Philippine National Bank vs. Reyes, Jr.

A real estate mortgage over conjugal property is void when executed without the written consent of the non-contracting spouse, but the conjugal partnership remains liable for the principal loan obligation when the loan was contracted for the family business, as the law presumes benefit to the family without need of proving actual benefit.

Venancio C. Reyes, Jr. and Lilia Reyes were married in 1973, before the Family Code took effect, placing their property regime under the Conjugal Partnership of Gains. During their marriage, they acquired three parcels of land in Malolos, Bulacan. Two titles were registered under "Felicidad Pascual and Lilia C. Reyes, married to Venancio Reyes," while one was registered solely under "Lilia C. Reyes, married to Venancio Reyes." Article 124 of the Family Code governs the administration and disposition of conjugal property under this regime, requiring the written consent of the non-contracting spouse for any encumbrance to be valid.

Venancio C. Reyes, Jr. and Lilia Reyes were married in 1973. During their union, they acquired three parcels of land in Malolos, Bulacan. Transfer Certificates of Title Nos. T-52812 and T-52813 were registered under "Felicidad Pascual and Lilia C. Reyes, married to Venancio Reyes," while TCT No. 53994 was registered under "Lilia C. Reyes, married to Venancio Reyes." These properties were mortgaged to Philippine National Bank on August 25, 1994 to secure a loan of ₱1,100,000.00, which on October 6, 1994 was increased to ₱3,000,000.00. Philippine National Bank claimed that both Reyes Spouses contracted and duly consented to the loan.

When the Reyes Spouses failed to pay the loan obligations, Philippine National Bank foreclosed the mortgaged real properties. The auction sale was held on September 19, 1997, with PNB emerging as the highest bidder and a certificate of sale issued in its favor. On September 22, 1998, Venancio filed before the Regional Trial Court a Complaint for Annulment of Certificate of Sale and Real Estate Mortgage against PNB. Upon order of the trial court, Venancio amended his Complaint to include Lilia and the Provincial Sheriff of Bulacan as defendants.

In assailing the validity of the real estate mortgage, Venancio claimed that his wife undertook the loan and the mortgage without his consent and that his signature was falsified on the promissory notes and the mortgage. Since the three lots were conjugal properties, he argued that the mortgage constituted over them was void. Philippine National Bank countered that Venancio had actual knowledge of the loan as early as 1996 but only filed suit in 1998, and that it was impossible for him to have no knowledge of the transaction since the Reyes Spouses lived together in the same house where notices and demand letters were sent.

Both the Regional Trial Court and the Court of Appeals found that Venancio's signature on the mortgage documents was forged, as established through the expert testimony of Efren B. Flores of the National Bureau of Investigation's Questioned Document Section. Flores compared the signatures on the loan documents with Venancio's standard signatures and concluded they were not written by the same person, noting slowly drawn pen strokes, discrepancies in structural pattern, and differences in loop formation. PNB's own witness, Loan and Discount Division Chief Efren Agustin, admitted he never actually saw Venancio sign the documents and only saw Lilia at the bank's premises. The trial court also found that the loan was used as additional working capital for Venancio's printing business.

• Validity of the Real Estate Mortgage: Petitioner argued that the real estate mortgage is valid and that both Reyes Spouses duly consented to the loan and the mortgage, pointing to Venancio's signature on the promissory notes and deed of mortgage.
• Conjugal Partnership Liability: Petitioner contended that the conjugal partnership should be held liable for the loan to the extent that it redounded to the benefit of the family under Article 122 of the Family Code, citing the trial court's finding that the loan was used as additional working capital for respondent's printing business.
• Laches: Petitioner claimed that respondent's cause of action should be barred by laches, pointing to his testimony admitting actual knowledge of the loan as early as 1996 but filing suit only in 1998. Petitioner further contended that it was impossible for respondent to have no knowledge since the spouses lived in the same house where notices and demand letters were sent.
• Reliance on Handwriting Expert: Petitioner contended that the Court of Appeals should not have relied heavily on the testimony of the handwriting expert, since jurisprudence shows such experts are not indispensable in determining forgery.

• Lack of Knowledge: Respondent alleged that his wife hid the transaction from him, and that even though they lived under the same roof, he was not aware of everything happening in their home because as a practicing lawyer, he was always away at work from 8 a.m. to 7 p.m.
• Factual Findings of Forgery: Respondent pointed out that both the RTC and the CA made factual findings of forgery, which should be respected by the Supreme Court as binding and conclusive.
• Void Contract: Respondent contended that the conjugal partnership cannot be held liable because a void contract has no legal existence from which an obligation may stem.

• Validity of the Real Estate Mortgage: Whether the Court of Appeals erred in declaring the real estate mortgage void.
• Conjugal Partnership Liability: Whether the conjugal partnership can be held liable for the loan contracted unilaterally by Lilia C. Reyes.
• Laches and Estoppel: Whether respondent is guilty of laches and whether his claim is now barred by estoppel.

• Validity of the Real Estate Mortgage: No. The real estate mortgage over conjugal property is void for want of the non-contracting spouse's written consent, as required by Article 124 of the Family Code. The forgery of respondent's signature was established by clear and convincing evidence.
• Conjugal Partnership Liability: Yes. The conjugal partnership is liable for the loan because the proceeds were used as additional working capital for respondent's printing business, giving rise to a presumption of benefit to the family under Article 121 of the Family Code. The nullity of the mortgage does not affect the validity of the principal obligation.
• Laches and Estoppel: No. Laches does not apply where the delay is within the period prescribed by law. Respondent filed the complaint within the statutory redemption period, and upon learning of the mortgage, immediately informed the bank of the forged signature.

• Validity of the Real Estate Mortgage: Article 124 of the Family Code requires the written consent of the spouse who did not encumber the property before any disposition or encumbrance of conjugal property can be valid; in the absence of such consent, the disposition or encumbrance is void. The Reyes Spouses were married in 1973, before the Family Code took effect, making their property regime the Conjugal Partnership of Gains, with Article 124 as the applicable provision. Both the RTC and the CA found that respondent's signature on the mortgage documents was forged, as established through the expert testimony of NBI handwriting expert Efren B. Flores, who identified discrepancies in pen pressure, stroke coordination, and structural pattern between the questioned signatures and standard signatures. PNB's own witness admitted he never saw respondent sign the documents. The Supreme Court accorded the highest degree of respect to the lower courts' concurrent factual findings of forgery, finding no compelling reason to overturn them. Having established forgery, respondent proved he did not consent to the mortgage, rendering it void and legally inexistent.

• Conjugal Partnership Liability: Petitioner's reliance on Article 122 of the Family Code was misplaced because that provision applies to personal debts and not to the mortgage. The principal obligation—the loan—remained valid notwithstanding the nullity of the accessory mortgage. Applying the doctrine from Ayala Investment & Development Corp. vs. Court of Appeals, where a spouse contracts a loan to be used for the family business, the law presumes the loan redounded to the benefit of the conjugal partnership, and no proof of actual benefit is required. Since the trial court found the loan was used as additional working capital for respondent's printing business, the conjugal partnership may be held liable for the loan amount. The mortgage, while void, may still be considered as an instrument evidencing the indebtedness, pursuant to Philippine National Bank vs. Banatao. If the conjugal partnership is insufficient to cover the liability, the spouses are solidarily liable for the unpaid balance with their separate properties, pursuant to the last paragraph of Article 121 of the Family Code.

• Laches and Estoppel: Laches means the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier. As held in Torbela vs. Rosario, a delay within the prescriptive period is sanctioned by law and is not considered a delay that would bar relief; laches applies only in the absence of a statutory prescriptive period. Records showed that upon learning about the mortgage, respondent immediately informed the bank about his forged signature. He filed the complaint on September 22, 1998, still within the prescribed period to redeem a mortgaged property. Accordingly, respondent did not sleep on his right, and laches does not bar his claim.

• Written Consent Requirement for Encumbrance of Conjugal Property (Article 124, Family Code) — Any disposition or encumbrance of conjugal property by one spouse must be consented to by the other in writing; otherwise, the disposition or encumbrance is void. The transaction is 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 acceptance by the other spouse or authorization by the court before the offer is withdrawn. In this case, the mortgage was void because respondent's signature was forged, meaning he never gave written consent.

• Presumption of Benefit to the Family (Ayala Investment Doctrine) — When a spouse contracts a loan to be used for the family business, the law presumes the obligation redounded to the benefit of the conjugal partnership, and no actual benefit need be proved. It is immaterial if the business ultimately fails. In contrast, when a spouse acts merely as a surety or guarantor, proof of actual benefit to the family must be presented before the conjugal partnership can be held liable. In this case, since the loan was used as working capital for respondent's printing business, the presumption applied and the conjugal partnership was held liable.

