The Commoner Lending Corporation vs. Rafael Balandra

A disposition or encumbrance of conjugal property made by one spouse without the authority of the court or the written consent of the other is void under Article 124 of the Family Code, but it is distinct from the void contracts contemplated by Article 1409 of the Civil Code: it is expressly construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected into a binding contract upon acceptance by the non-consenting spouse or authorization by the court before the offer is withdrawn by either or both offerors.

The property regime governing the spouses Rafael and Alita Balandra was the conjugal partnership of gains, the default regime under the Family Code, which took effect on August 3, 1988. Article 116 of the Family Code presumes all property acquired during the marriage, whether the acquisition appears to have been made, contracted, or registered in the name of one or both spouses, to be conjugal unless the contrary is proved. Article 124 of the same Code governs the administration and enjoyment of conjugal partnership property, vesting it jointly in both spouses and providing that the powers of administration do not include disposition or encumbrance without authority of the court or the written consent of the other spouse, failing which the disposition or encumbrance is void. The statutory backdrop matters because the characterization of an unauthorized encumbrance of conjugal property differs according to the law in force at the time of the transaction: under Articles 166 and 173 of the Civil Code, an alienation or encumbrance made before the effectivity of the Family Code without the wife's consent was merely voidable, whereas under Article 124 of the Family Code it is void — a distinction the Court drew in Alexander vs. Spouses Escalona.

Lot 2-A, Psd-06-007963, situated at Poblacion, Oton, Iloilo, together with the house erected thereon, was covered by Transfer Certificate of Title No. T-126054 in the names of Spouses Rafael Balandra and Alita Balandra. The lot and its improvements were mortgaged to The Commoner Lending Corporation to secure a loan of ₱300,000.00 contracted by Alita.

According to petitioner, it subjected Alita's loan application to an extensive credit investigation and advised her of the need for a power of attorney from her husband, respondent. Upon being shown the questioned General Power of Attorney and other documents, petitioner approved the loan application on March 23, 1997. On March 24, 1997, petitioner released the amount of ₱300,000.00 allegedly to the spouses, and on the same day the Real Estate Mortgage was executed covering the subject lot and its improvements as security for the loan.

Respondent, for his part, alleged that Alita forged his signature on the General Power of Attorney dated February 25, 1997, making it appear that he had authorized her, as his attorney-in-fact, to mortgage the subject properties. He maintained that he could not have signed the document on February 25, 1997 because he was then out of the country on board an overseas vessel. Invoking that the subject properties were his exclusive properties, respondent filed a Complaint for Nullity of Documents and Damages on October 24, 1997 against petitioner and Alita, praying that the General Power of Attorney dated February 25, 1997 and the Real Estate Mortgage dated March 24, 1997 be declared null and void for lack of his consent to both documents.

The spouses thereafter defaulted in their installment payments, leaving an outstanding obligation of ₱438,130.00 as of October 24, 1997. Respondent allegedly promised to pay thirty percent of the amount on or before October 15, 1997 and the remaining balance thereafter by way of installments, on the strength of which petitioner asserted that he had ratified the questioned mortgage. When respondent failed to comply with his undertaking, petitioner extrajudicially foreclosed the Real Estate Mortgage and consequently acquired the mortgaged properties.

Both the trial court and the appellate court found that respondent's signature on the questioned General Power of Attorney was a forgery. Two handwriting experts — Gregorio Mendoza, Jr., testifying for respondent, and P/Chief Inspector Arturo Bangcaya of the PNP Crime Laboratory of Region 6, testifying for petitioner — both concluded that respondent's standard signatures in his passport and seaman's book differed from the questioned signature on the General Power of Attorney; a visual assessment of the questioned signature showed glaring dissimilarities; and it was physically impossible for respondent to have signed the instrument and appeared before the notary public on February 25, 1997, as he was then outside the Philippines aboard the vessel MV ANTJE. Both lower tribunals likewise found that the mortgaged properties were conjugal and that the questioned loan did not redound to the benefit of the spouses' family.

