Uy vs. Estate of Fernandez

A surviving spouse’s sale of his one-half undivided share in conjugal partnership property before liquidation is not necessarily void; it transfers his ideal co-ownership share to the buyer, who becomes a co-owner with the right to possess the property as an incident of ownership, though only from the date of sale and without extinguishing rents owed for his prior possession as lessee. Defenses not pleaded in the answer in an unlawful detainer case governed by the Rules on Summary Procedure are deemed waived, and barangay conciliation is not required when the complainant is a juridical entity.

Vipa Fernandez Lahaylahay owned a parcel of land in Lopez Jaena Street, Jaro, Iloilo City covered by Transfer Certificate of Title No. T-26576. She was married to Levi Lahaylahay under the conjugal partnership of gains regime, with children Grace Joy Somosierra and Jill Frances Lahaylahay. Rafael C. Uy occupied the property as lessee under a 1990 lease. After Vipa’s death, her estate, represented by Grace Joy, became the party seeking to collect rents. The dispute implicated the Rules on Summary Procedure for unlawful detainer, the Katarungang Pambarangay Law, and the Family Code and Civil Code rules on conjugal partnership and co-ownership.

Vipa Fernandez Lahaylahay was the registered owner of a parcel of land situated in Lopez Jaena Street, Jaro, Iloilo City, covered by Transfer Certificate of Title No. T-26576. Vipa and Levi Lahaylahay were married on March 24, 1961 and had two children, Grace Joy Somosierra and Jill Frances Lahaylahay. They had no marriage settlement. Sometime in 1990, Vipa and Rafael Uy executed a contract of lease over the subject property and its improvements, under which Rafael bound himself to pay Vipa P3,000.00 per month, with a 10% increase every year thereafter.

On March 5, 1994, Vipa died without leaving a will or testament. Grace Joy became the de facto administrator of Vipa’s estate. After Vipa’s death, Levi lived in Aklan. In June 1998, Rafael stopped paying the monthly rents.

On June 12, 2003, the Estate of Vipa, through Grace Joy, filed a complaint for unlawful detainer with the Municipal Trial Court in Cities of Iloilo City against Rafael. The Estate alleged that, as of June 1998, Rafael was bound to pay rent at P3,300.00 per month, that his last payment was made in May 1998, and that his unpaid rents amounted to P271,150.00. Despite repeated demands, Rafael refused to pay the rents due.

In his Answer filed on July 18, 2003, Rafael denied that he refused to pay the rent. He claimed that sometime in June 1998, Patria Fernandez-Cuenca, Vipa’s sister, demanded payment of the rents, claiming that she was the rightful heir of Vipa. Because he had no idea who was entitled to receive the rent, he deposited P10,000.00 with the Office of the Clerk of Court of the Regional Trial Court of Iloilo City on November 20, 1998, and Grace Joy was informed of the consignation. He also claimed that Patria had instituted a case for the settlement of Vipa’s estate, docketed as Special Proceeding No. 6910, and that he made another consignation of P6,000.00. He averred that he was willing to pay the rent to the rightful heirs of Vipa.

On December 29, 2005, while the unlawful detainer case was pending, Levi sold his one-half undivided share in the subject property to Rafael for P500,000.00 by a Deed of Sale.

The MTCC found that after Vipa’s death in 1994 until 1998, Rafael paid rent to Grace Joy; that Patria claimed to be Vipa’s heir because she owed Rafael money and charged that debt against the monthly rent, an arrangement Rafael used to avoid paying Grace Joy; and that Rafael’s consignations totaling P16,000.00 were invalid for lack of prior tender. The RTC found that the subject property had been acquired during Vipa and Levi’s marriage and was conjugal, and that Levi had sold his share to Rafael. These findings framed the Supreme Court’s analysis of authority, ownership, and rent liability.

