Mallilin, Jr. vs. Castillo

Summary judgment is improper where the pleadings tender genuine factual issues on cohabitation and joint acquisition of property; Article 148 of the Family Code permits limited co-ownership between a man and a woman who live together but are incapacitated to marry each other; and a partition suit seeking a declaration of co-ownership and conveyance of shares is not a collateral attack on Torrens titles.

Petitioner Eustaquio Mallilin, Jr. and respondent Ma. Elvira Castillo were each married to another person and separated from their respective spouses. They allegedly cohabited and operated Superfreight Customs Brokerage Corporation, with petitioner serving as president and chairman of the board and respondent as vice-president and treasurer. Properties acquired during their union were registered solely in respondent’s name. The dispute implicated Article 144 of the Civil Code, Article 148 of the Family Code, the Torrens system’s rule against collateral attack under P.D. No. 1529, and Rule 35 summary judgment.

Petitioner Eustaquio Mallilin, Jr. and respondent Ma. Elvira Castillo were both married and with children, but each was separated from his or her respective spouse. According to petitioner, they cohabited after a brief courtship sometime in 1979 while their respective marriages still subsisted. During their union, they set up Superfreight Customs Brokerage Corporation, with petitioner as president and chairman of the board of directors and respondent as vice-president and treasurer. The business flourished, and the parties acquired real and personal properties that were registered solely in respondent’s name.

In 1992, due to irreconcilable differences, the couple separated. Petitioner demanded from respondent his share in the subject properties, but respondent refused, alleging that the properties had been registered solely in her name.

On February 24, 1993, petitioner filed a complaint for “Partition and/or Payment of Co-Ownership Share, Accounting and Damages” against respondent. The complaint, docketed as Civil Case No. 93-656 at the Regional Trial Court in Makati City, alleged that the properties were acquired out of the profits of their brokerage business and that, upon agreement of the parties, they were listed and registered in respondent’s name with petitioner as the unregistered co-owner. In her Amended Answer, respondent admitted that she engaged in the customs brokerage business with petitioner but alleged that the corporation was organized with other individuals and registered with the Securities and Exchange Commission in 1987. She denied that she and petitioner lived as husband and wife because they were still legally married to their respective spouses, and she claimed to be the exclusive owner of all the real and personal properties on the ground that they were acquired entirely out of her own money and registered solely in her name.

On November 25, 1994, respondent filed a Motion for Summary Judgment under Rule 34 of the Rules of Court. She contended that summary judgment was proper because the issues raised in the pleadings were sham and not genuine: whether petitioner could validly claim partition and co-ownership given that both parties were married to their respective spouses under valid and subsisting marriages, and whether petitioner could be considered an unregistered co-owner of real properties titled solely in her name. Respondent argued that Article 144 of the Civil Code applied only if the parties were not incapacitated to contract marriage, and that the question whether they lived together as husband and wife was therefore irrelevant because no co-ownership could exist between them. She also maintained that granting petitioner’s prayer would allow a collateral attack on the validity of the titles. Petitioner opposed the motion, contending that the case presented genuine factual issues, that Article 144 had been repealed by the Family Code, and that an implied trust had been constituted under Articles 1452 and 1453 of the Civil Code when the parties agreed to register the properties solely in respondent’s name.

The Court of Appeals, in its amended decision, noted discrepancies among the nine titles involved: TCT Nos. 149046, 168208, 37046, 37047, and 37048 were registered in the name of Elvira T. Castillo, single; TCT Nos. 30368, 30369, and 30371 were registered in the name of Steelhaus Realty & Dev. Corp.; and TCT No. (92323) 67881 was registered in the name of Eloisa Castillo. Petitioner sought to be declared a one-half co-owner of the real properties covered by these titles and eventually to have them partitioned. In addition to the real properties, petitioner also sought partition of personal properties consisting of motor vehicles and several pieces of jewelry.

