Heirs of Protacio Go, Sr. and Marta Barola vs. Servacio

A sale by the surviving spouse of a portion of conjugal property without the prior liquidation mandated by Article 130 of the Family Code is not necessarily void if the portion sold has not yet been allocated by judicial or extrajudicial partition to another heir of the deceased spouse; the sale transfers only the vendor's undivided share, and the proper remedy of the other co-heirs is judicial partition. The requirement of prior liquidation does not prejudice vested rights.

Protacio, Sr. and Marta Barola Go were spouses whose property relations were governed by the conjugal partnership of gains under the Civil Code. Their children include the petitioners and Rito B. Go. The dispute concerns the effect of Article 130 of the Family Code, which requires liquidation of conjugal partnership property upon termination by death, and Article 105, which applies the Family Code's conjugal partnership rules to partnerships established before its effectivity without prejudice to vested rights. Because Marta died before the Family Code took effect, the governing property regime and the consequences of a sale by the surviving spouse are at issue.

On February 22, 1976, Jesus B. Gaviola sold two parcels of land with a total area of 17,140 square meters situated in Southern Leyte to Protacio B. Go, Jr. Protacio, Sr. and Marta Barola Go were spouses whose property relations were governed by the conjugal partnership of gains; Marta was the wife of Protacio, Sr. and the mother of the petitioners. Marta died on November 25, 1987. On March 29, 1999, Protacio, Jr. executed an Affidavit of Renunciation and Waiver, affirming under oath that it was his father, Protacio, Sr., not he, who had purchased the two parcels of land (the property).

On December 28, 1999, Protacio, Sr. and his son Rito B. Go, joined by Rito's wife Dina B. Go, sold a portion of the property with an area of 5,560 square meters to Ester L. Servacio for ₱5,686,768.00. On March 2, 2001, petitioners demanded the return of the property, but Servacio refused. After barangay proceedings failed to resolve the dispute, petitioners sued Servacio and Rito in the Regional Trial Court in Maasin City, Southern Leyte for annulment of the sale. Petitioners averred that following Protacio, Jr.'s renunciation, the property became conjugal property, and that the sale to Servacio without prior liquidation of the community property between Protacio, Sr. and Marta was null and void. Servacio and Rito countered that Protacio, Sr. had exclusively owned the property because he had purchased it with his own money.

The RTC found that the property was the conjugal property of Protacio, Sr. and Marta, not the exclusive property of Protacio, Sr., because there were three vendors in the sale to Servacio—Protacio, Sr., Rito, and Dina—and the participation of Rito and Dina as vendors was by virtue of their being heirs of the late Marta. Under Article 160 of the Civil Code, the law in effect when the property was acquired, all property acquired by either spouse during the marriage was conjugal unless there was proof that it pertained exclusively to the husband or to the wife; Protacio, Jr.'s renunciation was grossly insufficient to rebut the legal presumption.

• Applicability of Article 130: Petitioners claimed that Article 130 of the Family Code was the applicable law.
• Void Sale Without Prior Liquidation: Petitioners argued that the sale by Protacio, Sr., et al. to Servacio was void for being made without prior liquidation.
• Conjugal Character of the Property: Petitioners averred that following Protacio, Jr.'s renunciation, the property became conjugal property, making the sale without prior liquidation null and void.

• Inapplicability of Article 130: Servacio and Rito argued that Article 130 of the Family Code was inapplicable.
• Validity to the Extent of the Vendors' Share: They maintained that the want of liquidation prior to the sale did not render the sale invalid, because the sale was valid to the extent of the portion that was finally allotted to the vendors as their share.
• No Prejudice to Heirs: They argued that the sale did not prejudice any rights of the petitioners as heirs, considering that what the sale disposed of was within the aliquot portion of the property that the vendors were entitled to as heirs.
• Exclusive Ownership: Servacio and Rito countered that Protacio, Sr. had exclusively owned the property because he had purchased it with his own money.

• Applicability of Article 130: Whether Article 130 of the Family Code governs the sale of conjugal property by the surviving spouse where the conjugal partnership was dissolved by the spouse's death before the effectivity of the Family Code.
• Validity of Sale Without Prior Liquidation: Whether the sale of a portion of the conjugal property by the surviving spouse and co-heirs without prior liquidation is void.
• Prejudice to Heirs' Rights: Whether the sale prejudiced the rights of the petitioners as heirs.
• Proper Remedy: Whether the proper recourse is annulment of the sale or judicial partition.

