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VALDES v RTC BRANCH 102, QC

VITUG, J .:p

The petition for new bewails, purely on the question of law, an alleged error committed by the RegionalTrial Court in Civil Case No. Q-92-12539. Petitioner avers that the court a quohas failed to apply the

correct law that should govern the disposition of a family dwelling in a situation where a marriage isdeclared void ab initiobecause of psychological incapacity on the part of either or both parties in thecontract.

The pertinent facts giving rise to this incident are, by large, not in dispute.

Antonio Valdez and Consuelo Gomez were married on 05 January 1971. Begotten during the marriagewere five children. In a petition, dated 22 June 1992, Valdez sought the declaration of nullity of themarriage pursuant to Article 36 of the Family code (docketed Civil Case No. Q-92-12539, Regional TrialCourt of Quezon City, Branch 102). After the hearing the parties following the joinder of issues, the trialcourt,1in its decision of 29 July 1994, granted the petition, viz:

WHEREFORE, judgment is hereby rendered as follows:

(1) The marriage of petitioner Antonio Valdez and respondent Consuelo Gomez-Valdez is herebydeclared null and void under Article 36 of the Family Code on the ground of their mutualpsychological incapacity to comply with their essential marital obligations;

(2) The three older children, Carlos Enrique III, Antonio Quintin and Angela Rosario shall choosewhich parent they would want to stay with.

Stella Eloisa and Joaquin Pedro shall be placed in the custody of their mother, herein respondentConsuelo Gomez-Valdes.

The petitioner and respondent shall have visitation rights over the children who are in the custody

of the other.

(3) The petitioner and the respondent are directed to start proceedings on the liquidation of theircommon propertiesas defined byArticle 147of the Family Code, and to comply with theprovisions ofArticles 50, 51, and 52of the same code, within thirty (30) days from notice of thisdecision.

Let a copy of this decision be furnished the Local Civil Registrar of Mandaluyong, Metro Manila,for proper recording in the registry of marriages.2(Emphasis ours.)

Consuelo Gomez sought a clarification of that portion of the decision directing compliance with Articles50, 51 and 52 of the Family Code. She asserted that the Family Code contained no provisions on theprocedure for the liquidation of common property in "unions without marriage." Parenthetically, during thehearing of the motion, the children filed a joint affidavit expressing their desire to remain with their father,Antonio Valdez, herein petitioner.

In an order, dated 05 May 1995, the trial court made the following clarification:

Consequently, considering that Article 147 of the Family Code explicitly provides that the propertyacquired by both parties during their union, in the absence of proof to the contrary, are presumedto have been obtained through the joint efforts of the parties and will be owned by them in equal

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shares, plaintiff and defendant will own their "family home"and all their properties for thatmatter in equal shares.

In the liquidation and partition of properties owned in common by the plaintiff and defendant, theprovisions on ownership found in the Civil Code shall apply. 3(Emphasis supplied.)

In addressing specifically the issue regarding the disposition of the family dwelling, the trial court said:

Considering that this Court has already declared the marriage between petitioner and respondentas null and void ab initio, pursuant to Art. 147, the property regime of petitioner and respondentshall be governed by the rules on ownership.

The provisions of Articles 102 and 129 of the Family Code finds no application since Article 102refers to the procedure for the liquidation of the conjugal partnership property and Article 129refers to the procedure for the liquidation of the absolute community of property.4

Petitioner moved for a reconsideration of the order. The motion was denied on 30 October 1995.

In his recourse to this Court, petitioner submits that Articles 50, 51 and 52 of the Family Code should beheld controlling: he argues that:

I

Article 147 of the Family Code does not apply to cases where the parties are psychologicallyincapacitated.

II

Articles 50, 51 and 52 in relation to Articles 102 and 129 of the Family Code govern thedisposition of the family dwelling in cases where a marriage is declared void ab initio, including amarriage declared void by reason of the psychological incapacity of the spouses.

