Heirs of Ignacia Aguilar-Reyes vs. Spouses Cipriano Mijares and Florentina Mijares

Under the Civil Code, a sale of conjugal real property by the husband without the wife's consent is voidable, not void, and may be annulled in its entirety within ten years from the transaction; court approval obtained after the sale and based on the wife's supposed death cannot validate the sale or make the buyers purchasers in good faith.

Spouses Vicente Reyes and Ignacia Aguilar-Reyes were married in 1960 and had been separated de facto since 1974. Lot No. 4349-B-2, located in Balintawak, Quezon City, was registered in their names and formed part of their conjugal properties, having been purchased with conjugal funds from their garments business. Under the Civil Code then governing the transaction, the husband could not alienate or encumber conjugal real property without the wife's consent, and Article 173 allowed the wife, during the marriage and within ten years from the questioned transaction, to seek annulment of a contract entered into by the husband without her consent. The Family Code, which took effect on August 3, 1988, later changed the rule by making such dispositions void absent the required consent or court authority.

Spouses Vicente Reyes and Ignacia Aguilar-Reyes were married in 1960 but had been separated de facto since 1974. Lot No. 4349-B-2, approximately 396 square meters, previously covered by Transfer Certificate of Title No. 205445, was located in Balintawak, Quezon City and registered in the names of the spouses. The lot and the apartments built thereon formed part of their conjugal properties, having been purchased using conjugal funds from their garments business.

Sometime in 1984, Ignacia learned that on March 1, 1983, Vicente had sold Lot No. 4349-B-2 to respondent spouses Cipriano and Florentina Mijares for P40,000.00. As a consequence, TCT No. 205445 was cancelled and TCT No. 306087 was issued on April 19, 1983 in the name of respondent spouses. She also discovered that Vicente had filed a petition for administration and appointment of guardian with the Metropolitan Trial Court of Quezon City, Branch XXI, misrepresenting that Ignacia had died on March 22, 1982 and that he and their five minor children were her only heirs. On September 29, 1983, the court appointed Vicente as guardian of their minor children, and in an Order dated October 14, 1983, authorized Vicente to sell the estate of Ignacia.

On August 9, 1984, Ignacia, through counsel, sent a letter to respondent spouses demanding the return of her one-half share in the lot. Failing to settle the matter amicably, Ignacia filed a complaint for annulment of sale against respondent spouses; the complaint was thereafter amended to include Vicente Reyes as one of the defendants. The Court later reckoned the filing date as June 4, 1986 for purposes of the prescriptive period and interest, although the factual narration states June 4, 1996. In their answer, respondent spouses claimed that they were purchasers in good faith and that the sale was valid because it was duly approved by the court. Vicente contended that what he sold to the spouses was only his share in Lot No. 4349-B-2, excluding the share of his wife, and that he never represented that the latter was already dead. He likewise testified that respondent spouses, through the counsel they provided him, took advantage of his illiteracy by filing a petition for the issuance of letters of administration and appointment of guardian without his knowledge.

The trial court found that the subject of the sale was the entire Lot No. 4349-B-2 and that the consideration was not P40,000.00 as stated in the March 1, 1983 deed of sale, but P110,000.00, as evidenced by the November 25, 1978 Agreement, the July 30, 1979 Memorandum of Understanding, the July 14, 1981 Memorandum of Agreement, and a receipt signed by Vicente Reyes acknowledging receipt of P110,000.00. The 1978 Agreement described Vicente as married but did not contain the conformity of his wife to the sale. The death certificate of Ignacia showed that she allegedly died on March 22, 1982, but it was issued by the Office of the Civil Registrar of Lubao, Pampanga on March 10, 1982; the alleged death was reported on March 4, 1982; and her burial or cremation would be on March 8, 1982. Respondent Florentina Mijares admitted on cross-examination that she asked for the death certificate because she was suspicious that Ignacia was still alive. Respondent spouses had the opportunity to verify Vicente's claim that he was a widower because their lawyer, Atty. Rodriguito S. Saet, represented Vicente in the special proceedings before the Metropolitan Trial Court. The guardianship and authority orders were issued only on September 29, 1983 and October 14, 1983, while the sale of the entire lot appears to have been made as early as November 25, 1978, on an installment basis, with the first installment due on or before July 31, 1979. The July 30, 1979 Memorandum of Understanding acknowledged Cipriano's receipt of Vicente's down payment of P50,000.00 and authorized Florentina Mijares to collect rentals, while the July 14, 1981 Memorandum of Agreement stated that out of the purchase price of P110,000.00, Vicente had a remaining balance of P19,000.00. The five minor children of Vicente also signed the March 1, 1983 deed of sale.

