[G.R. No 176556, July 04, 2012] BRIGIDO B. QUIAO, PETITIONER, VS. RITA C. QUIAO, KITCHIE C. QUIAO, LOTIS C.

QUIAO, PETCHIE C. QUIAO, REPRESENTED BY THEIR MOTHER RITA QUIAO, RESPONDENTS. DECISION REYES, J.: The family is the basic and the most important institution of society. It is in the family where children are born and molded either to become useful citizens of the country or troublemakers in the community. Thus, we are saddened when parents have to separate and fight over properties, without regard to the message they send to their children. Notwithstanding this, we must not shirk from our obligation to rule on this case involving legal separation escalating to questions on dissolution and partition of properties. The Case This case comes before us via Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court. The petitioner seeks that we vacate and set aside the Order[2] dated January 8, 2007 of the Regional Trial Court (RTC), Branch 1, Butuan City. In lieu of the said order, we are asked to issue a Resolution defining the net profits subject of the forfeiture as a result of the decree of legal separation in accordance with the provision of Article 102(4) of the Family Code, or alternatively, in accordance with the provisions of Article 176 of the Civil Code. Antecedent Facts On October 26, 2000, herein respondent Rita C. Quiao (Rita) filed a complaint for legal separation against herein petitioner Brigido B. Quiao (Brigido).[3] Subsequently, the RTC rendered a Decision[4] dated October 10, 2005, the dispositive portion of which provides: WHEREFORE, viewed from the foregoing considerations, judgment is hereby rendered declaring the legal separation of plaintiff Rita C. Quiao and defendantrespondent Brigido B. Quiao pursuant to Article 55. As such, the herein parties shall be entitled to live separately from each other, but the marriage bond shall not be severed. Except for Letecia C. Quiao who is of legal age, the three minor children, namely, Kitchie, Lotis and Petchie, all surnamed Quiao shall remain under the custody of the plaintiff who is the innocent spouse. Further, except for the personal and real properties already foreclosed by the RCBC, all the remaining properties, namely:

1. 2. 3. 4. 5. 6. 7. 8.

coffee mill in Balongagan, Las Nieves, Agusan del Norte; coffee mill in Durian, Las Nieves, Agusan del Norte; corn mill in Casiklan, Las Nieves, Agusan del Norte; coffee mill in Esperanza, Agusan del Sur; a parcel of land with an area of 1,200 square meters located in Tungao, Butuan City; a parcel of agricultural land with an area of 5 hectares located in Manila de Bugabos, Butuan City; a parcel of land with an area of 84 square meters located in Tungao, Butuan City; Bashier Bon Factory located in Tungao, Butuan City;

shall be divided equally between herein [respondents] and [petitioner] subject to the respective legitimes of the children and the payment of the unpaid conjugal liabilities of [P]45,740.00. [Petitioners] share, however, of the net profits earned by the conjugal partnership is forfeited in favor of the common children. He is further ordered to reimburse [respondents] the sum of [P]19,000.00 as attorney's fees and litigation expenses of [P]5,000.00[.] SO ORDERED.[5] Neither party filed a motion for reconsideration and appeal within the period provided for under Section 17(a) and (b) of the Rule on Legal Separation.[6] On December 12, 2005, the respondents filed a motion for execution[7] which the trial court granted in its Order dated December 16, 2005, the dispositive portion of which reads: Wherefore, finding the motion to be well taken, the same is hereby granted. Let a writ of execution be issued for the immediate enforcement of the Judgment. SO ORDERED.[8] Subsequently, on February 10, 2006, the RTC issued a Writ of Execution[9] which reads as follows: NOW THEREFORE, that of the goods and chattels of the [petitioner] BRIGIDO B. QUIAO you cause to be made the sums stated in the afore-quoted DECISION [sic], together with your lawful fees in the service of this Writ, all in the Philippine Currency. But if sufficient personal property cannot be found whereof to satisfy this execution and your lawful fees, then we command you that of the lands and buildings of the said [petitioner], you make the said sums in the manner required by law. You are enjoined to strictly observed Section 9, Rule 39, Rule [sic] of the 1997 Rules of Civil

Procedure. You are hereby ordered to make a return of the said proceedings immediately after the judgment has been satisfied in part or in full in consonance with Section 14, Rule 39 of the 1997 Rules of Civil Procedure, as amended.[10] On July 6, 2006, the writ was partially executed with the petitioner paying the respondents the amount of P46,870.00, representing the following payments: (a) P22,870.00 as petitioner's share of the payment of the conjugal share;

Reconsideration,[21]praying for the correction and reversal of the Order dated November 8, 2006. Thereafter, on January 8, 2007,[22] the trial court had changed its ruling again and granted the respondents' Motion for Reconsideration whereby the Order dated November 8, 2006 was set aside to reinstate the Order dated August 31, 2006. Not satisfied with the trial court's Order, the petitioner filed on February 27, 2007 this instant Petition for Review under Rule 45 of the Rules of Court, raising the following: Issues

(b) P19,000.00 as attorney's fees; and I (c) P5,000.00 as litigation expenses.[11] On July 7, 2006, or after more than nine months from the promulgation of the Decision, the petitioner filed before the RTC a Motion for Clarification,[12] asking the RTC to define the term Net Profits Earned. To resolve the petitioner's Motion for Clarification, the RTC issued an Order [13] dated August 31, 2006, which held that the phrase NET PROFIT EARNED denotes the remainder of the properties of the parties after deducting the separate properties of each [of the] spouse and the debts.[14] The Order further held that after determining the remainder of the properties, it shall be forfeited in favor of the common children because the offending spouse does not have any right to any share of the net profits earned, pursuant to Articles 63, No. (2) and 43, No. (2) of the Family Code.[15] The dispositive portion of the Order states: WHEREFORE, there is no blatant disparity when the sheriff intends to forfeit all the remaining properties after deducting the payments of the debts for only separate properties of the defendant-respondent shall be delivered to him which he has none. The Sheriff is herein directed to proceed with the execution of the Decision. IT IS SO ORDERED.[16] Not satisfied with the trial court's Order, the petitioner filed a Motion for Reconsideration[17] on September 8, 2006. Consequently, the RTC issued another Order[18] dated November 8, 2006, holding that although the Decision dated October 10, 2005 has become final and executory, it may still consider the Motion for Clarification because the petitioner simply wanted to clarify the meaning of net profit earned.[19] Furthermore, the same Order held: ALL TOLD, the Court Order dated August 31, 2006 is hereby ordered set aside. NET PROFIT EARNED, which is subject of forfeiture in favor of [the] parties' common children, is ordered to be computed in accordance [with] par. 4 of Article 102 of the Family Code.[20] On November 21, 2006, the respondents filed a Motion for IS THE DISSOLUTION AND THE CONSEQUENT LIQUIDATION OF THE COMMON PROPERTIES OF THE HUSBAND AND WIFE BY VIRTUE OF THE DECREE OF LEGAL SEPARATION GOVERNED BY ARTICLE 125 (SIC) OF THE FAMILY CODE? II WHAT IS THE MEANING OF THE NET PROFITS EARNED BY THE CONJUGAL PARTNERSHIP FOR PURPOSES OF EFFECTING THE FORFEITURE AUTHORIZED UNDER ARTICLE 63 OF THE FAMILY CODE? III WHAT LAW GOVERNS THE PROPERTY RELATIONS BETWEEN THE HUSBAND AND WIFE WHO GOT MARRIED IN 1977? CAN THE FAMILY CODE OF THE PHILIPPINES BE GIVEN RETROACTIVE EFFECT FOR PURPOSES OF DETERMINING THE NET PROFITS SUBJECT OF FORFEITURE AS A RESULT OF THE DECREE OF LEGAL SEPARATION WITHOUT IMPAIRING VESTED RIGHTS ALREADY ACQUIRED UNDER THE CIVIL CODE? IV WHAT PROPERTIES SHALL BE INCLUDED IN THE FORFEITURE OF THE SHARE OF THE GUILTY SPOUSE IN THE NET CONJUGAL PARTNERSHIP AS A RESULT OF THE ISSUANCE OF THE DECREE OF LEGAL SEPARATION?[23] Our Ruling While the petitioner has raised a number of issues on the applicability of certain laws, we are well-aware that the respondents have called our attention to the fact that the Decision dated October 10, 2005 has attained finality when the Motion for Clarification was filed.[24] Thus, we are constrained to resolve first the issue of the finality of the Decision dated October 10, 2005 and subsequently discuss the matters that we can clarify.

