Manacop vs. Court of Appeals

A final and executory judgment and writ of execution issued before the effectivity of the Family Code may be enforced against a house and lot that became a family home only by operation of law under the Family Code, because the Family Code's family home provisions do not retroact to exempt debts incurred before August 3, 1988. The exemption under Article 155 does not apply to debts incurred prior to the constitution of the family home, and actual occupancy by the owner or an Article 154 beneficiary is required.

Florante F. Manacop and his wife Eulaceli owned a residential house and lot in Commonwealth Village, Quezon City, covered by TCT No. 174180. E & L Mercantile, Inc. was the creditor in an indebtedness involving Manacop and F.F. Manacop Construction Co., Inc. The Family Code, which took effect on August 3, 1988, replaced the Civil Code's requirement of judicial or extrajudicial constitution of a family home with constitution by operation of law upon actual occupancy as a family residence, while Article 155 preserved certain exceptions to the family home's exemption from execution.

Petitioner Florante F. Manacop and his wife Eulaceli purchased on March 10, 1972 a 446-square-meter residential lot with a bungalow in Commonwealth Village, Commonwealth Avenue, Quezon City, for P75,000.00. The property was covered by Transfer Certificate of Title No. 174180.

On March 17, 1986, E & L Mercantile, Inc. filed a complaint against Manacop and F.F. Manacop Construction Co., Inc. before the Regional Trial Court of Pasig, Metro Manila to collect an indebtedness of P3,359,218.45. Instead of filing an answer, Manacop and his company entered into a compromise agreement with E & L Mercantile, Inc., under which the defendants undertook to pay P2,000,000.00 as and when their means permit, but expeditiously as possible as their collectibles were collected. On April 20, 1986, the trial court rendered judgment approving the compromise agreement and enjoined the parties to comply with it in good faith. On July 15, 1986, E & L Mercantile, Inc. filed a motion for execution, which the lower court granted on September 23, 1986. Execution was delayed; eventually, the sheriff levied on several vehicles and other personal properties of Manacop. In partial satisfaction of the judgment debt, these chattels were sold at public auction, and certificates of sale were correspondingly issued.

On August 1, 1989, Manacop and his company filed a motion to quash the alias writs of execution and to stop the sheriff from continuing to enforce them, alleging that the judgment was not yet executory because the compromise agreement had not matured; there was no showing that they had the means to pay the indebtedness or that their receivables had in fact been collected. They filed supplements and other pleadings. On August 11, 1989, E & L Mercantile, Inc. opposed the motion, arguing that it was too late to question the September 23, 1986 Order because more than two years had elapsed; that the second alias writ of execution had been partially implemented; and that Manacop and his company were in bad faith in refusing to pay despite collecting P41,664,895.56 from February 1984 to January 5, 1989. On September 21, 1989, E & L Mercantile, Inc. opposed the addendum, alleging that the property covered by TCT No. 174180 could not be considered a family home because Manacop was already living abroad and, having been acquired in 1972, should have been judicially constituted as a family home to exempt it from execution.

On September 26, 1989, the lower court denied the motion to quash and the prayers in the subsequent pleadings. It found that Manacop and his company had not paid their indebtedness even though they had collected receivables amounting to P57,224,319.75, held that the case had become final and executory, and ruled that the residence was not exempt from execution because it was not duly constituted as a family home under the Civil Code. Manacop and his company then filed with the Court of Appeals a petition for certiorari assailing the lower court's Orders of September 23, 1986 and September 26, 1989.

The lower court's findings were affirmed by the Court of Appeals, which added that there was no showing that any Article 154 beneficiary actually resided in the property. E & L Mercantile, Inc.'s assertion that Manacop had left the country and was living with all the members of his family in West Covina, Los Angeles, California, U.S.A. stood unrefuted. The Court of Appeals also noted that the debt and the compromise judgment preceded the Family Code's effectivity on August 3, 1988.

• Non-Retroactivity of the Family Code: Petitioner argued that the Court of Appeals misapplied Modequillo, contending that there was no need to constitute the house and lot as a family home because he was and still is a resident of the property from the time it was levied upon up to the present.
• Constitution by Occupancy: Petitioner maintained that the Family Code and Modequillo require simply occupancy of the property, without need for its judicial or extrajudicial constitution as a family home.
• Temporary Absence and Overseer Occupancy: Petitioner contended that he should be deemed residing in the family home because his stay in the United States was merely temporary, the person staying in the house was his overseer, and his wife stayed in the family home whenever she visited the country.
• Maturity of Compromise: Petitioner and his company moved to quash the alias writs, alleging that the compromise agreement had not yet matured because there was no showing that they had the means to pay the indebtedness or that their receivables had in fact been collected.

