Lorea de Ugalde vs. Jon de Ysasi

The finality of a court order approving a compromise agreement by which the spouses judicially separated their property terminates their conjugal partnership of gains, and the validity of their marriage cannot be adjudicated in the action for dissolution of that partnership where the question of nullity is the subject of a separate proceeding. A judgment upon a compromise agreement has all the force and effect of any other judgment, is conclusive upon the parties and their privies, and is not binding on third persons who are not parties to it.

Lorea de Ugalde and Jon de Ysasi were married in 1951 without executing any ante-nuptial agreement. Republic Act No. 386, the Civil Code of the Philippines, took effect on 30 August 1950 and thus governed the property relations of persons married at that time; in the absence of marriage settlements, it fixed the conjugal partnership of gains as the default regime. The spouses' son, Jon de Ysasi III, was the subject of an earlier action for custody and support between them, Civil Case No. 4791, before the Court of First Instance of Negros Occidental.

Lorea de Ugalde and Jon de Ysasi were married on 15 February 1951 before Municipal Judge Remigio Peña of Hinigaran, Negros Occidental, and their church wedding followed on 1 March 1951 at the San Sebastian Cathedral in Bacolod City, solemnized by Rev. Msgr. Flaviano Arriola. No ante-nuptial agreement was executed between them. Their union produced one son, Jon de Ysasi III. The spouses separated sometime in April 1957; de Ugalde alleged that de Ysasi drove her out of their home, while de Ysasi alleged that she left it.

On 2 June 1961, the spouses entered into an agreement providing, among others, that their conjugal partnership of gains would be deemed dissolved as of 15 April 1957. Pursuant to that agreement, they submitted an Amicable Settlement in Civil Case No. 4791, an action for custody of the then minor Jon de Ysasi III and for support then pending before the Court of First Instance of Negros Occidental. Under the settlement, de Ysasi was to pay de Ugalde P30,000 in full satisfaction of and as consideration for any and all money or property claims she had or might thereafter have against him, including but not limited to pensions, allowances, alimony, support, share in the conjugal property, and inheritance; upon receipt of that sum, she transferred, conveyed, waived, remised, released, and forever quitclaimed to him all such rights, claims, and interests. Both parties likewise waived any and all rights to question the validity and effectivity of the settlement, except with reference to the custody of the boy. On 6 June 1961, the CFI approved the Amicable Settlement.

De Ugalde alleged that on 26 May 1964 de Ysasi contracted another marriage with Victoria Eleanor Smith before Judge Lucio M. Tanco of Pasay City, and that de Ysasi and Smith had been acquiring and disposing of real and personal properties to her prejudice as the lawful wife, thereby defrauding her of rental income, profits, and fruits of their conjugal properties. De Ysasi, for his part, alleged that de Ugalde had obtained a divorce from him before the Supreme Court of Mexico and thereafter contracted a second marriage with Richard Galoway and, following Galoway's death, a third marriage with Frank Scholey.

On 12 December 1984, de Ugalde filed a petition for dissolution of the conjugal partnership of gains against de Ysasi before the Regional Trial Court of Negros Occidental, Bacolod City, Branch 48, docketed as Special Proceedings No. 3330. She prayed for her conjugal share in de Ysasi's inheritance from the settlement of the estates of his parents, Juan Ysasi and Maria Aldecoa de Ysasi, who died on 17 November 1975 and 25 February 1979, respectively; for monthly support of P5,000 to be deducted from that share; for the appointment of a receiver during the pendency of the litigation; for the annulment of all contracts, agreements, and documents signed and ratified by de Ysasi with third persons without her consent; and for the payment of appearance and attorney's fees. De Ysasi moved for the dismissal of the petition on the grounds of estoppel, laches, and res judicata, and in a Supplemental Affirmative Defense alleged that the marriage between him and de Ugalde was void because it had been executed without the benefit of a marriage license.

The trial court found that no marriage license had been secured and that there was no proof that the spouses had acquired, during their union, any property that could be considered conjugal. It likewise relied on the Amicable Settlement approved by the CFI in Civil Case No. 4791, which de Ugalde could no longer repudiate. In a separate proceeding, Civil Case No. 430 for Judicial Declaration of Absolute Nullity of Marriage before the Regional Trial Court of Himamaylan, Negros Occidental, Branch 55, the marriage between de Ugalde and de Ysasi was declared null and void ab initio by Decision dated 31 May 1995 for failure to comply with the essential requirement of a marriage license; no appeal or motion for reconsideration was filed, and a Certification of finality was issued on 20 November 1995.