The Decision dated October 10, 2005 has become final and executory at the time the Motion for Clarification was filed on July 7, 2006. Section 3, Rule 41 of the Rules of Court provides: Section 3. Period of ordinary appeal. - The appeal shall be taken within fifteen (15) days from notice of the judgment or final order appealed from. Where a record on appeal is required, the appellant shall file a notice of appeal and a record on appeal within thirty (30) days from notice of the judgment or final order. The period of appeal shall be interrupted by a timely motion for new trial or reconsideration. No motion for extension of time to file a motion for new trial or reconsideration shall be allowed. In Neypes v. Court of Appeals,[25] we clarified that to standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to appeal their cases, we held that it would be practical to allow a fresh period of 15 days within which to file the notice of appeal in the RTC, counted from receipt of the order dismissing a motion for a new trial or motion for reconsideration.[26] In Neypes, we explained that the "fresh period rule" shall also apply to Rule 40 governing appeals from the Municipal Trial Courts to the RTCs; Rule 42 on petitions for review from the RTCs to the Court of Appeals (CA); Rule 43 on appeals from quasi-judicial agencies to the CA and Rule 45 governing appeals by certiorari to the Supreme Court. We also said, The new rule aims to regiment or make the appeal period uniform, to be counted from receipt of the order denying the motion for new trial, motion for reconsideration (whether full or partial) or any final order or resolution.[27] In other words, a party litigant may file his notice of appeal within a fresh 15-day period from his receipt of the trial court's decision or final order denying his motion for new trial or motion for reconsideration. Failure to avail of the fresh 15-day period from the denial of the motion for reconsideration makes the decision or final order in question final and executory. In the case at bar, the trial court rendered its Decision on October 10, 2005. The petitioner neither filed a motion for reconsideration nor a notice of appeal. On December 16, 2005, or after 67 days had lapsed, the trial court issued an order granting the respondent's motion for execution; and on February 10, 2006, or after123 days had lapsed, the trial court issued a writ of execution. Finally, when the writ had already been partially executed, the petitioner, on July 7, 2006 or after 270 days had lapsed, filed his Motion for Clarification on the definition of the net profits earned. From the foregoing, the petitioner had clearly slept on his right to question the RTCs Decision dated October 10, 2005. For 270 days, the petitioner never raised a single issue until the decision had already been partially executed. Thus at the time the petitioner filed his motion for clarification, the trial courts decision has become final and executory. A judgment becomes final and executory when the reglementary period to appeal lapses and no appeal is perfected within such period. Consequently, no court, not even this Court, can arrogate unto itself appellate jurisdiction to review a case or modify a judgment that became final.[28]

The petitioner argues that the decision he is questioning is a void judgment. Being such, the petitioner's thesis is that it can still be disturbed even after 270 days had lapsed from the issuance of the decision to the filing of the motion for clarification. He said that a void judgment is no judgment at all. It never attains finality and cannot be a source of any right nor any obligation. [29] But what precisely is a void judgment in our jurisdiction? When does a judgment becomes void? A judgment is null and void when the court which rendered it had no power to grant the relief or no jurisdiction over the subject matter or over the parties or both.[30] In other words, a court, which does not have the power to decide a case or that has no jurisdiction over the subject matter or the parties, will issue a void judgment or acoram non judice.[31] The questioned judgment does not fall within the purview of a void judgment. For sure, the trial court has jurisdiction over a case involving legal separation. Republic Act (R.A.) No. 8369 confers upon an RTC, designated as the Family Court of a city, the exclusive original jurisdiction to hear and decide, among others, complaints or petitions relating to marital status and property relations of the husband and wife or those living together.[32] The Rule on Legal Separation[33] provides that the petition [for legal separation] shall be filed in the Family Court of the province or city where the petitioner or the respondent has been residing for at least six months prior to the date of filing or in the case of a non-resident respondent, where he may be found in the Philippines, at the election of the petitioner.[34] In the instant case, herein respondent Rita is found to reside in Tungao, Butuan City for more than six months prior to the date of filing of the petition; thus, the RTC, clearly has jurisdiction over the respondent's petition below. Furthermore, the RTC also acquired jurisdiction over the persons of both parties, considering that summons and a copy of the complaint with its annexes were served upon the herein petitioner on December 14, 2000 and that the herein petitioner filed his Answer to the Complaint on January 9, 2001.[35] Thus, without doubt, the RTC, which has rendered the questioned judgment, has jurisdiction over the complaint and the persons of the parties. From the aforecited facts, the questioned October 10, 2005 judgment of the trial court is clearly not void ab initio, since it was rendered within the ambit of the court's jurisdiction. Being such, the same cannot anymore be disturbed, even if the modification is meant to correct what may be considered an erroneous conclusion of fact or law.[36] In fact, we have ruled that for [as] long as the public respondent acted with jurisdiction, any error committed by him or it in the exercise thereof will amount to nothing more than an error of judgment which may be reviewed or corrected only by appeal.[37] Granting without admitting that the RTC's judgment dated October 10, 2005 was erroneous, the petitioner's remedy should be an appeal filed within the reglementary period. Unfortunately, the petitioner failed to do this. He has already lost the chance to question the trial court's decision, which has become immutable and unalterable. What we can only do is to clarify the very question raised below and nothing more.

For our convenience, the following matters cannot anymore be disturbed since the October 10, 2005 judgment has already become immutable and unalterable, to wit: (a) The finding that the petitioner is the offending spouse since he cohabited with a woman who is not his wife;[38] (b) The trial court's grant of the petition for legal separation of respondent Rita;[39] (c) The dissolution and liquidation of the conjugal partnership;[40] (d) The forfeiture of the petitioner's right to any share of the net profits earned by the conjugal partnership;[41] (e) The award to the innocent spouse of the minor children's custody;[42] (f) The disqualification of the offending spouse from inheriting from the innocent spouse by intestate succession;[43] (g) The revocation of provisions in favor of the offending spouse made in the will of the innocent spouse;[44] (h) The holding that the property relation of the parties is conjugal partnership of gains and pursuant to Article 116 of the Family Code, all properties acquired during the marriage, whether acquired by one or both spouses, is presumed to be conjugal unless the contrary is proved;[45] (i) The finding that the spouses acquired their real and personal properties while they were living together;[46] (j) The list of properties which Rizal Commercial Banking Corporation (RCBC) foreclosed;[47] (k) The list of the remaining properties of the couple which must be dissolved and liquidated and the fact that respondent Rita was the one who took charge of the administration of these properties;[48] (l) The holding that the conjugal partnership shall be liable to matters included under Article 121 of the Family Code and the conjugal liabilities totaling P503,862.10 shall be charged to the income generated by these properties;[49] (m) The fact that the trial court had no way of knowing whether the petitioner had separate properties which can satisfy his share for the support of the family;[50] (n) The holding that the applicable law in this case is Article 129(7);[51] (o) The ruling that the remaining properties not subject to any encumbrance shall therefore be divided equally between the petitioner and the respondent without prejudice to the children's legitime;[52]