• Summary Judgment and Genuine Issues: Petitioner contended that the case presented genuine factual issues, because he alleged that the properties were acquired during his union with respondent from profits derived from their brokerage business and that they were registered solely in respondent’s name only by agreement.
• Family Code Article 148: Petitioner argued that Article 144 of the Civil Code had been repealed by the Family Code, which under Article 148 allows a limited co-ownership even though a man and a woman living together are not capacitated to marry each other.
• Implied Trust: Petitioner asserted that an implied trust was constituted under Articles 1452 and 1453 of the Civil Code when he and respondent agreed to register the properties solely in the latter’s name although the same were acquired out of the profits made from their brokerage business.
• Collateral Attack: Petitioner maintained that the Court of Appeals’ first decision was correct in holding that the partition suit was not a collateral attack on the titles, since he sought to compel respondent to execute documents necessary to effect transfer of his claimed share and thus recognized the validity of the titles.
• Non-Party Properties: Petitioner contended that with respect to the properties registered in the name of Steelhouse Realty, respondent admitted ownership thereof and, at the very least, those properties could simply be excluded and the partition limited to the remaining real and personal properties.

• No Co-Ownership Due to Incapacity: Respondent contended that even if she and petitioner actually cohabited, petitioner could not validly claim a part of the subject real and personal properties because Article 144 of the Civil Code applies only if the parties are not in any way incapacitated to contract marriage; their union suffered the legal impediment of a prior subsisting marriage.
• Irrelevance of Cohabitation: Respondent maintained that the question of fact whether they lived together as husband and wife was irrelevant, because no co-ownership could exist between them.
• Collateral Attack: Respondent argued that petitioner cannot be considered an unregistered co-owner of the subject properties because, since titles to the land are solely in her name, granting petitioner’s prayer would allow a collateral attack on the validity of such titles.
• Exclusive Ownership: Respondent claimed to be the exclusive owner of all real and personal properties involved in petitioner’s action for partition on the ground that they were acquired entirely out of her own money and registered solely in her name.
• Summary Judgment Proper: Respondent moved for summary judgment, contending that the issues raised in the pleadings were sham and not genuine and that the case involved purely legal issues.

• Summary Judgment: Whether summary judgment under Rule 35 is proper where the pleadings tender genuine factual issues as to cohabitation, acquisition of properties, and co-ownership.
• Co-Ownership Under Article 148: Whether Article 148 of the Family Code permits a limited co-ownership between a man and a woman who live together but are incapacitated to marry each other, notwithstanding Article 144 of the Civil Code.
• Implied Trust: Whether an implied trust under Articles 1452 and 1453 of the Civil Code governs the properties, or whether the legal relation is already covered by Article 148 of the Family Code.
• Collateral Attack: Whether an action for partition seeking a declaration of co-ownership and conveyance of shares constitutes a collateral attack on Torrens titles where no prayer to alter, cancel, or modify the titles is made.
• Non-Party Properties and Due Process: Whether dismissal of the partition complaint is justified because properties registered in the names of Steelhouse Realty and Eloisa Castillo, who are not parties, would be affected, or whether those properties may simply be excluded.

• Summary Judgment: No. Summary judgment was improper because the pleadings tendered genuine issues of fact on cohabitation and joint acquisition, requiring presentation of evidence under Rule 35.
• Co-Ownership Under Article 148: Yes. Article 148 of the Family Code allows limited co-ownership between parties incapacitated to marry each other, based on actual joint contribution of money, property, or industry, with equal shares presumed absent proof to the contrary.
• Implied Trust: No. The legal relation is already covered by Article 148; co-ownership is itself a form of trust, making Articles 1452 and 1453 of the Civil Code immaterial.
• Collateral Attack: No. The partition suit does not attack the titles; it seeks a declaration of co-ownership and conveyance of shares, and petitioner alleges no fraud, mistake, or irregularity in the registration.
• Non-Party Properties and Due Process: No. Dismissal was unjustified; properties registered in the names of non-parties may simply be excluded from the partition, while the action proceeds as to respondent’s properties and personal properties.