• Absence of a Marriage License and the Conjugal Partnership: Petitioner argued that the lower court erred in ruling that, since the marriage of petitioner and respondent was void due to the absence of a marriage license, no conjugal partnership arose from their union.
• Res Judicata and the Amicable Settlement: Petitioner argued that the lower court erred in ruling that the amicable settlement in Civil Case No. 4791 barred all claims by the plaintiff under the principle of res judicata.
• Inchoate Right to the Estate of Respondent's Parents: Petitioner argued that the lower court erred in ruling that respondent's right to the estate of his deceased parents was merely inchoate, such that no property devolved to respondent and no conjugal partnership was formed.
• Sufficiency of the Petition: Petitioner argued that the lower court erred in ruling that her petition did not sufficiently state a cause of action.
• Authority of the CFI to Approve the Compromise Agreement: Petitioner alleged that the CFI had no authority to approve the Compromise Agreement because the case was for custody and the creditors were not given notice by the parties, as also required under Article 191 of the Civil Code.

• Estoppel, Laches, and Res Judicata: Respondent moved for the dismissal of the petition on the grounds of estoppel, laches, and res judicata, invoking the agreement of 2 June 1961 deeming the conjugal partnership dissolved as of 15 April 1957 and the Amicable Settlement approved by the CFI in Civil Case No. 4791 on 6 June 1961.
• Void Marriage for Lack of a Marriage License: Respondent alleged, in a Supplemental Affirmative Defense, that the marriage between him and petitioner was void because it was executed without the benefit of a marriage license.
• Prior Divorce and Subsequent Marriages: Respondent alleged that petitioner had already obtained a divorce from him before the Supreme Court of Mexico and had thereafter contracted a second marriage with Richard Galoway and, after Galoway's death, a third marriage with Frank Scholey.

• Jurisdiction over the Validity of the Marriage: Whether the trial court had jurisdiction to rule on the validity of petitioner and respondent's marriage in Special Proceedings No. 3330, where that question had been raised only as a defense and was the subject of a separate action for judicial declaration of absolute nullity of marriage.
• Dissolution of the Conjugal Partnership of Gains: Whether the conjugal partnership of gains between petitioner and respondent had already been terminated by the finality of the 6 June 1961 Order of the Court of First Instance in Civil Case No. 4791 approving the parties' separation of property.
• Repudiation of the Compromise Agreement: Whether petitioner could repudiate the Compromise Agreement on the ground that the CFI had no authority to approve it because the case was for custody and the creditors had not been given notice under Article 191 of the Civil Code.

• Jurisdiction over the Validity of the Marriage: No. The trial court exceeded its jurisdiction in ruling on the validity of the marriage, which had been raised only as a defense; the marriage had already been judicially annulled in Civil Case No. 430, whose 31 May 1995 Decision became final on 20 November 1995.
• Dissolution of the Conjugal Partnership of Gains: Yes. The finality of the 6 June 1961 CFI Order in Civil Case No. 4791 approving the parties' separation of property resulted in the termination of the conjugal partnership of gains under Article 175 of the Civil Code.
• Repudiation of the Compromise Agreement: No. A judgment upon a compromise agreement has all the force and effect of any other judgment and is conclusive upon the parties and their privies; petitioner cannot repudiate the Amicable Settlement on the ground that the CFI lacked authority to approve it.

• Jurisdiction over the Validity of the Marriage: Special Proceedings No. 3330 was an action for dissolution of the conjugal partnership of gains. The trial court ruled that the existence of a conjugal partnership of gains is predicated on a valid marriage and then proceeded to rule on the validity of the marriage, holding that the parties had failed to obtain a marriage license and that the marriage was therefore null and void. In doing so, the trial court exceeded its jurisdiction, because the validity of the marriage had been raised by respondent only as a defense to the action for dissolution and was the subject of another action, Civil Case No. 430 for Judicial Declaration of Absolute Nullity of Marriage before the Regional Trial Court of Himamaylan, Negros Occidental, Branch 55. That case was resolved by a Decision dated 31 May 1995 declaring the marriage between Jon A. de Ysasi and Lorea de Ugalde null and void ab initio for failure to comply with the formal and essential requirements of the law on marriage licenses, and directing the cancellation of the entry of marriage in the register and the furnishing of copies to the National Census and Statistics Office. No appeal or motion for reconsideration was filed, and a Certification of finality was issued on 20 November 1995. The marriage was thus already judicially annulled as of that date, and the trial court had no jurisdiction to annul it again in Special Proceedings No. 3330.