(p) The holding that the petitioner's share of the net profits earned by the conjugal partnership is forfeited in favor of the common children;[53] and (q) The order to the petitioner to reimburse the respondents the sum of P19,000.00 as attorney's fees and litigation expenses of P5,000.00.[54] After discussing lengthily the immutability of the Decision dated October 10, 2005, we will discuss the following issues for the enlightenment of the parties and the public at large. Article 129 of the Family Code applies to the present case since the parties' property relation is governed by the system of relative community or conjugal partnership of gains. The petitioner claims that the court a quo is wrong when it applied Article 129 of the Family Code, instead of Article 102. He confusingly argues that Article 102 applies because there is no other provision under the Family Code which defines net profits earned subject of forfeiture as a result of legal separation. Offhand, the trial court's Decision dated October 10, 2005 held that Article 129(7) of the Family Code applies in this case. We agree with the trial court's holding. First, let us determine what governs the couple's property relation. From the record, we can deduce that the petitioner and the respondent tied the marital knot on January 6, 1977. Since at the time of the exchange of marital vows, the operative law was the Civil Code of the Philippines (R.A. No. 386) and since they did not agree on a marriage settlement, the property relations between the petitioner and the respondent is the system of relative community or conjugal partnership of gains.[55] Article 119 of the Civil Code provides: Art. 119. The future spouses may in the marriage settlements agree upon absolute or relative community of property, or upon complete separation of property, or upon any other regime. In the absence of marriage settlements, or when the same are void, the system of relative community or conjugal partnership of gains as established in this Code, shall govern the property relations between husband and wife. Thus, from the foregoing facts and law, it is clear that what governs the property relations of the petitioner and of the respondent is conjugal partnership of gains. And under this property relation, the husband and the wife place in a common fund the fruits of their separate property and the income from their work or industry.[56] The husband and wife also own in common all the property of the conjugal partnership of gains.[57] Second, since at the time of the dissolution of the petitioner and the respondent's marriage the operative law is already the Family Code, the same applies in the instant case and the applicable law in so far as the liquidation of the conjugal partnership assets and liabilities is concerned is Article 129 of the Family Code in

relation to Article 63(2) of the Family Code. The latter provision is applicable because according to Article 256 of the Family Code [t]his Code shall have retroactive effect insofar as it does not prejudice or impair vested or acquired rights in accordance with the Civil Code or other law.[58] Now, the petitioner asks: Was his vested right over half of the common properties of the conjugal partnership violated when the trial court forfeited them in favor of his children pursuant to Articles 63(2) and 129 of the Family Code? We respond in the negative. Indeed, the petitioner claims that his vested rights have been impaired, arguing: As earlier adverted to, the petitioner acquired vested rights over half of the conjugal properties, the same being owned in common by the spouses. If the provisions of the Family Code are to be given retroactive application to the point of authorizing the forfeiture of the petitioner's share in the net remainder of the conjugal partnership properties, the same impairs his rights acquired prior to the effectivity of the Family Code.[59] In other words, the petitioner is saying that since the property relations between the spouses is governed by the regime of Conjugal Partnership of Gains under the Civil Code, the petitioner acquired vested rights over half of the properties of the Conjugal Partnership of Gains, pursuant to Article 143 of the Civil Code, which provides: All property of the conjugal partnership of gains is owned in common by the husband and wife.[60] Thus, since he is one of the owners of the properties covered by the conjugal partnership of gains, he has a vested right over half of the said properties, even after the promulgation of the Family Code; and he insisted that no provision under the Family Code may deprive him of this vested right by virtue of Article 256 of the Family Code which prohibits retroactive application of the Family Code when it will prejudice a person's vested right. However, the petitioner's claim of vested right is not one which is written on stone. InGo, Jr. v. Court of Appeals,[61] we define and explained vested right in the following manner: A vested right is one whose existence, effectivity and extent do not depend upon events foreign to the will of the holder, or to the exercise of which no obstacle exists, and which is immediate and perfect in itself and not dependent upon a contingency. The term vested right expresses the concept of present fixed interest which, in right reason and natural justice, should be protected against arbitrary State action, or an innately just and imperative right which enlightened free society, sensitive to inherent and irrefragable individual rights, cannot deny. To be vested, a right must have become a titlelegal or equitableto the present or future enjoyment of property.[62] (Citations omitted) In our en banc Resolution dated October 18, 2005 for ABAKADA Guro Party List Officer Samson S. Alcantara, et al. v. The Hon. Executive Secretary Eduardo R. Ermita,[63] we also explained:

The concept of vested right is a consequence of the constitutional guaranty of due process that expresses a present fixed interest which in right reason and natural justice is protected against arbitrary state action; it includes not only legal or equitable title to the enforcement of a demand but also exemptions from new obligations created after the right has become vested. Rights are considered vested when the right to enjoyment is a present interest, absolute, unconditional, and perfect or fixed and irrefutable.[64] (Emphasis and underscoring supplied) From the foregoing, it is clear that while one may not be deprived of his vested right, he may lose the same if there is due process and such deprivation is founded in law and jurisprudence. In the present case, the petitioner was accorded his right to due process. First, he was well-aware that the respondent prayed in her complaint that all of the conjugal properties be awarded to her.[65] In fact, in his Answer, the petitioner prayed that the trial court divide the community assets between the petitioner and the respondent as circumstances and evidence warrant after the accounting and inventory of all the community properties of the parties.[66] Second, when the Decision dated October 10, 2005 was promulgated, the petitioner never questioned the trial court's ruling forfeiting what the trial court termed as net profits, pursuant to Article 129(7) of the Family Code.[67] Thus, the petitioner cannot claim being deprived of his right to due process. Furthermore, we take note that the alleged deprivation of the petitioner's vested right is one founded, not only in the provisions of the Family Code, but in Article 176 of the Civil Code. This provision is like Articles 63 and 129 of the Family Code on the forfeiture of the guilty spouse's share in the conjugal partnership profits. The said provision says: Art. 176. In case of legal separation, the guilty spouse shall forfeit his or her share of the conjugal partnership profits, which shall be awarded to the children of both, and the children of the guilty spouse had by a prior marriage. However, if the conjugal partnership property came mostly or entirely from the work or industry, or from the wages and salaries, or from the fruits of the separate property of the guilty spouse, this forfeiture shall not apply. In case there are no children, the innocent spouse shall be entitled to all the net profits. From the foregoing, the petitioner's claim of a vested right has no basis considering that even under Article 176 of the Civil Code, his share of the conjugal partnership profits may be forfeited if he is the guilty party in a legal separation case. Thus, after trial and after the petitioner was given the chance to present his evidence, the petitioner's vested right claim may in fact be set aside under the Civil Code since the trial court found him the guilty party. More, in Abalos v. Dr. Macatangay, Jr.,[68] we reiterated our long-standing ruling that:

