Republic SUPREME Manila EN BANC

of

the

Philippines COURT

G.R. No. L-35702 May 29, 1973 DOMINGO vs. ISAIAS BATILLER, defendant-appellee. Gregorio M. Rubias for plaintiff-appellant. Vicente R. Acsay for defendant-appellee. D. RUBIAS, plaintiff-appellant,

TEEHANKEE, J.: In this appeal certified by the Court of Appeals to this Court as involving purely legal questions, we affirm the dismissal order rendered by the Iloilo court of first instance after pre-trial and submittal of the pertinent documentary exhibits. Such dismissal was proper, plaintiff having no cause of action, since it was duly established in the record that the application for registration of the land in question filed by Francisco Militante, plaintiff's vendor and predecessor interest, had been dismissed by decision of 1952 of the land registration court as affirmed by final judgment in 1958 of the Court of Appeals and hence, there was no title or right to the land that could be transmitted by the purported sale to plaintiff. As late as 1964, the Iloilo court of first instance had in another case of ejectment likewise upheld by final judgment defendant's "better right to possess the land in question . having been in the actual possession thereof under a claim of title many years before Francisco Militante sold the land to the plaintiff." Furthermore, even assuming that Militante had anything to sell, the deed of sale executed in 1956 by him in favor of plaintiff at a time when plaintiff was concededly his counsel of record in the land registration case involving the very land in dispute (ultimately decided adversely against Militante by the Court of Appeals' 1958 judgment affirming the lower court's dismissal of Militante's application for registration) was properly declared inexistent and void by the lower court, as decreed by Article 1409 in relation to Article 1491 of the Civil Code. The appellate court, in its resolution of certification of 25 July 1972, gave the following backgrounder of the appeal at bar: On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit to recover the ownership and possession of certain portions of lot under Psu-99791 located in Barrio General Luna, Barotac Viejo, Iloilo which he bought from his father-in-law, Francisco Militante in 1956 against its present occupant defendant, Isaias Batiller, who illegally entered said portions of the lot on two occasions in 1945 and in 1959. Plaintiff prayed also for damages and attorneys fees. (pp. 1-7, Record on Appeal). In his answer with counter-claim defendant claims the complaint of the plaintiff does not state a cause of action, the truth of the matter being that he and his predecessors-in-interest have always been in actual, open and continuous possession since time immemorial under claim of ownership of the portions of the lot in question and for the alleged malicious institution of the complaint he claims he has suffered moral damages in the amount of P 2,000.00, as well as the sum of P500.00 for attorney's fees. ... On December 9, 1964, the trial court issued a pre-trial order, after a pre-trial conference between the parties and their counsel which order reads as follows.. 'When this case was called for a pre-trial conference today, the plaintiff appeared assisted by himself and Atty. Gregorio M. Rubias. The defendant also appeared, assisted by his counsel Atty. Vicente R. Acsay. A. During the pre-trial conference, the parties have agreed that the following facts are attendant in this case and that they will no longer introduced any evidence, testimonial or documentary to prove them:

1. That Francisco Militante claimed ownership of a parcel of land located in the Barrio of General Luna, municipality of Barotac Viejo province of Iloilo, which he caused to be surveyed on July 18-31, 1934, whereby he was issued a plan Psu-99791 (Exhibit "B"). (The land claimed contained an area of 171:3561 hectares.) 2. Before the war with Japan, Francisco Militante filed with the Court of First Instance of Iloilo an application for the registration of the title of the land technically described in psu-99791 (Exh. "B")opposed by the Director of Lands, the Director of Forestry and other oppositors. However, during the war with Japan, the record of the case was lost before it was heard, so after the war Francisco Militante petitioned this court to reconstitute the record of the case. The record was reconstituted on the Court of the First Instance of Iloilo and docketed as Land Case No. R-695, GLRO Rec. No. 54852. The Court of First Instance heard the land registration case on November 14, 1952, and after the trial this court dismissed the application for registration . The appellant, Francisco Militante, appealed from the decision of this Court to the Court of Appeals where the case was docketed as CA-GR No. 13497-R.. 3. Pending the disposal of the appeal in CA-GR No. 13497-R and more particularly on June 18, 1956, Francisco Militante sold to the plaintiff, Domingo Rubias the land technically described in psu-99791 (Exh. "A"). The sale was duly recorded in the Office of the Register of Deeds for the province of Iloilo as Entry No. 13609 on July 11, 1960 (Exh. "A-1"). (NOTE: As per deed of sale, Exh. A, what Militante purportedly sold to plaintiff-appellant, his son-in-law, for the sum of P2,000.00 was "a parcel of untitled land having an area Of 144.9072 hectares ... surveyed under Psu 99791 ... (and) subject to the exclusions made by me, under (case) CA-i3497, Land Registration Case No. R-695, G.L.R.O. No. 54852, Court of First Instance of the province of Iloilo. These exclusions referred to portions of the original area of over 171 hectares originally claimed by Militante as applicant, but which he expressly recognized during the trial to pertain to some oppositors, such as the Bureau of Public Works and Bureau of Forestry and several other individual occupants and accordingly withdrew his application over the same. This is expressly made of record in Exh. A, which is the Court of Appeals' decision of 22 September 1958 confirming the land registration court's dismissal of Militante's application for registration.) 4. On September 22,1958 the Court of appeals in CA-G.R. No. 13497-R promulgated its judgment confirming the decision of this Court in Land Case No. R-695, GLRO Rec. No. 54852 which dismissed the application for Registration filed by Francisco Militante (Exh. "I"). 5. Domingo Rubias declared the land described in Exh. 'B' for taxation purposes under Tax Dec. No. 8585 (Exh. "C") for 1957; Tax Dec. Nos. 9533 (Exh. "C-1") and 10019 (Exh. "C-3")for the year 1961; Tax Dec. No. 9868 (Exh. "C-2") for the year 1964, paying the land taxes under Tax Dec. No. 8585 and 9533 (Exh. "D", "D-1", "G-6"). 6. Francisco Militante immediate predecessor-in-interest of the plaintiff, has also declared the land for taxation purposes under Tax Dec. No. 5172 in 1940 (Exh. "E") for 1945; under Tax Dec. No. T-86 (Exh. "E-1") for 1948; under Tax Dec. No. 7122 (Exh. "2"), and paid the land taxes for 1940 (Exhs. "G" and "G-7"), for 1945 46 (Exh. "G1") for 1947 (Exh. "G-2"), for 1947 & 1948 (Exh. "G-3"), for 1948 (Exh. "G-4"), and for 1948 and 1949 (Exh. "G-5"). 7. Tax Declaration No. 2434 in the name of Liberato Demontao for the land described therein (Exh. "F") was cancelled by Tax. Dec. No. 5172 of Francisco Militante (Exh. "E"). Liberato Demontao paid the land tax under Tax Dec. No. 2434 on Dec. 20, 1939 for the years 1938 (50%) and 1959 (Exh. "H"). 8. The defendant had declared for taxation purposes Lot No. 2 of the Psu-155241 under Tax Dec. Not. 8583 for 1957 and a portion of Lot No. 2, Psu-155241, for 1945 under Tax Dec. No. 8584 (Exh. "2-A" Tax No. 8583 (Exh. "2") was revised by Tax Dec. No. 9498 in the name of the defendant (Exh. "2-B") and Tax Dec. No. 8584 (Exh. "2A") was cancelled by Tax Dec. No. 9584 also in the name of the defendant (Exh. "2-C"). The defendant paid the land taxes for Lot 2, Psu-155241, on Nov. 9, 1960 for the years 1945 and 1946, for the year 1950, and for the year 1960 as shown by the certificate of the treasurer (Exh. "3"). The defendant may present to the Court other land taxes receipts for the payment of taxes for this lot. 9. The land claimed by the defendant as his own was surveyed on June 6 and 7,1956, and a plan approved by Director of Land on November 15, 1956 was issued, identified as Psu 155241 (Exh. "5"). 10. On April 22, 1960, the plaintiff filed forcible Entry and Detainer case against Isaias Batiller in the Justice of the Peace Court of Barotac Viejo Province of Iloilo (Exh. "4") to which the defendant Isaias Batiller riled his answer on August 29, 1960 (Exh. "4-A"). The Municipal Court of Barotac Viejo after trial, decided the case on May 10, 1961 in favor of the defendant and against the plaintiff (Exh. "4-B"). The plaintiff appealed from the decision of the Municipal Court of Barotac Viejo which was docketed in this Court as Civil Case No. 5750 on June 3, 1961, to which the defendant, Isaias Batiller, on June 13, 1961 filed his answer (Exh. "4-C"). And this Court after the trial. decided the case on November 26, 1964, in favor of the defendant, Isaias Batiller and against the plaintiff (Exh. "4-D").

(NOTE: As per Exh. 4-B, which is the Iloilo court of first instance decision of 26 November 1964dismissing plaintiff's therein complaint for ejectment against defendant, the iloilo court expressly found "that plaintiff's complaint is unjustified, intended to harass the defendant" and "that the defendant, Isaias Batiller, has a better right to possess the land in question described in Psu 155241 (Exh. "3"), Isaias Batiller having been in the actual physical possession thereof under a claim of title many years before Francisco Militante sold the land to the plaintiff-hereby dismissing plaintiff's complaint and ordering the plaintiff to pay the defendant attorney's fees ....") B. During the trial of this case on the merit, the plaintiff will prove by competent evidence the following: 1. That the land he purchased from Francisco Militante under Exh. "A" was formerly owned and possessed by Liberato Demontao but that on September 6, 1919 the land was sold at public auction by virtue of a judgment in a Civil Case entitled "Edw J. Pflieder plaintiff vs. Liberato Demontao Francisco Balladeros and Gregorio Yulo, defendants", of which Yap Pongco was the purchaser (Exh. "1-3"). The sale was registered in the Office of the Register of Deeds of Iloilo on August 4, 1920, under Primary Entry No. 69 (Exh. "1"), and a definite Deed of Sale was executed by Constantino A. Canto, provincial Sheriff of Iloilo, on Jan. 19, 1934 in favor of Yap Pongco (Exh. "I"), the sale having been registered in the Office of the Register of Deeds of Iloilo on February 10, 1934 (Exh. "1-1"). 2. On September 22, 1934, Yap Pongco sold this land to Francisco Militante as evidenced by a notarial deed (Exh. "J") which was registered in the Registry of Deeds on May 13, 1940 (Exh. "J-1"). 3. That plaintiff suffered damages alleged in his complaint. C. Defendants, on the other hand will prove by competent evidence during the trial of this case the following facts: 1. That lot No. 2 of the Psu-1552 it (Exh. '5') was originally owned and possessed by Felipe Batiller, grandfather of the defendant Basilio Batiller, on the death of the former in 1920, as his sole heir. Isaias Batiller succeeded his father , Basilio Batiller, in the ownership and possession of the land in the year 1930, and since then up to the present, the land remains in the possession of the defendant, his possession being actual, open, public, peaceful and continuous in the concept of an owner, exclusive of any other rights and adverse to all other claimants. 2. That the alleged predecessors in interest of the plaintiff have never been in the actual possession of the land and that they never had any title thereto. 3. That Lot No. 2, Psu 155241, the subject of Free Patent application of the defendant has beenapproved. 4. The damages suffered by the defendant, as alleged in his counterclaim."' 1 The appellate court further related the developments of the case, as follows: On August 17, 1965, defendant's counsel manifested in open court that before any trial on the merit of the case could proceed he would file a motion to dismiss plaintiff's complaint which he did, alleging that plaintiff does not have cause of action against him because the property in dispute which he (plaintiff) allegedly bought from his father-in-law, Francisco Militante was the subject matter of LRC No. 695 filed in the CFI of Iloilo, which case was brought on appeal to this Court and docketed as CA-G.R. No. 13497-R in which aforesaid case plaintiff was the counsel on record of his father-in-law, Francisco Militante. Invoking Arts. 1409 and 1491 of the Civil Code which reads: 'Art. 1409. The following contracts are inexistent and void from the beginning: xxx xxx xxx (7) Those expressly prohibited by law. 'ART. 1491. The following persons cannot acquire any purchase, even at a public auction, either in person of through the mediation of another: . xxx xxx xxx (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights of in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring an assignment and shall apply to lawyers, with respect to the

property and rights which may be the object of any litigation in which they may take part by virtue of their profession.' defendant claims that plaintiff could not have acquired any interest in the property in dispute as the contract he (plaintiff) had with Francisco Militante was inexistent and void. (See pp. 22-31, Record on Appeal). Plaintiff strongly opposed defendant's motion to dismiss claiming that defendant can not invoke Articles 1409 and 1491 of the Civil Code as Article 1422 of the same Code provides that 'The defense of illegality of contracts is not available to third persons whose interests are not directly affected' (See pp. 32-35 Record on Appeal). On October 18, 1965, the lower court issued an order disclaiming plaintiffs complaint (pp. 42-49, Record on Appeal.) In the aforesaid order of dismissal the lower court practically agreed with defendant's contention that the contract (Exh. A) between plaintiff and Francism Militante was null and void. In due season plaintiff filed a motion for reconsideration (pp. 50-56 Record on Appeal) which was denied by the lower court on January 14, 1966 (p. 57, Record on Appeal). Hence, this appeal by plaintiff from the orders of October 18, 1965 and January 14, 1966. Plaintiff-appellant imputes to the lower court the following errors: '1. The lower court erred in holding that the contract of sale between the plaintiff-appellant and his father-in-law, Francisco Militante, Sr., now deceased, of the property covered by Plan Psu-99791, (Exh. "A") was void, not voidable because it was made when plaintiff-appellant was the counsel of the latter in the Land Registration case. '2. The lower court erred in holding that the defendant-appellee is an interested person to question the validity of the contract of sale between plaintiff-appellant and the deceased, Francisco Militante, Sr. '3. The lower court erred in entertaining the motion to dismiss of the defendant-appellee after he had already filed his answer, and after the termination of the pre-trial, when the said motion to dismiss raised a collateral question. '4. The lower court erred in dismissing the complaint of the plaintiff-appellant.' The appellate court concluded that plaintiffs "assignment of errors gives rise to two (2) legal posers (1) whether or not the contract of sale between appellant and his father-in-law, the late Francisco Militante over the property subject of Plan Psu99791 was void because it was made when plaintiff was counsel of his father-in-law in a land registration case involving the property in dispute; and (2) whether or not the lower court was correct in entertaining defendant-appellee's motion to dismiss after the latter had already filed his answer and after he (defendant) and plaintiff-appellant had agreed on some matters in a pre-trial conference. Hence, its elevation of the appeal to this Court as involving pure questions of law. It is at once evident from the foregoing narration that the pre-trial conference held by the trial court at which the parties with their counsel agreed and stipulated on the material and relevant facts and submitted their respective documentary exhibits as referred to in the pre-trial order, supra, 2 practically amounted to a fulldress trial which placed on record all the facts and exhibits necessary for adjudication of the case. The three points on which plaintiff reserved the presentation of evidence at the-trial dealing with the source of the alleged right and title of Francisco Militante's predecessors, supra, 3 actually are already made of record in thestipulated facts and admitted exhibits. The chain of Militante's alleged title and right to the land as supposedly traced back to Liberato Demontao was actually asserted by Militante (and his vendee, lawyer and son-in-law, herein plaintiff) in the land registration case and rejected by the Iloilo land registration court which dismissedMilitante's application for registration of the land. Such dismissal, as already stated, was affirmed by the final judgment in 1958 of the Court of Appeals. 4 The four points on which defendant on his part reserved the presentation of evidence at the trial dealing with his and his ancestors' continuous, open, public and peaceful possession in the concept of owner of the land and the Director of Lands' approval of his survey plan thereof, supra, 5 are likewise already duly established facts of record, in the land registration case as well as in the ejectment case wherein the Iloilo court of first instance recognized the superiority of defendant's right to the land as against plaintiff. No error was therefore committed by the lower court in dismissing plaintiff's complaint upon defendant's motion after the pre-trial. 1. The stipulated facts and exhibits of record indisputably established plaintiff's lack of cause of action and justified the outright dismissal of the complaint. Plaintiff's claim of ownership to the land in question was predicated on the sale thereof for P2,000.00 made in 1956 by his father-in- law, Francisco Militante, in his favor, at a time when Militante's application for

registration thereof had already been dismissed by the Iloilo land registration court and was pending appeal in the Court of Appeals. With the Court of Appeals' 1958 final judgment affirming the dismissal of Militante's application for registration, the lack of any rightful claim or title of Militante to the land was conclusively and decisively judicially determined. Hence, there was no right or title to the land that could be transferred or sold by Militante's purported sale in 1956 in favor of plaintiff. Manifestly, then plaintiff's complaint against defendant, to be declared absolute owner of the land and to be restored to possession thereof with damages was bereft of any factual or legal basis. 2. No error could be attributed either to the lower court's holding that the purchase by a lawyer of the property in litigation from his client is categorically prohibited by Article 1491, paragraph (5) of the Philippine Civil Code, reproduced supra; 6 and that consequently, plaintiff's purchase of the property in litigation from his client (assuming that his client could sell the same since as already shown above, his client's claim to the property was defeated and rejected) was void and could produce no legal effect, by virtue of Article 1409, paragraph (7) of our Civil Code which provides that contracts "expressly prohibited or declared void by law' are "inexistent and that "(T)hese contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived." The 1911 case of Wolfson vs. Estate of Martinez 7 relied upon by plaintiff as holding that a sale of property in litigation to the party litigant's lawyer "is not void but voidable at the election of the vendor" was correctly held by the lower court to have been superseded by the later 1929 case of Director of Lands vs. Abagat. 8 In this later case of Abagat, the Court expressly cited two antecedent cases involving the same transaction of purchase of property in litigation by the lawyer which was expressly declared invalid under Article 1459 of the Civil Code of Spain (of which Article 1491 of our Civil Code of the Philippines is the counterpart) upon challenge thereof not by the vendor-client but by the adverse parties against whom the lawyer was to enforce his rights as vendee thus acquired. These two antecedent cases thus cited in Abagat clearly superseded (without so expressly stating the previous ruling in Wolfson: The spouses, Juan Soriano and Vicente Macaraeg, were the owners of twelve parcels of land. Vicenta Macaraeg died in November, 1909, leaving a large number of collateral heirs but no descendants. Litigation between the surviving husband, Juan Soriano, and the heirs of Vicenta immediately arose, and the herein appellant Sisenando Palarca acted as Soriano's lawyer. On May 2, 1918, Soriano executed a deed for the aforesaid twelve parcels of land in favor of Sisenando Palarca and on the following day, May 3, 1918, Palarca filed an application for the registration of the land in the deed. After hearing, the Court of First Instance declared that the deed was invalid by virtue of the provisions of article 1459 of the Civil Code, which prohibits lawyers and solicitors from purchasing property rights involved in any litigation in which they take part by virtue of their profession. The application for registration was consequently denied, and upon appeal by Palarca to the Supreme Court, the judgement of the lower court was affirmed by a decision promulgated November 16,1925 . (G.R. No. 24329, Palarca vs. Director of Lands, not reported.) In the meantime cadastral case No. 30 of the Province of Tarlac was instituted, and on August 21, 1923, Eleuteria Macaraeg, as administratrix of the estate of Vicente Macaraeg, filed claims for the parcels in question. Buenaventura Lavitoria administrator of the estate of Juan Soriano, did likewise and so did Sisenando Palarca. In a decision dated June 21, 1927, the Court of First Instance, Judge Carballo presiding, rendered judgment in favor of Palarea and ordered the registration of the land in his name. Upon appeal to this court by the administration of the estates of Juan Soriano and Vicente Macaraeg, the judgment of the court below was reversed and the land adjudicated to the two estates as conjugal property of the deceased spouses . (G.R. No. 28226, Director of Lands vs. Abagat, promulgated May 21, 1928, not reported.) 9 In the very case of Abagat itself, the Court, again affirming the invalidity and nullity of the lawyer's purchase of the land in litigation from his client, ordered the issuance of a writ of possession for the return of the land by the lawyer to the adverse parties without reimbursement of the price paid by him and other expenses, and ruled that "the appellant Palarca is a lawyer and is presumed to know the law. He must, therefore, from the beginning, have been well aware of the defect in his title and is, consequently, a possessor in bad faith." As already stated, Wolfson and Abagat were decided with relation to Article 1459 of the Civil Code of Spain then adopted here, until it was superseded on August 30, 1950 by the Civil Code of the Philippines whose counterpart provision is Article 1491. Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain persons, by reason of the relation of trust or their peculiar control over the property, from acquiring such property in their trust or control either directly or indirectly and "even at a public or judicial auction," as follows: (1) guardians; (2) agents; (3) administrators; (4) public officers and employees; judicial officers and employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by law.