• Forgery of the General Power of Attorney: Petitioner assigned as error the Court of Appeals' ruling that the General Power of Attorney was forged, maintaining that the appellate court gravely erred in so holding and asking the Court to revisit the factual findings relating to the regularity of the instrument's execution.
• Ratification through Subsequent Payment: Petitioner argued that the Court of Appeals gravely failed to recognize that respondent's subsequent payment of the balance of the loan ratified the mortgage, and asserted before the RTC that respondent impliedly ratified the loan and the mortgage entered into by his wife when he made partial payments on the outstanding obligation.
• Benefit to the Conjugal Partnership: Petitioner averred that the loan redounded to the benefit of respondent's family, and assigned as error the Court of Appeals' ruling that the Real Estate Mortgage did not redound to the benefit of the family.
• Partial Nullification of the Foreclosure: Petitioner protested the RTC's partial nullification of the foreclosure, contending that the mortgage should not have been invalidated even in part.

• Nullity of the Mortgage in Its Entirety: Respondent maintained, in his motion for reconsideration of the RTC Decision, that the Real Estate Mortgage is void in its entirety for being fictitious and simulated, and not merely void as to the one-half conjugal share.
• Conjugal Character of the Properties: In his comment to the petition, respondent admitted that the mortgaged properties are their conjugal properties.

• Regularity of the Execution of the Real Estate Mortgage / Forgery: Whether the Court of Appeals erred in affirming the factual finding that respondent's signature on the General Power of Attorney dated February 25, 1997 was forged, and in consequently treating the Real Estate Mortgage as irregularly executed.
• Characterization of the Real Estate Mortgage Constituted Without the Consent of Respondent: Whether the Real Estate Mortgage executed by Alita over the conjugal properties without respondent's written consent or court authority is void in its entirety as a legally inexistent and absolutely simulated transaction incapable of ratification, or a void disposition under Article 124 of the Family Code that constitutes a continuing offer susceptible of perfection through acceptance by the non-consenting spouse.

• Regularity of the Execution of the Real Estate Mortgage / Forgery: No. The finding of forgery is a question of fact, and the congruent findings of the RTC and the Court of Appeals are binding and conclusive on the Court in a petition for review on certiorari under Rule 45, which permits only questions of law.
• Characterization of the Real Estate Mortgage Constituted Without the Consent of Respondent: The mortgage is void under Article 124 of the Family Code for want of respondent's written consent, but it is not inexistent and incapable of ratification under Article 1409 of the Civil Code; it is a continuing offer that was perfected into a binding security when respondent accepted it by undertaking to settle the loan and making partial payments thereon.

• Regularity of the Execution of the Real Estate Mortgage / Forgery: The petition merely reiterated the factual issues and arguments relating to forgery that had been squarely passed upon by the Court of Appeals. The findings of the RTC, affirmed by the CA — the physical impossibility of respondent's having signed the questioned Real Estate Mortgage and the discrepancies in his signatures as established by handwriting experts — are essentially factual, inasmuch as the Court was being asked to revisit and re-evaluate the evidence on record and assess anew the testimonies given before the trial court. Under Rule 45 of the Rules of Court, only questions of law may be raised in a petition for review on certiorari and resolved by the Court; not being a trier of facts, the Court will not review the factual findings of the lower tribunals, which are generally binding and conclusive. The rule applies with more reason where the factual findings of the RTC were affirmed by the CA on appeal, and none of the recognized exceptions — among them, that the conclusion is grounded entirely on speculation, surmises, or conjectures; that the inference made is manifestly mistaken, absurd, or impossible; that there is grave abuse of discretion; that the judgment is based on a misapprehension of facts; that the findings of fact are conflicting; that the CA went beyond the issues and its findings are contrary to the admissions of both parties; that the CA's findings are contrary to those of the trial court; that the findings of fact are conclusions without citation of specific evidence; that the facts set forth in the petition and briefs are not disputed by the respondent; and that the CA's findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record — applied to the case. The Court thus found no cogent reason to disturb the congruent findings of the RTC and the CA that respondent's signature on the questioned Real Estate Mortgage is a forgery, supported as these were by the concurring conclusions of the two handwriting experts, the glaring dissimilarities shown by visual assessment of the questioned signature against respondent's standard signatures in his passport and seaman's book, and the physical impossibility of his having signed the instrument and appeared before the notary public on February 25, 1997, he being then outside the Philippines aboard the vessel MV ANTJE — circumstances that sufficiently debunked the presumption of regularity in the execution of the General Power of Attorney.

