criminal Case No. 7155, following Eastern Shipping Lines, Inc. vs. Court of Appeals.

• Conjugal partnership presumption — All property of the marriage is presumed to belong to the conjugal partnership unless it is proved to pertain exclusively to the husband or wife. Registration in the name of one spouse alone does not destroy the presumption, and separation in fact without judicial approval does not affect the conjugal partnership. The presumption applies even when the manner of acquisition does not appear, and the use of conjugal funds is not an essential requirement for the presumption to arise. The presumption may be rebutted only by strong, clear, categorical, and convincing evidence, with strict proof of exclusive ownership resting on the party asserting it. The Court applied this doctrine because the lot was acquired during the marriage, there was no prenuptial agreement, and Elenita failed to present sufficient evidence that the sales to her were donations rather than onerous transfers.

• Gross inadequacy of price in a contract of sale — Gross inadequacy of the price does not affect a contract of sale, except as it may indicate a defect in consent or that the parties really intended a donation or some other act or contract. Inadequacy of price per se will not rule out the transaction as one of sale; the price must be grossly inadequate or shocking to the conscience, such that the mind would revolt at it and such that a reasonable man would neither directly nor indirectly consent to it. The Court applied this doctrine because Elenita presented no evidence of the property’s market or assessed value in 1975, and the records contained no proof that the consent of the sellers was vitiated or that they intended a donation.

• Liability of the conjugal partnership for fines and pecuniary indemnities — Fines and pecuniary indemnities imposed upon the husband or wife, as a rule, may not be charged to the conjugal partnership. However, if the spouse who is bound has no exclusive property or if the property is insufficient, the fines and indemnities may be enforced against partnership assets only after the responsibilities enumerated in Article 161 of the Civil Code have been covered. At the time of liquidation, the spouse shall be charged for what has been paid. The Court applied this doctrine because Eduardo had no property in his name, so the conjugal partnership property could be held accountable for the indemnity adjudged against him, but only after compliance with Article 161.

• Article 161 obligations as a condition precedent — Before the conjugal partnership may be held to answer for a liability adjudged against one spouse, the obligations enumerated in Article 161 of the Civil Code must first be complied with. These include debts and obligations contracted for the benefit of the conjugal partnership, arrears or income due during the marriage, repairs on separate or conjugal property, maintenance of the family and education of the children, and expenses to permit the spouses to complete a professional, vocational, or other course. The Court applied this doctrine by requiring compliance with Article 161 before the conjugal properties could answer for Eduardo’s civil liability.

• "All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife." — This states the foundational presumption of conjugal ownership under Article 160 of the Civil Code, which the Court used to characterize Lot No. 234-C as conjugal.
• "The presumption that the property is conjugal property may be rebutted only by strong, clear, categorical, and convincing evidence—there must be strict proof of the exclusive ownership of one of the spouses, and the burden of proof rests upon the party asserting it." — This defines the quantum and burden of proof for rebutting the conjugal presumption, which Elenita failed to satisfy.
• "However, even after having declared that Lot No. 234-C is the conjugal property of spouses Elenita and Eduardo, it does not necessarily follow that it may automatically be levied upon in an execution to answer for debts, obligations, fines, or indemnities of one of the spouses." — This is the Court’s key qualification that conjugal character alone does not make the property automatically liable for one spouse’s personal fines or indemnities.
• "However, if the spouse who is bound should have no exclusive property or if the property should be insufficient, the fines and indemnities may be enforced upon the partnership assets only after the responsibilities enumerated in Article 161 of the Civil Code have been covered." — This states the Article 163 remedy and the condition precedent for enforcing a spouse’s fine or indemnity against conjugal partnership assets.

• Villanueva vs. Chiong, G.R. No. 159889, June 5, 2008, 554 SCRA 197 — Cited for the rule that all property of the marriage is presumed conjugal unless proved exclusive, and that separation in fact without judicial approval does not affect the conjugal partnership.
• Bucoy vs. Paulino, et al., 131 Phil. 790 (1968) — Cited for the rule that registration in the name of the husband or the wife alone does not destroy the presumption of conjugal ownership.
• Metropolitan Bank and Trust Co. vs. Pascual, G.R. No. 163744, February 29, 2008, 547 SCRA 246 — Cited for the rule that the presumption of conjugal ownership applies even when the manner in which the property was acquired does not appear, and that the use of conjugal funds is not an essential requirement for the presumption to arise.
• Coja vs. Court of Appeals, G.R. No. 151153, December 10, 2007, 539 SCRA 517 — Cited for the rule that the conjugal presumption may be rebutted only by strong, clear, categorical, and convincing evidence, with strict proof of exclusive ownership resting on the party asserting it.
• Acabal vs. Acabal, 494 Phil. 528 (2005) — Cited for the rule that inadequacy of price per se will not rule out a sale; the price must be grossly inadequate or shocking to the conscience.
• Eastern Shipping Lines, Inc. vs. Court of Appeals, G.R. No. 97412, July 12, 1994, 234 SCRA 78 — Cited for the imposition of 12% interest per annum on the indemnity adjudged against Eduardo.

• Rule 45, Rules of Court — The petition for review on certiorari was filed under this Rule, assailing the CA decision and resolution.
• Article 160, Civil Code — Provides that all property of the marriage is presumed to belong to the conjugal partnership unless proved to pertain exclusively to the husband or wife. Applied to hold that Lot No. 234-C is presumed conjugal.
• Article 178, Civil Code — Provides that separation in fact between the husband and wife without judicial approval shall not affect the conjugal partnership. Applied because the Dewara spouses were separated in fact but the lot retained its conjugal nature.
• Article 1470, Civil Code — Provides that gross inadequacy of the price does not affect a contract of sale, except as it may indicate a defect in consent or that the parties intended a donation or some other act or contract. Applied because Elenita failed to prove that the low prices indicated a donation.
• Article 163, Civil Code — Provides that payment of debts contracted before marriage and fines and pecuniary indemnities imposed upon the spouses shall not be charged to the conjugal partnership; however, such payment may be enforced against partnership assets after the responsibilities in Article 161 have been covered, if the spouse bound has no exclusive property or it is insufficient, with the spouse charged at liquidation for what was paid. Applied to allow enforcement against the conjugal properties only after Article 161 compliance.
• Article 161, Civil Code — Enumerates the obligations for which the conjugal partnership is liable:
  • (1) All debts and obligations contracted by the husband for the benefit of the conjugal partnership, and those contracted by the wife for the same purpose where she may legally bind the partnership;
  • (2) Arrears or income due during the marriage from obligations constituting a charge upon property of either spouse or of the partnership;
  • (3) Minor repairs or mere preservation made during the marriage upon the separate property of either spouse, with major repairs not charged to the partnership;
  • (4) Major or minor repairs upon the conjugal partnership property;
  • (5) Maintenance of the family and education of the children of both spouses and legitimate children of one spouse;
  • (6) Expenses to permit the spouses to complete a professional, vocational, or other course. The Court held that this enumeration must first be complied with before the conjugal partnership may be held to answer for the liability adjudged against Eduardo.

Carpio (Chairperson), Peralta, Abad, and Mendoza, JJ., concur.