• Late Challenge: Private respondent E & L Mercantile, Inc. opposed the motion to quash on the ground that it was too late to question the September 23, 1986 Order, more than two years having elapsed.
• Partial Implementation: Private respondent argued that the second alias writ of execution had been partially implemented.
• Bad Faith and Ability to Pay: Private respondent asserted that petitioner and his company were in bad faith in refusing to pay their indebtedness notwithstanding that from February 1984 to January 5, 1989, they had collected the total amount of P41,664,895.56.
• No Family Home: Private respondent alleged that the property covered by TCT No. 174180 could not be considered a family home because petitioner was already living abroad and, having been acquired in 1972, should have been judicially constituted as a family home to exempt it from execution.

• Execution of Pre-Family Code Judgment on Family Home: Whether a final and executory judgment promulgated and a writ of execution issued before the effectivity of the Family Code may be executed on a house and lot constituted as a family home under the Family Code.
• Retroactivity of Article 153: Whether Article 153 of the Family Code operates retroactively to exempt an existing family residence from execution for debts incurred before August 3, 1988.
• Actual Occupancy by Beneficiaries: Whether occupancy by an overseer, or the owner's temporary stay abroad, satisfies the requirement that a family home be actually occupied by the owner or any beneficiary enumerated in Article 154.

• Execution of Pre-Family Code Judgment on Family Home: Yes. A final and executory judgment and writ of execution issued before the Family Code's effectivity may be enforced against a house and lot that became a family home only by operation of law under the Family Code, because the Family Code's family home provisions do not retroact to exempt debts incurred before August 3, 1988.
• Retroactivity of Article 153: No. Article 153 has no retroactive effect; prior to August 3, 1988, a family home had to be constituted judicially or extrajudicially under the Civil Code, and Article 162 only makes existing family residences prospectively entitled to Family Code benefits.
• Actual Occupancy by Beneficiaries: No. Actual occupancy by the owner or an Article 154 beneficiary is required; occupancy by an overseer is insufficient, and the owner's temporary stay abroad does not satisfy the requirement.

• Execution of Pre-Family Code Judgment on Family Home: The issue was not novel. In Manacop vs. Court of Appeals, petitioner had raised the same family-home excuse against preliminary attachment over the same property. There, the Court upheld the attachment because the indebtedness was incurred in 1987 or prior to the Family Code's effectivity on August 3, 1988, and the family home was not exempt by force of the exclusion in paragraph 2, Article 155 of the Family Code. In the present case, the debt and the assailed orders of the trial court were incurred or issued before August 3, 1988. Under Article 155, a family home is exempt from execution except for, among others, debts incurred prior to the constitution of the family home. Because the property became a family home only upon the Family Code's effectivity, the pre-existing debt fell within the exception. The Court of Appeals therefore committed no reversible error in affirming the execution.
• Retroactivity of Article 153: Under Article 153, a family home is deemed constituted on a house and lot from the time it is occupied as a family residence, without need for judicial or extrajudicial constitution. Petitioner was partly correct that the Family Code simplified constitution. However, Modequillo vs. Breva explicitly ruled that Article 153 does not have retroactive effect. Article 162 provides that the Family Code's provisions shall also govern existing family residences insofar as applicable, but this means only that existing family residences at the time of the Family Code's effectivity are considered family homes and are prospectively entitled to its benefits; it does not retroact Articles 152 and 153 so as to exempt obligations incurred before the Family Code. Prior to August 3, 1988, the Civil Code procedure for judicial or extrajudicial constitution had to be followed. There was no proof that the subject property was so constituted. Since the debt was incurred and the assailed orders were issued before August 3, 1988, petitioner could not invoke the Family Code's protective provisions.
• Actual Occupancy by Beneficiaries: The exemption under Article 155 lasts only so long as any beneficiary actually resides in the family home. Article 154 enumerates the beneficiaries: the husband and wife, or an unmarried head of the family; and their parents, ascendants, descendants, brothers and sisters, legitimate or illegitimate, living in the family home and dependent on the head for legal support. In-laws may be included where the family home is jointly constituted by the spouses, but maids and overseers are excluded. "Actual" occupancy means real or actually existing occupancy, not merely possible, presumptive, or constructive. Occupancy need not be by the owner specifically; it may be by an Article 154 beneficiary. Here, the person staying in the house was Carmencita V. Abat, an overseer/maid and caretaker, who was not a beneficiary. Petitioner's temporary stay abroad and his wife's visits did not establish actual occupancy by a beneficiary. Thus, the actual-occupancy requirement was not met.