In Wolfson which involved the sale and assignment of a money judgment by the client to the lawyer, Wolfson, whose right to so purchase the judgment was being challenged by the judgment debtor, the Court, through Justice Moreland, then expressly reserved decision on "whether or not the judgment in question actually falls within the prohibition of the article" and held only that the sale's "voidability can not be asserted by one not a party to the transaction or his representative," citing from Manresa 10 that "(C)onsidering the question from the point of view of the civil law, the view taken by the code, we must limit ourselves to classifying as void all acts done contrary to the express prohibition of the statute. Now then: As the code does not recognize such nullity by the mere operation of law, the nullity of the acts hereinbefore referred to must be asserted by the person having the necessary legal capacity to do so and decreed by a competent court." 11 The reason thus given by Manresa in considering such prohibited acquisitions under Article 1459 of the Spanish Civil Code as merely voidable at the instance and option of the vendor and not void "that the Code does not recognize such nullity de pleno derecho" is no longer true and applicable to our own Philippine Civil Code whichdoes recognize the absolute nullity of contracts "whose cause, object, or purpose is contrary to law, morals, good customs, public order or public policy" or which are "expressly prohibited or declared void by law " and declares such contracts "inexistent and void from the beginning." 12 The Supreme Court of Spain and modern authors have likewise veered from Manresa's view of the Spanish codal provision itself. In its sentencia of 11 June 1966, the Supreme Court of Spain ruled that the prohibition of Article 1459 of the Spanish Civil Code is based on public policy, that violation of the prohibition contract cannot be validated by confirmation or ratification, holding that: ... la prohibicion que el articulo 1459 del C.C. establece respecto a los administradores y apoderados, la cual tiene conforme a la doctrina de esta Sala, contendia entre otras, en S. de 27-5-1959, un fundamento de orden moral lugar la violacion de esta a la nulidad de pleno derecho del acto o negocio celebrado, ... y prohibicion legal, afectante orden publico, no cabe con efecto alguno la aludida retification ... 13 The criterion of nullity of such prohibited contracts under Article 1459 of the Spanish Civil Code (Article 1491 of our Civil Code) as a matter of public order and policy as applied by the Supreme Court of Spain to administrators and agents in its above cited decision should certainly apply with greater reason to judges, judicial officers, fiscals and lawyers under paragraph 5 of the codal article. Citing the same decisions of the Supreme Court of Spain, Gullon Ballesteros, his "Curso de Derecho Civil, (Contratos Especiales)" (Madrid, 1968) p. 18, affirms that, with respect to Article 1459, Spanish Civil Code:. Que caracter tendra la compra que se realice por estas personas? Porsupuesto no cabe duda de que el caso (art.) 1459, 40 y 50, la nulidad esabsoluta porque el motivo de la prohibicion es de orden publico. 14 Perez Gonzales in such view, stating that "Dado el caracter prohibitivo delprecepto, la consequencia de la infraccion es la nulidad radical y ex lege." 15 Castan, quoting Manresa's own observation that. "El fundamento do esta prohibicion es clarisimo. No sa trata con este precepto tan solo de guitar la ocasion al fraude; persiguese, ademasel proposito de rodear a las personas que intervienen en la administrcionde justicia de todos los retigios que necesitan pora ejercer su ministerio librandolos de toda suspecha, que aunque fuere in fundada, redundura endescredito de la institucion." 16 arrives at the contrary and now accepted view that "Puede considerace en nuestro derecho inexistente 'o radicalmente nulo el contrato en los siguentes cases: a) ...; b) cuando el contrato se ha celebrado en violacion de una prescripcion 'o prohibicion legal, fundada sobre motivos de orden publico (hipotesis del art. 4 del codigo) ..." 17 It is noteworthy that Caltan's rationale for his conclusion that fundamental consideration of public policy render void and inexistent such expressly prohibited purchase (e.g. by public officers and employees of government property intrusted to them and by justices, judges, fiscals and lawyers of property and rights in litigation and submitted to or handled by them, under Article 1491, paragraphs (4) and (5) of our Civil Code) has been adopted in a new article of our Civil Code, viz, Article 1409 declaring such prohibited contracts as "inexistent and void from the beginning ." 18 Indeed, the nullity of such prohibited contracts is definite and permanent and cannot be cured by ratification. The public interest and public policy remain paramount and do not permit of compromise or ratification. In his aspect, the permanent disqualification of public and judicial officers and lawyers grounded on public policy differs from the first three cases of guardians, agents and administrators (Article 1491, Civil Code), as to whose transactions it had been opined that they may be "ratified" by means of and in "the form of a new contact, in which cases its validity shall be determined only by the circumstances at the time the execution of such new contract. The causes of nullity which have ceased to exist cannot impair the validity of the new contract. Thus, the object which was illegal at the time of the first contract, may have already become lawful at the time of the ratification or second contract; or the service which was impossible may have become possible; or the intention which could not be ascertained may have been clarified by the parties. The ratification or second contract would then be valid from its execution; however, it does not retroact to the date of the first contract." 19

As applied to the case at bar, the lower court therefore properly acted upon defendant-appellant's motion to dismiss on the ground of nullity of plaintiff's alleged purchase of the land, since its juridical effects and plaintiff's alleged cause of action founded thereon were being asserted against defendant-appellant. The principles governing the nullity of such prohibited contracts and judicial declaration of their nullity have been well restated by Tolentino in his treatise on our Civil Code, as follows: Parties Affected. Any person may invoke the in existence of the contract whenever juridical effects founded thereon are asserted against him. Thus, if there has been a void transfer of property, the transferor can recover it by the accion reinvindicatoria; and any prossessor may refuse to deliver it to the transferee, who cannot enforce the contract. Creditors may attach property of the debtor which has been alienated by the latter under a void contract; a mortgagee can allege the inexistence of a prior encumbrance; a debtor can assert the nullity of an assignment of credit as a defense to an action by the assignee. Action On Contract. Even when the contract is void or inexistent, an action is necessary to declare its inexistence, when it has already been fulfilled. Nobody can take the law into his own hands; hence, the intervention of the competent court is necessary to declare the absolute nullity of the contract and to decree the restitution of what has been given under it. The judgment, however, will retroact to the very day when the contract was entered into. If the void contract is still fully executory, no party need bring an action to declare its nullity; but if any party should bring an action to enforce it, the other party can simply set up the nullity as a defense. 20 ACCORDINGLY, the order of dismissal appealed from is hereby affirmed, with costs in all instances against plaintiff-appellant. So ordered. Makalintal, Zaldivar, Castro,. Fernando, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

G.R. No. 165879

November 10, 2006

MARIA B. CHING, Petitioner, vs. JOSEPH C. GOYANKO, JR., EVELYN GOYANKO, JERRY GOYANKO, IMELDA GOYANKO, JULIUS GOYANKO, MARY ELLEN GOYANKO AND JESS GOYANKO, Respondents. DECISION CARPIO MORALES, J.: On December 30, 1947, Joseph Goyanko (Goyanko) and Epifania dela Cruz (Epifania) were married. 1 Out of the union were born respondents Joseph, Jr., Evelyn, Jerry, Imelda, Julius, Mary Ellen and Jess, all surnamed Goyanko. Respondents claim that in 1961, their parents acquired a 661 square meter property located at 29 F. Cabahug St., Cebu City but that as they (the parents) were Chinese citizens at the time, the property was registered in the name of their aunt, Sulpicia Ventura (Sulpicia). On May 1, 1993, Sulpicia executed a deed of sale2 over the property in favor of respondents father Goyanko. In turn, Goyanko executed on October 12, 1993 a deed of sale 3 over the property in favor of his common-law-wife-herein petitioner Maria B. Ching. Transfer Certificate of Title (TCT) No. 138405 was thus issued in petitioners name . After Goyankos death on March 11, 1996, respondents discovered that ownership of the property had already been transferred in the name of petitioner. Respondents thereupon had the purported signature of their father in the deed of sale verified by the Philippine National Police Crime Laboratory which found the same to be a forgery.4 Respondents thus filed with the Regional Trial Court of Cebu City a complaint for recovery of property and damages against petitioner, praying for the nullification of the deed of sale and of TCT No. 138405 and the issuance of a new one in favor of their father Goyanko. In defense, petitioner claimed that she is the actual owner of the property as it was she who provided its purchase price. To disprove that Goyankos signature in the questioned deed of sale is a forgery, she presented as witness the notary public who testified that Goyanko appeared and signed the document in his presence. By Decision of October 16, 1998,5 the trial court dismissed the complaint against petitioner, the pertinent portions of which decision read:

There is no valid and sufficient ground to declare the sale as null and void, fictitious and simulated. The signature on the questioned Deed of Sale is genuine. The testimony of Atty. Salvador Barrameda who declared in court that Joseph Goyanko, Sr. and Maria Ching together with their witnesses appeared before him for notarization of Deed of Sale in question is more reliable than the conflicting testimonies of the two document examiners. Defendant Maria Ching asserted that the Deed of Sale executed by Joseph Goyanko, Sr. in her favor is valid and genuine. The signature of Joseph Goyanko, Sr. in the questioned Deed of Absolute Sale is genuine as it was duly executed and signed by Joseph Goyanko, Sr. himself. The parcel of lands known as Lot No. 6 which is sought to be recovered in this case could never be considered as the conjugal property of the original Spouses Joseph C. Goyanko and Epifania dela Cruz or the exclusive capital property of the husband. The acquisition of the said property by defendant Maria Ching is well-elicited from the aforementioned testimonial and documentary evidence presented by the defendant. Although for a time being the property passed through Joseph Goyanko, Sr. as a buyer yet his ownership was only temporary and transitory for the reason that it was subsequently sold to herein defendant Maria Ching. Maria Ching claimed that it was even her money which was used by Joseph Goyanko, Sr. in the purchase of the land and so it was eventually sold to her. In her testimony, defendant Ching justified her financial capability to buy the land for herself. The transaction undertaken was from the original owner Sulpicia Ventura to Joseph Goyanko, Sr. and then from Joesph Goyanko, Sr. to herein defendant Maria Ching. The land subject of the litigation is already registered in the name of defendant Maria Ching under TCT No. 138405. By virtue of the Deed of Sale executed in favor of Maria Ching, Transfer Certificate of Title No. 138405 was issued in her favor. In recognition of the proverbial virtuality of a Torrens title, it has been repeatedly held that, unless bad faith can be established on the part of the person appearing as owner on the certificate of title, there is no other owner than that in whose favor it has been issued. A Torrens title is not subject to collateral attack. It is a well-known doctrine that a Torrens title, as a rule, is irrevocable and indefeasible, and the duty of the court is to see to it that this title is maintained and respected unless challenged in a direct proceedings [sic].6(Citations omitted; underscoring supplied) Before the Court of Appeals where respondents appealed, they argued that the trial court erred: 1. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject property between Joseph, Sr. and the defendant-appellee, despite the proliferation in the records and admissions by both parties that defendantappellee was the "mistress" or "common-law wife" of Joseph, Sr.. 2. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject property between Joseph, Sr. and the defendant-appellee, despite the fact that the marriage of Joseph, Sr. and Epifania was then still subsisting thereby rendering the subject property as conjugal property of Joseph, Sr. and Epifania. 3. . . . in dismissing the complaint a quo . . . , in effect, sustaining the validity of the sale of the subject property between Joseph, Sr. and the defendant-appellee, despite the clear findings of forgery and the non-credible testimony of notary public.7 By Decision dated October 21, 2003,8 the appellate court reversed that of the trial court and declared null and void the questioned deed of sale and TCT No. 138405. Held the appellate court: . . . The subject property having been acquired during the existence of a valid marriage between Joseph Sr. and Epifania dela Cruz-Goyanko, is presumed to belong to the conjugal partnership. Moreover, while this presumption in favor of conjugality is rebuttable with clear and convincing proof to the contrary, we find no evidence on record to conclude otherwise. The record shows that while Joseph Sr. and his wife Epifania have been estranged for years and that he and defendant-appellant Maria Ching, have in fact been living together as common-law husband and wife, there has never been a judicial decree declaring the dissolution of his marriage to Epifania nor their conjugal partnership. It is therefore undeniable that the 661-square meter property located at No. 29 F. Cabahug Street, Cebu City belongs to the conjugal partnership. Even if we were to assume that the subject property was not conjugal, still we cannot sustain the validity of the sale of the property by Joseph, Sr. to defendant-appellant Maria Ching, there being overwhelming evidence on records that they have been living together as common-law husband and wife. On this score, Art. 1352 of the Civil Code provides: "Art. 1352. Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy." We therefore find that the contract of sale in favor of the defendant-appellant Maria Ching was null and void for being contrary to morals and public policy. The purported sale, having been made by Joseph Sr. in favor of his concubine, undermines the stability of the family, a basic social institution which public policy vigilantly protects. Furthermore, the law emphatically prohibits spouses from selling property to each other, subject to certain exceptions. And this is so because transfers or conveyances between spouses, if allowed during the marriage would destroy the system of conjugal partnership, a basic policy in civil law. The prohibition was designed to prevent the exercise of undue influence by one spouse over the other and is likewise applicable even to common-law relationships otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union.9 (Underscoring supplied)

Hence, the present petition, petitioners arguing that the appellate court gravely erred in: I. . . . APPLYING THE STATE POLICY ON PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW SPOUSES ON THE SUBJECT PROPERTY, THE SAME BEING FOUND BY THE COURT A QUO, AS THE EXCLUSIVE PROPERTY OF PETITIONER, AND THAT THE SAME WAS NEVER PART OF THE CONJUGAL PROPERTY OF THE MARRIAGE BETWEEN RESPONDENTS MOTHER EPIFANIA GOYANKO AND PETITIONERS COMMON LAW HUSBAND, JOSEPH GOYANKO, SR., NOR THE EXCLUSIVE OR CAPITAL PROPERTY OF THE LATTER AT ANYTIME BEFORE THE SAME WAS VALIDLY ACQUIRED BY PETITIONER. II. . . . NOT FINDING THAT A JURIDICAL RELATION OF TRUST AS PROVIDED FOR UNDER ARTICLES 1448 AND 1450 OF THE NEW CIVIL CODE CAN VALIDLY EXIST BETWEEN COMMON LAW SPOUSES. III. . . . NOT FINDING THAT A CONVEYANCE OVER A PROPERTY MADE BY A TRUSTEE, WHO BECAME AS SUCH IN CONTEMPLATION OF LAW, AND WHO HAPPENS TO BE A COMMON LAW HUSBAND OF THE BENEFICIARY, IS NOT A VIOLATION OF A STATE POLICY ON PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW SPOUSES. IV. . . . ALLOWING RESPONDENTS TO ABANDON THEIR ORIGINAL THEORY OF THEIR CASE DURING APPEAL.10 The pertinent provisions of the Civil Code which apply to the present case read: ART. 1352. Contracts without cause, or with unlawful cause, produce no effect whatever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy. ART. 1409. The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or fictitious; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. ARTICLE 1490. The husband and wife cannot sell property to each other, except: (1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation of property under Article 191. (Underscoring supplied) The proscription against sale of property between spouses applies even to common law relationships. So this Court ruled in Calimlim-Canullas v. Hon. Fortun, etc., et al.:11 Anent the second issue, we find that the contract of sale was null and void for being contrary to morals and public policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home where

his wife and children lived and from whence they derived their support. The sale was subversive of the stability of the family, a basic social institution which public policy cherishes and protects. Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purposes is contrary to law, morals, good customs, public order, or public policy are void and inexistent from the very beginning. Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy." Additionally, the law emphatically prohibits the spouses from selling property to each other subject to certain exceptions.1wphi1 Similarly, donations between spouses during marriage are prohibited. And this is so because if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by public interest and their criterion must be imposed upon the will of the parties. . . .12 (Italics in the original; emphasis and underscoring supplied) As the conveyance in question was made by Goyangko in favor of his common- law-wife-herein petitioner, it was null and void. Petitioners argument that a trust relationship was created between Goyanko as trustee and her as beneficiary as provided in Articles 1448 and 1450 of the Civil Code which read: ARTICLE 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child. ARTICLE 1450. If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom it is paid. The latter may redeem the property and compel a conveyance thereof to him. does not persuade. For petitioners testimony that it was she who provided the purchase price is uncorroborated. That she may have been considered the breadwinner of the family and that there was proof that she earned a living do not conclusively clinch her claim. As to the change of theory by respondents from forgery of their fathers signature in the deed of sale to sale contrary to public policy, it too does not persuade. Generally, a party in a litigation is not permitted to freely and substantially change the theory of his case so as not to put the other party to undue disadvantage by not accurately and timely apprising him of what he is up against,13 and to ensure that the latter is given the opportunity during trial to refute all allegations against him by presenting evidence to the contrary. In the present case, petitioner cannot be said to have been put to undue disadvantage and to have been denied the chance to refute all the allegations against her. For the nullification of the sale is anchored on its illegality per se, it being violative of the above-cited Articles 1352, 1409 and 1490 of the Civil Code. WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner. SO ORDERED CONCHITA Associate Justice WE CONCUR: G.R. No. 157434 September 19, 2006 CARPIO MORALES

SPOUSES CLARO and NIDA BAUTISTA, petitioners, vs. BERLINDA F. SILVA, Represented by HERMES J. DORADO, in his capacity as Attorney-In-Fact,respondent.