• Authority of Grace Joy: Rafael maintained that Grace Joy had no authority to represent the Estate of Vipa and that, when she filed the complaint for unlawful detainer with the MTCC, she did so in her personal capacity.
• Barangay Conciliation: Rafael argued that because Grace Joy acted in her personal capacity, the dispute should have been brought to the barangay for conciliation before the complaint was filed in the MTCC.
• Ownership of the Subject Property: Rafael claimed that the CA erred in reversing the RTC’s ruling on the issue of ownership and insisted that he had already purchased Levi’s one-half share in the subject property.

• Waiver and Non-Raising: The Estate averred that the supposed lack of authority of Grace Joy to file the complaint and the ownership of the subject property were never raised in the proceedings before the MTCC and, hence, could not be passed upon by the RTC in the appellate proceedings.
• Appointment of Grace Joy: The Estate pointed out that the RTC Decision dated October 28, 2005 in Special Proceedings No. 6910, which appointed Grace Joy as administrator of the intestate estate of Vipa, recognized that Grace Joy and Jill Frances are legitimate children of Vipa and Levi.

• Authority and Barangay Conciliation: Whether the complaint for unlawful detainer should be dismissed because Grace Joy lacked authority to represent the Estate of Vipa and because no prior barangay conciliation was held.
• Ownership and Possession: Whether the CA erred in holding that Rafael raised the issue of ownership only on appeal and in disregarding his claim that he had purchased Levi’s one-half undivided share in the subject property.
• Rent Liability: Whether Rafael remains liable for unpaid rentals and reasonable rent for the period before he became a co-owner.

• Authority and Barangay Conciliation: No. The defenses were not pleaded in the answer and are deemed waived under Section 5 of the 1991 Revised Rules on Summary Procedure; the lack of authority was mooted by Grace Joy’s appointment as administrator, and barangay conciliation was unnecessary because the Estate is a juridical entity.
• Ownership and Possession: Yes, the CA erred. The sale to Rafael occurred on December 29, 2005, after he filed his answer on July 18, 2003, so he could not have pleaded it; the sale of Levi’s one-half undivided share was valid and made Rafael a co-owner with the right to possess from December 29, 2005. He could no longer be directed to vacate.
• Rent Liability: Rafael remains liable for unpaid rentals from June 1998 until April 2003 in the amount of P271,150.00, with interest at 12% per annum from May 3, 2003 until June 30, 2013 and 6% per annum from July 1, 2013 until fully paid; and for reasonable rent from May 2003 until December 28, 2005 at P3,000.00 per month with the same interest rates from June 12, 2003. Attorney’s fees of P20,000.00 are proper.

