Titan Construction Corporation vs. Manuel A. David, Sr. and Martha S. David

A disposition of conjugal property by one spouse without the written consent of the other is void, and a purchaser relying on a spurious special power of attorney, under circumstances that should have put it on inquiry, cannot claim the protection accorded to a buyer in good faith and for value.

Manuel A. David, Sr. and Martha S. David were married on March 25, 1957, at a time when the conjugal partnership of gains under the Civil Code of the Philippines governed the property relations of spouses. Titan Construction Corporation is a domestic corporation. The lot at the center of the dispute, a 602-square-meter parcel in White Plains, Quezon City, was registered under the Torrens system in the name of Martha S. David, married to Manuel A. David. The spouses separated de facto in 1976.

Manuel A. David, Sr. and Martha S. David were married on March 25, 1957. In 1970, during their marriage, the spouses acquired a 602-square-meter lot in White Plains, Quezon City. The lot was registered in the name of "MARTHA S. DAVID, of legal age, Filipino, married to Manuel A. David" under Transfer Certificate of Title No. 156043 issued by the Register of Deeds of Quezon City. In 1976, the spouses separated de facto and no longer communicated with each other.

Sometime in March 1995, Manuel discovered that Martha had previously sold the property to Titan Construction Corporation for ₱1,500,000.00 through a Deed of Sale dated April 24, 1995. TCT No. 156043 had been cancelled and replaced by TCT No. 130129 in the name of Titan.

On March 13, 1996, Manuel filed a Complaint for Annulment of Contract and Reconveyance against Titan before the RTC of Quezon City. He alleged that the sale executed by Martha in favor of Titan was without his knowledge and consent and was therefore void. He prayed that the Deed of Sale and TCT No. 130129 be invalidated, that the property be reconveyed to the spouses, and that a new title be issued in their names. In its Answer with Counterclaim, Titan claimed that it was a buyer in good faith and for value because it relied on a Special Power of Attorney dated January 4, 1995 signed by Manuel which authorized Martha to dispose of the property on behalf of the spouses. Titan prayed for the dismissal of the complaint. In his unverified Reply, Manuel claimed that the SPA was spurious and that the signature purporting to be his was a forgery, hence Martha was wholly without authority to sell the property.

Manuel subsequently filed a Motion for Leave to File Amended Complaint, which the trial court granted. On October 15, 1996, Manuel filed an Amended Complaint impleading Martha as a co-defendant. Despite personal service of summons upon Martha, she failed to file an Answer and was declared in default. Trial then ensued.

At trial, the RTC found that the property was conjugal in character since it was purchased by the spouses with conjugal funds during their marriage, and that the registration of TCT No. 156043 in Martha's name, married to Manuel, did not negate the property's conjugal nature. The RTC also found that the SPA was spurious and did not bear Manuel's genuine signature, a finding supported by the unrebutted expert testimony of Atty. Desiderio Pagui; that the SPA did not contain Manuel's residence certificate and was not presented for registration with the Quezon City Register of Deeds, in violation of Section 64 of Presidential Decree No. 1529; and that the circumstances surrounding the transaction should have put Titan on notice of the SPA's dubious veracity. Titan's witness Valeriano Hernandez, the real estate agent who brokered the sale, testified that Jerry Yao, Titan's Vice President for Operations and signatory to the Deed of Sale, specifically inquired why Manuel's name did not appear on the Deed of Sale, and that during the first meeting between Martha and Yao, Martha informed Yao that the property was mortgaged to a casino for ₱500,000.00, prompting Titan to give her that amount without seeing the property, the original title, or the SPA, and without securing an acknowledgment receipt.

• Buyer in Good Faith: Titan claimed that it was a buyer in good faith and for value, having relied on the SPA presented by Martha.
• Paraphernal Character of the Property: Titan argued that the property was Martha's paraphernal property and that it properly relied on the SPA presented by her.
• Expert Testimony: Titan argued that the RTC erred in giving weight to the alleged expert testimony to the effect that Manuel's signature on the SPA was spurious.
• Torrens System: Titan maintained that the Court of Appeals failed to apply the pertinent law and jurisprudence on the Torrens system of land registration.
• Reimbursement: Titan argued, for the first time, that the Court of Appeals should have ordered Martha to reimburse the purchase price it paid, with legal interest.