• Applicability of Article 130: No. Article 130 applies to conjugal partnerships subsisting at the effectivity of the Family Code; because the conjugal partnership was dissolved by Marta's death in 1987, before the Family Code took effect on August 3, 1988, the Civil Code governed and an implied ordinary co-ownership ensued.
• Validity of Sale Without Prior Liquidation: Not necessarily void. A co-owner may sell his undivided share; the sale transfers only the vendor's rights and makes the buyer a co-owner, without prejudice to vested rights under Article 105.
• Prejudice to Heirs' Rights: Not through annulment. Pending partition, the efficacy of the sale and whether it adversely affected petitioners' interests cannot be decided with finality; any invalid portion is held in trust for the co-heirs.
• Proper Remedy: Judicial partition, not annulment. Under Bailon-Casilao vs. Court of Appeals, the proper action is partition under Rule 69.

• Applicability of Article 130: Article 130 provides that upon termination of marriage by death, the conjugal partnership property shall be liquidated in the settlement proceeding; if no judicial settlement is instituted, the surviving spouse shall liquidate judicially or extrajudicially within one year from death; and if no liquidation is made after six months, any disposition or encumbrance involving the conjugal partnership property of the terminated marriage shall be void. Article 105 states that the Family Code's conjugal partnership rules apply to partnerships established before its effectivity, without prejudice to vested rights acquired under the Civil Code or other laws. The Court reasoned that before those rules may be applied, the conjugal partnership of gains must be subsisting at the time of the Family Code's effectivity. Protacio, Sr. and Marta were married before August 3, 1988, but Marta died on November 25, 1987, dissolving the conjugal partnership under Article 175(1) of the Civil Code. Consequently, the property relation was governed by the Civil Code, and an implied ordinary co-ownership arose among Protacio, Sr. and Marta's other heirs over her share in the conjugal assets pending liquidation. Article 130's voiding provision did not automatically invalidate the sale.
• Validity of Sale Without Prior Liquidation: Under Article 493 of the Civil Code, each co-owner has full ownership of his part and may alienate, assign, or mortgage it, but the effect of the alienation or mortgage with respect to the co-owners is limited to the portion that may be allotted to him in the division upon termination of the co-ownership. Protacio, Sr., as co-owner with his children in Marta's share, could not assert or claim title to any specific portion without an actual partition by agreement or judicial decree; until then, he had only an ideal or abstract quota. Nonetheless, a co-owner could sell his undivided share. The sale by Protacio, Sr. and Rito as co-owners without the consent of the other co-owners was not necessarily void, because the rights of the selling co-owners were effectively transferred and Servacio became a co-owner of Marta's share. This result conformed to the principle that the binding force of a contract must be recognized as far as legally possible (quando res non valet ut ago, valeat quantum valere potest). Article 105 also expressly preserved vested rights acquired under the Civil Code, and declaring the sale entirely void would prejudice Servacio, who had already acquired the shares of Protacio, Sr. and Rito. Although respondents averred that each heir had already received a certain allotted portion and that Protacio, Sr. and Rito sold only portions adjudicated to them, no public document on the allocation was presented, and no liquidation or partition was averred. Pending partition, the efficacy of the sale and whether its extent adversely affected petitioners' interests could not be decided with finality.
• Prejudice to Heirs' Rights: The sale could not be declared entirely void because doing so would prejudice Servacio's vested rights; any portion that might not be validly sold would be held by Servacio as trustee for the benefit of the co-heirs of her vendors. Justice Paras's observations explained that if the property alienated really pertains to the surviving spouse's share, the transaction is valid; if after liquidation there are no more conjugal assets, the whole transaction is null and void; and if half belongs to the husband and half to the estate of the wife, the husband's corresponding half is valid and the other is not. Since these matters can be determined only at liquidation, a disposal by the surviving spouse is not void ab initio. Buyers of property that could not be validly sold become trustees of that portion for the benefit of the other heirs, and the heirs are not barred by prescription or laches.
• Proper Remedy: The proper action in cases where co-owners' consent was not secured in a sale of the entire property or of undivided shares is an action for partition under Rule 69 of the Revised Rules of Court, as instructed in Bailon-Casilao vs. Court of Appeals. A sale of the entire property by one co-owner without the consent of the other co-owners is not null and void; only the rights of the co-owner-seller are transferred, making the buyer a co-owner. The proper action is not for nullification of the sale or recovery of possession from the third person who substituted the co-owner, but for division of the common property. In the meantime, Servacio would be a trustee for the benefit of the co-heirs of her vendors in respect of any portion that might not be validly sold to her.