• Good Faith: Petitioners contended that the assailed sale of Lot No. 4349-B-2 should be annulled because respondent spouses were not purchasers in good faith.
• Rentals: Petitioners contended that they are entitled to reimbursement of the rentals collected on the apartment built on Lot No. 4349-B-2.

• Good Faith: Respondent spouses claimed that they are purchasers in good faith.
• Court Approval: Respondent spouses claimed that the sale was valid because it was duly approved by the court.

• Status of the Sale: Whether the sale of Lot No. 4349-B-2 to respondent spouses is void, voidable, or valid.
• Extent of Annulment: Assuming the sale is annullable, whether it should be annulled in its entirety or only with respect to the share of Ignacia.
• Good Faith: Whether respondent spouses are purchasers in good faith.
• Rentals: Whether petitioners are entitled to reimbursement of rentals collected on the apartment.
• Damages and Interest: Whether the awards of moral and exemplary damages and the interest on the refund should be modified.

• Status of the Sale: Voidable, not void. Under Articles 166 and 173 of the Civil Code, a sale of conjugal real property by the husband without the wife's consent is voidable, and the wife may seek annulment during the marriage and within ten years from the transaction.
• Extent of Annulment: Annulled in its entirety. The contract executed by the husband without the wife's consent may be annulled as a whole, not merely as to the wife's share, because the nullity rests on the lack of consent of an indispensable party.
• Good Faith: No. Respondents were not purchasers in good faith; the flawed death certificate, their lawyer's representation of Vicente, and the prior sale should have placed them on guard.
• Rentals: No. The claim for rentals, being in the nature of actual damages, was not supported by competent proof.
• Damages and Interest: Modified. Moral and exemplary damages must be separately determined at P25,000.00 each; the P110,000.00 refund earns 6% interest per annum from June 4, 1986 until finality and 12% per annum thereafter.

• Status of the Sale: Articles 166 and 173 of the Civil Code governed. Article 166 prohibited the husband from alienating or encumbering conjugal real property without the wife's consent. Article 173 allowed the wife, during the marriage and within ten years from the questioned transaction, to ask for annulment of any contract of the husband entered into without her consent. The Court noted that while several cases had ruled such alienation or encumbrance void, the better view is that the transaction is merely voidable and not void, consistent with Article 173. Heirs of Christina Ayuste vs. Court of Appeals categorically held that a sale of conjugal real property by the husband without the wife's consent is voidable, and Spouses Guiang vs. Court of Appeals quoted with approval that under the Civil Code such alienation or encumbrance is voidable, not void, although the Family Code later made post-August 3, 1988 dispositions void. Lot No. 4349-B-2 was conjugal, purchased with conjugal funds during the marriage. The sale without Ignacia's knowledge and consent was therefore voidable. Her action to annul the March 1, 1983 sale, filed before her demise, was within the ten-year prescriptive period under Article 173; even reckoning from November 25, 1978, the action remained timely.

• Extent of Annulment: The trial court correctly annulled the voidable sale in its entirety. Bucoy vs. Paulino, involving annulment of a sale with assumption of mortgages executed by the husband without the wife's consent, held that the alienation or encumbrance must be annulled in its entirety and not only insofar as the wife's share is concerned. Although the transaction in Bucoy was declared void and not merely voidable, the rationale for annulling the whole transaction is the same: the plain language of Article 173 allows the wife to annul the contract in its entirety, and any limitation to the wife's prejudice should have been spelled out by Congress. The nullity is decreed not on the basis of prejudice but because of the lack of consent of an indispensable party under Article 166. The conjugal partnership is liable for many obligations while it exists, and the husband should be stopped from disposing of conjugal property without the wife's consent. Thus, the entire sale was properly annulled.