• Characterization of the Real Estate Mortgage Constituted Without the Consent of Respondent: The Real Estate Mortgage dated March 24, 1997, executed on the basis of the forged General Power of Attorney, is governed by the Family Code, which took effect on August 3, 1988. In Alexander vs. Spouses Escalona, the Court held that the applicable law governing an alienation or encumbrance of conjugal properties without the consent of the other spouse must be reckoned on the date of the alienation or encumbrance, and laid down two guidelines: (1) an alienation or encumbrance of conjugal property without the wife's consent made before the effectivity of the Family Code is not void but merely voidable under Articles 166 and 173 of the Civil Code, with the wife having ten years from the transaction to file an action for annulment; and (2) an alienation or encumbrance of conjugal property made after the effectivity of the Family Code without the authority of the court or the written consent of the other spouse is void under Article 124 of the Family Code, without prejudice to vested rights in the property acquired before August 3, 1988, and unless the transaction is accepted by the non-consenting spouse or authorized by the court, an action for declaration of nullity may be filed before the continuing offer on the part of the consenting spouse and the third person becomes ineffective. Article 116 of the Family Code presumes all property acquired during the marriage, whether the acquisition appears to have been made, contracted, or registered in the name of one or both spouses, to be conjugal unless the contrary is proved; here, the records were bereft of any strong, clear, and convincing evidence presented by respondent that the mortgaged properties were his exclusive properties, and respondent himself admitted in his comment that the mortgaged properties are their conjugal properties. The Court has consistently held that a disposition or encumbrance of conjugal property made by a spouse without the written consent of the other during the effectivity of the Family Code is void. Article 124 provides that the administration and enjoyment of the conjugal partnership property belongs to both spouses jointly; that in the event one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration, which do not include disposition or encumbrance without authority of the court or the written consent of the other spouse; that in the absence of such authority or consent, the disposition or encumbrance shall be void; and that, however, the transaction shall be 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 the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. The contemplated encumbrance or disposition, albeit categorized as a void transaction, is further characterized distinctly from void contracts under Article 1409 of the Civil Code, which are deemed inexistent and consequently incapable of ratification. Void dispositions under Article 124 of the Family Code are expressly deemed a continuing offer which may be perfected and accepted by consent of the previously non-consenting spouse. In Spouses Cueno vs. Spouses Bautista, the Court noted the special nature of void transactions under the Family Code, that they can become binding contracts upon the acceptance by the other spouse or authorization by the court before the continuing offers are withdrawn by either or both spouses; in other words, a void contract under Article 124 of the Family Code, while not capable of ratification, is distinctively susceptible of perfection through acceptance by the non-consenting spouse. In this case, the Real Estate Mortgage executed by Alita without the written consent or authority of respondent partook of a continuing offer from petitioner and Alita that a mortgage be constituted over the subject conjugal properties to secure the questioned loan. Respondent had the option of accepting or rejecting the offer before its withdrawal either by petitioner or Alita. As found by both the RTC and the CA, respondent, instead of rejecting the offer, undertook to pay the outstanding loan obligation and made partial payments thereon. These circumstances established respondent's acceptance of the offer, thereby perfecting the previously unauthorized Real Estate Mortgage into a binding undertaking on his part to constitute the mortgage over the subject conjugal properties as security for the loan. Respondent's undertaking to settle the questioned loan, and his making of partial payments thereon to prevent foreclosure, was relied upon by petitioner; pursuant to Article 1431 of the Civil Code, a representation is rendered conclusive upon the party making it and cannot be denied as against the person relying thereon. That respondent's undertaking to pay the loan proceeded from his vain effort to save the mortgaged properties from being foreclosed is immaterial and irrelevant, there being nothing special or compelling about that reason, as the foreclosure of a mortgage is a necessary consequence of the failure to settle the loan it secures. The CA therefore erred in holding that the questioned Real Estate Mortgage dated March 24, 1997 is legally inexistent and absolutely wanting in civil effects for lack of respondent's consent. Pursuant to Article 124 of the Family Code, the previously unauthorized Real Estate Mortgage was perfected into a binding security for the questioned loan when respondent undertook to settle the loan, making partial payments thereon, to prevent foreclosure of the mortgage.