• Validity of the Sale: Manuel alleged that the sale executed by Martha in favor of Titan was without his knowledge and consent and was therefore void.
• Spurious Special Power of Attorney: Manuel claimed that the SPA was spurious and that the signature purporting to be his was a forgery, leaving Martha wholly without authority to sell the property.

• Conjugal Nature of the Property: Whether the lot acquired during the marriage of Manuel and Martha formed part of their conjugal partnership.
• Validity of the Sale Without the Husband's Consent: Whether the Deed of Sale executed by Martha in favor of Titan was void for lack of Manuel's consent.
• Genuineness and Due Execution of the Special Power of Attorney: Whether the SPA purportedly signed by Manuel was spurious, and whether Titan waived the protection of Section 8, Rule 8 of the Rules of Court.
• Buyer in Good Faith: Whether Titan was a buyer in good faith and for value.
• Reimbursement: Whether Martha should be ordered to reimburse Titan the purchase price it paid, with legal interest.

• Conjugal Nature of the Property: Yes. The lot acquired during the marriage is presumed conjugal under Article 160 of the Civil Code and Article 116 of the Family Code, and Titan failed to overturn the presumption.
• Validity of the Sale Without the Husband's Consent: No. Under Article 172 of the Civil Code and Article 124 of the Family Code, a disposition of conjugal property without the other spouse's written consent is void.
• Genuineness and Due Execution of the Special Power of Attorney: No. The notarial presumption of authenticity and due execution was overcome by clear and convincing evidence, and Titan waived the protection of Section 8, Rule 8 of the Rules of Court.
• Buyer in Good Faith: No. The circumstances surrounding the transaction should have put Titan on inquiry, and its conduct was not that of a prudent buyer.
• Reimbursement: No. The claim was raised for the first time on appeal and no cross-claim was filed against Martha, so granting it would violate due process; without prejudice to a separate action.

• Conjugal Nature of the Property: The Civil Code, the law in force at the time of the marriage in 1957, provides in Article 160 that all property of the marriage is presumed to belong to the conjugal partnership unless it be proved that it pertains exclusively to the husband or to the wife. Article 153(1) classifies as conjugal partnership property that which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership or for only one of the spouses. These provisions were carried over to the Family Code: Article 117(1) is identical, while Article 116 is even more unequivocal in 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 conjugal unless the contrary is proved. Titan's arguments that the property was Martha's exclusive property because Manuel failed to present proof of his income in 1970 and because Manuel admitted that Martha concluded the original purchase were unpersuasive. In consonance with Spouses Castro vs. Miat, Manuel was not required to prove that the property was acquired with funds of the partnership; the presumption applies even when the manner in which the property was acquired does not appear. Titan failed to overturn the presumption that the property, purchased during the spouses' marriage, was part of the conjugal partnership.

• Validity of the Sale Without the Husband's Consent: Since the property was part of the conjugal partnership, the sale to Titan required the consent of both spouses. Article 165 of the Civil Code provides that the husband is the administrator of the conjugal partnership, and Article 172 ordains that the wife cannot bind the conjugal partnership without the husband's consent, except in cases provided by law. Article 124 of the Family Code requires that any disposition or encumbrance of conjugal property must have the written consent of the other spouse; in the absence of such authority or consent, the disposition or encumbrance shall be void. The transaction, however, 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 the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. Here, Manuel never gave his consent, and the sale was accordingly void.