• Good Faith: A purchaser in good faith is one who buys property of another without notice that some other person has a right to or interest in the property and pays full and fair price at the time of purchase or before notice of the claim or interest. He buys with the belief that the person from whom he receives the thing was the owner and could convey title. A purchaser cannot close his eyes to facts that should put a reasonable man on his guard and still claim good faith. In this case, circumstances existed that should have placed respondents on guard. The death certificate of Ignacia showed she allegedly died on March 22, 1982, but it was issued by the Office of the Civil Registrar of Lubao, Pampanga on March 10, 1982; the alleged death was reported on March 4, 1982; and her burial or cremation would be on March 8, 1982. These obvious flaws should have prompted further investigation, especially since respondent Florentina Mijares admitted on cross-examination that she asked for the death certificate because she was suspicious that Ignacia was still alive. Respondents also had the opportunity to verify Vicente's claim that he was a widower because their lawyer, Atty. Rodriguito S. Saet, represented Vicente in the special proceedings before the Metropolitan Trial Court. Respondents could not rely on the alleged court approval of the sale because the guardianship and authority orders were issued only on September 29, 1983 and October 14, 1983, while the sale of the entire lot appears to have been made as early as November 25, 1978. The 1978 Agreement described Vicente as married but did not contain his wife's conformity. The execution of another deed in 1983 after the alleged death, and the special proceedings, were intended to correct the absence of Ignacia's consent. Even assuming respondents believed in good faith that Ignacia died on March 22, 1982, the sale prior to her alleged demise was without her consent and subject to annulment. The October 14, 1983 order authorizing the sale of Ignacia's estate could not validate the sale because it was issued on the assumption that Ignacia was already dead and the March 1, 1983 sale was never categorically approved. The minor children's signing of the March 1, 1983 deed did not estop them; they were too young and had no right to sell their mother's property while she was alive.

• Rentals: The prayer for payment of rentals was denied. Apart from Ignacia's allegation in her Sinumpaang Salaysay that the apartments could be rented at P1,000.00 a month, no other evidence was presented to substantiate the claim. In awarding rentals, which are in the nature of actual damages, the Court cannot rely on mere assertions, speculations, conjectures, or guesswork but must depend on competent proof and on the best evidence obtainable regarding the actual amount of loss. None having been presented, the claim for rentals must be denied.

• Damages and Interest: If a voidable contract is annulled, restoration of what has been given is proper; the relationship between the parties in any contract, even if subsequently annulled, must be characterized by good faith and fair dealing. For justice and equity and to avoid enrichment at another's expense, the trial court's order directing Vicente to refund P110,000.00 as purchase price was sustained. The trial court correctly found that the subject of the sale was the entire lot and the consideration was P110,000.00, not P40,000.00 as stated in the March 1, 1983 deed, as evidenced by the November 25, 1978 Agreement, the July 30, 1979 Memorandum of Understanding, the July 14, 1981 Memorandum of Agreement, and the receipt signed by Vicente. The trial court erred in imposing 12% interest per annum. Under Eastern Shipping Lines, Inc. vs. Court of Appeals, interest on obligations not constituting a loan or forbearance of money is 6% annually. If the purchase price could be established with certainty at the time of filing the complaint, the 6% interest should be computed from the date the complaint was filed until finality of the decision. In Lui vs. Loy, involving a suit for reconveyance and annulment of title filed by the first buyer against the seller and the second buyer, the Court ordered the seller to refund to the second buyer, who was not a purchaser in good faith, the purchase price, with 6% interest computed from the date of the filing of the complaint by the first buyer. After the judgment becomes final and executory until the obligation is satisfied, the amount due shall earn 12% per year, the interim period being deemed equivalent to a forbearance of credit. Accordingly, the P110,000.00 due respondents earns 6% interest per annum from June 4, 1986 until finality of the decision; thereafter, 12% per annum on the principal and interest until full payment. As to damages, although Vicente did not appeal, the plain error committed by the trial court in awarding moral and exemplary damages had to be corrected. A party who has not appealed is generally not entitled to affirmative relief other than what was granted below, but law and jurisprudence authorize consideration of errors affecting jurisdiction, plain errors not specified, and clerical errors. Moral and exemplary damages are different in nature and require separate determination. Moral damages are awarded where the claimant experienced physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury as a result of the act complained of. Exemplary damages are warranted when moral, temperate, liquidated, or compensatory damages were likewise awarded. The trial court's award of P50,000.00 "by way of moral and exemplary damages" was modified to P25,000.00 as moral damages and P25,000.00 as exemplary damages. Since Vicente was among the heirs substituted to Ignacia, payment of moral and exemplary damages must be made by Vicente to his children, the petitioners.