• Dissolution of the Conjugal Partnership of Gains: Petitioner and respondent were married on 15 February 1951, so the applicable law at the time of their marriage was Republic Act No. 386, the Civil Code of the Philippines, which took effect on 30 August 1950. Under Article 119 of the Civil Code, in the absence of marriage settlements, or when the same are void, the system of relative community or conjugal partnership of gains governs the property relations between husband and wife. Article 142 defines that regime as one by which the spouses place in a common fund the fruits of their separate property and the income from their work or industry, and divide equally, upon the dissolution of the marriage or of the partnership, the net gains or benefits obtained indiscriminately by either spouse during the marriage. Article 175 provides that the conjugal partnership of gains terminates upon the death of either spouse, when there is a decree of legal separation, when the marriage is annulled, and in case of judicial separation of property under Article 191. The finality of the 6 June 1961 Order in Civil Case No. 4791 approving the parties' separation of property resulted in the termination of the conjugal partnership of gains under Article 175. Consequently, when the trial court decided Special Proceedings No. 3330, the conjugal partnership between petitioner and respondent had already been dissolved. The CFI's approval of the Compromise Agreement on 6 June 1961 resulted in the dissolution of the conjugal partnership of gains between petitioner and respondent on even date.

• Repudiation of the Compromise Agreement: Petitioner alleged that the CFI had no authority to approve the Compromise Agreement because the case was for custody and the creditors were not given notice by the parties, as required under Article 191 of the Civil Code. She cannot repudiate the Compromise Agreement on this ground. A judgment upon a compromise agreement has all the force and effect of any other judgment, and is conclusive only upon the parties thereto and their privies, and not binding on third persons who are not parties to it. The Amicable Settlement had become final as between petitioner and respondent when it was approved by the CFI on 6 June 1961, and that approval resulted in the dissolution of the conjugal partnership of gains between them on even date.

• Compromise Judgment — A judgment upon a compromise agreement has all the force and effect of any other judgment; it is conclusive only upon the parties thereto and their privies, and is not binding on third persons who are not parties to it. The Court applied this rule in holding that the Amicable Settlement approved by the CFI on 6 June 1961 had become final as between petitioner and respondent, and that petitioner could not repudiate it on the ground that the CFI had no authority to approve it because the case was for custody and the creditors had not been notified under Article 191 of the Civil Code.
• Conjugal Partnership of Gains as the Default Property Regime — Under Article 119 of the Civil Code, future spouses may agree in marriage settlements upon absolute or relative community of property, complete separation of property, or any other regime; in the absence of marriage settlements, or when the same are void, the system of relative community or conjugal partnership of gains governs the property relations between husband and wife. Because petitioner and respondent married on 15 February 1951 without executing any ante-nuptial agreement, and the Civil Code took effect on 30 August 1950, their property relations were governed by the conjugal partnership of gains.
• Definition of the Conjugal Partnership of Gains — Under Article 142 of the Civil Code, the husband and wife place in a common fund the fruits of their separate property and the income from their work or industry, and divide equally, upon the dissolution of the marriage or of the partnership, the net gains or benefits obtained indiscriminately by either spouse during the marriage.
• Termination of the Conjugal Partnership of Gains — Article 175 of the Civil Code enumerates the causes of termination: (1) the death of either spouse; (2) a decree of legal separation; (3) the annulment of the marriage; and (4) judicial separation of property under Article 191. The Court held that the finality of the 6 June 1961 Order approving the parties' separation of property terminated the conjugal partnership of gains, so that no conjugal partnership existed when Special Proceedings No. 3330 was decided.
• Jurisdiction over the Validity of Marriage — The validity of a marriage may not be adjudicated by a court in an action for dissolution of the conjugal partnership of gains where that question is raised only as a defense and is the subject of a separate action for judicial declaration of absolute nullity; a court that rules on it in such a proceeding exceeds its jurisdiction. The Court applied this principle to hold that the trial court had no jurisdiction to annul the marriage again in Special Proceedings No. 3330, the marriage having already been judicially annulled in Civil Case No. 430 as of 20 November 1995.
• Finality of Judgment — A final order or judgment, including one approving a compromise agreement, settles the rights of the parties and bars subsequent litigation over the same matter. The finality of the 6 June 1961 CFI Order in Civil Case No. 4791 resulted in the dissolution of the conjugal partnership of gains and precluded petitioner's later action for its dissolution.