DECISION AUSTRIA-MARTINEZ, J.: To establish his status as a buyer for value in good faith, a person dealing with land registered in the name of and occupied by the seller need only show that he relied on the face of the seller's certificate of title. 1 But for a person dealing with land registered in the name of and occupied by the seller whose capacity to sell is restricted, such as by Articles 166 2 and 1733 of the Civil Code or Article 1244 of the Family Code, he must show that he inquired into the latter's capacity to sell in order to establish himself as a buyer for value in good faith.5 The extent of his inquiry depends on the proof of capacity of the seller. If the proof of capacity consists of a special power of attorney duly notarized, mere inspection of the face of such public document already constitutes sufficient inquiry. If no such special power of attorney is provided or there is one but there appear flaws in its notarial acknowledgmentmere inspection of the document will not do; the buyer must show that his investigation went beyond the document and into the circumstances of its execution. Appealed by Petition for Review on Certiorari under Rule 45 of the Rules of Court are the November 21, 2001 Decision 6 of the Court of Appeals (CA) in CA-G.R. CV No. 487677 which affirmed in toto the January 10, 1995 Decision of the Regional Trial Court (RTC) in Civil Case No. 3091-V-89, and the February 27, 2003 CA Resolution which denied the motion for reconsideration. Civil Case No. 3091-V-89 is a Complaint for Annulment of Deed of Absolute Sale and Transfer Certificate of Title (TCT) No. V2765, Reconveyance and Damages filed with the RTC, Branch 171, Valenzuela, Metro Manila by Berlina F. Silva (Berlina), through Hermes Dorado (Dorado) as Attorney-in-Fact, against Spouses Claro and Nida Bautista (Spouses Bautista). Spouses Bautista filed their Answer8 and a Third-Party Complaint against Berlina's husband, Pedro M. Silva (Pedro).9 In an Order dated August 6, 1991, the RTC declared third-party defendant Pedro in default for failure to file an answer to the Third-Party Complaint.10 The undisputed facts of the case, as found by the RTC, are as follows: 1. That Transfer Certificate of Title No. B-37189 of the Registry of Deeds for xxx Metro Manila District III over a parcel of land (Lot 42, Block 10, of the subdivision plan (LRC) Psd-210217, Sheet 2, being a portion of Lot 903, Malinta Estate, LRC Record No. 5941) situated in xxx Barrio of Parada, Valenzuela, Metro Manila, containing an area of 216 square meters, more or less, was registered in the names of Spouses Berlina F. Silva and Pedro M. Silva on August 14, 1980; 2. That on March 3, 1988, Pedro M. Silva, for himself and as attorney-in-fact of his wife Berlina F. Silva, thru a Special Power of Attorney purportedly executed on November 18, 1987 by Berlina F. Silva in his favor, signed and executed a Deed of Absolute Sale over the said parcel of land covered by Transfer Certificate of Title No. B-37189 in favor of defendants-spouses Claro Bautista and Nida Bautista; and 3. That as a consequence, Transfer Certificate of Title No. 37189 was cancelled and in lieu thereof, Transfer Certificate of Title No. V-2765 of the Registry of Deeds for the Valenzuela Branch was issued in the names of Spouses Claro Bautista and Nida Bautista on March 4, 1988.11 Based on the evidence presented, the RTC also found that the signature appearing on the Special Power of Attorney (SPA) as that of Berlina Silva is a forgery, and that consequently the Deed of Absolute Sale executed by Pedro in favor of Spouses Bautista is not authorized by Berlina.12 The RTC rendered judgment on January 10, 1995, the decretal portion of which reads: WHEREFORE, Judgment is hereby rendered: 1. Declaring the Deed of Absolute Sale dated March 3, 1988 executed by Pedro M. Silva, for himself and as attorney-infact of Berlina F. Silva, in favor of defendants-spouses Claro Bautista and Nida Bautista over the parcel of land, described and covered by Transfer Certificate of Title No. B-37189 Metro Manila District III, null and void and the resulting Transfer Certificate of Title No. V-2765 of Valenzuela Registry in the name of Spouses Claro Bautista and Nida Bautista cancelled and that Transfer Certificate of Title No. B-37189 reinstated. 2. Ordering defendants to reconvey the property covered by the said Transfer Certificate of Title No. V-2765 together with the improvements thereon to the plaintiff. 3. Condemning the defendants to pay the plaintiff the sum of P5,000.00 in the concept of reasonable attorney's fees and the costs of suit. Defendants' counterclaim is dismissed.

Judgment on default is hereby entered in favor of the third-party plaintiffs Spouses Claro Bautista and Nida Bautista against third-party defendants Pedro M. Silva, condemning the third-party defendant Pedro Silva to indemnify/pay third-party plaintiffs Spouses Claro Bautista and Nida Bautista the amount of Seventy Thousand Pesos (P70,000.00) the contract price of the sale of the property, with interest at the legal rate from the date of the execution of the said document on March 3, 1988 until the amount is fully paid and for whatever amount that the thirdparty plaintiffs were adjudged and paid to the plaintiff by reason of this decision and the costs of suit. SO ORDERED.13 Spouses Bautista filed an appeal with the CA which, in its November 21, 2001 Decision, affirmed in toto the RTC decision;14 and, in a Resolution dated February 27, 2003, denied the Motion for Reconsideration.15 Hence, the herein petition filed by Spouses Bautista praying that the CA Decision and Resolution be annulled and set aside on the following grounds: I. Respondent as represented by Hermes Dorado in his capacity as attorney-in-fact has no legal authority to file action against spouses petitioners. II. The petitioners are considered as purchasers in good faith and for value having relied upon a Special Power of Attorney which appears legal, valid and genuine on its face. III. Gratia argumenti that the special power of attorney is a forgery and the deed of sale executed by the husband is null and void, the nullity [thereof] does not include the one half share of the husband.16 The petition fails for lack of merit. As to the first ground, petitioners argue that for lack of authority of Dorado to represent respondent, the latter's Complaint failed to state a cause of action and should have been dismissed.17 The argument holds no water. True, there was no written authority for Dorado to represent respondent in the filing of her Complaint. However, no written authorization of Dorado was needed because the Complaint was actually filed by respondent, and not merely through Dorado as her attorney-in-fact. As correctly observed by the CA, respondent herself signed the verification attached to the Complaint.18 She stated therein that she is the plaintiff in Civil Case No. 3091-V-89 and that she caused the preparation of the Complaint.19 Respondent also personally testified on the facts alleged in her Complaint.20 In reality, respondent acted for and by herself, and not through any representative, when she filed the Complaint. Therefore, respondent being the real party in interest, by virtue of the then prevailing Articles 166 21 and 17322 of the Civil Code, the Complaint she filed sufficiently stated a cause of action. The sufficiency of the Complaint was not affected by the inclusion of Dorado as party representative for this was an obvious error which, under Section 11 of Rule 3,23 is not a ground for dismissal, as it may be corrected by the court, on its own initiative and at any stage of the action, by dropping such party from the complaint.24 Anent the second ground, there is no merit to petitioners' claim that they are purchasers in good faith. That the SPA is a forgery is a finding of the RTC and the CA on a question of fact.25 The same is conclusive upon the Court, 26 especially as it is based on the expert opinion of the NBI which constitutes more than clear, positive and convincing evidence that respondent did not sign the SPA, and on the uncontroverted Certification of Dorado that respondent was in Germany working as a nurse when the SPA was purportedly executed in 1987. The SPA being a forgery, it did not vest in Pedro any authority to alienate the subject property without the consent of respondent. Absent such marital consent, the deed of sale was a nullity.27 But then petitioners disclaim any participation in the forgery of the SPA or in the unauthorized sale of the subject property. They are adamant that even with their knowledge that respondent was in Germany at the time of the sale, they acted in good faith when they bought the subject property from Pedro alone because the latter was equipped with a SPA which contains a notarial acknowledgment that the same is valid and authentic.28 They invoke the status of buyers in good faith whose registered title in the property is already indefeasible and against which the remedy of reconveyance is no longer available.29 In the alternative, petitioners offer that should respondent be declared entitled to reconveyance, let it affect her portion only but not that of Pedro.30 Whether or not petitioners are buyers for value in good faith is a question of fact not cognizable by us in a petition for review.31 We resolve only questions of law; we do not try facts nor examine testimonial or documentary evidence on record. We leave these to the trial and appellate courts to whose findings and conclusions we accord great weight and respect, especially

when their findings concur.32 We may have at times reversed their findings and conclusions but we resort to this only under exceptional circumstances as when it is shown that said courts failed to take into account certain relevant facts which, if properly considered, would justify a different conclusion.33 No such exceptional circumstance obtains in the present case for we find the conclusions of the RTC and CA supported by the established facts and applicable law. However, we do not fully subscribe to some of their views on why petitioners cannot be considered in good faith, as we will discuss below. A holder of registered title may invoke the status of a buyer for value in good faith as a defense against any action questioning his title.34 Such status, however, is never presumed but must be proven by the person invoking it. 35 A buyer for value in good faith is one who buys property of another, without notice that some other person has a right to, or interest in, such property and pays full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. He buys the property with the well-founded belief that the person from whom he receives the thing had title to the property and capacity to convey it.36 To prove good faith, a buyer of registered and titled land need only show that he relied on the face of the title to the property. He need not prove that he made further inquiry for he is not obliged to explore beyond the four corners of the title. 37 Such degree of proof of good faith, however, is sufficient only when the following conditions concur: first, the seller is the registered owner of the land; 38 second, the latter is in possession thereof;39 and third, at the time of the sale, the buyer was not aware of any claim or interest of some other person in the property, 40 or of any defect or restriction in the title of the seller or in his capacity to convey title to the property.41 Absent one or two of the foregoing conditions, then the law itself puts the buyer on notice and obliges the latter to exercise a higher degree of diligence by scrutinizing the certificate of title and examining all factual circumstances in order to determine the seller's title and capacity to transfer any interest in the property.42 Under such circumstance, it is no longer sufficient for said buyer to merely show that he relied on the face of the title; he must now also show that he exercised reasonable precaution by inquiring beyond the title.43 Failure to exercise such degree of precaution makes him a buyer in bad faith.44 In the present case, petitioners were dealing with a seller (Pedro) who had title to and possession of the land but, as indicated on the face of his title, whose capacity to sell was restricted, in that the marital consent of respondent is required before he could convey the property. To prove good faith then, petitioners must show that they inquired not only into the title of Pedro but also into his capacity to sell. According to petitioners, to determine Pedro's capacity to sell, they conducted the following forms of inquiry: first, they inspected the photocopy of the SPA presented to them by Pedro;45 second, they brought said copy to Atty. Lorenzo Lucero (the notary public who prepared the deed of sale) and asked whether it was genuine; 46 and third, they inspected the original copy of the SPA after they advanced payment of Php55,000.00 to Pedro.47 Essentially, petitioners relied on the SPA, specifically on its notarial acknowledgment which states that respondent appeared before the notary public and acknowledged having executed the SPA in favor of Pedro. The RTC and CA, however, found such inquiry superficial. They expected of petitioners an investigation not only into the whereabouts of respondent at the time of the execution of the SPA 48 but also into the genuineness of the signature appearing on it.49 We find such requirements of the RTC and CA too stringent that to adopt them would be to throw commerce into madness where buyers run around to probe the circumstances surrounding each piece of sales document while sellers scramble to produce evidence of its good order. Remember that it is not just any scrap of paper that is under scrutiny but a SPA, the execution and attestation of which a notary public has intervened. To what extent, therefore, should an inquiry into a notarized special power of attorney go in order for one to qualify as a buyer for value in good faith? We agree with one author who said: x x x To speak of "notice", as applied to the grantee, is to follow the language of the Statue of Elizabeth. Its proviso protects the man who purchases "upon good consideration and bona fide * * * not having at the time * * * any manner of notice or knowledge." The term "notice", however, is really but an approach to the test of good faith, and all modern legislation tends toward that point. Thus, some present day statutes (outside of the Uniform Law) may speak of notice, actual and constructive, and define both terms, but they should be "liberally construed, so as to protect bona fide purchaser for value." They may require the grantee to have "knowledge" of the debtor's intent, but save for technical purposes of pleading, the term is read in the light of the rules we are studying. It comes always to a question of the grantee's good faith as distinct from mere negligence. 50 There must, indeed, be more than negligence. There must be a conscious turning away from the subject x x x. As put by the Supreme Court, the grantee must take the consequences if he "chooses to remain ignorant of what the

necessities of the case require him to know." The search, therefore, is described by the question, did the grantee make a choice between not knowing and finding out the truth; or were the circumstances such that he was not faced with that choice? (Emphasis ours) This means that no automatic correlation exists between the state of forgery of a document and the bad faith of the buyer who relies on it. A test has to be done whether the buyer had a choice between knowing the forgery and finding it out, or he had no such choice at all. When the document under scrutiny is a special power of attorney that is duly notarized, we know it to be a public document where the notarial acknowledgment is prima facie evidence of the fact of its due execution. 51 A buyer presented with such a document would have no choice between knowing and finding out whether a forger lurks beneath the signature on it. The notarial acknowledgment has removed that choice from him and replaced it with a presumption sanctioned by law that the affiant appeared before the notary public and acknowledged that he executed the document, understood its import and signed it. In reality, he is deprived of such choice not because he is incapable of knowing and finding out but because, under our notarial system, he has been given the luxury of merely relying on the presumption of regularity of a duly notarized SPA. And he cannot be faulted for that because it is precisely that fiction of regularity which holds together commercial transactions across borders and time. In sum, all things being equal, a person dealing with a seller who has possession and title to the property but whose capacity to sell is restricted, qualifies as a buyer in good faith if he proves that he inquired into the title of the seller as well as into the latter's capacity to sell; and that in his inquiry, he relied on the notarial acknowledgment found in the seller's duly notarized special power of attorney. He need not prove anything more for it is already the function of the notarial acknowledgment to establish the appearance of the parties to the document, its due execution and authenticity. 52 Note that we expressly made the foregoing rule applicable only under the operative words "duly notarized" and "all things being equal." Thus, said rule should not apply when there is an apparent flaw afflicting the notarial acknowledgment of the special power of attorney as would cast doubt on the due execution and authenticity of the document; or when the buyer has actual notice of circumstances outside the document that would render suspect its genuineness. In Domingo v. Reed,53 we found that the special power of attorney relied upon by the buyers contained a defective notarial acknowledgment in that it stated there that only the agent-wife signed the document before the notary public while the principal-husband did not. Such flaw rendered the notarial acknowledgment of no effect and reduced the special power of attorney into a private document. We declared the buyer who relied on the private special power of attorney a buyer in bad faith. In Lao v. Villones-Lao,54 and Estacio v. Jaranilla ,55 we found that the buyers knew of circumstances extrinsic to the special power of attorney which put in question the actual execution of said document. In Domingo Lao, the buyer knew that the agent-wife was estranged from the principal-husband but was living within the same city. In the Estacio case, we found admissions by the buyers that they knew that at the time of the purported execution of the special power of attorney, the alleged principal was not in the Philippines. In both cases we held that the buyers were not in good faith, not because we found any outward defect in the notarial acknowledgment of the special powers of attorney, but because the latter had actual notice of facts that should have put them on deeper inquiry into the capacity to sell of the seller. In the present case, petitioners knew that Berlina was in Germany at the time they were buying the property and the SPA relied upon by petitioners has a defective notarial acknowledgment. The SPA was a mere photocopy56and we are not convinced that there ever was an original copy of said SPA as it was only this photocopy that was testified to by petitioner Nida Bautista and offered into evidence by her counsel.57 We emphasize this fact because it was actually this photocopy that was relied upon by petitioners before they entered into the deed of sale with Pedro. As admitted to by petitioner Nida Bautista, upon inspection of the photocopy of the SPA, they gave Pedro an advanced payment of Php55,000.00; this signifies that, without further investigation on the SPA, petitioners had agreed to buy the subject property from Pedro. But then said photocopy of the SPA contains no notarial seal. A notarial seal is a mark, image or impression on a document which would indicate that the notary public has officially signed it.58 There being no notarial seal, the signature of the notary public on the notarial certificate was therefore incomplete. The notarial certificate being deficient, it was as if the notarial acknowledgment was unsigned. The photocopy of the SPA has no notarial acknowledgment to speak of. It was a mere private document which petitioners cannot foist as a banner of good faith. All told, it was not sufficient evidence of good faith that petitioners merely relied on the photocopy of the SPA as this turned out to be a mere private document. They should have adduced more evidence that they looked beyond it. They did not. Instead, they took no precautions at all. They verified with Atty. Lucero whether the SPA was authentic but then the latter was not the notary public who prepared the document. Worse, they purposely failed to inquire who was the notary public who prepared the SPA. Finally, petitioners conducted the transaction in haste. It took them all but three days or from March 2 to 4, 1988 to enter into the deed of sale, notwithstanding the restriction on the capacity to sell of Pedro. 59 In no way then may petitioners qualify as buyers for value in good faith.