• Conjugal Partnership of Gains; Applicability of Article 130 of the Family Code — Article 130 requires liquidation of conjugal partnership property upon termination by death and voids any disposition or encumbrance if no liquidation is made within the prescribed period. However, before the Family Code rules may be applied, the conjugal partnership of gains must be subsisting at the time of the Family Code's effectivity. If the conjugal partnership was dissolved before that effectivity, the Civil Code governs, and an implied ordinary co-ownership arises among the surviving spouse and the other heirs of the deceased spouse with respect to the deceased spouse's share pending liquidation. The Court applied this because Marta died in 1987, before the Family Code took effect on August 3, 1988.
• Co-ownership and Sale of an Undivided Share — Under Article 493 of the Civil Code, each co-owner has full ownership of his part and may alienate, assign, or mortgage it, but the effect of the alienation or mortgage with respect to the co-owners is limited to the portion that may be allotted to him in the division upon termination of the co-ownership. A co-owner cannot assert or claim title to a specific portion before actual partition; he has only an ideal or abstract quota. A sale by a co-owner without the consent of the other co-owners is not necessarily void; it transfers only the seller's rights and makes the buyer a co-owner. The Court applied this to the sale by Protacio, Sr. and Rito.
• Vested Rights and Favor Validitatis — Article 105 of the Family Code preserves vested rights already acquired under the Civil Code or other laws. Contracts must be recognized as far as legally possible (quando res non valet ut ago, valeat quantum valere potest). The Court relied on this to avoid declaring the sale entirely void, which would prejudice Servacio's vested rights as buyer of the shares of Protacio, Sr. and Rito.
• Proper Remedy of Co-owners: Judicial Partition — Where co-owners' consent is not secured in a sale of the entire property or of undivided shares, the proper action is partition under Rule 69 of the Revised Rules of Court, not annulment of the sale or recovery of possession from the buyer. The buyer becomes a co-owner as to the seller's share. The Court applied this in holding that petitioners' proper recourse was judicial partition.
• Trust Relationship Over Invalidly Sold Portion — A buyer of conjugal property that could not be validly sold becomes a trustee of that portion for the benefit of the other heirs, who are not barred by prescription or laches. The Court applied this to Servacio, who would hold any portion not validly sold in trust for the co-heirs of her vendors.

• "The disposition by sale of a portion of the conjugal property by the surviving spouse without the prior liquidation mandated by Article 130 of the Family Code is not necessarily void if said portion has not yet been allocated by judicial or extrajudicial partition to another heir of the deceased spouse. At any rate, the requirement of prior liquidation does not prejudice vested rights." — This passage states the core ruling and frames the dispositional principle that prior liquidation does not automatically void the sale.
• "Before applying such rules, however, the conjugal partnership of gains must be subsisting at the time of the effectivity of the Family Code. There being no dispute that Protacio, Sr. and Marta were married prior to the effectivity of the Family Code on August 3, 1988, their property relation was properly characterized as one of conjugal partnership governed by the Civil Code. Upon Marta’s death in 1987, the conjugal partnership was dissolved, pursuant to Article 175 (1) of the Civil Code, and an implied ordinary co-ownership ensued among Protacio, Sr. and the other heirs of Marta with respect to her share in the assets of the conjugal partnership pending a liquidation following its liquidation." — This passage explains why Article 130 did not govern and why an implied co-ownership arose.
• "Consequently, the sale by Protacio, Sr. and Rito as co-owners without the consent of the other co-owners was not necessarily void, for the rights of the selling co-owners were thereby effectively transferred, making the buyer (Servacio) a co-owner of Marta’s share." — This passage applies the co-ownership rule to the sale and defines its legal effect.
• "Thus, it is now settled that the appropriate recourse of co-owners in cases where their consent were not secured in a sale of the entire property as well as in a sale merely of the undivided shares of some of the co-owners is an action for PARTITION under Rule 69 of the Revised Rules of Court." — This passage identifies the proper remedy and is the Court's basis for denying annulment.