III

Assuming arguendothat Article 147 applies to marriages declared void ab initioon the ground ofthe psychological incapacity of a spouse, the same may be read consistently with Article 129.

IV

It is necessary to determine the parent with whom majority of the children wish to stay. 5

The trial court correctly applied the law. In a void marriage, regardless of the cause thereof, the propertyrelations of the parties during the period of cohabitation is governed by the provisions of Article 147 or

Article 148, such as the case may be, of the Family Code. Article 147 is a remake of Article 144 of theCivil Code as interpreted and so applied in previous cases; 6it provides:

Art. 147. When a man and a woman who are capacitated to marry each other, live exclusivelywith each other as husband and wife without the benefit of marriage or under a void marriage,their wages and salaries shall be owned by them in equal shares and the property acquired byboth of them through their work or industry shall be governed by the rules on co-ownership.

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In the absence of proof to the contrary, properties acquired while they lived together shall bepresumed to have been obtained by their joint efforts, work or industry, and shall be owned bythem in equal shares. For purposes of this Article, a party who did not participate in theacquisition by the other party of any property shall be deemed to have contributed jointly in theacquisition thereof in the former's efforts consisted in the care and maintenance of the family andof the household.

Neither party can encumber or dispose by acts inter vivosof his or her share in the propertyacquired during cohabitation and owned in common, without the consent of the other, until afterthe termination of their cohabitation.

When only one of the parties to a void marriage is in good faith, the share of the party in bad faithin the ownership shall be forfeited in favor of their common children. In case of default of orwaiver by any or all of the common children or their descendants, each vacant share shall belongto the innocent party. In all cases, the forfeiture shall take place upon the termination of thecohabitation.

This particular kind of co-ownership applies when a man and a woman, suffering no illegal impediment tomarry each other, so exclusively live together as husband and wife under a void marriage or without the

benefit of marriage. The term "capacitated" in the provision (in the first paragraph of the law) refers tothe legal capacityof a party to contract marriage, i.e., any "male or female of the age of eighteen years orupwards not under any of the impediments mentioned in Articles 37 and 38" 7of the Code.

Under this property regime, property acquired by both spouses through their work and industry shall begoverned by the rules on equal co-ownership. Any property acquired during the union isprimafaciepresumed to have been obtained through their joint efforts. A party who did not participate in theacquisition of the property shall be considered as having contributed thereto jointly if said party's "effortsconsisted in the care and maintenance of the family household." 8Unlike the conjugal partnership ofgains, the fruits of the couple's separate property are not included in the co-ownership.

Article 147 of the Family Code, in the substance and to the above extent, has clarified Article 144 of theCivil Code; in addition, the law now expressly provides that

(a) Neither party can dispose or encumber by act intervivoshis or her share in co-ownership property,without consent of the other, during the period of cohabitation; and

(b) In the case of a void marriage, any party in bad faith shall forfeit his or her share in the co-ownershipin favor of their common children; in default thereof or waiver by any or all of the common children, eachvacant share shall belong to the respective surviving descendants, or still in default thereof, to theinnocent party. The forfeiture shall take place upon the termination of the cohabitation 9or declaration ofnullity of the marriage. 10

When the common-law spouses suffer from a legal impediment to marry or when they do not liveexclusively with each other (as husband and wife), only the property acquired by both of them throughtheir actual joint contribution of money, property or industry shall be owned in common and in proportionto their respective contributions. Such contributions and corresponding shares, however, areprimafaciepresumed to be equal. The share of any party who is married to another shall accrue to the absolutecommunity or conjugal partnership, as the case may be, if so existing under a valid marriage. If the partywho has acted in bad faith is not validly married to another, his or her share shall be forfeited in themanner already heretofore expressed. 11

In deciding to take further cognizance of the issue on the settlement of the parties' common property, thetrial court acted neither imprudently nor precipitately; a court which has jurisdiction to declare themarriage a nullity must be deemed likewise clothed in authority to resolve incidental and consequential