That said, we come to the third issue on whether petitioners may retain the portion of Pedro Silva in the subject property. Certainly not. It is well-settled that the nullity of the sale of conjugal property contracted by the husband without the marital consent of the wife affects the entire property, not just the share of the wife. 60 We see no reason to deviate from this rule. WHEREFORE, the petition is hereby DENIED. The Decision dated November 21, 2001 and Resolution dated February 27, 2003 of the Court of Appeal are AFFIRMED. Costs against petitioners. SO ORDERED. Panganiban, C.J., Chairperson, Ynares-Santiago, Callejo, Sr., Chico-Nazario, J.J., concur.

G.R. No. 156364

September 3, 2007 BERNHARD HULST, petitioner,

JACOBUS vs. PR BUILDERS, INC., respondent. DECISION AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the Decision 1 dated October 30, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 60981. The facts: Jacobus Bernhard Hulst (petitioner) and his spouse Ida Johanna Hulst-Van Ijzeren (Ida), Dutch nationals, entered into a Contract to Sell with PR Builders, Inc. (respondent), for the purchase of a 210-sq m residential unit in respondent's townhouse project in Barangay Niyugan, Laurel, Batangas. When respondent failed to comply with its verbal promise to complete the project by June 1995, the spouses Hulst filed before the Housing and Land Use Regulatory Board (HLURB) a complaint for rescission of contract with interest, damages and attorney's fees, docketed as HLRB Case No. IV6-071196-0618. On April 22, 1997, HLURB Arbiter Ma. Perpetua Y. Aquino (HLURB Arbiter) rendered a Decision 2 in favor of spouses Hulst, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant, rescinding the Contract to Sell and ordering respondent to: 1) Reimburse complainant the sum of P3,187,500.00, representing the purchase price paid by the complainants to P.R. Builders, plus interest thereon at the rate of twelve percent (12%) per annum from the time complaint was filed; 2) Pay complainant the sum of P297,000.00 as actual damages; 3) Pay complainant the sum of P100,000.00 by way of moral damages; 4) Pay complainant the sum of P150,000.00 as exemplary damages; 5) P50,000.00 as attorney's fees and for other litigation expenses; and 6) Cost of suit. SO ORDERED.3 Meanwhile, spouses Hulst divorced. Ida assigned her rights over the purchased property to petitioner.4 From then on, petitioner alone pursued the case.

On August 21, 1997, the HLURB Arbiter issued a Writ of Execution addressed to the Ex-Officio Sheriff of the Regional Trial Court of Tanauan, Batangas directing the latter to execute its judgment.5 On April 13, 1998, the Ex-Officio Sheriff proceeded to implement the Writ of Execution. However, upon complaint of respondent with the CA on a Petition for Certiorari and Prohibition, the levy made by the Sheriff was set aside, requiring the Sheriff to levy first on respondent's personal properties.6 Sheriff Jaime B. Ozaeta (Sheriff) tried to implement the writ as directed but the writ was returned unsatisfied.7 On January 26, 1999, upon petitioner's motion, the HLURB Arbiter issued an Alias Writ of Execution. 8 On March 23, 1999, the Sheriff levied on respondent's 15 parcels of land covered by 13 Transfer Certificates of Title (TCT)9 in Barangay Niyugan, Laurel, Batangas.10 In a Notice of Sale dated March 27, 2000, the Sheriff set the public auction of the levied properties on April 28, 2000 at 10:00 a.m..11 Two days before the scheduled public auction or on April 26, 2000, respondent filed an Urgent Motion to Quash Writ of Levy with the HLURB on the ground that the Sheriff made an overlevy since the aggregate appraised value of the levied properties at P6,500.00 per sq m is P83,616,000.00, based on the Appraisal Report12 of Henry Hunter Bayne Co., Inc. dated December 11, 1996, which is over and above the judgment award.13 At 10:15 a.m. of the scheduled auction date of April 28, 2000, respondent's counsel objected to the conduct of the public auction on the ground that respondent's Urgent Motion to Quash Writ of Levy was pending resolution. Absent any restraining order from the HLURB, the Sheriff proceeded to sell the 15 parcels of land. Holly Properties Realty Corporation was the winning bidder for all 15 parcels of land for the total amount of P5,450,653.33. The sum of P5,313,040.00 was turned over to the petitioner in satisfaction of the judgment award after deducting the legal fees. 14 At 4:15 p.m. of the same day, while the Sheriff was at the HLURB office to remit the legal fees relative to the auction sale and to submit the Certificates of Sale15 for the signature of HLURB Director Belen G. Ceniza (HLURB Director), he received the Order dated April 28, 2000 issued by the HLURB Arbiter to suspend the proceedings on the matter.16 Four months later, or on August 28, 2000, the HLURB Arbiter and HLURB Director issued an Order setting aside the sheriff's levy on respondent's real properties,17 reasoning as follows: While we are not making a ruling that the fair market value of the levied properties is PhP6,500.00 per square meter (or an aggregate value of PhP83,616,000.00) as indicated in the Hunter Baynes Appraisal Report, we definitely cannot agree with the position of the Complainants and the Sheriff that the aggregate value of the 12,864.00-square meter levied properties is only around PhP6,000,000.00. The disparity between the two valuations are [sic] so egregious that the Sheriff should have looked into the matter first before proceeding with the execution sale of the said properties, especially when the auction sale proceedings was seasonably objected by Respondent's counsel, Atty. Noel Mingoa. However, instead of resolving first the objection timely posed by Atty. Mingoa, Sheriff Ozaete totally disregarded the objection raised and, posthaste, issued the corresponding Certificate of Sale even prior to the payment of the legal fees (pars. 7 & 8, Sheriff's Return). While we agree with the Complainants that what is material in an execution sale proceeding is the amount for which the properties were bidded and sold during the public auction and that, mere inadequacy of the price is not a sufficient ground to annul the sale, the court is justified to intervene where the inadequacy of the price shocks the conscience (Barrozo vs. Macaraeg, 83 Phil. 378). The difference between PhP83,616,000.00 and Php6,000,000.00 is PhP77,616,000.00 and it definitely invites our attention to look into the proceedings had especially so when there was only one bidder, the HOLLY PROPERTIES REALTY CORPORATION represented by Ma, Chandra Cacho (par. 7, Sheriff's Return) and the auction sale proceedings was timely objected by Respondent's counsel (par. 6, Sheriff's Return) due to the pendency of the Urgent Motion to Quash the Writ of Levy which was filed prior to the execution sale. Besides, what is at issue is not the value of the subject properties as determined during the auction sale, but the determination of the value of the properties levied upon by the Sheriff taking into consideration Section 9(b) of the 1997 Rules of Civil Procedure x x x. xxxx It is very clear from the foregoing that, even during levy, the Sheriff has to consider the fair market value of the properties levied upon to determine whether they are sufficient to satisfy the judgment, and any levy in excess of the judgment award is void (Buan v. Court of Appeals, 235 SCRA 424). x x x x18 (Emphasis supplied).

The dispositive portion of the Order reads: WHEREFORE, the levy on the subject properties made by the Ex-Officio Sheriff of the RTC of Tanauan, Batangas, is hereby SET ASIDE and the said Sheriff is hereby directed to levy instead Respondent's real properties that are reasonably sufficient to enforce its final and executory judgment, this time, taking into consideration not only the value of the properties as indicated in their respective tax declarations, but also all the other determinants at arriving at a fair market value, namely: the cost of acquisition, the current value of like properties, its actual or potential uses, and in the particular case of lands, their size, shape or location, and the tax declarations thereon. SO ORDERED.19 A motion for reconsideration being a prohibited pleading under Section 1(h), Rule IV of the 1996 HLURB Rules and Procedure, petitioner filed a Petition for Certiorari and Prohibition with the CA on September 27, 2000. On October 30, 2002, the CA rendered herein assailed Decision 20 dismissing the petition. The CA held that petitioner's insistence that Barrozo v. Macaraeg21 does not apply since said case stated that "when there is a right to redeem inadequacy of price should not be material" holds no water as what is obtaining in this case is not "mere inadequacy," but an inadequacy that shocks the senses; that Buan v. Court of Appeals22 properly applies since the questioned levy covered 15 parcels of land posited to have an aggregate value of P83,616,000.00 which shockingly exceeded the judgment debt of only around P6,000,000.00. Without filing a motion for reconsideration,23 petitioner took the present recourse on the sole ground that: THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ARBITER'S ORDER SETTING ASIDE THE LEVY MADE BY THE SHERIFF ON THE SUBJECT PROPERTIES.24 Before resolving the question whether the CA erred in affirming the Order of the HLURB setting aside the levy made by the sheriff, it behooves this Court to address a matter of public and national importance which completely escaped the attention of the HLURB Arbiter and the CA: petitioner and his wife are foreign nationals who are disqualified under the Constitution from owning real property in their names. Section 7 of Article XII of the 1987 Constitution provides: Sec. 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain . (Emphasis supplied). The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of the public domain. Private land may be transferred or conveyed only to individuals or entities "qualified to acquire lands of the public domain." The 1987 Constitution reserved the right to participate in the disposition, exploitation, development and utilization of lands of the public domain for Filipino citizens25 or corporations at least 60 percent of the capital of which is owned by Filipinos.26 Aliens, whether individuals or corporations, have been disqualified from acquiring public lands; hence, they have also been disqualified from acquiring private lands.27 Since petitioner and his wife, being Dutch nationals, are proscribed under the Constitution from acquiring and owning real property, it is unequivocal that the Contract to Sell entered into by petitioner together with his wife and respondent is void. Under Article 1409 (1) and (7) of the Civil Code, all contracts whose cause, object or purpose is contrary to law or public policy and those expressly prohibited or declared void by law are inexistent and void from the beginning. Article 1410 of the same Code provides that the action or defense for the declaration of the inexistence of a contract does not prescribe. A void contract is equivalent to nothing; it produces no civil effect.28 It does not create, modify or extinguish a juridical relation.29 Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in pari delicto or "in equal fault."30 In pari delicto is "a universal doctrine which holds that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other."31 This rule, however, is subject to exceptions32 that permit the return of that which may have been given under a void contract to: (a) the innocent party (Arts. 1411-1412, Civil Code);33 (b) the debtor who pays usurious interest (Art. 1413, Civil Code);34 (c) the party repudiating the void contract before the illegal purpose is accomplished or before damage is caused to a third person and if public interest is subserved by allowing recovery (Art. 1414, Civil Code); 35 (d) the incapacitated party if the interest of justice so demands (Art. 1415, Civil Code);36 (e) the party for whose protection the prohibition by law is intended if the agreement is not illegal per se but merely prohibited and if public policy would be enhanced by permitting recovery (Art. 1416, Civil Code);37 and (f) the party for whose benefit the law has been intended such as in price ceiling laws (Art. 1417, Civil Code)38 and labor laws (Arts. 1418-1419, Civil Code).39

It is significant to note that the agreement executed by the parties in this case is a Contract to Sell and not a contract of sale. A distinction between the two is material in the determination of when ownership is deemed to have been transferred to the buyer or vendee and, ultimately, the resolution of the question on whether the constitutional proscription has been breached. In a contract of sale, the title passes to the buyer upon the delivery of the thing sold. The vendor has lost and cannot recover the ownership of the property until and unless the contract of sale is itself resolved and set aside. 40 On the other hand, a contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.41 In other words, in a contract to sell, the prospective seller agrees to transfer ownership of the property to the buyer upon the happening of an event, which normally is the full payment of the purchase price. But even upon the fulfillment of the suspensive condition, ownership does not automatically transfer to the buyer. The prospective seller still has to convey title to the prospective buyer by executing a contract of absolute sale.42 Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the petitioner when he filed the suit for rescission. While the intent to circumvent the constitutional proscription on aliens owning real property was evident by virtue of the execution of the Contract to Sell, such violation of the law did not materialize because petitioner caused the rescission of the contract before the execution of the final deed transferring ownership. Thus, exception (c) finds application in this case. Under Article 1414, one who repudiates the agreement and demands his money before the illegal act has taken place is entitled to recover. Petitioner is therefore entitled to recover what he has paid, although the basis of his claim for rescission, which was granted by the HLURB, was not the fact that he is not allowed to acquire private land under the Philippine Constitution. But petitioner is entitled to the recovery only of the amount of P3,187,500.00, representing the purchase price paid to respondent. No damages may be recovered on the basis of a void contract; being nonexistent, the agreement produces no juridical tie between the parties involved.43 Further, petitioner is not entitled to actual as well as interests thereon,44 moral and exemplary damages and attorney's fees. The Court takes into consideration the fact that the HLURB Decision dated April 22, 1997 has long been final and executory. Nothing is more settled in the law than that a decision that has acquired finality becomes immutable and unalterable and may no longer be modified in any respect even if the modification is meant to correct erroneous conclusions of fact or law and whether it was made by the court that rendered it or by the highest court of the land.45 The only recognized exceptions to the general rule are the correction of clerical errors, the so-called nunc pro tunc entries which cause no prejudice to any party, void judgments, and whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable.46 None of the exceptions is present in this case. The HLURB decision cannot be considered a void judgment, as it was rendered by a tribunal with jurisdiction over the subject matter of the complaint.47 Ineluctably, the HLURB Decision resulted in the unjust enrichment of petitioner at the expense of respondent. Petitioner received more than what he is entitled to recover under the circumstances. Article 22 of the Civil Code which embodies the maxim, nemo ex alterius incommode debet lecupletari (no man ought to be made rich out of another's injury), states: Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. The above-quoted article is part of the chapter of the Civil Code on Human Relations, the provisions of which were formulated as basic principles to be observed for the rightful relationship between human beings and for the stability of the social order; designed to indicate certain norms that spring from the fountain of good conscience; guides for human conduct that should run as golden threads through society to the end that law may approach its supreme ideal which is the sway and dominance of justice.48 There is unjust enrichment when a person unjustly retains a benefit at the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience.49 A sense of justice and fairness demands that petitioner should not be allowed to benefit from his act of entering into a contract to sell that violates the constitutional proscription. This is not a case of equity overruling or supplanting a positive provision of law or judicial rule. Rather, equity is exercised in this case "as the complement of legal jurisdiction [that] seeks to reach and to complete justice where courts of law, through the inflexibility of their rules and want of power to adapt their judgments to the special circumstances of cases, are incompetent to do so."50 The purpose of the exercise of equity jurisdiction in this case is to prevent unjust enrichment and to ensure restitution. Equity jurisdiction aims to do complete justice in cases where a court of law is unable to adapt its judgments to the special circumstances of a case because of the inflexibility of its statutory or legal jurisdiction. 51 The sheriff delivered to petitioner the amount of P5,313,040.00 representing the net proceeds (bidded amount isP5,450,653.33) of the auction sale after deducting the legal fees in the amount of P137,613.33.52 Petitioner is only entitled

to P3,187,500.00, the amount of the purchase price of the real property paid by petitioner to respondent under the Contract to Sell. Thus, the Court in the exercise of its equity jurisdiction may validly order petitioner to return the excess amount of P2,125,540.00. The Court shall now proceed to resolve the single issue raised in the present petition: whether the CA seriously erred in affirming the HLURB Order setting aside the levy made by the Sheriff on the subject properties. Petitioner avers that the HLURB Arbiter and Director had no factual basis for pegging the fair market value of the levied properties at P6,500.00 per sq m or P83,616,000.00; that reliance on the appraisal report was misplaced since the appraisal was based on the value of land in neighboring developed subdivisions and on the assumption that the residential unit appraised had already been built; that the Sheriff need not determine the fair market value of the subject properties before levying on the same since what is material is the amount for which the properties were bidded and sold during the public auction; that the pendency of any motion is not a valid ground for the Sheriff to suspend the execution proceedings and, by itself, does not have the effect of restraining the Sheriff from proceeding with the execution. Respondent, on the other hand, contends that while it is true that the HLURB Arbiter and Director did not categorically state the exact value of the levied properties, said properties cannot just amount to P6,000,000.00; that the HLURB Arbiter and Director correctly held that the value indicated in the tax declaration is not the sole determinant of the value of the property. The petition is impressed with merit. If the judgment is for money, the sheriff or other authorized officer must execute the same pursuant to the provisions of Section 9, Rule 39 of the Revised Rules of Court, viz: Sec. 9. Execution of judgments for money, how enforced. (a) Immediate payment on demand . - The officer shall enforce an execution of a judgment for money by demanding from the judgment obligor the immediate payment of the full amount stated in the writ of execution and all lawful fees. x x x (b) Satisfaction by levy. - If the judgment obligor cannot pay all or part of the obligation in cash, certified bank check or other mode of payment acceptable to the judgment obligee, the officer shall levy upon the properties of the judgment obligor of every kind and nature whatsoever which may be disposed of for value and not otherwise exempt from execution, giving the latter the option to immediately choose which property or part thereof may be levied upon, sufficient to satisfy the judgment. If the judgment obligor does not exercise the option, the officer shall first levy on the personal properties, if any, and then on the real properties if the personal properties are insufficient to answer for the judgment. The sheriff shall sell only a sufficient portion of the personal or real property of the judgment obligor which has been levied upon. When there is more property of the judgment obligor than is sufficient to satisfy the judgment and lawful fees, he must sell only so much of the personal or real property as is sufficient to satisfy the judgment and lawful fees. Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal property, may be levied upon in like manner and with like effect as under a writ of attachment (Emphasis supplied).53 Thus, under Rule 39, in executing a money judgment against the property of the judgment debtor, the sheriff shall levy on all property belonging to the judgment debtor as is amply sufficient to satisfy the judgment and costs, and sell the same paying to the judgment creditor so much of the proceeds as will satisfy the amount of the judgment debt and costs. Any excess in the proceeds shall be delivered to the judgment debtor unless otherwise directed by the judgment or order of the court.54 Clearly, there are two stages in the execution of money judgments. First, the levy and then the execution sale. Levy has been defined as the act or acts by which an officer sets apart or appropriates a part or the whole of a judgment debtor's property for the purpose of satisfying the command of the writ of execution. 55 The object of a levy is to take property into the custody of the law, and thereby render it liable to the lien of the execution, and put it out of the power of the judgment debtor to divert it to any other use or purpose.56 On the other hand, an execution sale is a sale by a sheriff or other ministerial officer under the authority of a writ of execution of the levied property of the debtor.57 In the present case, the HLURB Arbiter and Director gravely abused their discretion in setting aside the levy conducted by the Sheriff for the reason that the auction sale conducted by the sheriff rendered moot and academic the motion to quash the levy.

