Homeowners Savings & Loan Bank vs. Dailo

A mortgage constituted on conjugal partnership property by one spouse without the written consent of the other is void in its entirety, the rules on co-ownership not applying suppletorily to conjugal partnerships of gains, and the conjugal partnership is not liable for the debt absent proof that the family benefited from the loan.

Spouses Dailo were married in 1967 and purchased a house and lot during the marriage, though the deed of sale was executed solely in the husband's name. In 1993, the husband executed a special power of attorney authorizing an agent to obtain a loan from Homeowners Savings and Loan Bank, secured by a real estate mortgage on the conjugal property, without the wife's knowledge or consent. Upon default, the bank extrajudicially foreclosed the mortgage, purchased the property at sale, and consolidated ownership after the redemption period lapsed. The husband died in 1995, after which the wife discovered the mortgage and the bank's occupation of the property.

• Marriage and Property Acquisition: Respondent Miguela C. Dailo and Marcelino Dailo, Jr. married on August 8, 1967. During the marriage, they purchased a house and lot in San Pablo City; the Deed of Absolute Sale, however, named only the husband as the vendee.
• The Mortgage: On December 1, 1993, the husband executed a Special Power of Attorney in favor of Lilibeth Gesmundo, authorizing her to obtain a loan from petitioner bank secured by the subject property. Gesmundo obtained a ₱300,000.00 loan and executed a Real Estate Mortgage on the property on the same day. These transactions occurred without the respondent's knowledge or consent.
• Foreclosure and Consolidation: Upon the loan's maturity and default, petitioner initiated extrajudicial foreclosure proceedings. Petitioner was the highest bidder at the extrajudicial sale. After the one-year redemption period lapsed without redemption, petitioner consolidated ownership via an Affidavit of Consolidation of Ownership and a Deed of Absolute Sale on June 6, 1996.
• Death and Discovery: Marcelino Dailo, Jr. died on December 20, 1995. Respondent subsequently discovered that petitioner had employed someone to clean the premises and that her car had been razed due to the caretaker's negligence.

• Validity of Mortgage over Husband's Share: Petitioner argued that Article 124 of the Family Code should be construed in relation to Article 493 of the Civil Code, maintaining that a spouse may exercise full ownership over his undivided share in the conjugal property under the concept of co-ownership. The mortgage was thus valid as to the late husband's share.
• Conjugal Partnership Liability: Petitioner argued that the conjugal partnership is liable for the payment of the loan obtained by the late husband because the proceeds redounded to the benefit of the family, specifically to finance the construction of housing units.

• Nullity of Mortgage: Respondent maintained that the mortgage was void for having been constituted without her knowledge and consent, as required by Article 124 of the Family Code.
• Lack of Family Benefit: Respondent contended that the conjugal partnership should not be held liable for the debt as the loan did not redound to the benefit of the family.

• Validity of Mortgage over Undivided Share: Whether the mortgage constituted by the late Marcelino Dailo, Jr. on the subject property as co-owner thereof is valid as to his undivided share.
• Conjugal Partnership Liability: Whether the conjugal partnership is liable for the payment of the loan obtained by the late Marcelino Dailo, Jr., the same having redounded to the benefit of the family.

• Validity of Mortgage over Undivided Share: The mortgage is void in its entirety. Article 124 of the Family Code expressly provides that any disposition or encumbrance of conjugal property without the written consent of the other spouse or court authority is void. Unlike Article 493 of the Civil Code on co-ownership, Article 124 does not qualify that the disposition is valid as to the disposing spouse's share. Furthermore, the rules on co-ownership do not apply suppletorily to conjugal partnerships of gains; the rules on partnership apply instead. The principle in Guiang v. Court of Appeals applies: the absence of one spouse's consent renders the entire sale or encumbrance void, including the portion pertaining to the contracting spouse.
• Conjugal Partnership Liability: The conjugal partnership is not liable for the debt. Under Article 121 of the Family Code, the conjugal partnership is liable for debts contracted without consent only to the extent that the family may have been benefited. The burden of proving such benefit lies with the creditor. Petitioner failed to adduce adequate proof beyond bare allegations that the loan redounded to the family's benefit. Moreover, petitioner is estopped from raising this theory on appeal, having vigorously asserted in the trial court that the property was the husband's exclusive property and never alleging family benefit until the Supreme Court.

• Suppletory Application of Laws to Conjugal Partnership of Gains — The rules on co-ownership under the Civil Code do not apply suppletorily to the Conjugal Partnership of Gains; the rules on contract of partnership apply in a suppletory manner. In contrast, the rules on co-ownership apply suppletorily to the Absolute Community of Property. The Court applied this to reject the invocation of Article 493 of the Civil Code, which allows a co-owner to mortgage his undivided share, emphasizing that conjugal partnership is a special type of partnership.
• Burden of Proof for Family Benefit — The burden of proof that a debt contracted by one spouse without the consent of the other redounded to the benefit of the conjugal partnership lies with the creditor claiming such benefit. The Court applied this to deny the imposition of liability on the conjugal partnership due to the creditor's failure to present evidence beyond bare allegations.
• Change of Theory on Appeal — A party adopting a certain theory in the lower court cannot change that theory on appeal if doing so would be unfair to the adverse party or require the presentation of new evidence. The Court applied this to bar the petitioner from claiming family benefit on appeal after asserting exclusivity of the property in the trial court.

• "Where the law does not distinguish, courts should not distinguish." — Cited to emphasize that Article 124 of the Family Code does not distinguish between the disposing spouse's share and the entirety of the conjugal property when declaring a disposition void for lack of consent, unlike Article 493 of the Civil Code.
• "The burden of proof that the debt was contracted for the benefit of the conjugal partnership of gains lies with the creditor-party litigant claiming as such. Ei incumbit probatio qui dicit, non qui negat (he who asserts, not he who denies, must prove)." — Establishing the evidentiary burden on creditors seeking to hold the conjugal partnership liable for a spouse's unilateral debt.

• Guiang v. Court of Appeals, 353 Phil. 578 (1998) — Followed. Held that the sale of conjugal property requires the consent of both spouses; the absence of one renders the entire sale null and void, including the portion pertaining to the spouse who contracted the sale.
• Ayala Investment & Development Corp. v. Court of Appeals, 349 Phil. 942 (1998) — Followed. Cited for the proposition that the burden of proving that a debt redounded to the benefit of the conjugal partnership lies with the creditor.

• Article 124, Family Code — Governs the administration and enjoyment of conjugal partnership property, requiring the written consent of the other spouse or court authority for disposition or encumbrance; absent such, the disposition or encumbrance is void. Applied to declare the mortgage void for lack of the wife's consent.
• Article 493, Civil Code — Allows a co-owner full ownership of his part and the right to alienate or mortgage it, limited to the portion allotted upon termination of co-ownership. Distinguished and held inapplicable to conjugal partnerships of gains.
• Article 121, Family Code — Makes the conjugal partnership liable for debts contracted by either spouse without the other's consent to the extent that the family may have been benefited. Applied to deny liability due to lack of proof of benefit.
• Article 106, Family Code — States that the conjugal partnership shall be governed by the rules on contract of partnership in all that is not in conflict with the Family Code or marriage settlements. Applied to determine the suppletory law for conjugal partnerships.
• Article 108, Family Code — Provides that the rules on co-ownership apply suppletorily to absolute community, not conjugal partnership. Applied to distinguish the applicable suppletory rules.

Puno (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario.