Ros vs. Philippine National Bank - Laoag Branch

A real estate mortgage over conjugal property executed by the husband alone is voidable rather than void, and the wife's uncorroborated denial of her signature cannot overcome the presumption of due execution attaching to a notarized instrument, forgery being required to be established by clear and convincing evidence; a loan contracted by the husband for the business by which he contributes to the family's support is likewise presumed to have redounded to the benefit of the conjugal partnership, rendering the debt chargeable thereto, and it is immaterial that the business later fails or does not succeed.

Jose A. Ros and Estrella Aguete were married on 16 January 1954, and the parcel of land at the center of the controversy — Lot No. 9161 of the Cadastral Survey of Laoag, with all its improvements, covered by Transfer Certificate of Title No. T-9646 — was acquired during their marriage in 1968, making it conjugal partnership property under the Civil Code, the law in force at the time of the transactions. Ros passed away on 26 September 1999 and was substituted in the litigation by Aguete and their ten children. The dispute is governed by the Civil Code regime on the conjugal partnership of gains, under which the husband may not alienate or encumber conjugal real property without the wife's consent, express or implied, and the wife may, during the marriage and within ten years from the questioned transaction, ask the courts to annul a contract of the husband entered into without the consent required of her.

On 14 October 1974, Jose A. Ros obtained a loan of ₱115,000.00 from the Philippine National Bank – Laoag Branch. To secure the obligation, Ros executed a real estate mortgage over Lot No. 9161 of the Cadastral Survey of Laoag, together with all the improvements thereon, described under Transfer Certificate of Title No. T-9646; the mortgage was executed on 23 October 1974 and bore what purported to be the signatures of both Ros and his wife, Estrella Aguete. The application for the loan stated that the proceeds would be used exclusively "for additional working [capital] of buy & sell of garlic & virginia tobacco." Aguete later confirmed in her testimony that Ros engaged in that business, although she claimed to be unaware whether it prospered and said she did not know where he "wasted the money," even as she acknowledged being aware of loans he had contracted.

The loan remained outstanding upon maturity. PNB accordingly instituted extrajudicial foreclosure proceedings on the mortgaged property, and after the extrajudicial sale a Certificate of Sale was issued in its favor as the highest bidder. No redemption having been made within one year, the property was consolidated and registered in the name of PNB – Laoag Branch on 10 August 1978. On 14 August 1978, PNB notified Aguete that she and her family should vacate the mortgaged property because the redemption period had expired.

Aguete maintained that she had no knowledge of the loan her husband obtained and had not consented to the mortgage over the conjugal property. She asserted that her signatures on the loan and mortgage documents were forged and that the loan did not redound to the benefit of the family. For its part, PNB sought dismissal of the complaint for lack of cause of action and invoked estoppel, laches, abandonment, and prescription, insisting that it was the spouses' own acts of omission or connivance that barred them from recovering the subject property.

Ros died on 26 September 1999 and was substituted by Aguete and their ten children. In their memorandum before the trial court, petitioners themselves admitted that Ros had forged Aguete's signatures on the questioned documents.

The trial court found that Aguete did not sign the loan documents, did not appear before the notary public to acknowledge their execution, did not receive the loan proceeds, and was unaware of the loan until PNB notified her on 14 August 1978 to vacate the mortgaged property. The Court of Appeals took a contrary view of the evidence, concluding that forgery had been concluded without adequate proof and that the trial court had improperly relied solely on Aguete's testimony; it declared that Aguete affixed her signatures on the documents knowingly and with her full consent. The appellate court further found that the loan was used for the expansion of the family's business.

• Weight of the Trial Court's Findings: Petitioners argued that the Court of Appeals erred in not giving weight to the findings and conclusions of the trial court, and in reversing and setting aside those findings and conclusions without stating specific contrary evidence.
• Validity of the Real Estate Mortgage: Petitioners maintained that the Court of Appeals erred in declaring the real estate mortgage valid notwithstanding Aguete's claim that her signatures on the loan documents were forged and that she never consented to the encumbrance of the conjugal property.
• Benefit to the Conjugal Partnership: Petitioners contended that the Court of Appeals erred in declaring, without basis, that the loan contracted by Ros with PNB – Laoag redounded to the benefit of his family, apart from the fact that such ground had not been raised by PNB in its appeal.

• Lack of Cause of Action; Estoppel, Laches, Abandonment, Prescription: PNB prayed for the dismissal of the complaint for lack of cause of action and insisted that it was petitioners' own acts of omission or connivance that barred them from recovering the subject property on the grounds of estoppel, laches, abandonment, and prescription.

• Weight of the Trial Court's Findings: Whether the Court of Appeals erred in not giving weight to the findings and conclusions of the trial court, and in reversing and setting aside such findings and conclusions without stating specific contrary evidence.
• Validity of the Real Estate Mortgage: Whether the Court of Appeals erred in declaring the real estate mortgage valid despite Aguete's claim that her signatures were forged and that she did not consent to the mortgage.
• Benefit to the Conjugal Partnership: Whether the Court of Appeals erred in ruling that the loan contracted by Ros redounded to the benefit of the conjugal partnership, and whether that ground had been raised by PNB in its appeal.

• Weight of the Trial Court's Findings: No. The reversal rested on the appellate court's own assessment of the evidence, which found forgery unproved; the notarized documents carried the presumption of due execution, and Aguete's uncorroborated denial could not rebut it.
• Validity of the Real Estate Mortgage: No. The husband's encumbrance of conjugal real property without the wife's consent renders the contract voidable, not void, and annulment may be declared only upon a finding that consent was withheld — a finding the evidence did not support.
• Benefit to the Conjugal Partnership: No. A loan contracted by the husband for the business by which he contributes to the family's support is presumed to redound to the benefit of the conjugal partnership, and the debt is chargeable thereto.

• Weight of the Trial Court's Findings: The Civil Code governed the transaction, and the subject property, acquired in 1968 during the marriage, formed part of the conjugal partnership of gains. The documents disavowed by Aguete were acknowledged before a notary public and were therefore public documents; under Section 30 of Rule 132 of the Rules of Court, the certificate of acknowledgment is prima facie evidence of the execution of the instrument, and the execution of a document ratified before a notary public cannot be disproved by the mere denial of the alleged signer. Petitioners' omission to present any positive evidence to substantiate the claim of forgery — no corroborating witness such as a handwriting expert was offered — was fatal. A notarized document carries the evidentiary weight conferred upon it with respect to its due execution and enjoys the presumption of regularity, rebuttable only by evidence so clear, strong, and convincing as to exclude all controversy as to the falsity of the certificate; the burden of proof lies on the one contesting the document, and forgery must be proved by clear and convincing evidence. Ros himself could not bring action against PNB, for no one can come before the courts with unclean hands, petitioners having admitted in their memorandum before the trial court that Ros forged Aguete's signatures.

• Validity of the Real Estate Mortgage: Under Article 166 of the Civil Code, the husband cannot alienate or encumber any real property of the conjugal partnership without the wife's consent, and should he do so the contract is voidable. Article 173 allows the wife, during the marriage and within ten years from the transaction questioned, to ask the courts for the annulment of any contract of the husband entered into without her consent when such consent is required; the same article, however, does not guarantee that annulment will be declared, for annulment may be decreed only upon a finding that the wife did not give her consent. On the evidence, the conclusion of the appellate court that Aguete gave her consent to Ros' encumbrance of the subject property was adopted, the notarized loan and mortgage documents standing as prima facie proof of due execution unrebutted by clear and convincing evidence of forgery.

• Benefit to the Conjugal Partnership: The application for loan showed that the proceeds would be used exclusively for additional working capital of the buy-and-sell of garlic and Virginia tobacco, and Aguete herself confirmed that Ros engaged in such business. Debts contracted by the husband for and in the exercise of the industry or profession by which he contributes to the support of the family cannot be deemed his exclusive and private debts. Where the husband himself is the principal obligor in the contract — that is, he directly received the money and services to be used in or for his own business or profession — the contract falls within the term "obligations for the benefit of the conjugal partnership." No actual benefit need be proved; it is enough that the benefit to the family is apparent at the signing of the contract, since from the very nature of a contract of loan or services the family stands to benefit from the loan facility or services to be rendered to the husband's business or profession. It is immaterial if the business or profession ultimately fails or does not succeed, for where the husband contracts obligations on behalf of the family business the law presumes that such obligation will redound to the benefit of the conjugal partnership. Accordingly, Ros' loan from PNB redounded to the benefit of the conjugal partnership, and the debt is chargeable to it.