• Summary Judgment: Rule 35, §3 of the Rules of Court provides that summary judgment is proper only when, based on the pleadings, depositions, and admissions on file, and after summary hearing, it is shown that except as to the amount of damages, there is no veritable issue regarding any material fact in the action and the movant is entitled to judgment as a matter of law. Conversely, where the pleadings tender a genuine issue—an issue of fact the resolution of which calls for the presentation of evidence, as distinguished from an issue which is sham, fictitious, contrived, set-up in bad faith, or patently unsubstantial—summary judgment is not proper. Petitioner anchored his claim of co-ownership on two factual grounds: first, that the properties were acquired by him and respondent during their union from 1979 to 1992 from profits derived from their brokerage business; and second, that the properties were registered solely in respondent’s name only because they agreed to that arrangement, thereby giving rise to an implied trust under Articles 1452 and 1453 of the Civil Code. Respondent denied that she and petitioner lived together as husband and wife and claimed that the properties were acquired solely by her with her own money and resources. With such conflicting positions, the truth could only be ascertained through the presentation of evidence; summary judgment was therefore improper.
• Co-Ownership Under Article 148: Article 144 of the Civil Code applies only to cases in which a man and a woman live together as husband and wife without the benefit of marriage provided they are not incapacitated or are without impediment to marry each other, or in which the marriage is void ab initio, provided it is not bigamous. It does not cover parties living in an adulterous relationship. However, Article 148 of the Family Code now provides for a limited co-ownership in cases where the parties in union are incapacitated to marry each other. Under Article 148, only the properties acquired by both parties through their actual joint contribution of money, property, or industry shall be owned by them in common in proportion to their respective contributions; in the absence of proof to the contrary, their contributions and corresponding shares are presumed equal. The same rule and presumption apply to joint deposits of money and evidences of credits. If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute community or conjugal partnership existing in such valid marriage. If the party who acted in bad faith is not validly married to another, his or her share shall be forfeited in the manner provided in the last paragraph of the preceding article; the foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith. It was error for the trial court to rule that, because the parties were not capacitated to marry each other, they could not have owned properties in common. The Family Code provides that if the parties are incapacitated to marry each other, properties acquired by them through their joint contribution of money, property, or industry shall be owned by them in common in proportion to their contributions, which, in the absence of proof to the contrary, is presumed equal. There is thus co-ownership even though the couple are not capacitated to marry each other. In this case, there may be a co-ownership between the parties. Consequently, whether petitioner and respondent cohabited and whether the properties involved are part of the alleged co-ownership are genuine and material. All but one of the properties involved were alleged to have been acquired after the Family Code took effect on August 3, 1988; with respect to property acquired before the Family Code took effect, if it is shown that it was really acquired under the regime of the Civil Code, then it should be excluded.
• Implied Trust: Petitioner alleged in paragraph 7 of his complaint that, due to his effective management, hard work, and enterprise, assisted by respondent, their customs brokerage business grew and out of the profits therefrom the parties acquired real and personal properties which, upon agreement of the parties, were listed and registered in respondent’s name with petitioner as the unregistered co-owner of all said properties. On this basis, he contended that an implied trust existed pursuant to Article 1452 of the Civil Code, which provides that if two or more persons agree to purchase property and by common consent the legal title is taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of each. This was not correct. The legal relation of the parties is already specifically covered by Article 148 of the Family Code, under which all the properties acquired by the parties out of their actual joint contributions of money, property, or industry shall constitute a co-ownership. Co-ownership is a form of trust and every co-owner is a trustee for the other. The provisions of Articles 1452 and 1453 of the Civil Code are therefore no longer material, since a trust relation already inheres in a co-ownership governed under Title III, Book II of the Civil Code.
• Collateral Attack: A Torrens title, as a rule, is conclusive and indefeasible. P.D. No. 1529, §48 provides that a certificate of title shall not be subject to collateral attack and cannot be altered, modified, or canceled except in a direct proceeding. An action is an attack on a title when the object of the action or proceeding is to nullify the title and thus challenge the judgment pursuant to which the title was decreed. The attack is direct when the object of an action or proceeding is to annul or set aside such judgment, or enjoin its enforcement. The attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment is nevertheless made as an incident thereof. In his complaint for partition, consistent with Roque vs. Intermediate Appellate Court, petitioner seeks first, a declaration that he is a co-owner of the subject properties, and second, the conveyance of his lawful shares. He does not attack respondent’s titles. Petitioner alleges no fraud, mistake, or any other irregularity that would justify a review of the registration decree in respondent’s favor. His theory is that although the subject properties were registered solely in respondent’s name, by agreement between them as well as under the Family Code, he is a co-owner and as such is entitled to the conveyance of his shares. On the premise that he is a co-owner, he can validly seek the partition of the properties in co-ownership and the conveyance to him of his share. In Guevara vs. Guevara, where a parcel of land bequeathed in a last will and testament was registered in the name of only one of the heirs, with the understanding that he would deliver to the others their shares after the debts of the original owner had been paid, the Court ruled that notwithstanding the registration of the land in the name of only one of the heirs, the other heirs can claim their shares in such action, judicial or extrajudicial, as may be necessary to partition the estate of the testator.
• Non-Party Properties and Due Process: The Court of Appeals reversed its first decision on the ground that to order partition would, in effect, rule and decide against Steelhouse Realty Development Corporation and Eloisa Castillo, both strangers to the case, as to the properties registered in their names. This reasoning ignored the fact that the majority of the properties involved are registered in respondent’s name, over which petitioner claims rights as a co-owner. Besides the real properties, petitioner also seeks partition of a substantial amount of personal properties consisting of motor vehicles and several pieces of jewelry. By dismissing petitioner’s complaint for partition on grounds of due process and equity, the appellate court unwittingly denied petitioner his right to prove ownership over the claimed real and personal properties. The dismissal of petitioner’s complaint was unjustified since both ends may be amply served by simply excluding from the action for partition the properties registered in the name of Steelhouse Realty and Eloisa Castillo.