• Voidable sale of conjugal real property without wife's consent under the Civil Code — Under Articles 166 and 173 of the Civil Code, the husband cannot alienate or encumber conjugal real property without the wife's consent; the absence of consent renders the transaction voidable, not void. The wife may, during the marriage and within ten years from the questioned transaction, seek annulment. Applied: the sale of Lot No. 4349-B-2 by Vicente without Ignacia's consent was voidable, and Ignacia's action was timely.

• Annulment of the entire contract — A contract executed by the husband without the wife's consent may be annulled in its entirety, not merely as to the wife's one-half share. The nullity rests on the lack of consent of an indispensable party under Article 166, and the plain language of Article 173 does not limit annulment to the wife's prejudice. Applied: the entire March 1, 1983 sale was annulled.

• Purchaser in good faith — A purchaser in good faith buys property without notice of another's right or interest and pays full and fair price at the time of purchase or before notice; he cannot close his eyes to facts that should put a reasonable man on guard. Applied: respondents were not purchasers in good faith because the flawed death certificate, their lawyer's representation of Vicente, and the prior sale should have prompted investigation.

• Restoration upon annulment of a voidable contract — If a voidable contract is annulled, restoration of what has been given is proper, consistent with justice, equity, and the principle of non-enrichment at another's expense. Applied: Vicente was ordered to refund the P110,000.00 purchase price to respondents.

• Interest on obligations not constituting a loan or forbearance — Interest on obligations not constituting a loan or forbearance of money is 6% per annum; if the amount is certain at the time of filing, it runs from filing until finality, and 12% per annum after finality until satisfaction. Applied: the P110,000.00 refund earns 6% from June 4, 1986 until finality and 12% thereafter.

• Actual damages require competent proof — Actual damages, including rentals, cannot be based on mere assertions, speculations, conjectures, or guesswork; they must be proved by competent evidence and the best evidence obtainable. Applied: the claim for rentals was denied for lack of evidence.

• Plain error exception — A party who has not appealed is generally not entitled to affirmative relief other than what was granted below, but courts may consider errors affecting jurisdiction, plain errors not specified, and clerical errors. Applied: the award of moral and exemplary damages was modified despite Vicente not appealing.

• Moral and exemplary damages are distinct — Moral and exemplary damages are different in nature and require separate determination. Moral damages compensate for physical suffering, mental anguish, and similar injury; exemplary damages are warranted when moral, temperate, liquidated, or compensatory damages are awarded. Applied: the lump-sum P50,000.00 award was split into P25,000.00 moral and P25,000.00 exemplary damages.

• "There is no ambiguity in the wording of the law. A sale of real property of the conjugal partnership made by the husband without the consent of his wife is voidable. The action for annulment must be brought during the marriage and within ten years from the questioned transaction by the wife. Where the law speaks in clear and categorical language, there is no room for interpretation — there is room only for application." — States the ratio that a husband's sale of conjugal real property without the wife's consent is voidable, not void, and fixes the ten-year prescriptive period for annulment.

• "The plain meaning attached to the plain language of the law is that the contract, in its entirety, executed by the husband without the wife's consent, may be annulled by the wife. Had Congress intended to limit such annulment in so far as the contract shall "prejudice" the wife, such limitation should have been spelled out in the statute. It is not the legitimate concern of this Court to recast the law." — States the ratio for annulling the entire contract, not merely the wife's share, because the law does not limit annulment to the wife's prejudice.

