Hidalgo vs. Bascuguin

A disposition or encumbrance of conjugal property made without the written consent of one spouse is void under Article 124 of the Family Code. When a void contract has been performed, the parties must be restored to their original situation as legally and equitably possible; thus, the purchase price shall be returned with legal interest and the property title shall be restored to the spouses.

Alberto C. Hidalgo and Evelyn Flaminiano Hidalgo acquired a house and lot in Lian, Batangas, during their marriage. Alberto worked abroad in Dubai, United Arab Emirates. In March 2004, upon his return to the Philippines, he discovered that Evelyn had unilaterally sold the property to family friend Conrado Bascuguin through a pacto de retro sale dated December 9, 2002, for ₱300,000.00. Alberto’s signature on the instrument had been forged; his passport established he arrived in the country only on December 23, 2002.

• Nature of the Transaction: During their marriage, Alberto and Evelyn Hidalgo acquired a conjugal house and lot in Lian, Batangas. Alberto worked in Dubai. On December 9, 2002, while Alberto was abroad, Evelyn sold the property to Conrado Bascuguin under a document denominated as “Kasulatan ng Bilihan ng Bahay at Lupa na Muling Mabibili” (a pacto de retro sale) for ₱300,000.00. The agreement allowed Evelyn to repurchase within five months. Bascuguin relied on Evelyn’s assurance that the transaction was in order; he considered the spouses family friends with whom he had previously entered similar agreements.

• Discovery and Demand: Alberto returned to the Philippines in March 2004 and discovered the sale. His passport indicated he arrived on December 23, 2002, whereas the transaction was dated December 9, 2002, making it impossible for him to have signed the instrument on that date. On April 22, 2004, Alberto, through counsel, sent a demand letter to Bascuguin asserting the sale was void for lack of his consent and offering to refund the ₱300,000.00 purchase price plus legal interest if Bascuguin returned the title. Bascuguin countered by demanding ₱900,000.00 and threatened to consolidate ownership if the spouses refused to pay.

• Trial Court Findings: The Regional Trial Court characterized the transaction as an equitable mortgage rather than a sale, noting that the price was inadequate and possession remained with the spouses. It ordered the spouses to reimburse Bascuguin the ₱300,000.00 with legal interest from the transaction date until full payment, and directed Bascuguin to return the title upon receipt of payment. No damages or attorney’s fees were awarded due to insufficient evidence.

• Appellate Court Findings: The Court of Appeals set aside the trial court’s ruling and applied Article 124 of the Family Code, holding that any disposition of conjugal property without the other spouse’s written consent is void. Finding it unnecessary to classify the contract as an equitable mortgage, the CA declared the pacto de retro sale void. It ordered the return of the title to the spouses and the return of the purchase price to Bascuguin, with interest running from the date of the trial court’s decision (September 12, 2011) at 12% per annum until June 30, 2013, and 6% per annum thereafter until finality, plus 6% from finality until full satisfaction.

• Procedural Excuse: Petitioner argued that the late filing of his motion for reconsideration before the Court of Appeals was excusable because the copy of the decision mailed to his counsel was returned with the notation “MOVED OUT.” He contended that after the death of an office administrator, his counsel’s Makati office was closed and the staff inadvertently failed to file a notice of change of address.

• No Obligation to Reimburse: Petitioner maintained that because the pacto de retro sale was void for lack of his consent under Article 124 of the Family Code, he could not be compelled to reimburse the purchase price, much less pay interest, as he never benefited from the transaction.

• Entitlement to Damages and Attorney’s Fees: Petitioner claimed moral and exemplary damages to compensate for the mental anguish caused by respondents’ acts of bad faith. He further argued he was entitled to attorney’s fees, having been compelled to litigate to protect his rights.

• Finality of Judgment: Bascuguin contended that the Court of Appeals Decision had already become final and executory due to the belated filing of petitioner’s motion for reconsideration; thus, the petition should be denied outright.

• Right to Reimbursement: Bascuguin invoked Article 1398 of the Civil Code, asserting that as a consequence of the annulment of the sale, he was entitled to the return of the purchase price with legal interest.