• Summary Judgment — Summary judgment is proper only when, based on the pleadings, depositions, admissions, and after summary hearing, there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law; it is not proper where the pleadings tender a genuine issue requiring presentation of evidence. The Court applied this rule to hold that the conflicting claims on cohabitation and joint acquisition required trial.
• Limited Co-Ownership Under Article 148 of the Family Code — Even if the parties are incapacitated to marry each other, properties acquired through their actual joint contribution of money, property, or industry are owned in common in proportion to their respective contributions; absent proof to the contrary, their contributions and shares are presumed equal. The Court applied this to hold that the parties, both married to others, may still have a co-ownership over properties acquired after the Family Code took effect on August 3, 1988.
• Co-Ownership as a Form of Trust — Co-ownership is a form of trust, and every co-owner is a trustee for the other. Because Article 148 of the Family Code already covers the parties’ legal relation, the implied-trust provisions of Articles 1452 and 1453 of the Civil Code are no longer material.
• Torrens Title and Collateral Attack — A certificate of title cannot be altered, modified, or canceled except in a direct proceeding; a collateral attack occurs when, in an action to obtain a different relief, an attack on the title or judgment is made as an incident thereof. The Court applied this to hold that a partition suit seeking a declaration of co-ownership and conveyance of shares does not attack the titles where no fraud, mistake, or irregularity in registration is alleged.
• Partition as Declaration of Co-Ownership and Conveyance — An action for partition is at once an action for declaration of co-ownership and for segregation and conveyance of a determinate portion of the properties involved; if the defendant asserts exclusive title, the action should not be dismissed but resolved, and dismissal is proper only if the plaintiff fails to sustain co-owner status. The Court used this to reject the collateral-attack ground.
• Due Process and Exclusion of Non-Party Properties — A partition complaint need not be dismissed merely because some properties are registered in the names of non-parties; due process and equity are served by excluding those properties from the action while allowing the case to proceed as to the properties of the respondent and the personal properties claimed.

• "The issue in this case is really whether summary judgment, in accordance with Rule 35 of the Rules of Court, is proper. We rule in the negative." — States the core procedural issue and the Court’s direct holding that summary judgment was improper.
• "There is thus co-ownership eventhough the couple are not capacitated to marry each other." — Articulates the ratio decidendi on Article 148 of the Family Code, allowing limited co-ownership despite the parties’ incapacity to marry.
• "Co-ownership is a form of trust and every co-owner is a trustee for the other." — Defines the trust relationship inherent in co-ownership and explains why the Civil Code implied-trust provisions were not material.
• "In his complaint for partition, consistent with our ruling in Roque regarding the nature of an action for partition, petitioner seeks first, a declaration that he is a co-owner of the subject properties; and second, the conveyance of his lawful shares. He does not attack respondent’s titles." — States the Court’s collateral-attack rationale: the partition suit seeks co-ownership and conveyance, not nullification of the Torrens titles.