• Family Home Under the Family Code; Non-Retroactivity — Under the Family Code, a family home is deemed constituted by operation of law from the time a house and lot is occupied as a family residence, without judicial or extrajudicial constitution. However, Article 153 does not retroact. Article 162 only provides that existing family residences at the effectivity of the Family Code are considered family homes and are prospectively entitled to its benefits. Applied: the subject property became a family home only on August 3, 1988; debts incurred before that date were not exempt.
• Exemptions from Execution Under Article 155 — A family home is exempt from execution, forced sale, or attachment except for: (1) nonpayment of taxes; (2) debts incurred prior to the constitution of the family home; (3) debts secured by mortgages on the premises before or after such constitution; and (4) debts due to laborers, mechanics, architects, builders, materialmen, and others who rendered service or furnished material for the construction of the building. The exemption is effective from the constitution of the family home and lasts so long as any beneficiary actually resides therein. Applied: the debt and judgment preceded the property's constitution as a family home, so the exemption did not bar execution.
• Actual Occupancy by Beneficiaries — The family home exemption requires actual occupancy by the owner or by any beneficiary enumerated in Article 154. "Actual" means real or actually existing, as opposed to merely possible, presumptive, or constructive. Maids and overseers are not beneficiaries. Applied: occupancy by an overseer did not satisfy the law.
• Article 162 Prospective Application — Article 162 governs existing family residences insofar as the Family Code's provisions are applicable, but it does not give Articles 152 and 153 retroactive effect. Applied: existing residences are protected only prospectively from the Family Code's effectivity.

• "Under the Family Code, a family home is deemed constituted on a house and lot from the time it is occupied as a family residence. There is no need to constitute the same judicially or extrajudicially as required in the Civil Code. If the family actually resides in the premises, it is, therefore, a family home as contemplated by law. Thus, the creditors should take the necessary precautions to protect their interest before extending credit to the spouses or head of the family who owns the home." — States the simplified constitution of a family home under the Family Code, which the Court qualified by holding that the provision does not retroact.
• "Article 162 simply means that all existing family residences at the time of the effectivity of the Family Code, are considered family homes and are prospectively entitled to the benefits accorded to a family home under the Family Code, Article 162 does not state that provisions of Chapter 2, Title V have a retroactive effect." — Defines the prospective application of the Family Code's family home provisions and rejects retroactive exemption for pre-existing debts.
• "The law explicitly provides that occupancy of the family home either by the owner thereof or by 'any of its beneficiaries' must be actual. That which is 'actual' is something real, or actually existing, as opposed to something merely possible, or to something which is presumptive or constructive." — States the actual-occupancy requirement for the family home exemption.
• "Since the debt involved herein was incurred and the assailed orders of the trial court issued prior to August 3, 1988, the petitioner cannot be shielded by the benevolent provisions of the Family Code." — States the ratio decidendi on the non-retroactivity of the Family Code's family home protections.

• Modequillo vs. Breva, 185 SCRA 766, 772, May 31, 1990 — Controlling precedent relied upon by the Court of Appeals and the Supreme Court; held that the Family Code's family home provisions do not retroact and that existing family residences are prospectively entitled to the benefits of the Family Code.
• Manacop vs. Court of Appeals, 215 SCRA 773, November 13, 1992 — Prior related case involving the same property; held that the family home was not exempt from preliminary attachment because the indebtedness was incurred prior to the Family Code's effectivity, falling under the exclusion in paragraph 2, Article 155.
• Salysay vs. Ruiz Castro, 98 Phil. 385 (1956) — Cited for the definition of "actual" as real or actually existing, as opposed to merely possible, presumptive, or constructive.

• Article 153, Family Code — Provides that a family home is deemed constituted on a house and lot from the time it is occupied as a family residence, without need for judicial or extrajudicial constitution. Applied: the property became a family home by operation of law only upon the Family Code's effectivity on August 3, 1988.
• Article 155, Family Code — Lists the exceptions to the family home's exemption from execution, forced sale, or attachment, including debts incurred prior to the constitution of the family home. Applied: the debt and judgment preceded the property's constitution as a family home, so execution was not barred.
• Article 162, Family Code — Provides that the Family Code's provisions shall also govern existing family residences insofar as applicable. Applied: this did not give Articles 152 and 153 retroactive effect; existing residences were only prospectively entitled to Family Code benefits.
• Article 154, Family Code — Enumerates the beneficiaries of a family home: the husband and wife, or an unmarried head of the family; and their parents, ascendants, descendants, brothers and sisters, legitimate or illegitimate, living in the family home and dependent on the head for legal support. Applied: maids and overseers are excluded, so occupancy by an overseer did not satisfy the actual-occupancy requirement.
• Articles 225, 229-231, and 233, Civil Code — Prescribe the procedure for judicial or extrajudicial constitution of a family home prior to the Family Code. Applied: there was no proof that the subject property was constituted under these provisions.

Narvasa, C.J., Davide, Jr., Melo, and Francisco, JJ.