[P]rior to the liquidation of the conjugal partnership, the interest of each spouse in the conjugal assets is inchoate, a mere expectancy, which constitutes neither a legal nor an equitable estate, and does not ripen into title until it appears that there are assets in the community as a result of the liquidation and settlement. The interest of each spouse is limited to the net remainder or remanente liquido (haber ganancial) resulting from the liquidation of the affairs of the partnership after its dissolution. Thus, the right of the husband or wife to one-half of the conjugal assets does not vest until the dissolution and liquidation of the conjugal partnership, or after dissolution of the marriage, when it is finally determined that, after settlement of conjugal obligations, there are net assets left which can be divided between the spouses or their respective heirs.[69] (Citations omitted) Finally, as earlier discussed, the trial court has already decided in its Decision dated October 10, 2005 that the applicable law in this case is Article 129(7) of the Family Code.[70] The petitioner did not file a motion for reconsideration nor a notice of appeal. Thus, the petitioner is now precluded from questioning the trial court's decision since it has become final and executory. The doctrine of immutability and unalterability of a final judgment prevents us from disturbing the Decision dated October 10, 2005 because final and executory decisions can no longer be reviewed nor reversed by this Court.[71] From the above discussions, Article 129 of the Family Code clearly applies to the present case since the parties' property relation is governed by the system of relative community or conjugal partnership of gains and since the trial court's Decision has attained finality and immutability. The net profits of the conjugal partnership of gains are all the fruits of the separate properties of the spouses and the products of their labor and industry. The petitioner inquires from us the meaning of net profits earned by the conjugal partnership for purposes of effecting the forfeiture authorized under Article 63 of the Family Code. He insists that since there is no other provision under the Family Code, which defines net profits earned subject of forfeiture as a result of legal separation, then Article 102 of the Family Code applies. What does Article 102 of the Family Code say? Is the computation of net profits earned in the conjugal partnership of gains the same with the computation of net profits earned in the absolute community? Now, we clarify. First and foremost, we must distinguish between the applicable law as to the property relations between the parties and the applicable law as to the definition of net profits. As earlier discussed, Article 129 of the Family Code applies as to the property relations of the parties. In other words, the computation and the succession of events will follow the provisions under Article 129 of the said Code. Moreover, as to the definition of net profits, we cannot but refer to Article 102(4) of the Family Code, since it expressly provides that for purposes of computing the

net profits subject to forfeiture under Article 43, No. (2) and Article 63, No. (2), Article 102(4) applies. In this provision, net profits shall be the increase in value between the market value of the community property at the time of the celebration of the marriage and the market value at the time of its dissolution.[72] Thus, without any iota of doubt, Article 102(4) applies to both the dissolution of the absolute community regime under Article 102 of the Family Code, and to the dissolution of the conjugal partnership regime under Article 129 of the Family Code. Where lies the difference? As earlier shown, the difference lies in the processes used under the dissolution of the absolute community regime under Article 102 of the Family Code, and in the processes used under the dissolution of the conjugal partnership regime under Article 129 of the Family Code. Let us now discuss the difference in the processes between the absolute community regime and the conjugal partnership regime. On Absolute Community Regime: When a couple enters into a regime of absolute community, the husband and the wife becomes joint owners of all the properties of the marriage. Whatever property each spouse brings into the marriage, and those acquired during the marriage (except those excluded under Article 92 of the Family Code) form the common mass of the couple's properties. And when the couple's marriage or community is dissolved, that common mass is divided between the spouses, or their respective heirs, equally or in the proportion the parties have established, irrespective of the value each one may have originally owned.[73] Under Article 102 of the Family Code, upon dissolution of marriage, an inventory is prepared, listing separately all the properties of the absolute community and the exclusive properties of each; then the debts and obligations of the absolute community are paid out of the absolute community's assets and if the community's properties are insufficient, the separate properties of each of the couple will be solidarily liable for the unpaid balance. Whatever is left of the separate properties will be delivered to each of them. The net remainder of the absolute community is its net assets, which shall be divided between the husband and the wife; and for purposes of computing the net profits subject to forfeiture, said profits shall be the increase in value between the market value of the community property at the time of the celebration of the marriage and the market value at the time of its dissolution.[74] Applying Article 102 of the Family Code, the net profits requires that we first find the market value of the properties at the time of the community's dissolution. From the totality of the market value of all the properties, we subtract the debts and obligations of the absolute community and this result to the net assets or net remainder of the properties of the absolute community, from which we deduct the market value of the properties at the time of marriage, which then results to the net profits.[75] Granting without admitting that Article 102 applies to the instant case, let us see what will happen if we apply Article 102:

(a) According to the trial court's finding of facts, both husband and wife have no separate properties, thus, the remaining properties in the list above are all part of the absolute community. And its market value at the time of the dissolution of the absolute community constitutes the market value at dissolution. (b) Thus, when the petitioner and the respondent finally were legally separated, all the properties which remained will be liable for the debts and obligations of the community. Such debts and obligations will be subtracted from the market value at dissolution. (c) What remains after the debts and obligations have been paid from the total assets of the absolute community constitutes the net remainder or net asset. And from such net asset/remainder of the petitioner and respondent's remaining properties, the market value at the time of marriage will be subtracted and the resulting totality constitutes the net profits. (d) Since both husband and wife have no separate properties, and nothing would be returned to each of them, what will be divided equally between them is simply the net profits. However, in the Decision dated October 10, 2005, the trial court forfeited the half-share of the petitioner in favor of his children. Thus, if we use Article 102 in the instant case (which should not be the case), nothing is left to the petitioner since both parties entered into their marriage without bringing with them any property. On Conjugal Partnership Regime: Before we go into our disquisition on the Conjugal Partnership Regime, we make it clear that Article 102(4) of the Family Code applies in the instant case for purposes only of defining net profit. As earlier explained, the definition of net profits in Article 102(4) of the Family Code applies to both the absolute community regime and conjugal partnership regime as provided for under Article 63, No. (2) of the Family Code, relative to the provisions on Legal Separation. Now, when a couple enters into a regime of conjugal partnership of gains under Article 142 of the Civil Code, the husband and the wife place in common fund the fruits of their separate property and income from their work or industry, and divide equally, upon the dissolution of the marriage or of the partnership, the net gains or benefits obtained indiscriminately by either spouse during the marriage.[76] From the foregoing provision, each of the couple has his and her own property and debts. The law does not intend to effect a mixture or merger of those debts or properties between the spouses. Rather, it establishes a complete separation of capitals.[77] Considering that the couple's marriage has been dissolved under the Family Code, Article 129 of the same Code applies in the liquidation of the couple's properties in the event that the conjugal partnership of gains is dissolved, to wit:

Art. 129. Upon the dissolution of the conjugal partnership regime, the following procedure shall apply: (1) An inventory shall be prepared, listing separately all the properties of the conjugal partnership and the exclusive properties of each spouse. (2) Amounts advanced by the conjugal partnership in payment of personal debts and obligations of either spouse shall be credited to the conjugal partnership as an asset thereof. (3) Each spouse shall be reimbursed for the use of his or her exclusive funds in the acquisition of property or for the value of his or her exclusive property, the ownership of which has been vested by law in the conjugal partnership. (4) The debts and obligations of the conjugal partnership shall be paid out of the conjugal assets. In case of insufficiency of said assets, the spouses shall be solidarily liable for the unpaid balance with their separate properties, in accordance with the provisions of paragraph (2) of Article 121. (5) Whatever remains of the exclusive properties of the spouses shall thereafter be delivered to each of them. (6) Unless the owner had been indemnified from whatever source, the loss or deterioration of movables used for the benefit of the family, belonging to either spouse, even due to fortuitous event, shall be paid to said spouse from the conjugal funds, if any. (7) The net remainder of the conjugal partnership properties shall constitute the profits, which shall be divided equally between husband and wife, unless a different proportion or division was agreed upon in the marriage settlements or unless there has been a voluntary waiver or forfeiture of such share as provided in this Code. (8) The presumptive legitimes of the common children shall be delivered upon the partition in accordance with Article 51. (9) In the partition of the properties, the conjugal dwelling and the lot on which it is situated shall, unless otherwise agreed upon by the parties, be adjudicated to the spouse with whom the majority of the common children choose to remain. Children below the age of seven years are deemed to have chosen the mother, unless the court has decided otherwise. In case there is no such majority, the court shall decide, taking into consideration the best interests of said children. In the normal course of events, the following are the steps in the liquidation of the properties of the spouses: (a) An inventory of all the actual properties shall be made, separately listing the couple's conjugal properties and their separate properties.[78] In the instant case,the trial court found that the couple has no separate properties when