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matters. Nor did it commit a reversible error in ruling that petitioner and private respondent own the"family home" and all their common property in equal shares, as well as in concluding that, in theliquidation and partition of the property owned in common by them, the provisions on co-ownership underthe Civil Code, not Articles 50, 51 and 52, in relation to Articles 102 and 129, 12of the Family Code,should aptly prevail. The rules set up to govern the liquidation of either the absolute community or theconjugal partnership of gains, the property regimes recognized for valid and voidable marriages (in thelatter case until the contract is annulled), are irrelevant to the liquidation of the co-ownership that existsbetween common-law spouses. The first paragraph of Articles 50 of the Family Code, applyingparagraphs (2), (3), (4) and 95) of Article 43, 13relates only, by its explicit terms, to voidablemarriagesand, exceptionally, to void marriages under Article 40 14of the Code, i.e., the declaration of nullity of asubsequent marriage contracted by a spouse of a prior void marriage before the latter is judiciallydeclared void. The latter is a special rule that somehow recognizes the philosophy and an old doctrinethat void marriages are inexistent from the very beginning and no judicial decree is necessary to establishtheir nullity. In now requiring forpurposes of remarriage, the declaration of nullity by final judgment of thepreviously contracted void marriage, the present law aims to do away with any continuing uncertainty onthe status of the second marriage. It is not then illogical for the provisions of Article 43, in relation toArticles 41 15and 42, 16of the Family Code, on the effects of the termination of a subsequent marriagecontracted during the subsistence of a previous marriage to be made applicable pro hac vice. In all othercases, it is not to be assumed that the law has also meant to have coincident property relations, on theone hand, between spouses in valid and voidable marriages (before annulment) and, on the other,

between common-law spouses or spouses of void marriages, leaving to ordain, on the latter case, theordinary rules on co-ownership subject to the provisions of the Family Code on the "family home," i.e., theprovisions found in Title V, Chapter 2, of the Family Code, remain in force and effect regardless of theproperty regime of the spouses.

WHEREFORE, the questioned orders, dated 05 May 1995 and 30 October 1995, of the trial court areAFFIRMED. No costs.

SO ORDERED.

BUENAVENTURA v CA

AZCUNA, J .:

These cases involve a petition for the declaration of nullity of marriage, which was filed by petitioner NoelBuenaventura on July 12, 1992, on the ground of the alleged psychological incapacity of his wife, IsabelSingh Buenaventura, herein respondent. After respondent filed her answer, petitioner, with leave of court,amended his petition by stating that both he and his wife were psychologically incapacitated to complywith the essential obligations of marriage. In response, respondent filed an amended answer denying theallegation that she was psychologically incapacitated.1

On July 31, 1995, the Regional Trial Court promulgated a Decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1) Declaring and decreeing the marriage entered into between plaintiff Noel A. Buenaventura anddefendant Isabel Lucia Singh Buenaventura on July 4, 1979, null and void ab initio;

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2) Ordering the plaintiff to pay defendant moral damages in the amount of 2.5 million pesos andexemplary damages of 1 million pesos with 6% interest from the date of this decision plusattorneys fees ofP100,000.00;

3) Ordering the plaintiff to pay the defendant expenses of litigation of P50,000.00, plus costs;

4) Ordering the liquidation of the assets of the conjugal partnership property[,] particularly theplaintiffs separation/retirement benefits received from the Far East Bank [and] Trust Company[,]by ceding, giving and paying to her fifty percent (50%) of the net amount of P3,675,335.79or P1,837,667.89 together with 12% interest per annum from the date of this decision and one-half (1/2) of his outstanding shares of stock with Manila Memorial Park and Provident Group ofCompanies;

5) Ordering him to give a regular support in favor of his son Javy Singh Buenaventura in theamount of P15,000.00 monthly, subject to modification as the necessity arises;

6) Awarding the care and custody of the minor Javy Singh Buenaventura to his mother, the hereindefendant; and

7) Hereby authorizing the defendant to revert back to the use of her maiden family name Singh.