• No Basis for Damages: Bascuguin argued that petitioner had not proven any factual basis to warrant an award of moral, exemplary, or attorney’s fees.

• Procedural Bar: Whether the petition must be denied outright for having been filed after the Court of Appeals Decision had attained finality due to the inexcusable negligence of petitioner’s counsel.

• Nullity of Sale: Whether the pacto de retro sale of the conjugal property is null and void for lack of Alberto’s written consent.

• Reimbursement: Whether respondent Bascuguin is entitled to reimbursement of the ₱300,000.00 purchase price with legal interest following the declaration of nullity.

• Damages: Whether petitioner is entitled to moral damages, exemplary damages, and attorney’s fees.

• Procedural Bar: The petition was procedurally barred. The failure of petitioner’s counsel to file a notice of change of address constituted inexcusable negligence, which is binding on the client. As held in Social Security System v. Isip, no court may exercise appellate jurisdiction to modify a decision that has become final. While the petition could have been denied on this ground alone, the merits were nonetheless examined and found to lack reversible error.

• Nullity of Sale: The pacto de retro sale was void. Under Article 124 of the Family Code, any disposition or encumbrance of conjugal property made without the written consent of the other spouse is void. The evidence—petitioner’s passport showing arrival only on December 23, 2002—conclusively established that his signature on the December 9, 2002 deed was forged and that he gave no consent. Neither party contested the void character of the transaction.

• Reimbursement: Respondent Bascuguin was entitled to reimbursement of the ₱300,000.00 purchase price with legal interest. Article 1398 of the Civil Code mandates that when a void contract has been performed, the parties must restore to each other what they received, together with fruits and interest. This rule was uniformly applied in Villanueva v. Chiong, Ines v. Court of Appeals, and Bucoy v. Paulino. Additionally, petitioner made judicial admissions of his willingness to reimburse in his demand letter and court testimony, which bind him absent proof of palpable mistake. The interest rates followed Nacar v. Gallery Frames: 12% per annum from the accrual date (trial court decision on September 12, 2011) until June 30, 2013; 6% per annum from July 1, 2013, until finality of the Court of Appeals decision on December 13, 2016; and 6% per annum from finality until full payment, the obligation being treated as a forbearance of credit.

• Damages: Petitioner’s claims for moral and exemplary damages, as well as attorney’s fees, were denied. There was no satisfactory proof of moral suffering, mental anguish, or any causal connection between respondents’ acts and the alleged injury, as required by Kierulf v. Court of Appeals. No showing of gross negligence or socially deleterious conduct warranted exemplary damages. None of the circumstances under Article 2208 of the Civil Code justifying an award of attorney’s fees was established.

• Void Disposition of Conjugal Property under Article 124, Family Code — Any sale, mortgage, or encumbrance of conjugal partnership property executed without the written consent of the other spouse is void. The transaction is deemed a continuing offer that may be perfected upon acceptance by the non-consenting spouse or court authorization before withdrawal. Here, the wife’s unilateral pacto de retro sale was entirely void because the husband’s signature was forged and he was abroad on the execution date.

• Restitution under Article 1398, Civil Code — When a void or annulled contract has been performed, the contracting parties must restore to each other the things that were the subject matter of the contract, with their fruits, and the price with its interest, except as otherwise provided by law. Applied to order the return of the title and the reimbursement of the purchase price plus legal interest.

• Immutability of Judgments and Negligence of Counsel — A decision that has become final and executory cannot be altered or modified by any court. The negligence of counsel, including the failure to inform the court of a change of address, binds the client and will not stay the finality of the decision (Juane v. Garcia, Macondray & Co. Inc. v. Provident Insurance, Corp.).

• Judicial Admissions — A party is bound by admissions made in pleadings, demand letters, or open court testimony. Such admissions cannot be contradicted unless shown to have been made through palpable mistake (Spouses Binarao v. Plus Builders, Inc., Metro Rail Transit Development Corp. v. Gammon Philippines, Inc.). Petitioner’s admitted willingness to refund the purchase price reinforced the application of Article 1398.