• Authority and Barangay Conciliation: Unlawful detainer cases are covered by the Rules on Summary Procedure. Under Section 5 of the 1991 Revised Rules on Summary Procedure, affirmative and negative defenses not pleaded in the answer are deemed waived, except lack of jurisdiction over the subject matter. Rafael did not plead in his MTCC answer that Grace Joy lacked authority to represent the Estate or that no barangay conciliation had occurred; these defenses were therefore waived. In any event, the authority issue became moot because the RTC appointed Grace Joy as administrator of Vipa’s intestate estate in Special Proceedings No. 6910. Barangay conciliation was also unnecessary: under the Katarungang Pambarangay Law, only individuals may be parties to barangay conciliation; complaints by or against corporations, partnerships, or other juridical entities may not be filed with the barangay. The Estate of Vipa is a juridical entity with a personality separate and distinct from Grace Joy, so no prior barangay conciliation was required.
• Ownership and Possession: The general rule that issues not raised during trial cannot be raised for the first time on appeal applies only where the issue could have been raised during trial. The sale of Levi’s one-half undivided share to Rafael was consummated on December 29, 2005, more than two years after Rafael filed his answer on July 18, 2003. He could not have pleaded the sale as an affirmative defense in that answer. Because Rafael’s ownership of the one-half undivided share would affect the property relations between the parties, the CA should have resolved the issue instead of dismissing it as raised late. Levi and Vipa were married on March 24, 1961; absent a marriage settlement, conjugal partnership of gains governed. The subject property, acquired during the marriage, was presumed conjugal. Vipa’s death on March 5, 1994 automatically terminated the conjugal partnership. Under Article 130 of the Family Code, upon termination by death, the conjugal property should be liquidated in the estate proceeding; if no judicial settlement is instituted, the surviving spouse must liquidate within six months, and absent liquidation, any disposition or encumbrance involving conjugal property is void. Article 105 makes Article 130 applicable to conjugal partnerships established before the Family Code. Rafael bought Levi’s one-half share for P500,000.00 by Deed of Sale dated December 29, 2005, when the conjugal properties were not yet liquidated. The disposition was not necessarily void. Under the conjugal partnership of gains, the spouses are co-owners of all conjugal property. Upon termination by death, the surviving spouse has an actual and vested one-half undivided share, which is not determinate until liquidation and partition. The deceased spouse’s share creates an implied ordinary co-ownership among the surviving spouse and the other heirs. Thus, upon Vipa’s death, one half of the subject property was reserved for Levi, while the other half passed to Vipa’s heirs—Grace Joy, Jill Frances, and Levi, who is entitled to the same share as a legitimate child. This implied co-ownership is governed by Article 493 of the Civil Code, under which each co-owner has full ownership of his part and may alienate, assign, or mortgage it, subject to the effect being limited to the portion allotted upon division. Although Levi could not claim title to any specific portion before partition and had only an ideal or proportionate share, he could sell his undivided share. The sale was therefore not necessarily void; it effectively transferred Levi’s right as co-owner and made Rafael a co-owner. The binding force of the contract was recognized as far as legally possible (quando res non valet ut ago, valeat quantum valere potest). Rafael became a co-owner only on December 29, 2005. From that date, he had the right to possess the property as an incident of ownership, so he could no longer be directed to vacate. Before that date, he was a mere lessee obliged to pay rent.
• Rent Liability: Because Rafael was a lessee before December 29, 2005, he remained liable for unpaid rentals from June 1998 until April 2003 in the amount of P271,150.00. Under Nacar vs. Gallery Frames, et al., and Bangko Sentral ng Pilipinas Monetary Board Resolution No. 796, the interest rate for loans or forbearance of money absent stipulation is 12% per annum before July 1, 2013 and 6% per annum from July 1, 2013. Thus, the P271,150.00 earned 12% per annum from the last demand on May 3, 2003 until June 30, 2013, and 6% per annum from July 1, 2013 until fully paid. Rafael was also liable for reasonable rent for the use and occupancy of the subject property from May 2003 until December 28, 2005 at P3,000.00 per month, with 12% per annum from the filing of the complaint on June 12, 2003 until June 30, 2013, and 6% per annum from July 1, 2013 until fully paid. Attorney’s fees of P20,000.00 were proper under Article 2208(2) of the Civil Code because Rafael’s unjustified refusal to pay the rents compelled the Estate to litigate and incur expenses to protect its interest; in unlawful detainer cases, attorney’s fees awarded shall not exceed P20,000.00.

