Villanueva vs. Chiong

A husband's alienation of conjugal property without the wife's consent, executed prior to the effectivity of the Family Code on August 3, 1988, is not void but merely voidable, annullable at the wife's instance during the marriage and within ten years from the transaction questioned, and the annulment operates on the contract in its entirety, not merely as to the wife's share.

Respondents Florentino and Elisera Chiong were married in January 1960 but had been separated in fact since 1975. During their marriage, they acquired Lot No. 997-D-1 situated at Poblacion, Dipolog City, covered by Transfer Certificate of Title No. (T-19393)-2325. Because all relevant transactions occurred before the effectivity of the Family Code on August 3, 1988, the applicable law is the Civil Code of the Philippines, particularly its provisions on conjugal partnership of gains and the wife's consent to alienation of conjugal property.

Respondents Florentino and Elisera Chiong were married in January 1960 but had been separated in fact since 1975. During their marriage, they acquired Lot No. 997-D-1 situated at Poblacion, Dipolog City, covered by Transfer Certificate of Title No. (T-19393)-2325 issued by the Registry of Deeds of Zamboanga del Norte. The title was registered in the name of Florentino Chiong, described as "married to Elisera Chiong." Sometime in 1985, Florentino verbally sold the one-half western portion of the lot to petitioners Walter and Aurora Villanueva for ₱8,000, payable in installments. Petitioners had in fact been occupying the subject parcel of land since 1976, and Florentino allowed them to build a store, a shop, and a house thereon.

Petitioners completed their last installment payment on December 13, 1986, and thereafter demanded that respondents execute a deed of sale in their favor. Elisera, however, refused to sign any deed of sale. On July 5, 1991, Elisera filed with the RTC a Complaint for Quieting of Title with Damages, docketed as Civil Case No. 4383. On February 12, 1992, petitioners filed their own Complaint for Specific Performance with Damages, docketed as Civil Case No. 4460. The RTC consolidated the two cases upon proper motion. On May 13, 1992, while the cases were pending, Florentino executed the questioned Deed of Absolute Sale in favor of petitioners, declaring therein his capacity to sell as a co-owner of the subject lot.

Elisera presented several pieces of evidence to establish the conjugal nature of the property: the transfer certificate of title, a real property tax declaration acknowledging both spouses as owners, and a Memorandum of Agreement dated November 19, 1979 executed by Florentino and Elisera for the administration of their conjugal properties, which expressly listed the subject residential lot as conjugal property titled in the name of the spouses. Florentino himself admitted the conjugal nature of the lot in the Deed of Absolute Sale dated May 13, 1992, where he declared his capacity to sell as a co-owner. Florentino failed to file his comment on the petition, having left his place of residence, and the Court deemed his filing of comment waived.

• Exclusive Ownership: Petitioners contended that the lot belonged exclusively to Florentino because respondents were already separated in fact at the time of sale, which dissolved their property relations. They claimed that Elisera's share, pertaining to the eastern part of the lot, had previously been sold to Spouses Jesus Y. Castro and Aida Cuenca.
• Actual Liquidation by Separation in Fact: Petitioners averred that while there was no formal liquidation of respondents' properties, their separation in fact resulted in its actual liquidation.
• Partial Annulment: Assuming arguendo that the lot remained conjugal, petitioners maintained that the transaction should not be entirely voided because Florentino had a one-half share over it, and annulment should be limited to the wife's share.

• Conjugal Nature of the Property: Elisera countered that the lot was conjugal property, presenting the transfer certificate of title, a real property tax declaration, and a Memorandum of Agreement dated November 19, 1979 executed by both spouses for the administration of their conjugal properties as proof.
• Void Sale for Lack of Consent: Elisera argued that the sale to petitioners was void because it was made without her knowledge, consent, or authority, and was neither authorized by any competent court nor did it redound to her or their children's benefit.

• Nature of the Property: Whether the subject lot is an exclusive property of Florentino or a conjugal property of respondents.
• Validity of the Sale: Whether the sale by Florentino without Elisera's consent was valid.