• Genuineness and Due Execution of the Special Power of Attorney: The RTC found that the signature of Manuel appearing on the SPA was not his genuine signature, based on the unrebutted and unimpeached testimony of expert witness Atty. Desiderio Pagui, which the defense failed to rebut, and on Manuel's categorical denial that he ever signed any document authorizing or ratifying the Deed of Sale to Titan. The genuineness and due execution of the SPA were placed in more serious doubt because it did not contain Manuel's residence certificate and, most importantly, was not presented for registration with the Quezon City Register of Deeds, a clear violation of Section 64 of P.D. No. 1529. While a notarized document enjoys a prima facie presumption of authenticity and due execution, and only clear and convincing evidence will overcome such legal presumption, that clear and convincing evidence was present: the details of Manuel's Community Tax Certificate were conspicuously absent while Martha's were complete, Manuel positively testified that he never signed the SPA, and the expert testimony established that the signature was not his. Titan's claim that the RTC gave undue weight to the expert testimony lacked merit, since the ruling rested not only on that testimony but also on Manuel's denial. The Court also noted that Titan filed before the CA a Manifestation with Motion for Re-Examination of Another Document/Handwriting Expert, alleging extreme necessity, but subsequently withdrew the motion on the ground that the PNP and NBI might come out with conflicting opinions. On Titan's contention that Manuel's failure to specifically deny the genuineness and due execution of the SPA in his unverified Reply amounted to an admission under Rule 8, Sections 7 and 8, the Court agreed with the CA that the verified complaint, which alleged that the sale was without Manuel's knowledge, consent, and approval, placed Titan on adequate notice that it would be called upon during trial to prove the genuineness or due execution of the disputed deed of sale. While Section 8, Rule 8 is mandatory, it is a discovery procedure and must be reasonably construed to attain its purpose without effecting a denial of substantial justice. Moreover, Titan requested during pre-trial a stipulation that the SPA was signed by Manuel, but Manuel refused to admit its genuineness; Titan did not object to the presentation of Atty. Pagui or to the admission of his Report, and even cross-examined the witness. Under Central Surety & Insurance Company vs. C.N. Hodges, a party who acts in complete disregard of or wholly overlooks Section 8, Rule 8 and does not object to the introduction and admission of evidence questioning the genuineness and due execution of a document must be deemed to have waived the benefits of said Rule. Titan was thus deemed to have waived the mantle of protection given by Section 8, Rule 8.

• Buyer in Good Faith: Several circumstances militated against a finding that Titan was a buyer in good faith. First, TCT No. 156043 was registered in the name of "MARTHA S. DAVID, of legal age, Filipino, married to Manuel A. David," but the Deed of Sale failed to include Martha's civil status and described the vendor only as "MARTHA S. DAVID, of legal age, Filipino citizen, with postal address at 247 Governor Pascual, Navotas, Rizal." It was also quite peculiar that an SPA would have even been necessary, considering that the SPA itself indicated that Martha and Manuel lived on the same street. Second, Titan's witness Valeriano Hernandez, the real estate agent who brokered the sale, testified that Jerry Yao, Titan's Vice President for Operations and Titan's signatory to the Deed of Sale, specifically inquired why the name of Manuel did not appear on the Deed of Sale, indicating that Titan was aware that Manuel's consent may be necessary. Titan also purportedly sent a representative to the Register of Deeds of Quezon City to verify TCT No. 156043, so it would have been aware that the SPA was never registered. Third, Hernandez testified that during the first meeting between Martha and Yao, Martha informed Yao that the property was mortgaged to a casino for ₱500,000.00; without even seeing the property, the original title, or the SPA, and without securing an acknowledgment receipt from Martha, Titan through Yao gave Martha ₱500,000.00 so she could redeem the property from the casino. These were certainly not actions typical of a prudent buyer.