• "The trial court exceeded its jurisdiction in ruling on the validity of petitioner and respondent's marriage, which was only raised by respondent as a defense to the action for dissolution of the conjugal partnership of gains." — This states the ratio decidendi on the jurisdictional issue: a court hearing an action for dissolution of the conjugal partnership of gains may not adjudicate the validity of the marriage when that question is merely defensive and is pending in a separate nullity proceeding.
• "A judgment upon a compromise agreement has all the force and effect of any other judgment, and conclusive only upon parties thereto and their privies, and not binding on third persons who are not parties to it." — This is the Court's canonical formulation of the effect of a compromise judgment, cited in support of the holding that petitioner could not repudiate the Amicable Settlement approved by the CFI in 1961.
• "The finality of the 6 June 1961 Order in Civil Case No. 4791 approving the parties' separation of property resulted in the termination of the conjugal partnership of gains in accordance with Article 175 of the Family Code." — This is the core holding on the property regime, establishing that the conjugal partnership had already been dissolved before the petition for its dissolution was filed in 1984.
• "Art. 175. The conjugal partnership of gains terminates: (1) Upon the death of either spouse; (2) When there is a decree of legal separation; (3) When the marriage is annulled; (4) In case of judicial separation of property under Article 191." — The Court quoted this provision in full as the statutory basis for its conclusion that the approval of the parties' separation of property terminated the conjugal partnership of gains.

• Lara, et al. vs. Del Rosario, Jr., 94 Phil. 778 (1954) — Cited by the Court for the proposition that Republic Act No. 386, the Civil Code of the Philippines, took effect on 30 August 1950, which established the Civil Code as the law applicable to the property relations of petitioner and respondent, who married on 15 February 1951.
• Philippine Journalists, Inc. vs. NLRC, G.R. No. 166421, 5 September 2006, 501 SCRA 75 — Cited by the Court as authority for the rule that a judgment upon a compromise agreement has all the force and effect of any other judgment, is conclusive upon the parties thereto and their privies, and is not binding on third persons who are not parties to it.

• Article 119, Civil Code (Republic Act No. 386) — Provides that future spouses may agree in marriage settlements upon absolute or relative community of property, complete separation of property, or any other regime, and that in the absence of marriage settlements, or when the same are void, the system of relative community or conjugal partnership of gains shall govern the property relations between husband and wife. Applied to establish that the conjugal partnership of gains governed the property relations of petitioner and respondent, who had no ante-nuptial agreement.
• Article 142, Civil Code (Republic Act No. 386) — Defines the conjugal partnership of gains as the regime by which the husband and wife place in a common fund the fruits of their separate property and the income from their work or industry, and divide equally, upon the dissolution of the marriage or of the partnership, the net gains or benefits obtained indiscriminately by either spouse during the marriage. Quoted by the Court to describe the property regime at issue.
• Article 175, Civil Code (Republic Act No. 386) — Enumerates the causes of termination of the conjugal partnership of gains: the death of either spouse, a decree of legal separation, the annulment of the marriage, and judicial separation of property under Article 191. The Court relied on this provision in holding that the finality of the 6 June 1961 Order approving the parties' separation of property terminated the conjugal partnership of gains; the decision's concluding statement on this point refers to the provision as Article 175 of the Family Code.
• Article 191, Civil Code (Republic Act No. 386) — The provision on judicial separation of property invoked by petitioner, who alleged that the CFI had no authority to approve the Compromise Agreement because the creditors were not given notice as required thereunder. The Court rejected the argument, holding that petitioner could not repudiate the Compromise Agreement on that ground.
• Rule 45, 1997 Rules of Civil Procedure — The procedural basis of the petition for review filed before the Supreme Court assailing the Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 41121.

• Conchita Carpio Morales (as replacement of Justice Leonardo A. Quisumbing, who was on official leave per Administrative Circular No. 84-2007)
• Adolfo S. Azcuna
• Dante O. Tinga
• Presbitero J. Velasco, Jr.