they married.[79] Rather, the trial court identified the following conjugal properties, to wit: 1. coffee mill in Balongagan, Las Nieves, Agusan del Norte; 2. coffee mill in Durian, Las Nieves, Agusan del Norte; 3. corn mill in Casiklan, Las Nieves, Agusan del Norte; 4. coffee mill in Esperanza, Agusan del Sur; 5. a parcel of land with an area of 1,200 square meters located in Tungao, Butuan City; 6. a parcel of agricultural land with an area of 5 hectares located in Manila de Bugabos, Butuan City; 7. a parcel of land with an area of 84 square meters located in Tungao, Butuan City; 8. Bashier Bon Factory located in Tungao, Butuan City.[80] (b) Ordinarily, the benefit received by a spouse from the conjugal partnership during the marriage is returned in equal amount to the assets of the conjugal partnership;[81] and if the community is enriched at the expense of the separate properties of either spouse, a restitution of the value of such properties to their respective owners shall be made.[82] (c) Subsequently, the couple's conjugal partnership shall pay the debts of the conjugal partnership; while the debts and obligation of each of the spouses shall be paid from their respective separate properties. But if the conjugal partnership is not sufficient to pay all its debts and obligations, the spouses with their separate properties shall be solidarily liable.[83] (d) Now, what remains of the separate or exclusive properties of the husband and of the wife shall be returned to each of them.[84] In the instant case, since it was already established by the trial court that the spouses have no separate properties,[85] there is nothing to return to any of them. The listed properties above are considered part of the conjugal partnership. Thus, ordinarily, what remains in the above-listed properties should be divided equally between the spouses and/or their respective heirs.[86] However, since the trial court found the petitioner the guilty party, his share from the net profits of the conjugal partnership is forfeited in favor of the common children, pursuant to Article 63(2) of the Family Code. Again, lest we be confused, like in the absolute community regime, nothing will be returned to the guilty party in the conjugal partnership regime, because there is no separate property which may be accounted for in the guilty party's favor. In the discussions above, we have seen that in both instances, the petitioner is not entitled to any property at all. Thus, we cannot but uphold the Decision dated

October 10, 2005 of the trial court. However, we must clarify, as we already did above, the Order dated January 8, 2007. WHEREFORE, the Decision dated October 10, 2005 of the Regional Trial Court, Branch 1 of Butuan City is AFFIRMED. Acting on the Motion for Clarification dated July 7, 2006 in the Regional Trial Court, the Order dated January 8, 2007 of the Regional Trial Court is hereby CLARIFIED in accordance with the above discussions. SO ORDERED.

Veloso vs. Martinez October 24, 1914 Ponente: J. Johnson Topic: What is excluded from CPG Facts: - Lucia Martinez is the widow and administratix of the estate of Domingo Franco. Before Domingos death, he borrowed from Veloso the sum of P4, 500 and gave as security for the payment certain jewelry worth P6000. - Lucia is now asking for the return of the jewelry, alleging that they were her sole and paraphernal property which she inherited from her mother - The trial court rendered judgment in favor of Lucia Issues: WON said jewelry is paraphernal property and thus should be returned to Lucia Decision: Decision appealed from is affirmed. Held Lucias Ratio Assumption is that the jewelry is exclusively Lucias because she inherited it from her mother. There is no proof to say otherwise. (Art.1382) Lucia denies giving her consent to Franco and therefore for him to use the jewelry to pay his debts is illegal. There should be formal instrument made before a notary public saying that she gives control and management of the property to Franco but there was no such instrument. (Art. 1384) The record shows that the jewels were the sole and separate property of the wife, acquired from her mother, and in the absence of further proof, we must presume that they constituted a part of her paraphernal property. As such paraphernal property she exercised dominion over the same. (Article 1382, Civil Code.) She had the exclusive control and management of the same, until and unless she had

Jewelry property

is

paraphernal

delivered it to her husband, before a notary public, with the intent that the husband might administer it properly. (Article 1384, Civil Code.) There is no proof in the record that she had ever delivered the same to her husband, in any manner, or for any purpose. That being true, she could not be deprived of the same by any act of her husband, without her consent, and without compliance with the provisions of the Civil Code above cited. MANOTOK REALTY V. CA April 30, 1987 Ponente: Gutierrez, J. Topic: CPG: Administration of Exclusive Property Facts: Felipe Madlangawa has been occupying a lot since 1949 in Clara de Tambunting de Legardas subdivision. Clara died in 1950 and all her paraphernal property was placed under custodia legis. Madlangawa made deposit to buy lot, which was received by Vicente Legarda, husband of Clara. An unpaid balance of Php 5,700 remained from Madlangawas payment because Claras heirs could not settle dispute regarding the property. Legarda eventually became special administrator of his late wifes estate. Manotok Realty bid for the subdivision and won. And although attempts were made to force squatters and occupants out, Madlangawa stayed. Madlangawa goes to Court to recover his occupied lot. RTC dismisses action because it had not established if lot was in actual possession of Madlangawa. On appeal, CA rules that Madalangawa is owner and that all that was left to do was for him to pay balance to Manotok. NCC 136: The wife retains the ownership of the paraphernal property. (1382) NCC 137: The wife shall have the administration of the paraphernal property, unless she delivers the same to the husband by means of a public instrument empowering him to administer it. Custodia legis: In the custody of the law Issue/s: Whether or not Legardas sale of wifes paraphernal property to Madlangawa is valid Reversed and set aside CA decision. Madlangawa ordered to surrender lot to Manotok Realty. Manotok to pay for rentals until surrendered. Manotok shall reimburse Madalanwa amount of Php 1,500 to offset rentals due. Ratio Although Legarda authorized the sale to Madlangawa, which has been ratified by Philippine Trust Company and approved by probate court, he did so wrongly. He was only appointed administrator 3 months after sale of wifes paraphernal property. He could not have validly disposed of land

because he was neither owner nor administrator of it. Since the sale is void, it cannot be ratified by PhilTrust. Legarda should have applied to probate court for authority to sell property in favor of Madlangawa. If approved, then would have been able to execute valid deed of sale. Sale conducted when Legarda was already rightful administrator of late wifes property.

2.

Sale to Manotok is valid

Alejandra Palanca vs. Smith Bell and Co. and Emilio Boncan Facts: 1. Smith Bell and Co. obtained judgment against Boncan for a sum of money 2. Later it obtained an execution which was levied upon the property in question, house constructed using the money borrowed by husband. After the said execution was levied upon the property, Boncan filed an action against Smith asking the court to declare her to be the exclusive owner of the house with the right to the possession and the said attachment be dissolved. Emiliano Boncan borrowed Php 14,000 from the International Banking Corporation to build a house. He then transferred possession of the property in favor of his wife, Alejandra Palanca, as a guarantee for the payment of the sum he had borrowed. Smith, Bell & Co. (Smith) won a civil case against Emiliano Boncan for a sum of money (amount not specified). Smith later obtained a writ of execution, which was levied upon the property in question. Alejandra Palanca filed an action before the CFI (Manila) against both Smith and Boncan, praying that the property be declared to be hers exclusively, and that the writ of execution levied upon it be dissolved. She contended that Boncan (her husband) had transferred possession of the property in her favor, and that he had no interest whatsoever in the property in question. CFI ruled against Palanca, who then elevated the case to the SC.

3.

Decision:

Issues: W/N the property is Palancas exclusively Decision: NO. The property is conjugal. Held Property is conjugal! Ratio When Boncan borrowed money upon the credit of the property of his wife, the money in effect became conjugal property. (Art. 1401(3), Old Civil Code) When the money was used for the construction of the house, the house

1.

Held Legarda acted wrongly as administrator/owner. Sale of property to Madlangawa is void.

likewise became conjugal property and is, thus, liable for the payment of the debts of Boncan. (Art. 1404, Old Civil Code)

2.

