Faustino Lichauco vs. Tan Pho

A guardian’s lease of a ward’s real property for more than six years executed without prior court approval is voidable, not void ab initio; a nunc pro tunc order may not be used to supply a wholly omitted judicial approval where no written data, minute, or memorandum in the record indicates that such approval was actually granted at the time. The subsequent registration of the lease in the original certificate of title does not foreclose a judicial declaration of its partial nullity; an action to annul a registered lease right is, in effect, a petition under Section 112 of Act No. 496 to amend the title on the ground of extinguishment of the registered interest.

Galo Lichauco, the spendthrift Zacarias Lichauco, and the minor siblings Luis and Julita Lichauco co-owned in equal pro indiviso shares a 1,812-square-meter parcel of land in Tondo, Manila. In 1913, after a fire destroyed buildings on the property, negotiations ensued for a long-term lease that would allow a new building to be constructed. The three co-owners, through Galo and the judicially appointed guardians of the incapacitated and the minors, executed a 20-year lease with Tan Pho (acting for the widow Tan U and the estate of Chua Piengco). The guardianship courts never entered a formal written order approving the lease, though the lessee’s copy bore an endorsement “Approved” signed by Judge A.S. Crossfield. The land was subsequently registered under Act No. 496, and the decree of registration noted the lease. Seven years later, the guardian ad litem of the incapacitated and the minors brought an action to annul the lease, and Tan Pho countered by petitioning the guardianship courts for nunc pro tunc orders reflecting approval as of December 1913. The trial court sustained the lease and impliedly granted the nunc pro tunc petitions, prompting the consolidated appeals.

• The Co-Ownership: A piece of land in Manila measuring about 1,812 square meters, situated on Santo Cristo, Comercio, and Estero de Binondo streets, was owned pro indiviso: one-third by Galo Lichauco, one-third by the incapacitated Zacarias Lichauco, and the remaining one-third by the minor siblings Luis and Julita Lichauco. At the time of the lease, guardianship proceedings were pending for Zacarias (Case No. 4923) and for the minors (Case No. 10812).

• Execution of the Lease: On October 14, 1913, the co-owners — Galo Lichauco in his own right, Geronimo Jose as guardian of Zacarias Lichauco, and Amparo Nable Jose as guardian of Luis and Julita Lichauco — executed a contract of lease in favor of Tan Pho. Tan Pho signed as general attorney-in-fact of Tan U (widow of Chua Piengco) and as administrator of the estate of the deceased Chua Piengco. The lease was for twenty years at a monthly rent of P1,560, commencing March 1, 1914. The lessee undertook to erect a building of strong materials worth approximately P52,000, subject to the lessors’ architectural supervision, with all improvements to become the property of the landowners upon the expiration of the term without any compensation to the lessee.

• Attempted Judicial Approval: The day after execution, on October 15, 1913, Geronimo Jose filed a motion in the guardianship of Zacarias Lichauco (Case No. 4923) seeking authorization to employ counsel and to approve the lease. The portion requesting approval of the lease elicited no written ruling; no order granting or denying that specific relief was entered in the court records. No comparable motion was filed in the minors’ guardianship case.

• The Crossfield Endorsement: Sometime after execution, the lessee’s duplicate copy of the lease was presented to Judge A.S. Crossfield, who then presided over the probate and guardianship branch of the CFI Manila. The duplicate was endorsed with the word “Approved,” signed by Judge Crossfield, and stamped with the seal of the Court of First Instance. No similar endorsement appeared on the lessors’ copies or on the notaries’ retained copies. The endorsed duplicate was never attached to or made part of the court records.

• Evidence of Contemporaneous Approval: By stipulation, Judge Crossfield’s proposed testimony was that to the best of his recollection Amparo Nable Jose requested and obtained verbal permission from him to execute the lease on behalf of the minors, and that he ordered the clerk to prepare orders for entry in both guardianship records approving the leases, though no such orders were actually entered. The deputy clerk, Felipe Canillas, swore in an affidavit that he was never instructed to prepare any order approving the leases, and that the libro de actas for 1913 contained no entry of any such approval. The last paragraph of Canillas’s affidavit noted that the seal of the probate division was readily accessible to attorneys and litigants.