• Reimbursement: Titan's equity argument that Martha should reimburse the purchase price with legal interest was raised for the first time before the CA, which disposed of it by holding that if well-recognized jurisprudence precludes raising an issue only for the first time on appeal proper, with more reason should such issue be disallowed or disregarded when initially raised only in a motion for reconsideration of the decision of the appellate court. The records showed that Titan did not file a cross-claim against Martha for the return of the ₱1,500,000.00 it paid her as consideration for the sale. To hold Martha liable to Titan for the return of the consideration without any claim therefor being filed against her would violate her right to due process. The essence of due process is to be found in the reasonable opportunity to be heard and submit any evidence one may have in support of his defense; before a person can be deprived of his property, he should first be informed of the claim against him and the theory on which such claim is premised. While litigation is not a game of technicalities, elementary considerations of due process require that a party be duly apprised of a claim against him before judgment may be rendered. Thus, the Court could not, in these proceedings, order the return of the amounts paid by Titan to Martha, without prejudice to Titan's instituting the appropriate action against Martha before the proper court. The Court further observed that Titan never subpoenaed Martha as a witness to testify on the character of the property or the circumstances surrounding the transaction, and that Titan's claim that she could not be found was belied by the RTC records showing that she personally received and signed for the summons at her address in Greenhills, San Juan; Titan neither filed a cross-claim nor made any adverse allegation against Martha.

• Conjugal Partnership Presumption — 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. The presumption applies even when the manner in which the property was acquired does not appear, and the spouse claiming exclusive ownership bears the burden of proof. In this case, the lot acquired in 1970 during the David spouses' marriage was held conjugal, Titan having failed to overturn the presumption.

• Void Disposition of Conjugal Property Without Spousal Consent — Under Article 172 of the Civil Code and Article 124 of the Family Code, a disposition or encumbrance of conjugal property without the written consent of the other spouse is void. The transaction may be construed as a continuing offer on the part of the consenting spouse and the third person, perfectible upon acceptance by the other spouse or authorization by the court before the offer is withdrawn. Here, the sale by Martha to Titan without Manuel's consent was void.

• Buyer in Good Faith — A buyer in good faith purchases property without notice that another person has a right or interest therein and must exercise ordinary prudence, not closing his eyes to facts that should put him on inquiry. Titan's failure to inquire into the SPA's registration, its knowledge of Manuel's absence from the Deed of Sale, and its precipitate payment of ₱500,000.00 without seeing the property or the original title negated good faith.

• Presumption of Authenticity of Notarized Documents — A notarized document enjoys a prima facie presumption of authenticity and due execution, which may be overcome only by clear and convincing evidence. The presumption was overcome here by expert testimony, the husband's categorical denial, and defects in the notarization, including the absence of his community tax certificate and the failure to register the SPA with the Register of Deeds.

• Waiver of the Protection of Rule 8, Section 8 — The requirement that the adverse party specifically deny under oath the genuineness and due execution of a document is a discovery procedure that may be waived. A party who does not object to the introduction and admission of evidence questioning a document's genuineness and due execution is deemed to have waived the benefit of the rule. Titan was held to have waived this protection.

• Due Process in the Assertion of Claims — Before a person can be deprived of his property, he must first be informed of the claim against him and the theory on which it is premised. A court cannot order a party to reimburse amounts absent a cross-claim or other claim duly asserted against him. The Court declined to order Martha to reimburse Titan, without prejudice to a separate action.

• "In consonance with our ruling in Spouses Castro v. Miat, Manuel was not required to prove that the property was acquired with funds of the partnership. Rather, the presumption applies even when the manner in which the property was acquired does not appear." — This passage states the ratio on the conjugal presumption, clarifying that the burden rests on the party asserting exclusive ownership and not on the spouse invoking conjugality.

• "While it is true that the SPA was notarized, it is no less true that there were defects in the notarization which mitigate against a finding that the SPA was either genuine or duly executed." — This passage articulates the standard for overcoming the notarial presumption of authenticity and due execution, and explains why the presumption yielded to clear and convincing evidence in this case.

• "These are certainly not actions typical of a prudent buyer." — This passage encapsulates the Court's good-faith analysis, summarizing the circumstances that should have put Titan on inquiry regarding the SPA's veracity.

• "While it is true that litigation is not a game of technicalities, it is equally true that elementary considerations of due process require that a party be duly apprised of a claim against him before judgment may be rendered." — This passage states the due process rationale for refusing to order Martha to reimburse Titan in the absence of a cross-claim, while preserving Titan's right to a separate action.