Alejandra was the owner of a certain property. Such property was given by Emilio with the consent of Alejandra as a guaranty for the payment of a loan against International Banking Corporation With the money borrowed, Emilio constructed a house in question and later conveyed the house to Alejandra and as guaranty for the payment of the debt to the International Banking. The money borrowed by Emilio upon the credit of the property of his wife became conjugal property and when the same was reinvested in the construction of a house, the house became conjugal property.

loan came. If it came from Romaricos salary, the land is conjugal property Under the old civil code only the following are chargeable to the conjugal property: (1) debts incurred for the necessary support of the family (2) when the administration of the conjugal property was transferred to the wife by the court or by the husband (3) when moderate gifts of charity are given. There was not showing that the instant case falls in any of these.

Wong vs. IAC GR No. 70082, August 19, 1991 FACTS: Romario Henson married Katrina on January 1964. They had 3 children however, even during the early years of their marriage, the spouses had been most of the time living separately. During the marriage or on about January 1971, the husband bought a parcel of land in Angeles from his father using the money borrowed from an officemate. Sometime in June 1972, Katrina entered an agreement with Anita Chan where the latter consigned the former pieces of jewelry valued at P321,830.95. Katrina failed to return the same within the 20 day period thus Anita demanded payment of their value. Katrina issued in September 1972, check of P55,000 which was dishonored due to lack of funds. The spouses Anita Chan and Ricky Wong filed action for collection of the sum of money against Katrina and her husband Romarico. The reply with counterclaim filed was only in behalf of Katrina. Trial court ruled in favor of the Wongs then a writ of execution was thereafter issued upon the 4 lots in Angeles City all in the name of Romarico Henson married to Katrina Henson. 2 of the lots were sold at public auction to Juanito Santos and the other two with Leonardo Joson. A month before such redemption, Romarico filed an action for annulment of the decision including the writ and levy of execution. ISSUE: WON debt of the wife without the knowledge of the husband can be satisfied through the conjugal property. HELD: The spouses had in fact been separated when the wife entered into the business deal with Anita. The husband had nothing to do with the business transactions of Katrina nor authorized her to enter into such. The properties in Angeles were acquired during the marriage with unclear proof where the husband obtained the money to repay the loan. Hence, it is presumed to belong in the conjugal partnership in the absence of proof that they are exclusive property of the husband and even though they had been living separately. A wife may bind the conjugal partnership only when she purchases things necessary for support of the family. The writ of execution cannot be issued against Romarico and the execution of judgments extends only over properties belonging to the judgment debtor. The conjugal properties cannot answer for Katrinas obligations as she exclusively incurred the latter without the consent of her husband nor they did redound to the benefit of the family. There was also no evidence submitted that the administration of the partnership had been transferred to Katrina by Romarico before said obligations were incurred. In as much as the decision was void only in so far as Romarico and the conjugal properties concerned, Spouses Wong may still execute the debt against Katrina, personally and exclusively.

WONG V INTERMEDIATE APPELLATE COURT FACTS: Romarico Henson and Katrina Pineda were married. During their marriage Romarico bought a parcel of land from his father using money borrowed from an officemate. Most of the time, the spouses were living separately; Romarico stayed in Angeles while Katrina was in Manila. One time, while Katrina was in Hong Kong, pieces of jewelry were consigned to her by Anita Chan. Katrina issued a check for 55,000 as payment for the jewelry but was dishonored for insufficiency of funds. Thereafter, Anitan Chan, assisted by her husband Ricky Wong , filed a complaint for estafa. However the lower court dismissed the complaint on the theory that estafa cannot be committed when the issuance of the check was for the payment of a preexisting obligation. Hence, the liability was only civil. Thus, petitioners filed a civil case for collection of a sum of money. The lower court ruled in favor of petitioner and ordered that the property of the spouses Romarico and Katrina be levied upon. Take note that during the hearing only Katrina was represented by counsel. Romarico assails the levy of the parcel of lands belonging to him saying that (1) he was deprived of his day in court and (2) he had nothing to do with the transaction. Lower court sustained this contention. The CA sustained the decision of the lower court saying that the parcel of lands levied were not conjugal properties but was exclusive capital of Romarico bought using his own funds; that even assuming it was conjugal property, it cannot be proceeded against because the debt of Katrina was not consented to by Romarico neither was it for the daily expenses of the family nor did it redound to the benefit of the family. In fact, there was no evidence to the effect that administration of the property was transferred to Katrina. ISSUE: Whether or not the parcels of land levied upon form part of the conjugal property YES Whether or not the obligation incurred by Katrina is chargeable against the conjugal property NO HELD: 1. The presumption is that a property is conjugal unless rebutted by clear and convincing evidence. In this case, while it may be true that the money used to buy the land was loaned from an officemate by Romarico, no evidence was shown as to where the repayment of that

[G.R. No. 187490, February 08, 2012] ANTONIA R. DELA PEA AND ALVIN JOHN B. DELA PEA, PETITIONERS, VS. GEMMA REMILYN C. AVILA AND FAR EAST BANK & TRUST CO., RESPONDENTS. DECISION PEREZ, J.: Filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure, this petition for review on certiorari seeks the reversal and setting aside of the Decision[1] dated 31 March 2009 rendered by the then Second Division of the Court of Appeals in CAG.R. CV No. 90485,[2] the dispositive portion of which states: WHEREFORE, premises considered, the appeal is GRANTED and the assailed Decision, dated December 18, 2007, of the Regional Trial Court of Marikina City, Branch 272, is hereby REVERSED and SET ASIDE. The Deed of Absolute Sale in favor of Gemma Avila dated November 4, 1997 and the subsequent sale on auction of the subject property to FEBTC (now Bank of the Philippine Islands) on March 15, 1999 are upheld as valid and binding. SO ORDERED.[3] The Facts The suit concerns a 277 square meter parcel of residential land, together with the improvements thereon, situated in Marikina City and previously registered in the name of petitioner Antonia R. Dela Pea (Antonia), "married to Antegono A. Dela Pea" (Antegono) under Transfer Certificate of Title (TCT) No. N-32315 of the Registry of Deeds of Rizal.[4] On 7 May 1996, Antonia obtained from A.C. Aguila & Sons, Co. (Aguila) a loan in the sum of P250,000.00 which, pursuant to the Promissory Note the former executed in favor of the latter, was payable on or before 7 July 1996, with interest pegged at 5% per month.[5] On the very same day, Antonia also executed in favor of Aguila a notarized Deed of Real Estate Mortgage over the property, for the purpose of securing the payment of said loan obligation. The deed provided, in part, that "(t)his contract is for a period of Three (3) months from the date of this instrument".[6] On 4 November 1997, Antonia executed a notarized Deed of Absolute Sale over the property in favor of respondent Gemma Remilyn C. Avila (Gemma), for the stated consideration of P600,000.00.[7] Utilizing the document, Gemma caused the cancellation of TCT No. N-32315 as well as the issuance of TCT No. 337834 of the Marikina City Registry of Deeds, naming her as the owner of the subject realty.[8] On 26 November 1997, Gemma also constituted a real estate mortgage over said parcel in favor of respondent Far East Bank and Trust Company [now Bank of the Philippine Islands] (FEBTC-BPI), to secure a loan facility with a credit limit of P1,200,000.00.[9] As evidenced by the Promissory Notes she executed from 12 December 1997 to 10 March 1998,[10] Gemma obtained the following loans from

Visayas Avenue Branch of the FEBTC-BPI, in the aggregate sum of P1,200,000.00, to wit: Promissory Note BDS#970779 BDS#970790 BDS#980800 BDS#980805 BDS#980817 BDS#980821 Date 12/02/97 12/15/97 01/16/98 02/06/98 02/27/98 03/10/98 Amount P300,000.00 P100,000.00 P100,000.00 P100,000.00 P150,000.00 P450,000.00 Maturity 04/30/98 04/14/98 04/30/98 04/30/98 04/30/98 04/30/98