• Void disposition of conjugal property under Article 124 of the Family Code as a continuing offer — A disposition or encumbrance of conjugal partnership property made by one spouse without the authority of the court or the written consent of the other spouse is void. The requisites and effects are: (a) the property must be conjugal, presumed so under Article 116 of the Family Code absent strong, clear, and convincing proof to the contrary; (b) the disposition or encumbrance must have been made by one spouse alone, the powers of sole administration not including disposition or encumbrance without court authority or the other spouse's written consent; (c) the transaction is void, but is expressly construed as a continuing offer on the part of the consenting spouse and the third person; and (d) the offer may be perfected as a binding contract upon acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. The Court applied the doctrine by holding that respondent's undertaking to pay the outstanding loan and his partial payments thereon, made to prevent foreclosure and relied upon by petitioner, constituted acceptance of the continuing offer and perfected the previously unauthorized mortgage.
• Distinction between void contracts under Article 1409 of the Civil Code and void dispositions under Article 124 of the Family Code — Void contracts under Article 1409 are deemed inexistent and, consequently, incapable of ratification. Void dispositions under Article 124 of the Family Code, while likewise categorized as void, are expressly deemed a continuing offer and are therefore distinctively susceptible of perfection through acceptance by the previously non-consenting spouse. The Court relied on this distinction to reject the Court of Appeals' characterization of the mortgage as legally inexistent and absolutely wanting in civil effects.
• Estoppel by representation under Article 1431 of the Civil Code — Through estoppel, an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon. The Court applied the provision to hold that respondent's undertaking to settle the loan, upon which petitioner relied, could not be denied by him as a means of defeating the perfected mortgage.
• Presumption of conjugality under Article 116 of the Family Code — All property acquired during the marriage, whether the acquisition appears to have been made, contracted, or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved. Because respondent presented no strong, clear, and convincing evidence that the mortgaged properties were his exclusive properties — and in fact admitted in his comment that they were conjugal — the presumption stood.
• Rule 45 limitation to questions of law — Only questions of law may be raised in a petition for review on certiorari under Rule 45; the Court is not a trier of facts and will not review the factual findings of the lower tribunals, which are generally binding and conclusive, especially where the RTC's findings were affirmed by the CA, and where none of the recognized exceptions to the rule obtains.
• Applicable law reckoned from the date of the alienation or encumbrance — The law governing an alienation or encumbrance of conjugal properties without the consent of the other spouse must be reckoned on the date of the alienation or encumbrance: before the effectivity of the Family Code, the transaction is merely voidable under Articles 166 and 173 of the Civil Code; after its effectivity, it is void under Article 124 of the Family Code.

• "However, the transaction shall be 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 the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors." — This is the canonical formulation of the third paragraph of Article 124 of the Family Code, quoted by the Court as the textual basis for treating an unauthorized encumbrance of conjugal property as a continuing offer rather than as an inexistent contract.
• "Notably, void dispositions under Article 124 of the Family Code are expressly deemed as a continuing offer which may be perfected and accepted by consent of the previously non-consenting spouse." — This passage states the ratio decidendi distinguishing void dispositions under the Family Code from void contracts under Article 1409 of the Civil Code and supplies the ground on which the Court of Appeals' ruling of absolute inexistence was overturned.
• "In other words, a void contract under Article 124 of the Family, while not capable of ratification, is distinctively susceptible of perfection through acceptance by the non-consenting spouse." — This is the Court's distilled statement of the doctrine drawn from Spouses Cueno vs. Spouses Bautista, and it is the proposition on which the disposition of the case turns.
• "Pursuant to Article 124 of the Family Code, the previously unauthorized REM was perfected into a binding security for the questioned loan when respondent undertook to settle the loan, making partial payments thereon, to prevent foreclosure of the mortgage." — This is the Court's application of the doctrine to the facts, resolving the substantive issue in petitioner's favor and explaining why the complaint for nullity was dismissed.