Let copies of this decision be furnished the appropriate civil registry and registries of properties.

SO ORDERED.2

Petitioner appealed the above decision to the Court of Appeals. While the case was pending in theappellate court, respondent filed a motion to increase the P15,000 monthly supportpendente liteof theirson Javy Singh Buenaventura. Petitioner filed an opposition thereto, praying that it be denied or that suchincident be set for oral argument.3

On September 2, 1996, the Court of Appeals issued a Resolution increasing the supportpendente

liteto P20,000.4

Petitioner filed a motion for reconsideration questioning the said Resolution.5

On October 8, 1996, the appellate court promulgated a Decision dismissing petitioners appeal for lack ofmerit and affirming in toto the trial courts decision.

6Petitioner filed a motion for reconsideration whichwas denied. From the abovementioned Decision, petitioner filed the instant Petition for Reviewon Certiorari.

On November 13, 1996, through another Resolution, the Court of Appeals denied petitioners motion forreconsideration of the September 2, 1996 Resolution, which increased the monthly support for theson.7Petitioner filed a Petition for Certiorarito question these two Resolutions.

On July 9, 1997, the Petition for Review on Certiorari8and the Petition for Certiorari9were orderedconsolidated by this Court.10

In the Petition for Review on Certioraripetitioner claims that the Court of Appeals decided the case not inaccord with law and jurisprudence, thus:

1. WHEN IT AWARDED DEFENDANT-APPELLEE MORAL DAMAGES IN THE AMOUNT OFP2.5 MILLION AND EXEMPLARY DAMAGES OF P1 MILLION, WITH 6% INTEREST FROMTHE DATE OF ITS DECISION, WITHOUT ANY LEGAL AND MORAL BASIS;

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2. WHEN IT AWARDED P100,000.00 ATTORNEYS FEES ANDP50,000.00 EXPENSES OFLITIGATION, PLUS COSTS, TO DEFENDANT-APPELLEE, WITHOUT FACTUAL AND LEGALBASIS;

3. WHEN IT ORDERED PLAINTIFF-APPELLANT NOEL TO PAY DEFENDANT-APPELLEEONE-HALF OR P1,837,667.89 OUT OF HIS RETIREMENT BENEFITS RECEIVED FROM THE

FAR EAST BANK AND TRUST CO., WITH 12% INTEREST THEREON FROM THE DATE OFITS DECISION, NOTWITHSTANDING THAT SAID RETIREMENT BENEFITS AREGRATUITOUS AND EXCLUSIVE PROPERTY OF NOEL, AND ALSO TO DELIVER TODEFENDANT-APPELLEE ONE-HALF OF HIS SHARES OF STOCK WITH THE MANILAMEMORIAL PARK AND THE PROVIDENT GROUP OF COMPANIES, ALTHOUGH SAIDSHARES OF STOCK WERE ACQUIRED BY NOEL BEFORE HIS MARRIAGE TORESPONDENT ISABEL AND ARE, THEREFORE, AGAIN HIS EXCLUSIVE PROPERTIES; AND

4. WHEN IT AWARDED EXCLUSIVE CARE AND CUSTODY OVER THE PARTIES MINORCHILD TO DEFENDANT-APPELLEE WITHOUT ASKING THE CHILD (WHO WAS ALREADY 13YEARS OLD AT THAT TIME) HIS CHOICE AS TO WHOM, BETWEEN HIS TWO PARENTS, HEWOULD LIKE TO HAVE CUSTODY OVER HIS PERSON.11

In the Petition for Certiorari, petitioner advances the following contentions:

THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION WHEN IT REFUSED TOSET RESPONDENTS MOTION FOR INCREASED SUPPORT FOR THE PARTIES SON FORHEARING.12

THERE WAS NO NEED FOR THE COURT OF APPEALS TO INCREASE JAVYS MONTHLYSUPPORT OF P15,000.00 BEING GIVEN BY PETITIONER EVEN AT PRESENT PRICES.13