• "A purchaser in good faith is one who buys property of another, without notice that some other person has a right to, or interest in, such property and pays full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. He buys the property with the belief that the person from whom he receives the thing was the owner and could convey title to the property. A purchaser cannot close his eyes to facts which should put a reasonable man on his guard and still claim he acted in good faith." — Defines purchaser in good faith and supplies the standard applied to hold respondents not in good faith.

• "If a voidable contract is annulled, the restoration of what has been given is proper. The relationship between parties in any contract even if subsequently annulled must always be characterized and punctuated by good faith and fair dealing." — States the basis for ordering Vicente to refund the P110,000.00 purchase price despite the annulment of the sale.

• Heirs of Christina Ayuste vs. Court of Appeals, 372 Phil. 370, 379 (1999) — Held that a sale of conjugal real property by the husband without the wife's consent is voidable, not void, and that the action for annulment must be brought during the marriage and within ten years from the questioned transaction.
• Spouses Guiang vs. Court of Appeals, 353 Phil. 578, 588 (1998) — Quoted with approval that under the Civil Code an alienation or encumbrance of conjugal real property by the husband without the wife's consent is voidable, not void, and noted that the Family Code changed the rule for dispositions after August 3, 1988.
• Bucoy vs. Paulino, 131 Phil. 790, 804-805 (1968) — Held that an alienation or encumbrance executed by the husband without the wife's consent must be annulled in its entirety, not only as to the wife's share; the rationale was applied even though the transaction there was void rather than voidable.
• Sandoval vs. Court of Appeals, 329 Phil. 48, 62 (1996) — Cited for the definition of a purchaser in good faith and the rule that a purchaser cannot close his eyes to facts that should put a reasonable man on guard.
• Eastern Shipping Lines, Inc. vs. Court of Appeals, G.R. No. 97412, July 12, 1994, 234 SCRA 78, 96 — Held that interest on obligations not constituting a loan or forbearance of money is 6% per annum, and that after finality the amount due earns 12% per annum until satisfaction.
• Lui vs. Loy, G.R. No. 145982, July 3, 2003 — In a suit for reconveyance and annulment of title, the seller was ordered to refund the purchase price to the second buyer, who was not a purchaser in good faith, with 6% interest computed from the date the first buyer filed the complaint.
• Lucena vs. Court of Appeals, 371 Phil. 188, 802 (1999) — Cited for the rule that actual damages cannot be based on mere assertions, speculations, conjectures, or guesswork but must be proved by competent evidence.
• Aurora Land Projects Corporation vs. National Labor Relations Commission, 334 Phil. 44, 59 (1997) — Cited for the plain error exception allowing a court to consider errors not assigned on appeal, including plain errors not specified.
• Herbosa vs. Court of Appeals, G.R. No. 119087, January 25, 2002 — Cited in connection with the correction of the award of moral and exemplary damages, which must be separately determined.
• Philippine Telegraph and Telephone Corporation vs. Court of Appeals, G.R. No. 139268, September 3, 2002 — Cited for the definition and basis of moral damages.
• Pacific Airways Corporation vs. Tonda, G.R. No. 138478, November 26, 2002 — Cited for the rule that exemplary damages are warranted when moral, temperate, liquidated, or compensatory damages are awarded.

• Article 166, Civil Code — Provided that unless the wife has been declared non compos mentis, a spendthrift, under civil interdiction, or confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership without the wife's consent; if she refuses unreasonably, the court may compel her consent. Applied: Vicente's sale of conjugal Lot No. 4349-B-2 without Ignacia's consent was voidable.
• Article 173, Civil Code — Allowed the wife, during the marriage and within ten years from the transaction questioned, to ask the courts for annulment of any contract of the husband entered into without her consent when such consent is required, or any act or contract tending to defraud her or impair her interest in the conjugal partnership property. Applied: Ignacia's action for annulment was timely, and the sale was annulled.
• Article 124, Family Code — Cited in a footnote as governing sales or encumbrances of conjugal or community property concluded after the effectivity of the Family Code on August 3, 1988; under it, a disposition without the required authority or consent is void, but the transaction is construed as a continuing offer. Not applied to the present sale, which was governed by the Civil Code.

Davide, Jr., C.J. (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.