The HLURB Arbiter lost jurisdiction to act on the motion to quash the levy by virtue of the consummation of the auction sale. Absent any order from the HLURB suspending the auction sale, the sheriff rightfully proceeded with the auction sale. The winning bidder had already paid the winning bid. The legal fees had already been remitted to the HLURB. The judgment award had already been turned over to the judgment creditor. What was left to be done was only the issuance of the corresponding certificates of sale to the winning bidder. In fact, only the signature of the HLURB Director for that purpose was needed58 a purely ministerial act. A purely ministerial act or duty is one which an officer or tribunal performs in a given state of facts, in a prescribed manner, in obedience to the mandate of a legal authority, without regard for or the exercise of his own judgment upon the propriety or impropriety of the act done. If the law imposes a duty upon a public officer and gives him the right to decide how or when the duty shall be performed, such duty is discretionary and not ministerial. The duty is ministerial only when the discharge of the same requires neither the exercise of official discretion nor judgment. 59In the present case, all the requirements of auction sale under the Rules have been fully complied with to warrant the issuance of the corresponding certificates of sale. And even if the Court should go into the merits of the assailed Order, the petition is meritorious on the following grounds: Firstly, the reliance of the HLURB Arbiter and Director, as well as the CA, on Barrozo v. Macaraeg60 and Buan v. Court of Appeals61 is misplaced. The HLURB and the CA misconstrued the Court's pronouncements in Barrozo. Barrozo involved a judgment debtor who wanted to repurchase properties sold at execution beyond the one-year redemption period. The statement of the Court in Barrozo, that "only where such inadequacy shocks the conscience the courts will intervene," is at best a mere obiter dictum. This declaration should be taken in the context of the other declarations of the Court in Barrozo, to wit: Another point raised by appellant is that the price paid at the auction sale was so inadequate as to shock the conscience of the court. Supposing that this issue is open even after the one-year period has expired and after the properties have passed into the hands of third persons who may have paid a price higher than the auction sale money, the first thing to consider is that the stipulation contains no statement of the reasonable value of the properties; and although defendant' answer avers that the assessed value wasP3,960 it also avers that their real market value was P2,000 only. Anyway, mere inadequacy of price which was the complaint' allegation is not sufficient ground to annul the sale. It is only where such inadequacy shocks the conscience that the courts will intervene. x x x Another consideration is that the assessed value being P3,960 and the purchase price being in effect P1,864 (P464 sale price plus P1,400 mortgage lien which had to be discharged) the conscience is not shocked upon examining the prices paid in the sales in National Bank v. Gonzales, 45 Phil., 693 and Guerrero v. Guerrero, 57 Phil., 445, sales which were left undisturbed by this Court. Furthermore, where there is the right to redeem as in this case inadequacy of price should not be material because the judgment debtor may re-acquire the property or else sell his right to redeem and thus recover any loss he claims to have suffered by reason of the price obtained at the execution sale. x x x x (Emphasis supplied).62 In other words, gross inadequacy of price does not nullify an execution sale. In an ordinary sale, for reason of equity, a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks one's conscience as to justify the courts to interfere; such does not follow when the law gives the owner the right to redeem as when a sale is made at public auction,63 upon the theory that the lesser the price, the easier it is for the owner to effect redemption.64 When there is a right to redeem, inadequacy of price should not be material because the judgment debtor may re-acquire the property or else sell his right to redeem and thus recover any loss he claims to have suffered by reason of the price obtained at the execution sale.65 Thus, respondent stood to gain rather than be harmed by the low sale value of the auctioned properties because it possesses the right of redemption. More importantly, the subject matter in Barrozo is the auction sale, not the levy made by the Sheriff. The Court does not sanction the piecemeal interpretation of a decision. To get the true intent and meaning of a decision, no specific portion thereof should be isolated and resorted to, but the decision must be considered in its entirety. 66 As regards Buan, it is cast under an entirely different factual milieu. It involved the levy on two parcels of land owned by the judgment debtor; and the sale at public auction of one was sufficient to fully satisfy the judgment, such that the levy and attempted execution of the second parcel of land was declared void for being in excess of and beyond the original judgment award granted in favor of the judgment creditor. In the present case, the Sheriff complied with the mandate of Section 9, Rule 39 of the Revised Rules of Court, to "sell only a sufficient portion" of the levied properties "as is sufficient to satisfy the judgment and the lawful fees." Each of the 15 levied properties was successively bidded upon and sold, one after the other until the judgment debt and the lawful fees were fully satisfied. Holly Properties Realty Corporation successively bidded upon and bought each of the levied properties for the total amount of P5,450,653.33 in full satisfaction of the judgment award and legal fees.67

Secondly, the Rules of Court do not require that the value of the property levied be exactly the same as the judgment debt; it can be less or more than the amount of debt. This is the contingency addressed by Section 9, Rule 39 of the Rules of Court. In the levy of property, the Sheriff does not determine the exact valuation of the levied property. Under Section 9, Rule 39, in conjunction with Section 7, Rule 57 of the Rules of Court, the sheriff is required to do only two specific things to effect a levy upon a realty: (a) file with the register of deeds a copy of the order of execution, together with the description of the levied property and notice of execution; and (b) leave with the occupant of the property copy of the same order, description and notice.68 Records do not show that respondent alleged non-compliance by the Sheriff of said requisites. Thirdly, in determining what amount of property is sufficient out of which to secure satisfaction of the execution, the Sheriff is left to his own judgment. He may exercise a reasonable discretion, and must exercise the care which a reasonably prudent person would exercise under like conditions and circumstances, endeavoring on the one hand to obtain sufficient property to satisfy the purposes of the writ, and on the other hand not to make an unreasonable and unnecessary levy.69 Because it is impossible to know the precise quantity of land or other property necessary to satisfy an execution, the Sheriff should be allowed a reasonable margin between the value of the property levied upon and the amount of the execution; the fact that the Sheriff levies upon a little more than is necessary to satisfy the execution does not render his actions improper.70 Section 9, Rule 39, provides adequate safeguards against excessive levying. The Sheriff is mandated to sell so much only of such real property as is sufficient to satisfy the judgment and lawful fees. In the absence of a restraining order, no error, much less abuse of discretion, can be imputed to the Sheriff in proceeding with the auction sale despite the pending motion to quash the levy filed by the respondents with the HLURB. It is elementary that sheriffs, as officers charged with the delicate task of the enforcement and/or implementation of judgments, must, in the absence of a restraining order, act with considerable dispatch so as not to unduly delay the administration of justice; otherwise, the decisions, orders, or other processes of the courts of justice and the like would be futile. 71 It is not within the jurisdiction of the Sheriff to consider, much less resolve, respondent's objection to the continuation of the conduct of the auction sale. The Sheriff has no authority, on his own, to suspend the auction sale. His duty being ministerial, he has no discretion to postpone the conduct of the auction sale. Finally, one who attacks a levy on the ground of excessiveness carries the burden of sustaining that contention. 72In the determination of whether a levy of execution is excessive, it is proper to take into consideration encumbrances upon the property, as well as the fact that a forced sale usually results in a sacrifice; that is, the price demanded for the property upon a private sale is not the standard for determining the excessiveness of the levy.73 Here, the HLURB Arbiter and Director had no sufficient factual basis to determine the value of the levied property. Respondent only submitted an Appraisal Report, based merely on surmises. The Report was based on the projected value of the townhouse project after it shall have been fully developed, that is, on the assumption that the residential units appraised had already been built. The Appraiser in fact made this qualification in its Appraisal Report: "[t]he property subject of this appraisal has not been constructed. The basis of the appraiser is on the existing model units."74 Since it is undisputed that the townhouse project did not push through, the projected value did not become a reality. Thus, the appraisal value cannot be equated with the fair market value. The Appraisal Report is not the best proof to accurately show the value of the levied properties as it is clearly self-serving. Therefore, the Order dated August 28, 2000 of HLURB Arbiter Aquino and Director Ceniza in HLRB Case No. IV6-071196-0618 which set aside the sheriff's levy on respondent's real properties, was clearly issued with grave abuse of discretion. The CA erred in affirming said Order. WHEREFORE, the instant petition is GRANTED. The Decision dated October 30, 2002 of the Court of Appeals in CA-G.R. SP No. 60981 is REVERSED and SET ASIDE. The Order dated August 28, 2000 of HLURB Arbiter Ma. Perpetua Y. Aquino and Director Belen G. Ceniza in HLRB Case No. IV6-071196-0618 is declared NULL andVOID. HLURB Arbiter Aquino and Director Ceniza are directed to issue the corresponding certificates of sale in favor of the winning bidder, Holly Properties Realty Corporation. Petitioner is ordered to return to respondent the amount of P2,125,540.00, without interest, in excess of the proceeds of the auction sale delivered to petitioner. After the finality of herein judgment, the amount of P2,125,540.00 shall earn 6% interest until fully paid. SO ORDERED. Ynares-Santiago, Chairperson, Chico-Nazario, Nachura, Reyes, JJ., concur. ARTURO R. ABALOS, petitioner, vs. DR. GALICANO S. MACATANGAY, JR., respondent. DECISION TINGA, J.: The instant petition seeks a reversal of the Decision of the Court of Appeals in CA-G.R. CV No. 48355 entitled Dr. Galicano S. Macatangay, Jr. v. Arturo R. Abalos and Esther Palisoc-Abalos, promulgated on March 14, 2002. The appellate court reversed the trial courts decision which dismissed the action for specific performance filed by respondent, and ordere d petitioner and his wife to execute in favor of herein respondent a deed of sale over the subject property.

Spouses Arturo and Esther Abalos are the registered owners of a parcel of land with improvements located at Azucena St., Makati City consisting of about three hundred twenty-seven (327) square meters, covered by Transfer Certificate of Title (TCT) No. 145316 of the Registry of Deeds of Makati. Armed with a Special Power of Attorney dated June 2, 1988, purportedly issued by his wife, Arturo executed a Receipt and Memorandum of Agreement (RMOA) dated October 17, 1989, in favor of respondent, binding himself to sell to respondent the subject property and not to offer the same to any other party within thirty (30) days from date. Arturo acknowledged receipt of a check from respondent in the amount of Five Thousand Pesos (P5,000.00), representing earnest money for the subject property, the amount of which would be deducted from the purchase price of One Million Three Hundred Three Hundred Thousand Pesos (P1,300,000.00). Further, the RMOA stated that full payment would be effected as soon as possession of the property shall have been turned over to respondent. Subsequently, Arturos wife, Esther, executed a Special Power of Attorney dated October 25, 1989, appointing her si ster, Bernadette Ramos, to act for and in her behalf relative to the transfer of the property to respondent. Ostensibly, a marital squabble was brewing between Arturo and Esther at the time and to protect his interest, respondent caused the annotation of his adverse claim on the title of the spouses to the property on November 14, 1989. On November 16, 1989, respondent sent a letter to Arturo and Esther informing them of his readiness and willingness to pay the full amount of the purchase price. The letter contained a demand upon the spouses to comply with their obligation to turn over possession of the property to him. On the same date, Esther, through her attorney-in-fact, executed in favor of respondent, a Contract to Sell the property to the extent of her conjugal interest therein for the sum of six hundred fifty thousand pesos (P650,000.00) less the sum already received by her and Arturo. Esther agreed to surrender possession of the property to respondent within twenty (20) days from November 16, 1989, while the latter promised to pay the balance of the purchase price in the amount of one million two hundred ninety thousand pesos (P1,290,000.00) after being placed in possession of the property. Esther also obligated herself to execute and deliver to respondent a deed of absolute sale upon full payment. In a letter dated December 7, 1989, respondent informed the spouses that he had set aside the amount of One Million Two Hundred Ninety Thousand Pesos (P1,290,000.00) as evidenced by Citibank Check No. 278107 as full payment of the purchase price. He reiterated his demand upon them to comply with their obligation to turn over possession of the property. Arturo and Esther failed to deliver the property which prompted respondent to cause the annotation of another adverse claim on TCT No. 145316. On January 12, 1990, respondent filed a complaint for specific performance with damages against petitioners. Arturo filed his answer to the complaint while his wife was declared in default. The Regional Trial Court (RTC) dismissed the complaint for specific performance. It ruled that the Special Power of Attorney (SPA) ostensibly issued by Esther in favor of Arturo was void as it was falsified. Hence, the court concluded that the SPA could not have authorized Arturo to sell the property to respondent. The trial court also noted that the check issued by respondent to cover the earnest money was dishonored due to insufficiency of funds and while it was replaced with another check by respondent, there is no showing that the second check was issued as payment for the earnest money on the property. On appeal taken by respondent, the Court of Appeals reversed the decision of the trial court. It ruled that the SPA in favor of Arturo, assuming that it was void, cannot affect the transaction between Esther and respondent. The appellate court ratiocinated that it was by virtue of the SPA executed by Esther, in favor of her sister, that the sale of the property to respondent was effected. On the other hand, the appellate court considered the RMOA executed by Arturo in favor of respondent valid to effect the sale of Arturos conjugal share in the property. Dissatisfied with the appellate courts disposition of the case, petitioner seeks a reversal of its decision alleging that: I. The Court of Appeals committed serious and manifest error when it decided on the appeal without affording petitioner his right to due process. II. The Court of Appeals committed serious and manifest error in reversing and setting aside the findings of fact by the trial court. III. The Court of Appeals erred in ruling that a contract to sell is a contract of sale, and in ordering petitioner to execute a registrable form of deed of sale over the property in favor of respondent.[1] Petitioner contends that he was not personally served with copies of summons, pleadings, and processes in the appeal proceedings nor was he given an opportunity to submit an appellees brief. He alleges that his counsel was in the United States from 1994 to June 2000, and he never received any news or communication from him after the proceedings in the trial court were terminated. Petitioner submits that he was denied due process because he was not informed of the appeal proceedings, nor given the chance to have legal representation before the appellate court. We are not convinced. The essence of due process is an opportunity to be heard. Petitioners failure to participate in the appeal proceedings is not due to a cause imputable to the appellate court but because of petitioners own neglect in

ascertaining the status of his case. Petitioners counsel is equally negligent in failing to inform his client about the recent developments in the appeal proceedings. Settled is the rule that a party is bound by the conduct, negligence and mistakes of his counsel.[2] Thus, petitioners plea of denial of due process is downright baseless. Petitioner also blames the appellate court for setting aside the factual findings of the trial court and argues that factual findings of the trial court are given much weight and respect when supported by substantial evidence. He asserts that the sale between him and respondent is void for lack of consent because the SPA purportedly executed by his wife Esther is a forgery and therefore, he could not have validly sold the subject property to respondent. Next, petitioner theorizes that the RMOA he executed in favor of respondent was not perfected because the check representing the earnest money was dishonored. He adds that there is no evidence on record that the second check issued by respondent was intended to replace the first check representing payment of earnest money. Respondent admits that the subject property is co-owned by petitioner and his wife, but he objects to the allegations in the petition bearing a relation to the supposed date of the marriage of the vendors. He contends that the alleged date of marriage between petitioner and his wife is a new factual issue which was not raised nor established in the court a quo. Respondent claims that there is no basis to annul the sale freely and voluntarily entered into by the husband and the wife. The focal issue in the instant petition is whether petitioner may be compelled to convey the property to respondent under the terms of the RMOA and the Contract to Sell. At bottom, the resolution of the issue entails the ascertainment of the contractual nature of the two documents and the status of the contracts contained therein. Contracts, in general, require the presence of three essential elements: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. [3] Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation.[4] In a contract of sale, the seller must consent to transfer ownership in exchange for the price, the subject matter must be determinate, and the price must be certain in money or its equivalent.[5] Being essentially consensual, a contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price.[6] However, ownership of the thing sold shall not be transferred to the vendee until actual or constructive delivery of the property.[7] On the other hand, an accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of option.[8] An option merely grants a privilege to buy or sell within an agreed time and at a determined price. It is separate and distinct from that which the parties may enter into upon the consummation of the option.[9] A perfected contract of option does not result in the perfection or consummation of the sale; only when the option is exercised may a sale be perfected.[10] The option must, however, be supported by a consideration distinct from the price.[11] Perusing the RMOA, it signifies a unilateral offer of Arturo to sell the property to respondent for a price certain within a period of thirty days. The RMOA does not impose upon respondent an obligation to buy petitioners property, as in fact it does not even bear his signature thereon. It is quite clear that after the lapse of the thirty-day period, without respondent having exercised his option, Arturo is free to sell the property to another. This shows that the intent of Arturo is merely to grant respondent the privilege to buy the property within the period therein stated. There is nothing in the RMOA which indicates that Arturo agreed therein to transfer ownership of the land which is an essential element in a contract of sale. Unfortunately, the option is not binding upon the promissory since it is not supported by a consideration distinct from the price.[12] As a rule, the holder of the option, after accepting the promise and before he exercises his option, is not bound to buy. He is free either to buy or not to buy later. In Sanchez v. Rigos[13] we ruled that in an accepted unilateral promise to sell, the promissor is not bound by his promise and may, accordingly, withdraw it, since there may be no valid contract without a cause or consideration. Pending notice of its withdrawal, his accepted promise partakes of the nature of an offer to sell which, if acceded or consented to, results in a perfected contract of sale. Even conceding for the nonce that respondent had accepted the offer within the period stated and, as a consequence, a bilateral contract of purchase and sale was perfected, the outcome would be the same. To benefit from such situation, respondent would have to pay or at least make a valid tender of payment of the price for only then could he exact compliance with the undertaking of the other party.[14] This respondent failed to do. By his own admission, he merely informed respondent spouses of his readiness and willingness to pay. The fact that he had set aside a check in the amount of One Million Two Hundred Ninety Thousand Pesos (P1,290,000.00) representing the balance of the purchase price could not help his cause. Settled is the rule that tender of payment must be made in legal tender. A check is not legal tender, and therefore cannot constitute a valid tender of payment.[15] Not having made a valid tender of payment, respondents action for specific performance must fail. With regard to the payment of Five Thousand Pesos (P5,000.00), the Court is of the view that the amount is not earnest money as the term is understood in Article 1482 which signifies proof of the perfection of the contract of sale, but merely a guarantee that respondent is really interested to buy the property. It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale.[16] No reservation of ownership on the part of Arturo is necessary since, as previously stated, he has never agreed to transfer ownership of the property to respondent. Granting for the sake of argument that the RMOA is a contract of sale, the same would still be void not only for want of consideration and absence of respondents signature thereon, but also for lack of Esthers conformity thereto. Quite glaring is