• Accessory Nature of Mortgage — A mortgage is merely an accessory agreement and does not affect the principal contract of loan. The nullity of the mortgage does not extinguish the principal obligation. The void mortgage may still be considered as an instrument evidencing the indebtedness.

• Laches in Relation to Prescriptive Periods — Laches means the failure or neglect, for an unreasonable and unexplained length of time, to assert a right. A delay within the statutory prescriptive period is sanctioned by law and does not constitute laches. Laches applies only in the absence of a statutory prescriptive period.

• Solidary Liability of Spouses for Conjugal Partnership Deficiencies (Article 121, Family Code) — If the conjugal partnership is insufficient to cover liabilities enumerated in Article 121, the spouses are solidarily liable for the unpaid balance with their separate properties. This is a subsidiary but solidary liability.

• "A spouse's consent is indispensable for the disposition or encumbrance of conjugal properties." — This is the opening statement of the decision, encapsulating the central legal principle that animates the entire ruling.

• "Any disposition or encumbrance of a conjugal property by one spouse must be consented to by the other; otherwise, it is void." — This passage restates the rule under Article 124 of the Family Code, establishing the controlling standard for validity of encumbrances over conjugal property.

• "A mortgage is merely an accessory agreement and does not affect the principal contract of loan. The mortgages, while void, can still be considered as instruments evidencing the indebtedness[.]" — Quoted from Philippine National Bank vs. Banatao, this passage defines the relationship between the accessory mortgage and the principal loan obligation, explaining why the nullity of the mortgage does not extinguish the debt.

• "A delay within the prescriptive period is sanctioned by law and is not considered to be a delay that would bar relief. Laches apply only in the absence of a statutory prescriptive period." — Quoted from Torbela vs. Rosario, this passage articulates the doctrine that laches cannot apply when the action is filed within the period prescribed by law.

• Manotok Realty, Inc. vs. CLT Realty Development Corp., 512 Phil. 679 (2005) — Cited for the doctrine that factual findings of trial courts affirmed by the Court of Appeals are accorded the highest degree of respect and are generally binding and conclusive on the Supreme Court. Applied to uphold the lower courts' finding of forgery.
• Ayala Investment & Development Corp. vs. Court of Appeals, 349 Phil. 942 (1998) — Cited as controlling authority for the two-scenario framework on conjugal partnership liability for spousal debts: (A) when a spouse contracts a loan for the family business, benefit is presumed; (B) when a spouse acts as surety or guarantor, actual benefit must be proved. Applied to hold the conjugal partnership liable because the loan was used as working capital for respondent's printing business.
• Philippine National Bank vs. Banatao, 602 Phil. 508 (2009) — Cited for the principle that a mortgage is merely an accessory agreement that does not affect the principal contract of loan, and that a void mortgage may still serve as evidence of indebtedness. Applied to sustain PNB's right to recover the loan amount notwithstanding the nullity of the mortgage.
• Torbela vs. Rosario, 678 Phil. 1 (2011) — Cited for the doctrine that laches does not apply when the delay is within the statutory prescriptive period. Applied to reject PNB's laches defense, the complaint having been filed within the redemption period.

• Article 124, Family Code — Governs the administration and enjoyment of the conjugal partnership, requiring the written consent of the non-contracting spouse for any disposition or encumbrance of conjugal property. In the absence of such consent, the disposition or encumbrance is void. Applied to declare the real estate mortgage void for lack of respondent's written consent.
• Article 121, Family Code — Enumerates the liabilities of the conjugal partnership, including debts and obligations contracted during the marriage for the benefit of the conjugal partnership. Its last paragraph provides that if the conjugal partnership is insufficient to cover these liabilities, the spouses are solidarily liable for the unpaid balance with their separate properties. Applied to hold the conjugal partnership liable for the loan and to impose solidary liability on the spouses' separate properties for any deficiency.
• Article 122, Family Code — Provides that personal debts contracted by a spouse shall not be charged to the conjugal partnership except insofar as they redounded to the benefit of the family. Discussed but distinguished: petitioner's reliance on this provision was misplaced because it applies to personal debts, not to the mortgage; the proper basis for conjugal partnership liability was Article 121 read with the Ayala Investment doctrine.

Carpio (Chairperson), Velasco, Jr., Del Castillo, and Mendoza, JJ., concurred.