• Conjugal Partnership of Gains — Presumption of Conjugal Ownership — Under Article 160 of the Civil Code, all property of the marriage is presumed to belong to the conjugal partnership unless it is proved that it pertains exclusively to the husband or to the wife, and Article 153 defines conjugal property to include that acquired by onerous title during the marriage at the expense of the common fund. The Court applied the presumption to Lot No. 9161, acquired in 1968 during the marriage of Ros and Aguete, who were married on 16 January 1954, and thus treated the property as conjugal and governed by the Civil Code as the law in force at the time of the mortgage.

• Voidable, Not Void, Encumbrance of Conjugal Real Property by the Husband Without the Wife's Consent — Article 166 of the Civil Code prohibits the husband from alienating or encumbering any real property of the conjugal partnership without the wife's consent, and a contract executed in violation of that prohibition is voidable, not void. Article 173 permits the wife, during the marriage and within ten years from the transaction questioned, to ask the courts for the annulment of any contract of the husband entered into without her consent when such consent is required, but annulment will be declared only upon a finding that the wife did not in fact give her consent. Because the evidence failed to establish that Aguete withheld consent, no ground for annulment existed.

• Presumption of Due Execution of Notarized Documents — An instrument duly acknowledged before a notary public is a public document that may be presented in evidence without further proof, the certificate of acknowledgment being prima facie evidence of the execution of the instrument under Section 30 of Rule 132 of the Rules of Court. The execution of a document ratified before a notary public cannot be disproved by the mere denial of the alleged signer; it carries the evidentiary weight conferred upon it with respect to its due execution and enjoys the presumption of regularity, which may be rebutted only by evidence so clear, strong, and convincing as to exclude all controversy as to the falsity of the certificate. The burden of proof to overcome the presumption lies on the one contesting the document.

• Forgery Must Be Proved by Clear and Convincing Evidence — An allegation of forgery must be established by clear and convincing evidence, and whoever alleges it bears the burden of proving it. The Court found the burden undischarged because petitioners offered no corroborating witness, such as a handwriting expert, who could authoritatively declare that Aguete's signatures were forged, and relied solely on her testimony.

• Unclean Hands — A party who has himself perpetrated the wrong complained of cannot seek relief from the courts. Ros, who in legal effect admitted in the complaint and in petitioners' memorandum that the signatures of his wife on the questioned documents were forged, could not himself bring action against PNB.

• Presumption that the Husband's Business Loan Redounds to the Benefit of the Conjugal Partnership — Debts contracted by the husband for and in the exercise of the industry or profession by which he contributes to the support of the family cannot be deemed his exclusive and private debts. Where the husband is himself the principal obligor and directly received the money to be used in or for his own business or profession, the contract falls within the term "obligations for the benefit of the conjugal partnership." No actual benefit need be proved; it is enough that the benefit to the family is apparent at the signing of the contract, and it is immaterial that the business later fails or does not succeed, the law presuming that the obligation will redound to the benefit of the conjugal partnership.

• "The husband cannot alienate or encumber any conjugal real property without the consent, express or implied, of the wife. Should the husband do so, then the contract is voidable." — This passage states the ratio on the nature of the husband's unauthorized encumbrance, establishing that the defect renders the contract voidable rather than void and thus defeats petitioners' prayer for a declaration of nullity.
• "The documents disavowed by Aguete are acknowledged before a notary public, hence they are public documents. Every instrument duly acknowledged and certified as provided by law may be presented in evidence without further proof, the certificate of acknowledgment being prima facie evidence of the execution of the instrument or document involved." — This passage anchors the evidentiary ruling on the notarized loan and mortgage documents and supplies the procedural basis, Section 30 of Rule 132, for dispensing with further proof of execution.
• "A notarized document carries the evidentiary weight conferred upon it with respect to its due execution, and it has in its favor the presumption of regularity which may only be rebutted by evidence so clear, strong and convincing as to exclude all controversy as to the falsity of the certificate." — This is the canonical formulation of the quantum of proof required to overturn a notarized instrument, and it is the passage most frequently invoked for the standard governing allegations of forgery.
• "It is enough that the benefit to the family is apparent at the signing of the contract. From the very nature of the contract of loan or services, the family stands to benefit from the loan facility or services to be rendered to the business or profession of the husband. It is immaterial, if in the end, his business or profession fails or does not succeed." — This passage defines the operative test for when a husband's business loan is chargeable to the conjugal partnership, dispensing with proof of actual benefit and rendering the subsequent failure of the venture irrelevant.