• Alexander vs. Spouses Escalona, G.R. No. 256141, July 19, 2022 — Controlling precedent on the law governing an alienation or encumbrance of conjugal property without the consent of the other spouse; the Court adopted its two-part guideline reckoning the applicable law on the date of the transaction, and cited the Concurring Opinion of Associate Justice Alfredo Benjamin S. Caguioa in the same case on the special nature of void transactions under Article 124.
• Spouses Cueno vs. Spouses Bautista, G.R. No. 246445, March 2, 2021 — Followed for the proposition that void transactions under the Family Code are of a special nature, capable of becoming binding contracts upon acceptance by the other spouse or authorization by the court before the continuing offers are withdrawn.
• Tenazas vs. R. Villegas Taxi Transport, 731 Phil. 217 (2014) — Cited for the rule that questions of fact requiring a re-evaluation of evidence are inappropriate in a petition for review on certiorari under Rule 45.
• "J" Marketing Corp. vs. Taran, 607 Phil. 414 (2009) — Cited, through Tenazas, for the principle that the Court is not a trier of facts and will not review the factual findings of the lower tribunals, which are generally binding and conclusive.
• Pascual vs. Burgos, 776 Phil. 167 (2016) — Cited for the enumeration of the recognized exceptions to the rule that factual findings of the lower tribunals are binding on the Court.
• Medina vs. Mayor Asistio, Jr., 269 Phil. 225 (1990) — Cited, through Pascual vs. Burgos, as the source of the ten exceptions to the rule on the conclusiveness of factual findings.

• Article 124, Family Code — Governs the administration and enjoyment of conjugal partnership property, which belongs to both spouses jointly. It provides that the powers of sole administration in case of the incapacity or inability of one spouse do not include disposition or encumbrance without authority of the court or the written consent of the other spouse, and that in the absence of such authority or consent the disposition or encumbrance shall be void; however, the transaction shall be 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. The Court applied the provision as the controlling law because the mortgage was executed on March 24, 1997, after the Family Code took effect on August 3, 1988, and held that respondent's partial payments perfected the previously unauthorized mortgage.
• Article 116, Family Code — Provides that all property acquired during the marriage, whether the acquisition appears to have been made, contracted, or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved. The provision supplied the presumption that the mortgaged lot and house were conjugal, which respondent failed to rebut and which he effectively conceded in his comment.
• Article 1409, Civil Code — Declares certain contracts inexistent and void from the beginning. The RTC characterized the General Power of Attorney as absolutely simulated or fictitious under this article; the Court held that the provision does not govern the mortgage, because void dispositions under Article 124 of the Family Code are distinct from Article 1409 void contracts and are not incapable of perfection.
• Article 1431, Civil Code — Provides that through estoppel an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon. The Court invoked the provision to hold that respondent could not deny his undertaking to settle the loan, which petitioner had relied upon.
• Articles 166 and 173, Civil Code — Identified in Alexander vs. Spouses Escalona as the applicable law for alienations or encumbrances of conjugal property made without the wife's consent before the effectivity of the Family Code, in which case the transaction is not void but merely voidable and may be annulled within ten years from the transaction. Cited to contrast the pre-Family Code regime with the rule applicable to the present mortgage.
• Rule 45, Rules of Court — Limits a petition for review on certiorari to questions of law. The Court applied the rule in declining to review the factual finding of forgery affirmed by both the RTC and the Court of Appeals.

Caguioa (Chairperson), Gaerlan, Dimaampao, and Singh, JJ., concur.