On 3 March 1998, in the meantime, Antonia filed with the Register of Deeds of Marikina an Affidavit of Adverse Claim to the effect, among others, that she was the true and lawful owner of the property which had been titled in the name of Gemma under TCT No. 32315; and, that the Deed of Absolute Sale Gemma utilized in procuring her title was simulated.[11] As a consequence, Antonia's Affidavit of Adverse Claim was inscribed on TCT No. 337834 as Entry No. 501099 on 10 March 1998.[12] In view of Gemma's failure to pay the principal as well as the accumulated interest and penalties on the loans she obtained, on the other hand, FEBTC-BPI caused the extrajudicial foreclosure of the real estate mortgage constituted over the property. As the highest bidder at the public auction conducted in the premises,[13] FEBTC-BPI later consolidated its ownership over the realty and caused the same to be titled in its name under TCT No. 415392 of the Marikina registry.[14] On 18 May 1998, Antonia and her son, petitioner Alvin John B. Dela Pea (Alvin), filed against Gemma the complaint for annulment of deed of sale docketed before Branch 272 of the Regional Trial Court (RTC) of Marikina City as Civil Case No. 98445-MK. Claiming that the subject realty was conjugal property, the Dela Peas alleged, among other matters, that the 7 May 1996 Deed of Real Estate Mortgage Antonia executed in favor of Aguila was not consented to by Antegono who had, by then, already died; that despite its intended 1998 maturity date, the due date of the loan secured by the mortgage was shortened by Gemma who, taking advantage of her "proximate relationship" with Aguila, altered the same to 1997; and, that the 4 November 1997 Deed of Absolute Sale in favor of Gemma was executed by Antonia who was misled into believing that the transfer was necessary for the loan the former promised to procure on her behalf from FEBTCBPI. In addition to the annulment of said Deed of Absolute Sale for being simulated and derogatory of Alvin's successional rights, the Dela Peas sought the reconveyance of the property as well as the grant of their claims for moral and exemplary damages, attorney's fees and the costs.[15] Served with summons, Gemma specifically denied the material allegations of the foregoing complaint in her 1 July 1998 answer. Maintaining that the realty was the exclusive property of Antonia who misrepresented that her husband was still alive, Gemma averred that the former failed to pay the P250,000.00 loan she obtained from Aguila on its stipulated 7 July 1996 maturity; that approached to help prevent the extrajudicial foreclosure of the mortgage constituted on the property, she agreed to settle the outstanding obligation to Aguila and to extend Antonia a

P50,000.00 loan, with interest pegged at 10% per month; that to pay back the foregoing accommodations, Antonia agreed to the use of the property as collateral for a loan to be obtained by her from FEBTC-BPI, hence, the execution of the impugned Deed of Absolute Sale; and, that conformably with the foregoing agreement, she obtained loans in the total sum of P1,200,000.00 from FEBTC-BPI and applied the proceeds thereof to the sums owed by Antonia. Together with the dismissal of the complaint, Gemma also prayed for the grant of her counterclaims for moral and exemplary damages, attorney's fees, litigation expenses and the costs.[16] On 25 September 1999, the Dela Peas filed a supplemental complaint, impleading FEBTC-BPI as additional defendant. Calling attention to Antonia's 3 March 1998Affidavit of Adverse Claim and the Notice of Lis Pendens they purportedly caused to be annotated on TCT No. 337834 on 10 December 1999, the Dela Peas alleged that FEBTC-BPI was in bad faith when it purchased the property at public auction on 15 March 1999.[17] In their 12 November 1999 answer, FEBTC-BPI, in turn, asserted that the property was already titled in Gemma's name when she executed the 26 November 1997 real estate mortgage thereon, to secure the payment of the loans she obtained in the sum of P1,200,000.00; and, that not being privy to Antonia's transaction with Gemma and unaware of any adverse claim on the property, it was a mortgagee in good faith, entitled to foreclose the mortgage upon Gemma's failure to pay the loans she obtained. Seeking the dismissal of the complaint and the grant of its counterclaims for damages against the Dela Peas, FEBTC-BPI alternatively interposed cross-claims against Gemma for the payment of the subject loans, the accumulated interests and penalties thereon as well as such sums for which it may be held liable in the premises.[18] On 14 April 2000, the RTC issued the order terminating the pre-trial stage and declaring Gemma in default for failure to attend the pre-trial settings and to engage the services of a new lawyer despite due notice and the withdrawal of her counsel of record.[19] In support of their complaint, Antonia[20] and Alvin[21] both took the witness stand and, by way of corroborative evidence, presented the testimony of one Alessandro Almoden[22] who claimed to have referred Antonia to Gemma for the purpose of obtaining a loan. By way of defense evidence, on the other hand, FEBTC-BPI adduced the oral evidence elicited from Eleanor Abellare, its Account Officer who handled Gemma's loans,[23] and Zenaida Torres, the National Bureau of Investigation (NBI) Document Examiner who, after analyzing Antonia's specimen signatures on the 7 May 1996 Deed of Real Estate Mortgage and 4 November 1997 Deed of Absolute Sale,[24] issued NBI Questioned Documents Report No. 482802 to the effect, among others, that said signatures were written by one and the same person.[25] On 18 December 2007, the RTC went on to render a Decision finding that the subject property was conjugal in nature and that the 4 November 1997 Deed of Absolute SaleAntonia executed in favor of Gemma was void as a disposition without the liquidation required under Article 130 of the Family Code. Brushing aside FEBTC-BPI's claim of good faith,[26] the RTC disposed of the case in the following wise:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the plaintiffs and against the defendants, as follows: 1). Declaring the Deed of Absolute dated November 04, 1997 in favor of defendant, [Gemma] as null and void; 2). Ordering defendant [FEBTC-BPI] to execute a deed of reconveyance in favor of the [Dela Peas] involving the subject property now covered by Transfer Certificate of Title No. 415392 in the name of [FEBTC-BPI]; 3). Ordering [Gemma] to pay the [Dela Peas] the following: a). the amount of P200,000.00 as moral damages; and b). the amount of P20,000.00 as and for attorney's fees; and c). costs of the suit On the cross-claim, [Gemma] is hereby ordered to pay [FEBTC-BPI] the amount of P2,029,317.17 as of November 10, 1999, with twelve (12%) percent interest per annum until fully paid. SO ORDERED.[27] Aggrieved, FEBTC-BPI perfected the appeal which was docketed before the CA as CA-G.R. CV No. 90485. On 31 March 2009 the CA's Second Division rendered the herein assailed decision, reversing the RTC's appealed decision, upon the following findings and conclusions: (a) the property was paraphernal in nature for failure of the Dela Peas to prove that the same was acquired during Antonia's marriage to Antegono; (b) having misled Gemma into believing that the property was exclusively hers, Antonia is barred from seeking the annulment of the 4 November 1997 Deed of Absolute Sale; (c) Antonia's claim that her signature was forged is belied by her admission in the pleadings that she was misled by Gemma into executing said Deed of Absolute Sale and by NBI Questioned Document Report No. 482-802; and, (d) FEBTC-BPI is a mortgagee in good faith and for value since Gemma's 26 November 1997 execution of the real estate mortgage in its favor predated Antonia's 3 March 1998Affidavit of Adverse Claim and the 10 December 1999 annotation of a Notice of Lis Pendens on TCT No. 337834.[28] The Issues The Dela Peas seek the reversal of the assailed 31 March 2009 CA decision upon the affirmative of following issues, to wit: 1) Whether or not the CA erred in reversing the RTC holding the house and lot covered by TCT No. N-32315 conjugal property of the spouses Antegono and Antonia Dela Pea; 2) Whether or not the CA erred in reversing the RTC declaring null and void the Deed of Absolute Sale executed by Antonia to (Gemma); and