• Guardianship Accounts and Motions: A motion filed by Zacarias Lichauco on August 1, 1913 (before his incapacitation was adjudicated), stated that the court had “decided that the land be leased to the administration of the testamentary estate of Chua Piengco.” The guardians’ accounts from 1913 to 1919, approved by the court, reflected receipt of the rents stipulated in the lease. No account entry, however, identified the rents as deriving from a lease exceeding six years, nor did the approval of the accounts adjudicate the validity of the underlying contract.

• Torrens Registration: Galo Lichauco later applied for original registration of the land under Act No. 496. The petition, signed also by the guardians in behalf of the wards, recited that the property was free of encumbrances and that it was occupied by Tan Pho. At the hearing on January 29, 1914, Galo Lichauco and Tan Pho’s counsel stipulated the existence of the 20-year lease. The Land Registration Court’s judgment of April 3, 1914, adjudicated the land to the co-owners and declared it “subject to a contract of lease for twenty years in favor of Tan-U … upon the conditions mentioned in the said contract.” Decree No. 17729 issued on July 21, 1914, and the corresponding certificate of title carried a memorandum of the lease. The instrument of lease itself was never registered under Sections 50, 51, or 52 of Act No. 496.

• Institution of the Annulment Suit: On September 17, 1920, Faustino Lichauco, as guardian ad litem of the minors and the incapacitated Zacarias, filed a complaint against Tan Pho, Tan U, the Chua heirs, and Galo Lichauco, seeking annulment of the lease and an accounting. Tan Pho responded by moving in the two guardianship cases for nunc pro tunc orders approving the lease retroactively to December 1913.

• Tan Pho’s Authority: It was admitted that, at the time of the lease, Tan Pho was the administrator of the unpartitioned estate of Chua Piengco and also the general attorney-in-fact of Tan U. Tan U later executed a document expressly approving and ratifying the lease. The Chua heirs’ interest in the lease derived from Tan U and depended on her will.

• Lack of Special Power: Petitioners maintained that under Article 1548 of the Civil Code, guardians could not execute a lease for more than six years without special power. The family council that might have granted such power had already been abolished by Section 552 of the Code of Civil Procedure, and the courts had no statutory authority to grant it until the enactment of Act No. 2640 in 1916. They contended that the ruling in Enriquez v. A.S. Watson & Co. was erroneous and based on Spanish jurisprudence later abandoned by the Supreme Court of Spain.

• Absence of Judicial Approval: The lease lacked the required judicial approval. No written order of approval was ever entered in the guardianship proceedings. The endorsement on the lessee’s duplicate copy was not a judicial act; it was made ex parte and did not form part of the court record.

• Invalidity of Nunc Pro Tunc Order: The nunc pro tunc orders granted by the trial court were invalid because there was no record entry, minute, or memorandum to supply. The power of a court to enter a nunc pro tunc order is limited to recording an act actually done; it cannot create a record of an act that never occurred. Parol evidence could not be the sole basis for recreating a judicial approval of which no written trace existed.

• Tan Pho’s Want of Authority: Tan Pho lacked authority to bind the heirs of Chua Piengco, as his general power of attorney did not extend to executing long-term leases involving construction of substantial improvements, and he acted without the consent of the heirs.

• Inefficacy of Registration: Registration of the lease in the Torrens decree did not cure the substantive defect. The certificate of title is not conclusive of matters not properly registrable, and the lack of judicial approval rendered the lease voidable; the registration proceeding, which described the land as free of encumbrances, could not convert a voidable contract into an indefeasible right.

• Court’s Power to Authorize: Respondents invoked the doctrine in Enriquez v. A.S. Watson & Co. that Courts of First Instance possessed inherent power to authorize guardians to lease wards’ property for more than six years, even prior to Act No. 2640. The guardians, therefore, had the capacity to execute the lease with proper court approval.

• Sufficiency of Judicial Approval: The lease was in fact approved by Judge Crossfield. The endorsement on the lessee’s copy, the judge’s affidavit, the motions filed in the guardianship cases, and the court-approved accounts reflecting receipt of the contract rents collectively demonstrated that judicial approval had been granted orally and was intended to be formally recorded.