• Legal Interest for Forbearance of Credit (Nacar v. Gallery Frames) — When an obligation arises from forbearance of credit, or when the judgment awards a sum of money, the interest rate is 12% per annum from the time of accrual until June 30, 2013, and 6% per annum from July 1, 2013, until full satisfaction. This formula was applied to the obligation to return the purchase price upon annulment of the void sale.

• “In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerers.” — Article 124, Family Code, quoted as the controlling provision on the nullity of unilateral dispositions of conjugal property.

• “When the terms of a void contract have been performed, the parties must be reinstated to their original situation as legally and equitably possible.” — Articulates the rationale for ordering mutual restitution upon nullification of the pacto de retro sale.

• “It is painful enough for a litigant to suffer a setback in legal battle. It is doubly painful if defeat is occasioned by his attorney’s failure to receive notice because the latter has changed the place of his law office without giving the proper notice therefor.” — From Juane v. Garcia, underscoring the binding effect of counsel’s negligence on the client.

• Jader-Manalo v. Spouses Camaisa, 425 Phil. 346 (2002) — Followed: A contract to sell conjugal property signed solely by the husband was void because the wife’s awareness of the transaction did not amount to consent; Article 124 requires actual written consent of both spouses.

• Spouses Aggabao v. Spouses Parulan, 644 Phil. 26 (2010) — Followed: A sale of conjugal properties through a forged special power of attorney was void; the husband’s lack of consent triggered the nullity under Article 124.

• Philippine National Bank v. Reyes, Jr., 796 Phil. 736 (2016) — Followed: A mortgage unilaterally executed by the wife on conjugal properties was void for lack of the husband’s consent, his signature having been falsified.

• Villanueva v. Chiong, 577 Phil. 80 (2008); Ines v. Court of Appeals, 317 Phil. 373 (1995); Bucoy v. Paulino, 131 Phil. 790 (1968) — Applied: These cases uniformly ordered the return of the purchase price with interest and the restoration of property upon nullification of unauthorized dispositions of conjugal property.

• Nacar v. Gallery Frames, 716 Phil. 267 (2013) — Applied: Prescribed the two-tiered interest rate (12%/6%) applicable to the monetary obligation to reimburse the purchase price.

• Juane v. Garcia, 134 Phil. 747 (1968); Macondray & Co. Inc. v. Provident Insurance, Corp., 487 Phil. 158 (2004); Social Security System v. Isip, 549 Phil. 112 (2007) — Applied: Established that counsel’s negligence in updating address binds the client and that a final decision cannot be disturbed.

• Spouses Binarao v. Plus Builders, Inc., 524 Phil. 361 (2006); Metro Rail Transit Development Corporation v. Gammon Philippines, Inc., 823 Phil. 917 (2018) — Applied: Confirmed the binding nature of judicial admissions, precluding petitioner from denying his offer to reimburse.

• Kierulf v. Court of Appeals, 336 Phil. 414 (1997) — Applied: Moral damages require pleading and proof of actual suffering; exemplary damages require gross negligence; attorney’s fees require statutory or contractual basis.

• Article 124, Family Code — Governed the disposition of conjugal partnership property; any encumbrance or disposition without the other spouse’s written consent was void, as applied to annul the pacto de retro sale.

• Article 1398, Civil Code — Mandated restitution of the subject matter, fruits, and price with interest upon annulment, serving as the basis for ordering the return of the ₱300,000.00 and the title.

• Article 2208, Civil Code — Enumerated the exclusive instances when attorney’s fees may be recovered; none was proven here.

• Article 2231, Civil Code — Required gross negligence for exemplary damages in quasi-delicts; no such finding was made.

• Rule 52, Section 1; Rule 36, Section 2; Rule 13, Section 2, Rules of Court — Governed the periods for filing motions for reconsideration, finality of judgments, and service upon counsel; their strict application barred the petition because of counsel’s negligence.

• Articles 166 and 173, New Civil Code — Referenced to contrast the old law (where a sale without the wife’s consent was merely voidable) with the Family Code’s rule declaring it void.

Justices Rosario, Carandang, Zalameda, and Dimaampao concurred.