the absence of the signature of Esther in the RMOA, which proves that she did not give her consent to the transaction initiated by Arturo. The husband cannot alienate any real property of the conjugal partnership without the wifes consent.[17] However, it was the Contract to Sell executed by Esther through her attorney-in-fact which the Court of Appeals made full use of. Holding that the contract is valid, the appellate court explained that while Esther did not authorize Arturo to sell the property, her execution of the SPA authorizing her sister to sell the land to respondent clearly shows her intention to convey her interest in favor of respondent. In effect, the court declared that the lack of Esthers consent to the sale made by Artu ro was cured by her subsequent conveyance of her interest in the property through her attorney-in-fact. We do not share the ruling. The nullity of the RMOA as a contract of sale emanates not only from lack of Esthers consent thereto but also from want of consideration and absence of respondents signature thereon. Such nullity cannot be obliterated by Esthers subsequent confirmation of the putative transaction as expressed in the Contract to Sell. Under the law, a void contract cannot be ratified[18] and the action or defense for the declaration of the inexistence of a contract does not prescribe. [19] A void contract produces no effect either against or in favor of anyoneit cannot create, modify or extinguish the juridical relation to which it refers.[20] True, in the Contract to Sell, Esther made reference to the earlier RMOA executed by Arturo in favor of respondent. However, the RMOA which Arturo signed is different from the deed which Esther executed through her attorneyin-fact. For one, the first is sought to be enforced as a contract of sale while the second is purportedly a contract to sell only. For another, the terms and conditions as to the issuance of title and delivery of possession are divergent. The congruence of the wills of the spouses is essential for the valid disposition of conjugal property. Where the conveyance is contained in the same document which bears the conformity of both husband and wife, there could be no question on the validity of the transaction. But when there are two documents on which the signatures of the spouses separately appear, textual concordance of the documents is indispensable. Hence, in this case where the wifes putative consent to the sale of conjugal property appears in a separate document which does not, however, contain the same terms and conditions as in the first document signed by the husband, a valid transaction could not have arisen. Quite a bit of elucidation on the conjugal partnership of gains is in order. Arturo and Esther appear to have been married before the effectivity of the Family Code. There being no indication that they have adopted a different property regime, their property relations would automatically be governed by the regime of conjugal partnership of gains.[21] The subject land which had been admittedly acquired during the marriage of the spouses forms part of their conjugal partnership.[22] Under the Civil Code, the husband is the administrator of the conjugal partnership. This right is clearly granted to him by law.[23] More, the husband is the sole administrator. The wife is not entitled as of right to joint administration.[24] The husband, even if he is statutorily designated as administrator of the conjugal partnership, cannot validly alienate or encumber any real property of the conjugal partnership without the wifes consent. [25] Similarly, the wife cannot dispose of any property belonging to the conjugal partnership without the conformity of the husband. The law is explicit that the wife cannot bind the conjugal partnership without the husbands consent, except in cases provided by law. [26] More significantly, it has been held that prior 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.[27] 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.[28] In not a few cases, we ruled that the sale by the husband of property belonging to the conjugal partnership without the consent of the wife when there is no showing that the latter is incapacitated is void ab initio because it is in contravention of the mandatory requirements of Article 166 of the Civil Code.[29] Since Article 166 of the Civil Code requires the consent of the wife before the husband may alienate or encumber any real property of the conjugal partnership, it follows that acts or transactions executed against this mandatory provision are void except when the law itself authorizes their validity. [30] Quite recently, in San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals ,[31] we ruled that neither spouse could alienate in favor of another, his or her interest in the partnership or in any property belonging to it, or ask for partition of the properties before the partnership itself had been legally dissolved. Nonetheless, alienation of the share of each spouse in the conjugal partnership could be had after separation of property of the spouses during the marriage had been judicially decreed, upon their petition for any of the causes specified in Article 191[32] of the Civil Code in relation to Article 214[33] thereof. As an exception, the husband may dispose of conjugal property without the wifes consent if such sale is necessary to answer for conjugal liabilities mentioned in Articles 161 and 162 of the Civil Code. [34] In Tinitigan v. Tinitigan, Sr.,[35] the Court ruled that the husband may sell property belonging to the conjugal partnership even without the consent of the wife if the sale is necessary to answer for a big conjugal liability which might endanger the familys economic standing. This is one instance where the wifes consent is not required and, impliedly, no judicial intervention is necessary.

Significantly, the Family Code has introduced some changes particularly on the aspect of the administration of the conjugal partnership. The new law provides that the administration of the conjugal partnership is now a joint undertaking of the husband and the wife. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal partnership, the other spouse may assume sole powers of administration. However, the power of administration does not include the power to dispose or encumber property belonging to the conjugal partnership.[36] In all instances, the present law specifically requires the written consent of the other spouse, or authority of the court for the disposition or encumbrance of conjugal partnership property without which, the disposition or encumbrance shall be void. [37] Inescapably, herein petitioners action for specific performance must fail. Even on the supposition that the parties only disposed of their respective shares in the property, the sale, assuming that it exists, is still void for as previously stated, the right of the husband or the wife to one-half of the conjugal assets does not vest until the liquidation of the conjugal partnership. Nemo dat qui non habet. No one can give what he has not. WHEREFORE, the appealed Decision is hereby REVERSED and SET ASIDE. The complaint in Civil Case No. 90-106 of the Regional Trial Court of Makati is ordered DISMISSED. No pronouncement as to costs. SO ORDERED. Puno, (Chairman), Austria-Martinez, and Callejo, Sr., JJ., concur. Chico-Nazario, J., on leave.

G.R. No. 169900

March 18, 2010

MARIO SIOCHI, Petitioner, vs. ALFREDO GOZON, WINIFRED GOZON, GIL TABIJE, INTER-DIMENSIONAL REALTY, INC., and ELVIRA GOZON, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 169977 INTER-DIMENSIONAL REALTY, vs. MARIO SIOCHI, ELVIRA GOZON, ALFREDO GOZON, and WINIFRED GOZON, Respondents. RESOLUTION CARPIO, J.: This is a consolidation of two separate petitions for review,1 assailing the 7 July 2005 Decision2 and the 30 September 2005 Resolution3 of the Court of Appeals in CA-G.R. CV No. 74447. This case involves a 30,000 sq.m. parcel of land (property) covered by TCT No. 5357. 4 The property is situated in Malabon, Metro Manila and is registered in the name of "Alfredo Gozon (Alfredo), married to Elvira Gozon (Elvira)." On 23 December 1991, Elvira filed with the Cavite City Regional Trial Court (Cavite RTC) a petition for legal separation against her husband Alfredo. On 2 January 1992, Elvira filed a notice of lis pendens, which was then annotated on TCT No. 5357. On 31 August 1993, while the legal separation case was still pending, Alfredo and Mario Siochi (Mario) entered into an Agreement to Buy and Sell5 (Agreement) involving the property for the price of P18 million. Among the stipulations in the Agreement were that Alfredo would: (1) secure an Affidavit from Elvira that the property is Alfredos exclusive property and to annotate the Agreement at the back of TCT No. 5357; (2) secure the approval of the Cavite RTC to exclude the property from the legal separation case; and (3) secure the removal of the notice of lis pendens pertaining to the said case and annotated on TCT No. 5357. However, despite repeated demands from Mario, Alfredo failed to comply with these stipulations. After paying the P5 million earnest money as partial payment of the purchase price, Mario took possession of the property in September 1993. On 6 September 1993, the Agreement was annotated on TCT No. 5357. Meanwhile, on 29 June 1994, the Cavite RTC rendered a decision 6 in the legal separation case, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered decreeing the legal separation between petitioner and respondent. Accordingly, petitioner Elvira Robles Gozon is entitled to live separately from respondent Alfredo Gozon without dissolution of their marriage bond. The conjugal partnership of gains of the spouses is hereby declared DISSOLVED and LIQUIDATED. Being the offending spouse, respondent is deprived of his share in the net profits and the same is awarded to their child Winifred R. Gozon whose custody is awarded to petitioner. INC., Petitioner,

Furthermore, said parties are required to mutually support their child Winifred R. Gozon as her needs arises. SO ORDERED.7 As regards the property, the Cavite RTC held that it is deemed conjugal property. On 22 August 1994, Alfredo executed a Deed of Donation over the property in favor of their daughter, Winifred Gozon (Winifred). The Register of Deeds of Malabon, Gil Tabije, cancelled TCT No. 5357 and issued TCT No. M-105088 in the name of Winifred, without annotating the Agreement and the notice of lis pendens on TCT No. M-10508. On 26 October 1994, Alfredo, by virtue of a Special Power of Attorney9 executed in his favor by Winifred, sold the property to Inter-Dimensional Realty, Inc. (IDRI) for P18 million.10 IDRI paid Alfredo P18 million, representing full payment for the property.11 Subsequently, the Register of Deeds of Malabon cancelled TCT No. M-10508 and issued TCT No. M-1097612 to IDRI. Mario then filed with the Malabon Regional Trial Court (Malabon RTC) a complaint for Specific Performance and Damages, Annulment of Donation and Sale, with Preliminary Mandatory and Prohibitory Injunction and/or Temporary Restraining Order. On 3 April 2001, the Malabon RTC rendered a decision,13 the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered as follows: 01. On the preliminary mandatory and prohibitory injunction: 1.1 The same is hereby made permanent by: 1.1.1 Enjoining defendants Alfredo Gozon, Winifred Gozon, Inter-Dimensional Realty, Inc. and Gil Tabije, their agents, representatives and all persons acting in their behalf from any attempt of commission or continuance of their wrongful acts of further alienating or disposing of the subject property; 1.1.2. Enjoining defendant Inter-Dimensional Realty, Inc. from entering and fencing the property; 1.1.3. Enjoining defendants Alfredo Gozon, Winifred Gozon, Inter-Dimensional Realty, Inc. to respect plaintiffs possession of the property. 02. The Agreement to Buy and Sell dated 31 August 1993, between plaintiff and defendant Alfredo Gozon is hereby approved, excluding the property and rights of defendant Elvira Robles-Gozon to the undivided one-half share in the conjugal property subject of this case. 03. The Deed of Donation dated 22 August 1994, entered into by and between defendants Alfredo Gozon and Winifred Gozon is hereby nullified and voided. 04. The Deed of Absolute Sale dated 26 October 1994, executed by defendant Winifred Gozon, through defendant Alfredo Gozon, in favor of defendant Inter-Dimensional Realty, Inc. is hereby nullified and voided. 05. Defendant Inter-Dimensional Realty, Inc. is hereby ordered to deliver its Transfer Certificate of Title No. M-10976 to the Register of Deeds of Malabon, Metro Manila. 06. The Register of Deeds of Malabon, Metro Manila is hereby ordered to cancel Certificate of Title Nos. 10508 "in the name of Winifred Gozon" and M-10976 "in the name of Inter-Dimensional Realty, Inc.," and to restore Transfer Certificate of Title No. 5357 "in the name of Alfredo Gozon, married to Elvira Robles" with the Agreement to Buy and Sell dated 31 August 1993 fully annotated therein is hereby ordered. 07. Defendant Alfredo Gozon is hereby ordered to deliver a Deed of Absolute Sale in favor of plaintiff over his one-half undivided share in the subject property and to comply with all the requirements for registering such deed. 08. Ordering defendant Elvira Robles-Gozon to sit with plaintiff to agree on the selling price of her undivided one-half share in the subject property, thereafter, to execute and deliver a Deed of Absolute Sale over the same in favor of the plaintiff and to comply with all the requirements for registering such deed, within fifteen (15) days from the receipt of this DECISION. 09. Thereafter, plaintiff is hereby ordered to pay defendant Alfredo Gozon the balance of Four Million Pesos (P4,000,000.00) in his one-half undivided share in the property to be set off by the award of damages in plaintiffs favor.

10. Plaintiff is hereby ordered to pay the defendant Elvira Robles-Gozon the price they had agreed upon for the sale of her one-half undivided share in the subject property. 11. Defendants Alfredo Gozon, Winifred Gozon and Gil Tabije are hereby ordered to pay the plaintiff, jointly and severally, the following: 11.1 Two Million Pesos (P2,000,000.00) as actual and compensatory damages; 11.2 One Million Pesos (P1,000,000.00) as moral damages; 11.3 Five Hundred Thousand Pesos (P500,000.00) as exemplary damages; 11.4 Four Hundred Thousand Pesos (P400,000.00) as attorneys fees; and 11.5 One Hundred Thousand Pesos (P100,000.00) as litigation expenses. 11.6 The above awards are subject to set off of plaintiffs obligation in paragraph 9 hereof. 12. Defendants Alfredo Gozon and Winifred Gozon are hereby ordered to pay Inter-Dimensional Realty, Inc. jointly and severally the following: 12.1 Eighteen Million Pesos (P18,000,000.00) which constitute the amount the former received from the latter pursuant to their Deed of Absolute Sale dated 26 October 1994, with legal interest therefrom; 12.2 One Million Pesos (P1,000,000.00) as moral damages; 12.3 Five Hundred Thousand Pesos (P500,000.00) as exemplary damages; and 12.4 One Hundred Thousand Pesos (P100,000.00) as attorneys fees. 13. Defendants Alfredo Gozon and Winifred Gozon are hereby ordered to pay costs of suit. SO ORDERED.14 On appeal, the Court of Appeals affirmed the Malabon RTCs decision with modification. The dispositive portion of the Court of Appeals Decision dated 7 July 2005 reads: WHEREFORE, premises considered, the assailed decision dated April 3, 2001 of the RTC, Branch 74, Malabon is hereby AFFIRMED with MODIFICATIONS, as follows: 1. The sale of the subject land by defendant Alfredo Gozon to plaintiff-appellant Siochi is declared null and void for the following reasons: a) The conveyance was done without the consent of defendant-appellee Elvira Gozon; b) Defendant Alfredo Gozons one-half () undivided share has been forfeited in favor of his daughter, defendant Winifred Gozon, by virtue of the decision in the legal separation case rendered by the RTC, Branch 16, Cavite; 2. Defendant Alfredo Gozon shall return/deliver to plaintiff-appellant Siochi the amount of P5 Million which the latter paid as earnest money in consideration for the sale of the subject land; 3. Defendants Alfredo Gozon, Winifred Gozon and Gil Tabije are hereby ordered to pay plaintiff-appellant Siochi jointly and severally, the following: a) P100,000.00 as moral damages; b) P100,000.00 as exemplary damages; c) P50,000.00 as attorneys fees; d) P20,000.00 as litigation expenses; and

e) The awards of actual and compensatory damages are hereby ordered deleted for lack of basis. 4. Defendants Alfredo Gozon and Winifred Gozon are hereby ordered to pay defendant-appellant IDRI jointly and severally the following: a) P100,000.00 as moral damages; b) P100,000.00 as exemplary damages; and c) P50,000.00 as attorneys fees. Defendant Winifred Gozon, whom the undivided one-half share of defendant Alfredo Gozon was awarded, is hereby given the option whether or not to dispose of her undivided share in the subject land. The rest of the decision not inconsistent with this ruling stands. SO ORDERED.15 Only Mario and IDRI appealed the decision of the Court of Appeals. In his petition, Mario alleges that the Agreement should be treated as a continuing offer which may be perfected by the acceptance of the other spouse before the offer is withdrawn. Since Elviras conduct signified her acquiescence to the sale, Mario prays for the Court to direct Alfredo and Elvira to execute a Deed of Absolute Sale over the property upon his payment of P9 million to Elvira. On the other hand, IDRI alleges that it is a buyer in good faith and for value. Thus, IDRI prays that the Court should uphold the validity of IDRIs TCT No. M-10976 over the property. We find the petitions without merit. This case involves the conjugal property of Alfredo and Elvira. Since the disposition of the property occurred after the effectivity of the Family Code, the applicable law is the Family Code. Article 124 of the Family Code provides: Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to the recourse to the court by the wife for a proper remedy, which must be availed of within five years from the date of the contract implementing such decision. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. (Emphasis supplied) In this case, Alfredo was the sole administrator of the property because Elvira, with whom Alfredo was separated in fact, was unable to participate in the administration of the conjugal property. However, as sole administrator of the property, Alfredo still cannot sell the property without the written consent of Elvira or the authority of the court. Without such consent or authority, the sale is void.16 The absence of the consent of one of the spouse renders the entire sale void, including the portion of the conjugal property pertaining to the spouse who contracted the sale.17 Even if the other spouse actively participated in negotiating for the sale of the property, that other spouses written consent to the sale is still required by law for its validity.18 The Agreement entered into by Alfredo and Mario was without the written consent of Elvira. Thus, the Agreement is entirely void. As regards Marios contention that the Agreement is a continuing offer which may be perfected by Elviras acceptance before the offer is withdrawn, the fact that the property was subsequently donated by Alfredo to Winifred and then sold to IDRI clearly indicates that the offer was already withdrawn. However, we disagree with the finding of the Court of Appeals that the one-half undivided share of Alfredo in the property was already forfeited in favor of his daughter Winifred, based on the ruling of the Cavite RTC in the legal separation case. The Court of Appeals misconstrued the ruling of the Cavite RTC that Alfredo, being the offending spouse, is deprived of his share in the net profits and the same is awarded to Winifred. The Cavite RTC ruling finds support in the following provisions of the Family Code: Art. 63. The decree of legal separation shall have the following effects: (1) The spouses shall be entitled to live separately from each other, but the marriage bonds shall not be severed;