3. Whether or not the CA erred in reversing the RTC holding (FEBTC-BPI) a mortgagee/purchaser in bad faith.[29] The Court's Ruling The petition is bereft of merit. Pursuant to Article 160 of the Civil Code of the Philippines, 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. Although it is not necessary to prove that the property was acquired with funds of the partnership,[30] proof of acquisition during the marriage is an essential condition for the operation of the presumption in favor of the conjugal partnership.[31] In the case of Francisco vs. Court of Appeals,[32]this Court categorically ruled as follows: Article 160 of the New Civil Code provides 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." However, the party who invokes this presumption must first prove that the property in controversy was acquired during the marriage. Proof of acquisition during the coverture is a condition sine qua non for the operation of the presumption in favor of the conjugal partnership. The party who asserts this presumption must first prove said time element. Needless to say, the presumption refers only to the property acquired during the marriage and does not operate when there is no showing as to when property alleged to be conjugal was acquired. Moreover, this presumption in favor of conjugality is rebuttable, but only with strong, clear and convincing evidence; there must be a strict proof of exclusive ownership of one of the spouses.[33] As the parties invoking the presumption of conjugality under Article 160 of the Civil Code, the Dela Peas did not even come close to proving that the subject property was acquired during the marriage between Antonia and Antegono. Beyond Antonia's bare and uncorroborated assertion that the property was purchased when she was already married,[34] the record is bereft of any evidence from which the actual date of acquisition of the realty can be ascertained. When queried about the matter during his cross-examination, even Alvin admitted that his sole basis for saying that the property was owned by his parents was Antonia's unilateral pronouncement to the effect.[35] Considering that the presumption of conjugality does not operate if there is no showing of when the property alleged to be conjugal was acquired,[36] we find that the CA cannot be faulted for ruling that the realty in litigation was Antonia's exclusive property. Not having established the time of acquisition of the property, the Dela Peas insist that the registration thereof in the name of "Antonia R. Dela Pea, of legal age, Filipino, married to Antegono A. Dela Pea" should have already sufficiently established its conjugal nature. Confronted with the same issue in the case Ruiz vs. Court of Appeals,[37] this Court ruled, however, that the phrase "married to" is merely descriptive of the civil status of the wife and cannot be interpreted to mean that the husband is also a registered owner. Because it is likewise possible that the property was acquired by the wife while she was still single and registered only after

her marriage, neither would registration thereof in said manner constitute proof that the same was acquired during the marriage and, for said reason, to be presumed conjugal in nature. "Since there is no showing as to when the property in question was acquired, the fact that the title is in the name of the wife alone is determinative of its nature as paraphernal, i.e., belonging exclusively to said spouse."[38] Viewed in light of the paraphernal nature of the property, the CA correctly ruled that the RTC reversibly erred in nullifying Antonia's 4 November 1997 sale thereof in favor of Gemma, for lack of the liquidation required under Article 130 of the Family Code.[39] That Antonia treated the realty as her own exclusive property may, in fact, be readily gleaned from her utilization thereof as security for the payment of the P250,000.00 loan she borrowed from Aguila.[40] Despite Gemma's forfeiture of the right to present evidence on her behalf, her alleged alteration of the 7 May 1996 Deed of Real Estate Mortgage to shorten the maturity of the loan secured thereby was also properly brushed aside by the CA. The double lie inherent in Antonia's assertion that the same deed was altered by Gemma to shorten the maturity of the loan to "1997 instead of 1998" is instantly evident from paragraph 1 of the document which, consistent with 7 July 1996 maturity date provided in the Promissory Note she executed,[41] specifically stated that "(t)his contract is for a period of Three (3) months from the date of this instrument."[42] Antonia's evident lack of credibility also impels us to uphold the CA's rejection of her version of the circumstances surrounding the execution of the 4 November 1997 Deed of Absolute Sale in favor of Gemma. In disavowing authorship of the signature appearing on said deed,[43] Antonia contradicted the allegation in the Dela Peas' complaint that she was misled by Gemma into signing the same document.[44] The rule is well-settled that judicial admissions like those made in the pleadings are binding and cannot be contradicted, absent any showing that the same was made thru palpable mistake.[45] Alongside that appearing on the Deed of Real Estate Mortgage she admitted executing in favor of Aguila, Antonia's signature on the Deed of Absolute Sale was, moreover, found to have been written by one and the same person in Questioned Document Report No. 482-802 prepared by Zenaida Torres, the NBI Document Examiner to whom said specimen signatures were submitted for analysis.[46] Parenthetically, this conclusion is borne out by our comparison of the same signatures. For all of Antonia's denial of her receipt of any consideration for the sale of the property in favor of Gemma,[47] the evidence on record also lend credence to Gemma's version of the circumstances surrounding the execution of the assailed 4 November 1997 Deed of Absolute Sale. Consistent with Gemma's claim that said deed was executed to facilitate the loans she obtained from FEBTC-BPI which were agreed to be used as payment of the sums she expended to settle the outstanding obligation to Aguila and the P50,000.00 she loaned Antonia,[48] the latter admitted during her direct examination that she did not pay the loan she obtained from Aguila.[49] Presented as witness of the Dela Peas, Alessandro Almoden also admitted that Gemma had extended a loan in the sum of P50,000.00 in favor of Antonia. Notably, Alessandro Almoden's claim that the title to the property had been delivered to Gemma as a consequence of the transaction[50] is at odds with Antonia's claim that she presented said document to the Registry of Deeds when

she verified the status of the property prior to the filing of the complaint from which the instant suit originated.[51] With the material contradictions in the Dela Pea's evidence, the CA cannot be faulted for upholding the validity of the impugned 4 November 1997 Deed of Absolute Sale. Having been duly notarized, said deed is a public document which carries the evidentiary weight conferred upon it with respect to its due execution.[52] Regarded as evidence of the facts therein expressed in a clear, unequivocal manner,[53] public documents enjoy a presumption of regularity which may only be rebutted by evidence so clear, strong and convincing as to exclude all controversy as to falsity.[54] The burden of proof to overcome said presumptions lies with the party contesting the notarial document[55] like the Dela Peas who, unfortunately, failed to discharge said onus. Absent clear and convincing evidence to contradict the same, we find that the CA correctly pronounced the Deed of Absolute Sale was valid and binding between Antonia and Gemma. Since foreclosure of the mortgage is but the necessary consequence of nonpayment of the mortgage debt,[56] FEBTC-BPI was, likewise, acting well within its rights as mortgagee when it foreclosed the real estate mortgage on the property upon Gemma's failure to pay the loans secured thereby. Executed on 26 November 1997, the mortgage predated Antonia's filing of an Affidavit of Adverse Claim with the Register of Deeds of Marikina on 3 March 1998 and the annotation of a Notice of Lis Pendens on TCT No. 337834 on 10 December 1999. "The mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfilment of the obligation for whose security it was constituted."[57] When the principal obligation is not paid when due, the mortgagee consequently has the right to foreclose the mortgage, sell the property, and apply the proceeds of the sale to the satisfaction of the unpaid loan.[58] Finally, the resolution of this case cannot be affected by the principles that banks like FEBTC-BPI are expected to exercise more care and prudence than private individuals in that their dealings because their business is impressed with public interest[59] and their standard practice is to conduct an ocular inspection of the property offered to be mortgaged and verify the genuineness of the title to determine the real owner or owners thereof, hence, the inapplicability of the general rule that a mortgagee need not look beyond the title does not apply to them.[60] The validity of the Deed of Absolute Sale executed by Antonia in favor of Gemma having been upheld, FEBTC-BPI's supposed failure to ascertain the ownership of the property has been rendered immaterial for the purpose of determining the validity of the mortgage executed in its favor as well as the subsequent extrajudicial foreclosure thereof. WHEREFORE, premises considered, the petition is DENIED for lack of merit and the assailed CA Decision dated 31 March 2009 is, accordingly, AFFIRMED in toto. SO ORDERED.