IN RESOLVING RESPONDENTS MOTION FOR THE INCREASE OF JAVYS SUPPORT, THECOURT OF APPEALS SHOULD HAVE EXAMINED THE LIST OF EXPENSES SUBMITTED BYRESPONDENT IN THE LIGHT OF PETITIONERS OBJECTIONS THERETO, INSTEAD OFMERELY ASSUMING THAT JAVY IS ENTITLED TO A P5,000 INCREASE IN SUPPORT AS

SAID AMOUNT IS "TOO MINIMAL."14

LIKEWISE, THE COURT OF APPEALS SHOULD HAVE GIVEN PETITIONER ANOPPORTUNITY TO PROVE HIS PRESENT INCOME TO SHOW THAT HE CANNOT AFFORDTO INCREASE JAVYS SUPPORT.

15

With regard to the first issue in the main case, the Court of Appeals articulated:

On Assignment of Error C, the trial court, after findings of fact ascertained from the testimoniesnot only of the parties particularly the defendant-appellee but likewise, those of the twopsychologists, awarded damages on the basis of Articles 21, 2217 and 2229 of the Civil Code ofthe Philippines.

Thus, the lower court found that plaintiff-appellant deceived the defendant-appellee into marryinghim by professing true love instead of revealing to her that he was under heavy parental pressureto marry and that because of pride he married defendant-appellee; that he was not ready to enterinto marriage as in fact his career was and always would be his first priority; that he was unable torelate not only to defendant-appellee as a husband but also to his son, Javy, as a father; that hehad no inclination to make the marriage work such that in times of trouble, he chose the easiestway out, that of leaving defendantappellee and their son; that he had no desire to keepdefendant-appellee and their son as proved by his reluctance and later, refusal to reconcile aftertheir separation; that the aforementioned caused defendant-appellee to suffer mental anguish,

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anxiety, besmirched reputation, sleepless nights not only in those years the parties were togetherbut also after and throughout their separation.

Plaintiff-appellant assails the trial courts decision on the ground that unlike those arising from abreach in ordinary contracts, damages arising as a consequence of marriage may not beawarded. While it is correct that there is, as yet, no decided case by the Supreme Court where

damages by reason of the performance or non-performance of marital obligations were awarded,it does not follow that no such award for damages may be made.

Defendant-appellee, in her amended answer, specifically prayed for moral and exemplarydamages in the total amount of 7 million pesos. The lower court, in the exercise of its discretion,found full justification of awarding at least half of what was originally prayed for. We find noreason to disturb the ruling of the trial court.16

The award by the trial court of moral damages is based on Articles 2217 and 21 of the Civil Code, whichread as follows:

ART. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety,besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury.

Though incapable of pecuniary computation, moral damages may be recovered if they are theproximate result of the defendants wrongful act or omission.

ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary tomorals, good customs or public policy shall compensate the latter for the damage.

The trial court referred to Article 21 because Article 221917of the Civil Code enumerates the cases inwhich moral damages may be recovered and it mentions Article 21 as one of the instances. It must benoted that Article 21 states that the individual must willfully cause loss or injury to another. There is aneed that the act is willful and hence done in complete freedom. In granting moral damages, therefore,the trial court and the Court of Appeals could not but have assumed that the acts on which the moraldamages were based were done willfully and freely, otherwise the grant of moral damages would have noleg to stand on.

On the other hand, the trial court declared the marriage of the parties null and void based on Article 36 ofthe Family Code, due to psychological incapacity of the petitioner, Noel Buenaventura. Article 36 of theFamily Code states:

A marriage contracted by any party who, at the time of the celebration, was psychologicallyincapacitated to comply with the essential marital obligations of marriage, shall likewise be voideven if such incapacity becomes manifest only after its solemnization.