• Dael vs. Intermediate Appellate Court, G.R. No. 68873, March 31, 1989, 171 SCRA 524, 532-533 — Cited for the rule that upon dissolution of the conjugal partnership by death, an implied ordinary co-ownership arises among the surviving spouse and the other heirs of the deceased spouse with respect to the deceased spouse's share pending liquidation.
• Metropolitan Bank and Trust Co. vs. Pascual, G.R. No. 163744, February 29, 2008, 547 SCRA 246 — Cited in connection with Article 493 of the Civil Code and the principle that contracts must be upheld as far as legally possible.
• Acabal vs. Acabal, G.R. No. 148376, March 31, 2005, 454 SCRA 555, 581 — Cited for the rule that a co-owner cannot assert or claim title to a specific portion of the co-owned property without actual partition and has only an ideal or abstract quota.
• Aguirre vs. Court of Appeals, G.R. No. 122249, January 29, 2004, 421 SCRA 310, 324, citing Fernandez vs. Fernandez, G.R. No. 143256, August 28, 2001, 363 SCRA 811, 829 — Cited for the rule that a sale by a co-owner without the consent of the other co-owners is not necessarily void; only the selling co-owner's rights are transferred, making the buyer a co-owner.
• Bailon-Casilao vs. Court of Appeals, No. L-78178, April 15, 1988, 160 SCRA 738 — Cited as the controlling precedent that the proper action for co-owners whose consent was not secured in a sale of the entire property or of undivided shares is judicial partition under Rule 69, not annulment or recovery of possession.
• Cuison, et al. vs. Fernandez, et al., L-11764, January 31, 1959 — Cited in the Court's quotation from Justice Paras for the rule that buyers of property that could not be validly sold become trustees of that portion for the benefit of the other heirs, who are not barred by prescription or laches.
• Aromin vs. Floresca, G.R. No. 160994, July 27, 2006, 496 SCRA 785, 815 — Quoted in Metropolitan Bank and Trust Co. vs. Pascual for the principle that the binding force of a contract must be recognized as far as legally possible (quando res non valet ut ago, valeat quantum valere potest).

• Article 130, Family Code — Provides that upon termination of marriage by death, the conjugal partnership property shall be liquidated in the settlement proceeding; if no judicial settlement is instituted, the surviving spouse shall liquidate judicially or extrajudicially within one year from the death of the deceased spouse; and if no liquidation is made after six months, any disposition or encumbrance involving the conjugal partnership property of the terminated marriage shall be void. The Court discussed this provision but held that it did not automatically void the sale because the conjugal partnership had been dissolved before the Family Code's effectivity.
• Article 105, Family Code — Provides that the Family Code's conjugal partnership rules apply to conjugal partnerships established before its effectivity, without prejudice to vested rights already acquired under the Civil Code or other laws. The Court relied on this to avoid declaring the sale entirely void and to protect Servacio's vested rights.
• Article 175(1), Civil Code — Provides that the conjugal partnership of gains terminates upon the death of either spouse. The Court applied this to hold that the conjugal partnership was dissolved upon Marta's death in 1987.
• Article 493, Civil Code — Provides that each co-owner has full ownership of his part and may alienate, assign, or mortgage it, but the effect of the alienation or mortgage with respect to the co-owners is limited to the portion that may be allotted to him in the division upon termination of the co-ownership. The Court applied this to allow Protacio, Sr. and Rito to sell their undivided shares and to make Servacio a co-owner.
• Article 160, Civil Code — Provides that all property acquired by either spouse during the marriage is conjugal unless there is proof that it pertains exclusively to the husband or to the wife. The RTC applied this in declaring the property conjugal, and the Supreme Court noted that finding in its recital.
• Rule 69, Revised Rules of Court — Governs actions for partition. The Court cited it as the proper recourse for co-owners whose consent was not secured in a sale of the entire property or of undivided shares.

• Chief Justice Renato C. Corona (Chairperson)
• Justice Teresita J. Leonardo-De Castro
• Justice Mariano C. Del Castillo
• Justice Martin S. Villarama, Jr.