(2) The absolute community or the conjugal partnership shall be dissolved and liquidated but the offending spouse shall have no right to any share of the net profits earned by the absolute community or the conjugal partnership, which shall be forfeited in accordance with the provisions of Article 43(2); (3) The custody of the minor children shall be awarded to the innocent spouse, subject to the provisions of Article 213 of this Code; and The offending spouse shall be disqualified from inheriting from the innocent spouse by intestate succession. Moreover, provisions in favor of the offending spouse made in the will of the innocent spouse shall be revoked by operation of law. Art. 43. The termination of the subsequent marriage referred to in the preceding Article shall produce the following effects: xxx (2) The absolute community of property or the conjugal partnership, as the case may be, shall be dissolved and liquidated, but if either spouse contracted said marriage in bad faith, his or her share of the net profits of the community property or conjugal partnership property shall be forfeited in favor of the common children or, if there are none, the children of the guilty spouse by a previous marriage or, in default of children, the innocent spouse; (Emphasis supplied) Thus, among the effects of the decree of legal separation is that the conjugal partnership is dissolved and liquidated and the offending spouse would have no right to any share of the net profits earned by the conjugal partnership. It is only Alfredos share in the net profits which is forfeited in favor of Winifred. Article 102(4) of the Family Code provides that "[f]or purposes of computing the net profits subject to forfeiture in accordance with Article 43, No. (2) and 63, No. (2), the 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." Clearly, what is forfeited in favor of Winifred is not Alfredos share in the conjugal partnership property but merely in the net profits of the conjugal partnership property. With regard to IDRI, we agree with the Court of Appeals in holding that IDRI is not a buyer in good faith. As found by the RTC Malabon and the Court of Appeals, IDRI had actual knowledge of facts and circumstances which should impel a reasonably cautious person to make further inquiries about the vendors title to the property. The representative of IDRI testified that he knew about the existence of the notice of lis pendens on TCT No. 5357 and the legal separation case filed before the Cavite RTC. Thus, IDRI could not feign ignorance of the Cavite RTC decision declaring the property as conjugal. Furthermore, if IDRI made further inquiries, it would have known that the cancellation of the notice of lis pendens was highly irregular. Under Section 77 of Presidential Decree No. 1529,19 the notice of lis pendens may be cancelled (a) upon order of the court, or (b) by the Register of Deeds upon verified petition of the party who caused the registration of the lis pendens. In this case, the lis pendens was cancelled by the Register of Deeds upon the request of Alfredo. There was no court order for the cancellation of the lis pendens. Neither did Elvira, the party who caused the registration of the lis pendens, file a verified petition for its cancellation. Besides, had IDRI been more prudent before buying the property, it would have discovered that Alfredos donation of the property to Winifred was without the consent of Elvira. Under Article 125 20 of the Family Code, a conjugal property cannot be donated by one spouse without the consent of the other spouse. Clearly, IDRI was not a buyer in good faith. 1avvphi1 Nevertheless, we find it proper to reinstate the order of the Malabon RTC for the reimbursement of the P18 million paid by IDRI for the property, which was inadvertently omitted in the dispositive portion of the Court of Appeals decision. WHEREFORE, we DENY the petitions. We AFFIRM the 7 July 2005 Decision of the Court of Appeals in CA-G.R. CV No. 74447 with the following MODIFICATIONS: (1) We DELETE the portions regarding the forfeiture of Alfredo Gozons one -half undivided share in favor of Winifred Gozon and the grant of option to Winifred Gozon whether or not to dispose of her undivided share in the property; and (2) We ORDER Alfredo Gozon and Winifred Gozon to pay Inter-Dimensional Realty, Inc. jointly and severally the Eighteen Million Pesos (P18,000,000) which was the amount paid by Inter-Dimensional Realty, Inc. for the property, with legal interest computed from the finality of this Decision. SO ORDERED. ANTONIO Associate Justice T. CARPIO

G.R. No. 165133

April 19, 2010

SPOUSES JOSELINA ALCANTARA AND ANTONIO ALCANTARA, and SPOUSES JOSEFINO RUBI AND ANNIE DISTORRUBI, Petitioners, vs. BRIGIDA L. NIDO, as attorney-in-fact of REVELEN N. SRIVASTAVA, Respondent. RESOLUTION CARPIO, J.: The Case Spouses Antonio and Joselina Alcantara and Spouses Josefino and Annie Rubi (petitioners) filed this Petition for Review1 assailing the Court of Appeals (appellate court) Decision 2 dated 10 June 2004 as well as the Resolution 3dated 17 August 2004 in CA-G.R. CV No. 78215. In the assailed decision, the appellate court reversed the 17 June 2002 Decision 4 of Branch 69 of the Regional Trial Court of Binangonan, Rizal (RTC) by dismissing the case for recovery of possession with damages and preliminary injunction filed by Brigida L. Nido (respondent), in her capacity as administrator and attorney-in-fact of Revelen N. Srivastava (Revelen). The Facts Revelen, who is respondents daughter and of legal age, is the owner of an unregistered land with an area of 1,939 square meters located in Cardona, Rizal. Sometime in March 1984, respondent accepted the offer of petitioners to purchase a 200square meter portion of Revelens lot (lot) at P200 per square meter. Petitioners paid P3,000 as downpayment and the balance was payable on installment. Petitioners constructed their houses in 1985. In 1986, with respondents consent, petitioners occupied an additional 150 square meters of the lot. By 1987, petitioners had already paid P17,5005 before petitioners defaulted on their installment payments. On 11 May 1994, respondent, acting as administrator and attorney-in-fact of Revelen, filed a complaint for recovery of possession with damages and prayer for preliminary injunction against petitioners with the RTC. The RTCs Ruling The RTC stated that based on the evidence presented, Revelen owns the lot and respondent was verbally authorized to sell 200 square meters to petitioners. The RTC ruled that since respondents authority to sell the land was not in writing, the sale w as void under Article 18746 of the Civil Code.7 The RTC ruled that rescission is the proper remedy.8 On 17 June 2002, the RTC rendered its decision, the dispositive portion reads: WHEREFORE, judgment is rendered in favor of plaintiff and against the defendants, by 1. Declaring the contract to sell orally agreed by the plaintiff Brigida Nido, in her capacity as representative or agent of her daughter Revelen Nido Srivastava, VOID and UNENFORCEABLE. 2. Ordering the parties, upon finality of this judgment, to have mutual restitution the defendants and all persons claiming under them to peacefully vacate and surrender to the plaintiff the possession of the subject lot covered by TD No. 09-0742 and its derivative Tax Declarations, together with all permanent improvements introduced thereon, and all improvements built or constructed during the pendency of this action, in bad faith; and the plaintiff, to return the sum of P17,500.00, the total amount of the installment on the land paid by defendant; the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. 3. Ordering the defendants to pay plaintiff the sum of P20,000.00 as attorneys fees, plus P15,000.00 as actual litigation expenses, plus the costs of suit. SO ORDERED.9 The Appellate Courts Ruling On 5 January 2004, petitioners appealed the trial courts Decision to the appellate court. In its decision dated 10 June 2004, the appellate court reversed the RTC decision and dismissed the civil case.10 The appellate court explained that this is an unlawful detainer case. The prayer in the complaint and amended complaint was for recovery of possession and the case was filed within one year from the last demand letter. Even if the complaint involves a

question of ownership, it does not deprive the Municipal Trial Court (MTC) of its jurisdiction over the ejectment case. Petitioners raised the issue of lack of jurisdiction in their Motion to Dismiss and Answer before the RTC. 11 The RTC denied the Motion to Dismiss and assumed jurisdiction over the case because the issues pertain to a determination of the real agreement between the parties and rescission of the contract to sell the property.12 The appellate court added that even if respondents complaint is for recovery of possession or accion publiciana, the RTC sti ll has no jurisdiction to decide the case. The appellate court explained: Note again that the complaint was filed on 11 May 1994. By that time, Republic Act No. 7691 was already in effect. Said law took effect on 15 April 1994, fifteen days after its publication in the Malaya and in the Time Journal on 30 March 1994 pursuant to Sec. 8 of Republic Act No. 7691. Accordingly, Sec. 33 of Batas Pambansa 129 was amended by Republic Act No. 7691 giving the Municipal Trial Court the exclusive original jurisdiction over all civil actions involving title to, or possession of, real property, or any interest therein where the assessed value of the property or interest therein does not exceed P20,000 or, in civil actions in Metro Manila, where such assessed value does not exceed P50,000, exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses and costs. At bench, the complaint alleges that the whole 1,939- square meter lot of Revelen N. Srivastava is covered by Tax Declaration No. 09-0742 (Exh. "B", p. 100, Records) which gives its assessed value of the whole lot of P4,890.00. Such assessed value falls within the exclusive original prerogative or jurisdiction of the first level court and, therefore, the Regional Trial Court a quo has no jurisdiction to try and decided the same.131avvphi1 The appellate court also held that respondent, as Revelens agent, did not have a written authority to enter into such contra ct of sale; hence, the contract entered into between petitioners and respondent is void. A void contract creates no rights or obligations or any juridical relations. Therefore, the void contract cannot be the subject of rescission. 14 Aggrieved by the appellate courts Decision, petitioners elevated the case before this Court. Issues Petitioners raise the following arguments: 1. The appellate court gravely erred in ruling that the contract entered into by respondent, in representation of her daughter, and former defendant Eduardo Rubi (deceased), is void; and 2. The appellate court erred in not ruling that the petitioners are entitled to their counterclaims, particularly specific performance.15 Ruling of the Court We deny the petition. Petitioners submit that the sale of land by an agent who has no written authority is not void but merely voidable given the spirit and intent of the law. Being only voidable, the contract may be ratified, expressly or impliedly. Petitioners argue that since the contract to sell was sufficiently established through respondents admission during the pre -trial conference, the appellate court should have ruled on the matter of the counterclaim for specific performance.16 Respondent argues that the appellate court cannot lawfully rule on petit ioners counterclaim because there is nothing in the records to sustain petitioners claim that they have fully paid the price of the lot. 17 Respondent points out that petitioners admitted the lack of written authority to sell. Respondent also alleges that there was clearly no meeting of the minds between the parties on the purported contract of sale.18 Sale of Land through an Agent Articles 1874 and 1878 of the Civil Code provide: Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Art. 1878. Special powers of attorney are necessary in the following cases: xxx

(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; xxx Article 1874 of the Civil Code explicitly requires a written authority before an agent can sell an immovable property. Based on a review of the records, there is absolutely no proof of respondents written authority to sell the lot to peti tioners. In fact, during the pre-trial conference, petitioners admitted that at the time of the negotiation for the sale of the lot, petitioners were of the belief that respondent was the owner of lot.19 Petitioners only knew that Revelen was the owner of the lot during the hearing of this case. Consequently, the sale of the lot by respondent who did not have a written authority from Revelen is void. A void contract produces no effect either against or in favor of anyone and cannot be ratified.20 A special power of attorney is also necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired for a valuable consideration. Without an authority in writing, respondent cannot validly sell the lot to petitioners. Hence, any "sale" in favor of the petitioners is void. Our ruling in Dizon v. Court of Appeals21 is instructive: When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document. Further, Article 1318 of the Civil Code enumerates the requisites for a valid contract, namely: 1. consent of the contracting parties; 2. object certain which is the subject matter of the contract; 3. cause of the obligation which is established. Respondent did not have the written authority to enter into a contract to sell the lot. As the consent of Revelen, the real owner of the lot, was not obtained in writing as required by law, no contract was perfected. Consequently, petitioners failed to validly acquire the lot. General Power of Attorney On 25 March 1994, Revelen executed a General Power of Attorney constituting respondent as her attorney-in-fact and authorizing her to enter into any and all contracts and agreeme nts on Revelens behalf. The General Power of Attorney was notarized by Larry A. Reid, Notary Public in California, U.S.A. Unfortunately, the General Power of Attorney presented as "Exhibit C" 22 in the RTC cannot also be the basis of respondents written authority to sell the lot. Section 25, Rule 132 of the Rules of Court provides: Sec. 25. Proof of public or official record . An official record or an entry therein, when admissible for any purpose, may be evidenced by an official publication thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the custody. If the office in which the record is kept is in a foreign country, the certificate may be made by a secretary of embassy or legation consul general, consul, vice consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal of his office. In Teoco v. Metropolitan Bank and Trust Company,23 quoting Lopez v. Court of Appeals,24 we explained: From the foregoing provision, when the special power of attorney is executed and acknowledged before a notary public or other competent official in a foreign country, it cannot be admitted in evidence unless it is certified as such in accordance with the foregoing provision of the rules by a secretary of embassy or legation, consul general, consul, vice consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept of

said public document and authenticated by the seal of his office. A city judge-notary who notarized the document, as in this case, cannot issue such certification.25 Since the General Power of Attorney was executed and acknowledged in the United States of America, it cannot be admitted in evidence unless it is certified as such in accordance with the Rules of Court by an officer in the foreign service of the Philippines stationed in the United States of America. Hence, this document has no probative value. Specific Performance Petitioners are not entitled to claim for specific performance. It must be stressed that when specific performance is sought of a contract made with an agent, the agency must be established by clear, certain and specific proof.26To reiterate, there is a clear absence of proof that Revelen authorized respondent to sell her lot. Jurisdiction of the RTC Section 33 of Batas Pambansa Bilang 129,27 as amended by Republic Act No. 7691 provides: Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil Cases. Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts shall exercise: xxx (3) Exclusive original jurisdiction in all civil actions which involve title to, possession of, real property, or any interest therein where the assessed value of the property or interest therein does not exceed Twenty thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty thousand pesos (P50,000.00) exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses and costs: x x x In Geonzon Vda. de Barrera v. Heirs of Vicente Legaspi,28 the Court explained: Before the amendments introduced by Republic Act No. 7691, the plenary action of accion publiciana was to be brought before the regional trial court. With the modifications introduced by R.A. No. 7691 in 1994, the jurisdiction of the first level courts has been expanded to include jurisdiction over other real actions where the assessed value does not exceed P20,000, P50,000 where the action is filed in Metro Manila. The first level courts thus have exclusive original jurisdiction over accion publiciana and accion reivindicatoria where the assessed value of the real property does not exceed the aforestated amounts. Accordingly, the jurisdictional element is the assessed value of the property. Assessed value is understood to be "the worth or value of property established by taxing authorities on the basis of which the tax rate is applied. Commonly, however, it does not represent the true or market value of the property." The appellate court correctly ruled that even if the complaint filed with the RTC involves a question of ownership, the MTC still has jurisdiction because the assessed value of the whole lot as stated in Tax Declaration No. 09-0742 is P4,890.29 The MTC cannot be deprived of jurisdiction over an ejectment case based merely on the assertion of ownership over the litigated property, and the underlying reason for this rule is to prevent any party from trifling with the summary nature of an ejectment suit.30 The general rule is that dismissal of a case for lack of jurisdiction may be raised at any stage of the proceedings since jurisdiction is conferred by law. The lack of jurisdiction affects the very authority of the court to take cognizance of and to render judgment on the action; otherwise, the inevitable consequence would make the courts decision a "lawless" thing. 31 Since the RTC has no jurisdiction over the complaint filed, all the proceedings as well as the Decision of 17 June 2002 are void. The complaint should perforce be dismissed. WHEREFORE, we DENY the petition. We AFFIRM the Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 78215. SO ORDERED. ANTONIO Associate Justice WE CONCUR: SPOUSES REX AND CONCEPCION AGGABAO, Petitioners, G.R. No. 165803 Present: T. CARPIO

-versus-

CARPIO MORALES, Chairperson BERSAMIN, DEL CASTILLO,* VILLARAMA, JR., and SERENO, JJ. Promulgated:

DIONISIO Z. PARULAN, JR. and MA. ELENA PARULAN, Respondents.

September 1, 2010 x-----------------------------------------------------------------------------------------x DECISION BERSAMIN, J:

On July 26, 2000, the Regional Trial Court (RTC), Branch 136, in Makati City annulled the deed of absolute sale executed in favor of the petitioners covering two parcels of registered land the respondents owned for want of the written consent of respondent husband Dionisio Parulan, Jr. On July 2, 2004, in C.A.-G.R. CV No. 69044,[1] the Court of Appeals (CA) affirmed the RTC decision.

Hence, the petitioners appeal by petition for review on certiorari, seeking to reverse the decision of the CA. They present as the main issue whether the sale of conjugal property made by respondent wife by presenting a special power of attorney to sell (SPA) purportedly executed by respondent husband in her favor was validly made to the vendees, who allegedly acted in good faith and paid the full purchase price, despite the showing by the husband that his signature on the SPA had been forged and that the SPA had been executed during his absence from the country.

We resolve the main issue against the vendees and sustain the CAs finding that the vendee s were not buyers in good faith, because they did not exercise the necessary prudence to inquire into the wifes authority to sell. We hold that the sa le of conjugal property without the consent of the husband was not merely voidable but void; hence, it could not be ratified.

Antecedents

Involved in this action are two parcels of land and their improvements (property) located at No. 49 Miguel Cuaderno Street, Executive Village, BF Homes, Paraaque City and registered under Transfer Certificate of Title (TCT) No. 63376[2] and TCT No. 63377[3] in the name of respondents Spouses Maria Elena A. Parulan (Ma. Elena) and Dionisio Z. Parulan, Jr. (Dionisio), who have been estranged from one another.