• Waiver of defenses under the Rules on Summary Procedure — In unlawful detainer cases governed by the 1991 Revised Rules on Summary Procedure, affirmative and negative defenses not pleaded in the answer are deemed waived, except lack of jurisdiction over the subject matter. Rafael failed to plead lack of authority of Grace Joy and lack of barangay conciliation, so these defenses were waived.
• Barangay conciliation and juridical entities — Only individuals may be parties to barangay conciliation proceedings; complaints by or against corporations, partnerships, or other juridical entities may not be filed with, received, or acted upon by the barangay. The Estate of Vipa is a juridical entity separate from Grace Joy, so prior barangay conciliation was not required.
• Exception to the rule against new issues on appeal — A party may raise an issue for the first time on appeal if the issue could not have been raised during trial. Rafael could not have pleaded Levi’s sale of his share in his 2003 answer because the sale occurred on December 29, 2005.
• Conjugal partnership of gains; termination by death; liquidation — Under the conjugal partnership of gains, spouses are co-owners of all conjugal property. Upon termination by death, the surviving spouse has an actual and vested one-half undivided share, not determinate until liquidation and partition; the deceased spouse’s share creates an implied ordinary co-ownership among the surviving spouse and the other heirs. Although Article 130 of the Family Code generally voids dispositions of conjugal property without liquidation, the Court held that the surviving spouse’s sale of his one-half undivided share is not necessarily void because he may alienate his ideal co-ownership share under Article 493 of the Civil Code.
• Co-ownership and alienation of an undivided share — Each co-owner has full ownership of his part and may alienate, assign, or mortgage it, but the effect of the alienation is limited to the portion allotted to him upon termination of the co-ownership. Before partition, no co-owner can claim title to a definite portion; he has only an ideal or abstract quota. Levi could sell his undivided share, making Rafael a co-owner.
• Right of possession of a co-owner — A co-owner has the right to possess the property as an incident of ownership. From December 29, 2005, Rafael had this right and could not be ejected, though he remained liable for rents incurred while he was a lessee.
• Interest rates on loans or forbearance of money — Under Nacar vs. Gallery Frames, et al. and BSP Monetary Board Resolution No. 796, the rate is 12% per annum before July 1, 2013 and 6% per annum from July 1, 2013 in the absence of stipulation. The Court applied these rates to the unpaid rentals and reasonable rent.
• Attorney’s fees in unlawful detainer — Attorney’s fees may be awarded under Article 2208(2) of the Civil Code when the defendant’s act or omission compels the plaintiff to litigate or incur expenses to protect its interest; in unlawful detainer cases, the award shall not exceed P20,000.00. The Court upheld the P20,000.00 award.

• "Rafael failed to plead in the answer he filed with the MTCC that Grace Joy has no authority to represent the Estate of Vipa. Neither did he raise therein the lack of barangay conciliation between the parties herein prior to the filing of the complaint for unlawful detainer. Accordingly, the foregoing defenses are already deemed waived." — This passage states the ratio for rejecting Rafael’s procedural defenses under the Rules on Summary Procedure.
• "What escaped the appellate court's attention is that the sale of the one-half undivided share in the subject property to Rafael was consummated only on December 29, 2005, more than two years after Rafael filed with the MTCC his answer to the complaint for unlawful detainer on July 18, 2003." — This passage establishes the exception to the rule against raising new issues on appeal because the sale occurred after the answer was filed.
• "Thus, upon Vipa's death, one half of the subject property was automatically reserved in favor of the surviving spouse, Levi, as his share in the conjugal partnership. The other half, which is Vipa's share, was transmitted to Vipa's heirs – Grace Joy, Jill Frances, and her husband Levi, who is entitled to the same share as that of a legitimate child." — This passage defines the property relations upon Vipa’s death and the resulting implied co-ownership.
• "However, Rafael became a co-owner of the subject property only on December 29, 2005 – the time when Levi sold his one-half undivided share over the subject property to the former. Thus, from December 29, 2005 Rafael, as a co-owner, has the right to possess the subject property as an incident of ownership. Otherwise stated, prior to his acquisition of Levi's one-half undivided share, Rafael was a mere lessee of the subject property and is thus obliged to pay the rent for his possession thereof." — This passage is the core holding on possession and rent liability.