• Roque vs. Intermediate Appellate Court, 165 SCRA 118 (1988) — Cited for the nature of an action for partition: it is at once an action for declaration of co-ownership and for segregation and conveyance of a determinate portion; if the defendant asserts exclusive title, the action should not be dismissed but resolved, and dismissal is proper only if the plaintiff fails to sustain co-owner status. The Supreme Court used this to reject the collateral-attack ground.
• Guevara vs. Guevara, 74 Phil. 479 (1943) — Cited for the principle that notwithstanding registration of land in the name of only one heir, the other heirs may claim their shares in an action necessary to partition the estate; supports the holding that a partition suit does not attack the Torrens title.
• Castillo vs. Court of Appeals, 10 SCRA 549 (1964); Sotto vs. Teves, 86 SCRA 154 (1978) — Cited for the rule that co-ownership is a form of trust and every co-owner is a trustee for the other, making the Civil Code implied-trust provisions unnecessary.
• Tarnate vs. Gatchalian, 241 SCRA 254 (1995) — Cited for the summary judgment rule that summary judgment is proper only where there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.
• Galicia vs. Polo, 179 SCRA 371 (1989); Garcia vs. Court of Appeals, 167 SCRA 815 (1988) — Cited for the converse rule that where the pleadings tender a genuine issue, summary judgment is not proper.
• Co vs. Court of Appeals, 196 SCRA 705 (1991) — Cited for the definition of direct and collateral attack on a Torrens title.
• Juaniza vs. Jose, 89 SCRA 306 (1979) — Cited for the rule that Article 144 of the Civil Code applies only where the parties are not incapacitated to marry each other.
• Lesaca vs. Lesaca, 91 Phil. 135 (1952); Marata vs. Dionisio, G.R. No. 24449, unpublished — Cited by respondent for the proposition that Article 144 applies only if the parties are not incapacitated to contract marriage.

• Article 144, Civil Code — Governs property acquired by a man and a woman living together as husband and wife but not married, or under a void marriage; it applies only if the parties are not incapacitated to marry each other or the marriage is void ab initio and not bigamous, and does not cover adulterous relationships. The Court held it did not bar co-ownership because Article 148 of the Family Code now governs parties incapacitated to marry.
• Article 148, Family Code — Provides limited co-ownership for cohabitation not falling under Article 147: properties acquired through actual joint contribution of money, property, or industry are owned in common in proportion to contributions, presumed equal absent proof to the contrary; the share of a party validly married to another accrues to the absolute community or conjugal partnership, and bad-faith forfeiture rules apply. The Court applied it to allow co-ownership despite the parties’ incapacity to marry.
• Article 147, Family Code — Referred to as the preceding article governing parties capacitated to marry each other who live exclusively with each other as husband and wife without the benefit of marriage or under a void marriage; their wages and salaries are owned in equal shares and property acquired through work or industry is governed by co-ownership rules.
• Articles 1452 and 1453, Civil Code — Provide for implied trusts where two or more persons agree to purchase property and legal title is taken in the name of one for the benefit of all, or where property is conveyed in reliance upon a declared intention to hold it for or transfer it to another. The Court held these provisions were not material because Article 148 of the Family Code already covers the parties’ co-ownership, which is itself a form of trust.
• Section 48, P.D. No. 1529 — Provides that a certificate of title shall not be subject to collateral attack and cannot be altered, modified, or canceled except in a direct proceeding. The Court applied it to hold that the partition suit was not a collateral attack because it did not seek to nullify the titles.
• Rule 35, Section 3, Rules of Court (formerly Rule 34) — Provides that summary judgment is proper only when there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. The Court applied it to reverse the summary judgment because genuine factual issues existed.
• Title III, Book II, Civil Code — Governs co-ownership. The Court noted that the trust relation already inheres in a co-ownership governed under this Title, making the separate implied-trust provisions unnecessary.

Justices Bellosillo, Quisumbing, and De Leon, Jr. concurred. Justice Buena took no part.