In January 1991, real estate broker Marta K. Atanacio (Atanacio) offered the property to the petitioners, who initially did not show interest due to the rundown condition of the improvements. But Atanacios persistence prevailed upon them, so that on February 2, 1991, they and Atanacio met with Ma. Elena at the site of the property. During their meeting, Ma. Elena showed to them the following documents, namely: (a) the owners original copy of TCT No. 63376; (b) a certified true copy of TCT No. 63377; (c) three tax declarations; and (d) a copy of the special power of attorney (SPA) dated January 7, 1991 executed by Dionisio authorizing Ma. Elena to sell the property.[4] Before the meeting ended, they paid P20,000.00 as earnest money, for which Ma. Elena executed a handwritten Receipt of Earnest Money, whereby the parties stipulated that: (a) they would pay an additional payment of P130,000.00 on February 4, 1991; (b) they would pay the balance of the bank loan of the respondents

amounting to P650,000.00 on or before February 15, 1991; and (c) they would make the final payment of P700,000.00 once Ma. Elena turned over the property on March 31, 1991.[5]

On February 4, 1991, the petitioners went to the Office of the Register of Deeds and the Assessors Office of Paraaque City to verify the TCTs shown by Ma. Elena in the company of Atanacio and her husband (also a licensed broker). [6] There, they discovered that the lot under TCT No. 63376 had been encumbered to Banco Filipino in 1983 or 1984, but that the encumbrance had already been cancelled due to the full payment of the obligation.[7] They noticed that the Banco Filipino loan had been effected through an SPA executed by Dionisio in favor of Ma. Elena. [8] They found on TCT No. 63377 the annotation of an existing mortgage in favor of the Los Baos Rural Bank, also effected through an SPA executed by Dionisio in favor of Ma. Elena, coupled with a copy of a court order authorizing Ma. Elena to mortgage the lot to secure a loan of P500,000.00.[9]

The petitioners and Atanacio next inquired about the mortgage and the court order annotated on TCT No. 63377 at the Los Baos Rural Bank. There, they met with Atty. Noel Zarate, the banks legal counsel, who related that the bank had asked f or the court order because the lot involved was conjugal property.[10]

Following their verification, the petitioners delivered P130,000.00 as additional down payment on February 4, 1991; and P650,000.00 to the Los Baos Rural Bank onFebruary 12, 1991, which then released the owners duplicate copy of TCT No. 63377 to them.[11]

On March 18, 1991, the petitioners delivered the final amount of P700,000.00 to Ma. Elena, who executed a deed of absolute sale in their favor. However, Ma. Elena did not turn over the owners duplicate copy of TCT No. 63376, claiming t hat said copy was in the possession of a relative who was then in Hongkong. [12] She assured them that the owners duplicate copy of TCT No. 63376 would be turned over after a week.

On March 19, 1991, TCT No. 63377 was cancelled and a new one was issued in the name of the petitioners.

Ma. Elena did not turn over the duplicate owners copy of TCT No. 63376 as promised. In due time, the petitioners learned that the duplicate owners copy of TCT No. 63376 had been all along in the custody of Atty. Jeremy Z. Parulan, who appeared to hold an SPA executed by his brother Dionisio authorizing him to sell both lots.[13]

At Atanacios instance, the petitioners met on March 25, 1991 with Atty. Parulan at the Manila Peninsula.[14] For that meeting, they were accompanied by one Atty. Olandesca.[15] They recalled that Atty. Parulan smugly demanded P800,000.00 in exchange for the duplicate owners copy of TCT No. 63376, because Atty. Parulan represented the current value of the property to be P1.5 million. As a counter-offer, however, they tendered P250,000.00, which Atty. Parulan declined,[16] giving them only untilApril 5, 1991 to decide.

Hearing nothing more from the petitioners, Atty. Parulan decided to call them on April 5, 1991, but they informed him that they had already fully paid to Ma. Elena.[17]

Thus,

on April

15,

1991,

Dionisio,

through

Atty.

Parulan,

commenced

an

action

(Civil

Case

No.

91-

1005 entitled Dionisio Z. Parulan, Jr., represented by Jeremy Z. Parulan, as attorney in fact, v. Ma. Elena Parulan, Sps. Rex and

Coney Aggabao), praying for the declaration of the nullity of the deed of absolute sale executed by Ma. Elena, and the cancellation of the title issued to the petitioners by virtue thereof.

In turn, the petitioners filed on July 12, 1991 their own action for specific performance with damages against the respondents.

Both cases were consolidated for trial and judgment in the RTC.[18]

Ruling of the RTC

After trial, the RTC rendered judgment, as follows: WHEREFORE, and in consideration of the foregoing, judgment is hereby rendered in favor of plaintiff Dionisio A. Parulan, Jr. and against defendants Ma. Elena Parulan and the Sps. Rex and Concepcion Aggabao, without prejudice to any action that may be filed by the Sps. Aggabao against co-defendant Ma. Elena Parulan for the amounts they paid her for the purchase of the subject lots, as follows: 1. The Deed of Absolute Sale dated March 18, 1991 covering the sale of the lot located at No. 49 M. Cuaderno St., Executive Village, BF Homes, Paraaque, Metro Manila, and covered by TCT Nos. 63376 and 63377 is declared null and void. 2. Defendant Mrs. Elena Parulan is directed to pay litigation expenses amounting to P50,000.00 and the costs of the suit. SO ORDERED.[19]

The RTC declared that the SPA in the hands of Ma. Elena was a forgery, based on its finding that Dionisio had been out of the country at the time of the execution of the SPA;[20] that NBI Sr. Document Examiner Rhoda B. Flores had certified that the signature appearing on the SPA purporting to be that of Dionisio and the set of standard sample signatures of Dionisio had not been written by one and the same person;[21] and that Record Officer III Eliseo O. Terenco and Clerk of Court Jesus P. Maningas of the Manila RTC had issued a certification to the effect that Atty. Alfred Datingaling, the Notary Public who had notarized the SPA, had not been included in the list of Notaries Public in Manila for the year 1990-1991.[22]

The RTC rejected the petitioners defense of being buyers in good faith because of their failure to exercise ordin ary prudence, including demanding from Ma. Elena a court order authorizing her to sell the properties similar to the order that the Los Baos Rural Bank had required before accepting the mortgage of the property. [23] It observed that they had appeared to be in a hurry to consummate the transaction despite Atanacios advice that they first consult a lawyer before buying the propert y; that with ordinary prudence, they should first have obtained the owners duplicate copies of the TCTs before paying the full amount of the consideration; and that the sale was void pursuant to Article 124 of the Family Code.[24]

Ruling of the CA

As stated, the CA affirmed the RTC, opining that Article 124 of the Family Code applied because Dionisio had not consented to the sale of the conjugal property by Ma. Elena; and that the RTC correctly found the SPA to be a forgery. The CA denied the petitioners motion for reconsideration.[25]

Issues

The petitioners now make two arguments: (1) they were buyers in good faith; and (2) the CA erred in affirming the RTCs finding that the sale between Mrs. Elena and the petitioners had been a nullity under Artic le 124 of the Family Code.

The petitioners impute error to the CA for not applying the ordinary prudent mans standard in determining their status as buyers in good faith. They contend that the more appropriate law to apply was Article 173 of the Civil Code, not Article 124 of the Family Code; and that even if the SPA held by Ma. Elena was a forgery, the ruling in Veloso v. Court of Appeals[26] warranted a judgment in their favor.

Restated, the issues for consideration and resolution are as follows: 1) Which between Article 173 of the Civil Code and Article 124 of the Family Code should apply to the sale of the conjugal property executed without the consent of Dionisio? 2) Might the petitioners be considered in good faith at the time of their purchase of the property? 3) Might the ruling in Veloso v. Court of Appeals be applied in favor of the petitioners despite the finding of forgery of the SPA?

Ruling

The petition has no merit. We sustain the CA.

1. Article 124, Family Code, applies to sale of conjugal properties made after the effectivity of the Family Code

The petitioners submit that Article 173 of the Civil Code, not Article 124 of the Family Code, governed the property relations of the respondents because they had been married prior to the effectivity of the Family Code; and that the second paragraph of Article 124 of the Family Code should not apply because the other spouse held the administration over the conjugal property. They argue that notwithstanding his absence from the country Dionisio still held the administration of the conjugal property by virtue of his execution of the SPA in favor of his brother; and that even assuming that Article 124 of the Family Code properly applied, Dionisio ratified the sale through Atty. Parulans counter -offer during the March 25, 1991 meeting.

We do not subscribe to the petitioners submissions.

To start with, Article 254[27] the Family Code has expressly repealed several titles under the Civil Code, among them the entire Title VI in which the provisions on the property relations between husband and wife, Article 173 included, are found.

Secondly, the sale was made on March 18, 1991, or after August 3, 1988, the effectivity of the Family Code. The proper law to apply is, therefore, Article 124 of the Family Code, for it is settled that any alienation or encumbrance of conjugal property made during the effectivity of the Family Code is governed by Article 124 of the Family Code.[28]

Article 124 of the Family Code provides: Article 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.

Thirdly, according to Article 256[29] of the Family Code, the provisions of the Family Code may apply retroactively provided no vested rights are impaired. In Tumlos v. Fernandez,[30] the Court rejected the petitioners argument that the Family Code did not apply because the acquisition of the contested property had occurred prior to the effectivity of the Family Code, and pointed out that Article 256 provided that the Family Code could apply retroactively if the application would not prejudice vested or acquired rights existing before the effectivity of the Family Code. Herein, however, the petitioners did not show any vested right in the property acquired prior to August 3, 1988 that exempted their situation from the retroactive application of the Family Code.

Fourthly, the petitioners failed to substantiate their contention that Dionisio, while holding the administration over the property, had delegated to his brother, Atty. Parulan, the administration of the property, considering that they did not present in court the SPA granting to Atty. Parulan the authority for the administration. Nonetheless, we stress that the power of administration does not include acts of disposition or encumbrance, which are acts of strict ownership. As such, an authority to dispose cannot proceed from an authority to administer, and vice versa, for the two powers may only be exercised by an agent by following the provisions on agency of the Civil Code (from Article 1876 to Article 1878). Specifically, the apparent authority of Atty. Parulan, being a special agency, was limited to the sale of the property in question, and did not include or extend to the power to administer the property. [31]

Lastly, the petitioners insistence that Atty. Parulans making of a counter -offer during the March 25, 1991 meeting ratified the sale merits no consideration. Under Article 124 of the Family Code, the transaction executed sans the written consent of Dionisio or the proper court order was void; hence, ratification did not occur, for a void contract could not be ratified.[32]

On the other hand, we agree with Dionisio that the void sale was a continuing offer from the petitioners and Ma. Elena that Dionisio had the option of accepting or rejecting before the offer was withdrawn by either or both Ma. Elena and the petitioners. The last sentence of the second paragraph of Article 124 of the Family Code makes this clear, stating that in the absence of the other spouses consent, the transaction should be construed as a continuing offer on the part of the consentin g

spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or upon authorization by the court before the offer is withdrawn by either or both offerors.

2. Due diligence required in verifying not only vendors title, but also agents authority to sell the property

A purchaser in good faith is one who buys the property of another, without notice that some other person has a right to, or interest in, such property, and pays the full and fair price for it at the time of such purchase or before he has notice of the claim or interest of some other persons in the property. He buys the property with the belief that the person from whom he receives the thing was the owner and could convey title to the property. He cannot close his eyes to facts that should put a reasonable man on his guard and still claim he acted in good faith.[33] The status of a buyer in good faith is never presumed but must be proven by the person invoking it.[34]

Here, the petitioners disagree with the CA for not applying the ordinary prudent mans standard in determining their status as buyers in good faith. They insist that they exercised due diligence by verifying the status of the TCTs, as well as by inquiring about the details surrounding the mortgage extended by the Los Baos Rural Bank. They lament the holding of the CA that they should have been put on their guard when they learned that the Los Baos Rural Bank had first required a court order before granting the loan to the respondents secured by their mortgage of the property.

The petitioners miss the whole point.

Article 124 of the Family Code categorically requires the consent of both spouses before the conjugal property may be disposed of by sale, mortgage, or other modes of disposition. In Bautista v. Silva,[35] the Court erected a standard to determine the good faith of the buyers dealing with a seller who had title to and possession of the land but whose capacity to sell was restricted, in that the consent of the other spouse was required before the conveyance, declaring that in order to prove good faith in such a situation, the buyers must show that they inquired not only into the title of the seller but also into the sellers capacity to sell.[36] Thus, the buyers of conjugal property must observe two kinds of requisite diligence, namely: (a) the diligence in verifying the validity of the title covering the property; and (b) the diligence in inquiring into the authority of the transacting spouse to sell conjugal property in behalf of the other spouse.

It is true that a buyer of registered land needs only to show that he has relied on the face of the certificate of title to the property, for he is not required to explore beyond what the certificate indicates on its face.[37] In this respect, the petitioners sufficiently proved that they had checked on the authenticity of TCT No. 63376 and TCT No. 63377 with the Office of the Register of Deeds in Pasay City as the custodian of the land records; and that they had also gone to the Los Baos Rural Bank to inquire about the mortgage annotated on TCT No. 63377. Thereby, the petitioners observed the requisite diligence in examining the validity of the TCTs concerned.

Yet, it ought to be plain enough to the petitioners that the issue was whether or not they had diligently inquired into the authority of Ma. Elena to convey the property, not whether or not the TCT had been valid and authentic, as to which there was no doubt. Thus, we cannot side with them.

Firstly, the petitioners knew fully well that the law demanded the written consent of Dionisio to the sale, but yet they did not present evidence to show that they had made inquiries into the circumstances behind the execution of the SPA purportedly executed by Dionisio in favor of Ma. Elena. Had they made the appropriate inquiries, and not simply accepted the SPA for what it represented on its face, they would have uncovered soon enough that the respondents had been estranged from each other and were under de factoseparation, and that they probably held conflicting interests that would negate the existence of an agency between them. To lift this doubt, they must, of necessity, further inquire into the SPA of Ma. Elena. The omission to inquire indicated their not being buyers in good faith, for, as fittingly observed in Domingo v. Reed:[38] What was required of them by the appellate court, which we affirm, was merely to investigate as any prudent vendee should the authority of Lolita to sell the property and to bind the partnership. They had knowledge of facts that should have led them to inquire and to investigate, in order to acquaint themselves with possible defects in her title. The law requires them to act with the diligence of a prudent person; in this case, their only prudent course of action was to investigate whether respondent had indeed given his consent to the sale and authorized his wife to sell the property.[39]

Indeed, an unquestioning reliance by the petitioners on Ma. Elenas SPA without first taking precautions to verify its authenticity was not a prudent buyers move.[40] They should have done everything within their means and power to ascertain whether the SPA had been genuine and authentic. If they did not investigate on the relations of the respondents vis--vis each other, they could have done other things towards the same end, like attempting to locate the notary public who had notarized the SPA, or checked with the RTC in Manila to confirm the authority of Notary Public Atty. Datingaling. It turned out that Atty. Datingaling was not authorized to act as a Notary Public for Manila during the period 1990-1991, which was a fact that they could easily discover with a modicum of zeal.

Secondly, the final payment of P700,000.00 even without the owners duplicate copy of the TCT No. 63376 being handed to them by Ma. Elena indicated a revealing lack of precaution on the part of the petitioners. It is true that she promised to produce and deliver the owners copy within a week because her relative having custody of it had gone to Hongkong, but their passivity in such an essential matter was puzzling light of their earlier alacrity in immediately and diligently validating the TCTs to the extent of inquiring at the Los Baos Rural Bank about the annotated mortgage. Yet, they could have rightly withheld the final payment of the balance. That they did not do so reflected their lack of due care in dealing with Ma. Elena.

Lastly, another reason rendered the petitioners good faith incredible. They did not take immediate act ion against Ma. Elena upon discovering that the owners original copy of TCT No. 63376 was in the possession of Atty. Parulan, contrary to Elenas representation. Human experience would have impelled them to exert every effort to proceed against Ma. Elena, including demanding the return of the substantial amounts paid to her. But they seemed not to mind her inability to produce the TCT, and, instead, they contented themselves with meeting with Atty. Parulan to negotiate for the possible turnover of the TCT to them. 3. Veloso v. Court of Appeals cannot help petitioners

The petitioners contend that the forgery of the SPA notwithstanding, the CA could still have decided in their favor conformably with Veloso v. Court of Appeals,[41] a casewhere the petitioner husband claimed that his signature and that of the notary public who had notarized the SPA the petitioner supposedly executed to authorize his wife to sell the property had been forged. In denying relief, the Court upheld the right of the vendee as an innocent purchaser for value.

Veloso is inapplicable, however, because the contested property therein was exclusively owned by the petitioner and did not belong to the conjugal regime. Veloso being upon conjugal property, Article 124 of the Family Code did not apply.

In contrast, the property involved herein pertained to the conjugal regime, and, consequently, the lack of the written consent of the husband rendered the sale void pursuant to Article 124 of the Family Code. Moreover, even assuming that the property involved in Veloso was conjugal, its sale was made on November 2, 1987, or prior to the effectivity of the Family Code; hence, the sale was still properly covered by Article 173 of the Civil Code, which provides that a sale effected without the consent of one of the spouses is only voidable, not void. However, the sale herein was made already during the effectivity of the Family Code, rendering the application of Article 124 of the Family Code clear and indubitable.

The fault of the petitioner in Veloso was that he did not adduce sufficient evidence to prove that his signature and that of the notary public on the SPA had been forged. The Court pointed out that his mere allegation that the signatures had been forged could not be sustained without clear and convincing proof to substantiate the allegation. Herein, however, both the RTC and the CA found from the testimonies and evidence presented by Dionisio that his signature had been definitely forged, as borne out by the entries in his passport showing that he was out of the country at the time of the execution of the questioned SPA; and that the alleged notary public, Atty. Datingaling, had no authority to act as a Notary Public for Manila during the period of 1990-1991.

WHEREFORE, we deny the petition for review on certiorari, and affirm the decision dated July 2, 2004 rendered by the Court of Appeals in C.A.-G.R. CV No. 69044entitled Dionisio Z. Parulan, Jr. vs. Ma. Elena Parulan and Sps. Rex and Concepcion Aggabao and Sps. Rex and Concepcion Aggabao vs. Dionisio Z. Parulan, Jr. and Ma. Elena Parulan.

Costs of suit to be paid by the petitioners.