• Nacar vs. Gallery Frames, et al., 716 Phil. 267 (2013) — The Court relied on this case for the applicable interest rates: 12% per annum before July 1, 2013 and 6% per annum from July 1, 2013, pursuant to BSP Monetary Board Resolution No. 796.
• Universal Robina Sugar Milling Corporation vs. Heirs of Teves, 438 Phil. 26, 41 (2002) — Cited for the rule that only individuals may be parties to barangay conciliation and that complaints by or against juridical entities may not be filed with the barangay.
• Limjoco vs. Intestate of Fragante, 80 Phil. 776 (1948) — Cited to support the separate juridical personality of an estate, distinct from the person representing it.
• Sañado vs. Court of Appeals, 408 Phil. 669 (2001) — Cited for the principle that a party may be barred from raising an issue for the first time on appeal only if the issue could have been raised during trial.
• Melecio Domingo vs. Spouses Genaro and Elena B. Molina, G.R. No. 200274, April 20, 2016 — Cited for the rule that upon termination of the conjugal partnership, the surviving spouse has an actual and vested one-half undivided share, which is not determinate until liquidation and partition.
• Dael vs. Intermediate Appellate Court, 253 Phil. 516, 526 (1989) — Cited for the rule that an implied ordinary co-ownership arises among the surviving spouse and the other heirs as to the deceased spouse’s share in the conjugal properties.
• Sanchez vs. Court of Appeals, 452 Phil. 665, 676 (2003) — Cited for the rule that before partition, no co-owner can claim title to any definite portion of the property; each has only an ideal or abstract proportionate share.
• Lopez vs. Vda de Cuaycong, 74 Phil. 601 (1944) — Cited for the principle quando res non valet ut ago, valeat quantum valere potest, that a contract must be recognized as far as it is legally possible to do so.

• Section 5, 1991 Revised Rules on Summary Procedure — Affirmative and negative defenses not pleaded in the answer are deemed waived, except lack of jurisdiction over the subject matter. Applied to Rafael’s failure to plead lack of authority and lack of barangay conciliation.
• Section 1(A)(1), 1991 Revised Rules on Summary Procedure — Unlawful detainer cases are covered by the Rules on Summary Procedure. The Court used this to apply the waiver rule and the attorney’s fees cap.
• Sections 399 to 422, Chapter 7, Title One, Book III and Section 515, Title One, Book IV, Republic Act No. 7160 (Local Government Code) — The Katarungang Pambarangay Law limits barangay conciliation to individuals; complaints by or against juridical entities may not be filed. Applied to the Estate of Vipa.
• Article 130, Family Code — Upon termination of the marriage by death, conjugal partnership property shall be liquidated in the estate proceeding; if no judicial settlement is instituted, the surviving spouse must liquidate within six months; absent liquidation, any disposition or encumbrance involving the conjugal property shall be void. The Court cited this but held that Levi’s sale of his one-half undivided share was not necessarily void.
• Article 105, Family Code — The Family Code provisions on conjugal partnership of gains apply to conjugal partnerships already established before the Code’s effectivity, without prejudice to vested rights. Applied because Levi and Vipa married in 1961.
• Article 493, Civil Code — Each co-owner has full ownership of his part and may alienate, assign, or mortgage it, subject to the effect being limited to the portion allotted upon division. Applied to Levi’s sale of his undivided share to Rafael.
• Article 2208(2), Civil Code — Attorney’s fees may be awarded when the defendant’s act or omission has compelled the plaintiff to litigate or incur expenses to protect its interest. Applied to justify the P20,000.00 attorney’s fees.
• Article 119, Civil Code — Cited as the basis for the conjugal partnership of gains regime in the absence of a marriage settlement.
• Article 160, Civil Code — Property acquired during the marriage is presumed conjugal. Applied to the subject property.
• Article 175(1), Civil Code — The conjugal partnership terminates upon the death of either spouse. Applied to Vipa’s death on March 5, 1994.
• Resolution No. 796, Bangko Sentral ng Pilipinas Monetary Board — Cited through Nacar vs. Gallery Frames, et al. for the 6% interest rate effective July 1, 2013.

Velasco, Jr. (Chairperson), Bersamin, Jardeleza, and Tijam, JJ., concur.