• Nature of the Property: Yes, the lot is conjugal property. The presumption under Article 160 of the Civil Code that all property acquired during marriage belongs to the conjugal partnership was not overcome, and the separation in fact did not affect the conjugal partnership under Article 178.
• Validity of the Sale: The sale was not void but voidable. Under Articles 166 and 173 of the Civil Code, a husband's alienation of conjugal property without the wife's consent is annullable at the wife's instance during the marriage and within ten years from the transaction. Elisera timely filed suit within the prescriptive period, and the sale was properly annulled in its entirety.

• Nature of the Property: Petitioners' contention that separation in fact dissolved the property relations and rendered the lot Florentino's exclusive property was rejected. Under Article 178 of the Civil Code, separation in fact between husband and wife without judicial approval does not affect the conjugal partnership. The lot therefore retained its conjugal nature. Under Article 160, all property acquired during the marriage is presumed to belong to the conjugal partnership unless proved to pertain exclusively to one spouse. Petitioners' mere insistence was insufficient to overcome this presumption. While the certificate of title alone—registered in Florentino's name—did not conclusively establish the lot's conjugal nature, Elisera presented additional evidence: a real property tax declaration acknowledging both spouses as owners, a Memorandum of Agreement dated November 19, 1979 expressly listing the lot as conjugal property, and Florentino's own admission in the Deed of Absolute Sale that he was a co-owner. The totality of this evidence confirmed the lot's conjugal character.

• Validity of the Sale: The sale by Florentino without Elisera's consent was not void ab initio but merely voidable. Citing Vda. de Ramones vs. Agbayani and Villaranda vs. Villaranda, the Court held that under the Civil Code—applicable because the transactions occurred before the Family Code's effectivity on August 3, 1988—a husband's alienation of conjugal property without the wife's consent is voidable, not void. Article 166 requires the wife's consent for alienation of conjugal property, and Article 173 grants the wife the right to seek annulment during the marriage and within ten years from the transaction questioned. Elisera filed Civil Case No. 4383 on July 5, 1991, within ten years of the 1985 verbal sale and well within the prescriptive period. Petitioners' argument that the sale should be annulled only as to the wife's share was rejected under Heirs of Ignacia Aguilar-Reyes vs. Mijares, citing Bucoy vs. Paulino, which held that annulment operates on the contract in its entirety. Upon annulment, Article 1398 of the Civil Code mandates mutual restoration: petitioners must return the land with its fruits, and Florentino must return the ₱8,000 purchase price with interest. However, because petitioners had been using and deriving benefit from the land just as Florentino had used the purchase money, the Court equitably offset the two amounts and deleted the interest award.

• Presumption of Conjugal Property (Article 160, Civil Code) — All property acquired by the spouses during the marriage is presumed to belong to the conjugal partnership of gains, unless it is proved that it pertains exclusively to the husband or to the wife. The presumption was applied here to uphold the lot's conjugal nature, reinforced by the tax declaration, Memorandum of Agreement, and Florentino's own admission in the deed of sale.
• Separation in Fact Does Not Affect Conjugal Partnership (Article 178, Civil Code) — Separation in fact between husband and wife without judicial approval shall not affect the conjugal partnership. The Court applied this to reject petitioners' claim that the spouses' separation in fact since 1975 dissolved their property relations.
• Voidable Nature of Husband's Alienation Without Wife's Consent (Articles 166 and 173, Civil Code) — Under the Civil Code, a husband's alienation or encumbrance of conjugal property without the wife's consent is not void but voidable. The wife may seek annulment during the marriage and within ten years from the transaction questioned. This applies to transactions occurring before the effectivity of the Family Code on August 3, 1988.
• Annulment in Its Entirety — The contract executed by the husband without the wife's consent may be annulled in its entirety, not merely insofar as the wife's share is concerned. The Court relied on Heirs of Ignacia Aguilar-Reyes vs. Mijares and Bucoy vs. Paulino to reject the argument that only the wife's one-half share should be subject to annulment.
• Mutual Restoration Upon Annulment (Article 1398, Civil Code) — Upon annulment of a contract, the parties shall restore to each other the things subject of the contract, with their fruits, and the price with its interest. The Court applied this to require petitioners to return the land and Florentino to return the ₱8,000 purchase price, but equitably offset the respective benefits derived from the land and the money, deleting the interest award.