• Propriety of Nunc Pro Tunc Entry: The nunc pro tunc petitions were proper to supply the omission in the record of a judicial act that actually occurred. The court could rely on parol evidence, including the judge’s recollection and the parties’ contemporaneous conduct, to enter the order.

• Tan Pho’s Authority: Tan Pho acted under a valid general power of attorney from Tan U, who subsequently ratified the lease. As administrator of the unpartitioned estate of Chua Piengco, he was empowered to manage the estate’s property and invest funds in improvements on leased land to produce income.

• Conclusiveness of Registration: The lease was incorporated into the decree of registration following a hearing at which the guardians were represented and agreed to the stipulation. Having become part of an indefeasible Torrens title after the lapse of one year under Section 38 of Act No. 496, the lease could no longer be challenged.

• Power of Guardians: Whether the guardians could execute a lease for more than six years without a family council’s special power, given the abolition of family councils and the state of statutory law in 1913.

• Judicial Approval and Nunc Pro Tunc: Whether the lease was actually judicially approved, and if not, whether the trial court could properly enter a nunc pro tunc order approving it retroactively based on extra-record evidence when no written order, minute, or memorandum of such approval existed in the guardianship records.

• Authority of Tan Pho: Whether Tan Pho possessed sufficient legal authority to bind Tan U and the estate of Chua Piengco to the 20-year lease and the concomitant building obligation.

• Effect of Registration: Whether the registration of the lease in the original Torrens certificate of title and the lapse of the one-year period for review of the decree barred the action for annulment and rendered the lease incontestable.

• Power of Guardians: The guardians needed special power to lease for more than six years, and the Court of First Instance had authority to grant that approval. The ruling in Enriquez v. A.S. Watson & Co. was affirmed and followed, recognizing that courts of general jurisdiction possess inherent power to authorize guardians to execute such leases. Subsequent Spanish decisions were not binding on Philippine courts after the transfer of sovereignty.

• Judicial Approval and Nunc Pro Tunc: The lease was never judicially approved. No written order approving the lease was entered in the record of either guardianship case. A nunc pro tunc order may only be issued to make the record speak the truth by supplying an omission of an act that was actually performed; it may not substitute for the absence of the act itself. The record must contain some written data — a minute, memorandum, or entry — from which the missing entry may be inferred. In this case, neither the motion partially granted, the judge’s endorsement on the lessee’s copy, nor the accounts afforded such a basis. The trial court therefore erred in impliedly granting the nunc pro tunc petitions.

• Authority of Tan Pho: Tan Pho’s authority was sufficient. His general power of attorney from Tan U, coupled with Tan U’s subsequent ratification, bound her interest. As administrator of the unpartitioned Chua Piengco estate, the act of investing estate funds in improvements on leased land to generate income fell within the ordinary powers of an administrator. The defect in authority, if any, did not supply an independent ground for annulment.

• Effect of Registration: Registration did not cure the lack of judicial approval. The lease was voidable, not void ab initio; it carried full legal effect until annulled. The proceeding for annulment effectively sought a declaration that the registered right had been partially extinguished as to the plaintiffs — a ground for amendment of the certificate of title under Section 112 of Act No. 496. Because the amendment was premised on an extinguishment occurring after registration (i.e., by the declaration of partial nullity), it did not constitute a revision of the original decree barred by Section 38. No third-party rights had intervened, so the cancellation of the lease memorandum as to the plaintiffs was proper.

• Nunc Pro Tunc Orders — A nunc pro tunc entry may only be used to record on the record judicial action that actually occurred at a former time but was omitted through inadvertence or mistake; it cannot create a record of action never taken. The power is restricted to supplying an omission in the record, not to correcting judicial errors or supplying non-action. There must be some written data, minute, memorandum, or entry in the record that directly or by fair inference supports the entry sought. Parol evidence alone is insufficient where no trace of the alleged act appears in the files.

• Voidable Contracts — Lease Lacking Judicial Approval — A guardian’s lease of a ward’s property for more than six years without judicial approval is not void ab initio but merely voidable. It produces legal effects between the parties until annulled. A judicial declaration of nullity retroacts to the date the action was commenced, because the ground for annulment already existed at that time.