• Vera-Cruz vs. Calderon, G.R. No. 160748, 14 July 2004, 434 SCRA 534 — Cited as authority for the rule that the husband cannot alienate or encumber conjugal real property without the wife's consent, express or implied, and that a contract executed in violation of that rule is voidable.
• Heirs of Ignacia Aguilar-Reyes vs. Spouses Mijares, G.R. No. 143826, 28 August 2000, 410 SCRA 97 — Cited in Vera-Cruz vs. Calderon as the underlying source of the voidable-contract rule applied to the husband's unauthorized encumbrance of conjugal property.
• Pan Pacific Industrial Sales Co., Inc. vs. Court of Appeals, G.R. No. 125283, 10 February 2006, 482 SCRA 164 — Cited for the rule that the execution of a document ratified before a notary public cannot be disproved by the mere denial of the alleged signer, that a notarized document enjoys the presumption of regularity rebuttable only by clear, strong, and convincing evidence, and that forgery must be proved by clear and convincing evidence by the party alleging it.
• Sy Tiangco vs. Pablo and Apao, 59 Phil. 119 (1933) — Cited in Pan Pacific as the earlier authority for the principle that a notarized document cannot be impugned by the mere denial of the signer.
• Perez vs. Lantin, 132 Phil. 120 (1968) — Cited for the rule that debts contracted by the husband for and in the exercise of the industry or profession by which he contributes to the support of the family cannot be deemed his exclusive and private debts.
• Javier vs. Osmeña, 34 Phil. 336 (1916) — Cited in Perez vs. Lantin as the antecedent authority on the classification of the husband's business obligations as chargeable to the conjugal partnership.
• Ayala Investment & Development Corp. vs. Court of Appeals, G.R. No. 118305, 12 February 1998, 286 SCRA 272 — Cited for the rule that no actual benefit need be proved because it is enough that the benefit to the family is apparent at the signing of the contract, the law presuming that an obligation contracted by the husband on behalf of the family business will redound to the benefit of the conjugal partnership.

• Article 153, Civil Code — Enumerates the property constituting the conjugal partnership, including that acquired by onerous title during the marriage at the expense of the common fund. Cited to establish the conjugal character of the mortgaged lot acquired in 1968 during the spouses' marriage.
• Article 160, Civil Code — Provides that all property of the marriage is presumed to belong to the conjugal partnership unless proved to pertain exclusively to the husband or the wife. Cited as the presumption supporting the finding that Lot No. 9161 formed part of the conjugal partnership of gains.
• Article 161, Civil Code — Lists the debts and obligations for which the conjugal partnership is liable, including all debts and obligations contracted by the husband for the benefit of the conjugal partnership. Cited as the statutory basis for charging Ros' ₱115,000.00 loan to the conjugal partnership.
• Article 166, Civil Code — Prohibits the husband, unless the wife has been declared non compos mentis, a spendthrift, under civil interdiction, or confined in a leprosarium, from alienating or encumbering any real property of the conjugal partnership without the wife's consent, and allows the court to compel her consent if she refuses unreasonably. Cited in holding that the mortgage executed by Ros alone was voidable rather than void.
• Article 173, Civil Code — Allows the wife, during the marriage and within ten years from the transaction questioned, to ask the courts for the annulment of any contract of the husband entered into without her consent when such consent is required. Cited in holding that the remedy is available only upon a finding that the wife did not give her consent, a finding absent in this case.
• Section 30, Rule 132, Rules of Court — Provides that every instrument duly acknowledged and certified as provided by law may be presented in evidence without further proof, the certificate of acknowledgment being prima facie evidence of the execution of the instrument. Cited in holding that the notarized loan and mortgage documents were prima facie proof of due execution, unrebutted by petitioners' bare denial.

• Justice Diosdado M. Peralta
• Justice Roberto A. Abad
• Justice Jose Catral Mendoza
• Justice Maria Lourdes P.A. Sereno (designated additional member per Special Order No. 978 dated 30 March 2011)