• "the husband cannot alienate or encumber any real property of the conjugal partnership without the wife's consent" — This is the text of Article 166 of the Civil Code as quoted in the decision, establishing the controlling rule that the wife's consent is necessary for valid alienation of conjugal property under the Civil Code regime.
• "The plain meaning attached to the plain language of the law is that the contract, in its entirety, executed by the husband without the wife's consent, may be annulled by the wife." — This passage, quoted from Heirs of Ignacia Aguilar-Reyes vs. Mijares, articulates the rationale for annulment of the entire contract rather than only the wife's share, rejecting the earlier doctrine in Baello vs. Villanueva and Coque vs. Navas Sioca.
• "The effect of annulment of the contract is to wipe it out of existence, and to restore the parties, insofar as legally and equitably possible, to their original situation before the contract was entered into." — This statement, drawn from Tolentino's Civil Code commentary, defines the operative effect of annulment under Article 1398 and underpins the Court's order of mutual restoration.
• "Under the particular circumstances of this case, however, it would be equitable to consider the two amounts as offsetting each other. Hence, the award of the trial court for the payment of interest should be deleted." — This is the equitable modification introduced by the Court, offsetting petitioners' benefit from use of the land against Florentino's benefit from use of the purchase price, resulting in deletion of the interest award.

• Vda. de Ramones vs. Agbayani, G.R. No. 137808, September 30, 2005, 471 SCRA 306 — Controlling precedent establishing that a husband's alienation of conjugal property without the wife's consent, prior to the Family Code, is voidable and not void. Followed and applied directly to the instant case.
• Villaranda vs. Villaranda, G.R. No. 153447, February 23, 2004, 423 SCRA 571 — Cited within Vda. de Ramones in support of the voidable characterization of unauthorized alienations of conjugal property under the Civil Code.
• Heirs of Ignacia Aguilar-Reyes vs. Mijares, G.R. No. 143826, August 28, 2003, 410 SCRA 97 — Controlling precedent for the proposition that annulment of a husband's unauthorized sale of conjugal property operates on the entire contract, not merely the wife's share. Followed, with the clarification that the rationale applies equally to voidable (as opposed to void) transactions.
• Bucoy vs. Paulino, 131 Phil. 790 (1968) — Cited within Heirs of Ignacia Aguilar-Reyes as the earlier authority for annulment in its entirety of a husband's sale of conjugal property without the wife's consent.
• Ruiz vs. Court of Appeals, G.R. No. 146942, April 22, 2003, 401 SCRA 410 — Cited for the proposition that a title registered in the husband's name alone is determinative of its nature as belonging exclusively to said spouse; distinguished in this case because additional evidence overcame that presumption.

• Article 160, Civil Code of the Philippines — 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. Applied to uphold the lot's conjugal nature, as petitioners failed to rebut the presumption with sufficient evidence.
• Article 166, Civil Code of the Philippines — The husband cannot alienate or encumber any real property of the conjugal partnership without the wife's consent, unless the wife has been declared non compos mentis, a spendthrift, under civil interdiction, or confined in a leprosarium. Applied to determine that Florentino's sale without Elisera's consent required her consent for validity.
• Article 173, Civil Code of the Philippines — The wife may, during the marriage and within ten years from the transaction questioned, ask the courts for annulment of any contract of the husband entered into without her consent when such consent is required. Applied to hold that Elisera's filing of Civil Case No. 4383 on July 5, 1991 was within the ten-year prescriptive period from the 1985 sale.
• Article 178, Civil Code of the Philippines — The separation in fact between husband and wife without judicial approval shall not affect the conjugal partnership. Applied to reject petitioners' argument that the spouses' separation in fact since 1975 dissolved their property relations.
• Article 1398, Civil Code of the Philippines — Upon annulment of an obligation, the contracting parties shall restore to each other the things subject of the contract, with their fruits, and the price with its interest. Applied to order mutual restoration, with equitable offset of benefits deleting the interest award.

Tinga, Carpio, Velasco Jr., Leonardo-de Castro, Brion, JJ., concurred. (Leonardo-de Castro was an additional member in place of Justice Conchita Carpio Morales, who was on leave of absence.)