• Amendment of Torrens Title Under Section 112 of Act No. 496 — An action to annul a registered lease right is, in substance, a petition under Section 112 to amend the certificate of title by cancelling a registered interest on the ground that it has been extinguished. Such a proceeding does not reopen the original decree of registration, provided the extinguishment is based on events occurring after registration. The one-year statutory bar under Section 38 applies only to direct attacks on the decree itself, not to amendments based on post-registration extinguishment of rights.

• Good Faith Builder Under Voidable Lease — When a lessee erects improvements on leased land under a voidable lease and acts in good faith, the lessee is considered a builder in good faith and retains ownership of the improvements. The landowner may appropriate the improvements upon payment of indemnity under Articles 361, 453, and 454 of the Civil Code, or compel the lessee to purchase the land.

• “The office of a judgment nunc pro tunc is to record some act of the court done at a former time which was not then carried into the record, and the power of a court to make such entries is restricted to placing upon the record evidence of judicial action which has been actually taken. It may be used to make the record speak the truth, but not to make it speak what it did not speak but ought to have spoken.”

• “The exercise of a power to recreate a record where no memorandum whatever exists of such record is evidently a dangerous one ….” (quoting Gagnon v. United States)

• “A nunc pro tunc entry in practice is an entry made now of something which was actually previously done, to have effect as of the former date. Its office is not to supply omitted action by the court, but to supply an omission in the record of action really had, but omitted through inadvertence or mistake.”

• “Since it is a contract that is merely voidable it has all the effects of being valid and efficacious, even with respect to the plaintiffs, so long as it is not declared void. … the present judgment being limited to declaring it judicially.”

• Enriquez v. A.S. Watson & Co., 22 Phil. 623 — Followed. Recognized the inherent power of Courts of First Instance to authorize guardians to lease ward’s property for more than six years. The doctrine was held controlling, and the Court declined to depart from stare decisis.

• Cordova v. Folgueras, 227 U.S. 375 — Cited. Declared that decisions of Spanish courts rendered after 1898 are not binding on Philippine courts, though entitled to great consideration.

• Gagnon v. United States, 193 U.S. 451 — Applied. Held that a nunc pro tunc order cannot recreate a record when no memorandum whatever exists of the alleged judicial act; the danger of relying on parol evidence alone was emphasized.

• Wight v. Nicholson, 134 U.S. 136 — Distinguished. Parol evidence was permitted in that case only to supply an accessory, inevitable consequence of a judicial act already recorded; it did not authorize supplying an entirely independent and unrecorded act.

• Lino Luna v. Rodriguez and De los Angeles, 37 Phil. 186 — Mentioned. Noted as Philippine jurisprudence that did not positively resolve the nunc pro tunc question.

• Article 1548, Spanish Civil Code — Prohibited a guardian from executing a lease for more than six years without special power. Applied to require judicial authorization for the 20-year lease.

• Article 1300, Spanish Civil Code — Provided that contracts containing all essential requisites may be annulled if vitiated by a defect recognized by law. Invoked to characterize the lease as voidable rather than void.

• Articles 361, 453, and 454, Spanish Civil Code — Governed the rights of a builder in good faith on another’s land; supplied the remedy of indemnity or forced purchase of the land.

• Sections 552 and 555, Code of Civil Procedure — Section 552 abolished family councils, removing the traditional source of special power; Section 555 required guardians to render detailed accounts but did not make account approval a ratification of underlying contracts.

• Section 38, Act No. 496 (Land Registration Act) — Established the one-year period to review a decree of registration. Held inapplicable because the proceeding sought amendment based on post-registration extinguishment, not revision of the decree.

• Section 112, Act No. 496 — Allowed amendment of a certificate of title upon extinguishment of registered interests, among other grounds. Construed to authorize cancellation of the lease memorandum after judicial declaration of partial nullity.

Araullo, C.J., Street, Malcolm, Avanceña, Villamor, and Johns, JJ., concurred. No separate concurring opinions were registered.

N/A — The decision was unanimous.