• Spouses Castro vs. Miat, 445 Phil. 282 (2003) — Controlling precedent, followed. Cited for the rule that the spouse asserting the conjugal character of property need not prove that it was acquired with partnership funds; the presumption of conjugality applies even when the manner of acquisition does not appear. Relied upon to reject Titan's argument that Manuel had to prove his financial capacity.

• Toribio vs. Bidin — Cited (through the CA) for the rule that a verified complaint alleging that the plaintiff never sold or disposed of his share places the defendants on adequate notice that they would be called upon during trial to prove the genuineness or due execution of the disputed deed of sale.

• Central Surety & Insurance Company vs. C.N. Hodges — Cited (through the CA) for the rule that a party who acts in complete disregard of or wholly overlooks Section 8, Rule 8 and does not object to the introduction and admission of evidence questioning the genuineness and due execution of a document is deemed to have waived the benefit of the rule.

• Mendiola vs. Court of Appeals, 193 Phil. 326 (1981) — Cited for the rule that a notarial document is evidence of the facts expressed therein, and that under Rule 132, Section 30 of the Rules of Court, the certificate of acknowledgment is prima facie evidence of the execution of the instrument.

• Gutierrez vs. Mendoza-Plaza, G.R. No. 185477, December 4, 2009 — Cited for the rule that a notarized document enjoys a prima facie presumption of authenticity and due execution.

• Domingo vs. Robles, 493 Phil. 916 (2005) — Cited for the rule that only clear and convincing evidence will overcome the legal presumption in favor of a notarized document.

• Sea Power Shipping Enterprises, Inc. vs. Court of Appeals, 412 Phil. 603 (2001) — Cited for the rule that while litigation is not a game of technicalities and the rules of procedure should not be strictly enforced at the cost of substantial justice, procedural rules must be followed except for the most persuasive of reasons.

• Blanco vs. Quasha, 376 Phil. 480 (1999) — Cited for the rule that only errors of law, and not of fact, are reviewable by the Supreme Court in a petition for review on certiorari under Rule 45.

• Article 160, Civil Code — All property of the marriage is presumed to belong to the conjugal partnership unless it be proved that it pertains exclusively to the husband or to the wife. Applied to hold the White Plains lot conjugal.
• Article 153(1), Civil Code — Conjugal partnership property includes that which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership or for only one of the spouses. Applied to classify the lot as conjugal.
• Article 117(1), Family Code — Carries over Article 153(1) of the Civil Code, classifying as conjugal partnership property that acquired by onerous title during the marriage at the expense of the common fund. Cited to reinforce the conjugal character of the property.
• Article 116, 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 conjugal unless the contrary is proved. Applied against Titan.
• Article 165, Civil Code — The husband is the administrator of the conjugal partnership. Cited to establish Manuel's role in the conjugal partnership.
• Article 172, Civil Code — The wife cannot bind the conjugal partnership without the husband's consent, except in cases provided by law. Applied to void the sale.
• Article 124, Family Code — Any disposition or encumbrance of conjugal property without the written consent of the other spouse is void; the transaction is construed as a continuing offer perfectible upon acceptance by the other spouse or authorization by the court. Applied to void the Deed of Sale.
• Section 64, Presidential Decree No. 1529 — Any person may, by power of attorney, convey or otherwise deal with registered land, and the same shall be registered with the Register of Deeds of the province or city where the land lies. Cited to cast doubt on the SPA's genuineness and due execution.
• Sections 7 and 8, Rule 8, Rules of Court — A document's genuineness and due execution are deemed admitted unless the adverse party, under oath, specifically denies them and sets forth what he claims to be the facts. Discussed and held waived by Titan.
• Section 30, Rule 132, Rules of Court — Proof of notarial documents; every instrument duly acknowledged or proved 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 connection with the notarial presumption.
• Rule 45, Rules of Court — Only errors of law, and not of fact, are reviewable by the Supreme Court in a petition for review on certiorari. Cited to justify deference to the factual findings of the lower courts.

Antonio T. Carpio (Chairperson), Arturo D. Brion, Roberto A. Abad, and Jose Portugal Perez.