Psychological incapacity has been defined, thus:

. . . no less than a mental (not physical) incapacity that causes a party to be truly incognitive of

the basic marital covenants that concomitantly must be assumed and discharged by theparties to the marriagewhich, as so expressed by Article 68 of the Family Code, include theirmutual obligations to live together, observe love, respect and fidelity and render help and support.There is hardly any doubt that the intendment of the law has been to confine the meaning of"psychological incapacity" to the most serious cases of personality disorders clearlydemonstrative of an utter insensitivity or inability to give meaning and significance to themarriage. . . .18

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The Court of Appeals and the trial court considered the acts of the petitioner after the marriage as proof ofhis psychological incapacity, and therefore a product of his incapacity or inability to comply with theessential obligations of marriage. Nevertheless, said courts considered these acts as willful and hence asgrounds for granting moral damages. It is contradictory to characterize acts as a product of psychologicalincapacity, and hence beyond the control of the party because of an innate inability, while at the sametime considering the same set of acts as willful. By declaring the petitioner as psychologicallyincapacitated, the possibility of awarding moral damages on the same set of facts was negated. Theaward of moral damages should be predicated, not on the mere act of entering into the marriage, but onspecific evidence that it was done deliberately and with malice by a party who had knowledge of his orher disability and yet willfully concealed the same. No such evidence appears to have been adduced inthis case.

For the same reason, since psychological incapacity means that one is truly incognitive of the basicmarital covenants that one must assume and discharge as a consequence of marriage, it removes thebasis for the contention that the petitioner purposely deceived the private respondent. If the privaterespondent was deceived, it was not due to a willful act on the part of the petitioner. Therefore, the awardof moral damages was without basis in law and in fact.

Since the grant of moral damages was not proper, it follows that the grant of exemplary damages cannot

stand since the Civil Code provides that exemplary damages are imposed in additionto moral,temperate, liquidated or compensatory damages.19

With respect to the grant of attorneys fees and expenses of litigation the trial court explained, thus:

Regarding Attorneys fees, Art. 2208 of the Civil Code authorizes an award of attorneys fees andexpenses of litigation, other than judicial costs, when as in this case the plaintiffs act or omissionhas compelled the defendant to litigate and to incur expenses of litigation to protect her interest(par. 2), and where the Court deems it just and equitable that attorneys fees and expenses oflitigation should be recovered. (par. 11)20

The Court of Appeals reasoned as follows:

On Assignment of Error D, as the award of moral and exemplary damages is fully justified, theaward of attorneys fees and costs of litigation by the trial court is likewise fully justified.21

The acts or omissions of petitioner which led the lower court to deduce his psychological incapacity, andhis act in filing the complaint for the annulment of his marriage cannot be considered as undulycompelling the private respondent to litigate, since both are grounded on petitioners psychologicalincapacity, which as explained above is a mental incapacity causing an utter inability to comply with theobligations of marriage. Hence, neither can be a ground for a ttorneys fees and litigation expenses.Furthermore, since the award of moral and exemplary damages is no longer justified, the award ofattorneys fees and expenses of litigation is left without basis.

Anent the retirement benefits received from the Far East Bank and Trust Co. and the shares of stock inthe Manila Memorial Park and the Provident Group of Companies, the trial court said:

The third issue that must be resolved by the Court is what to do with the assets of the conjugalpartnership in the event of declaration of annulment of the marriage. The Honorable SupremeCourt has held that the declaration of nullity of marriage carries ipso factoa judgment for theliquidation of property (Domingo v. Court of Appeals, et al., G.R. No. 104818, Sept. 17, 1993, 226SCRA, pp. 572573, 586). Thus, speaking through Justice Flerida Ruth P. Romero, it was ruledin this case:

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When a marriage is declared void ab initio, the law states that the final judgment thereinshall provide for the liquidation, partition and distribution of the properties of the spouses,the custody and support of the common children and the delivery of their presumptivelegitimes, unless such matters had been adjudicated in the previous proceedings.

The parties here were legally married on July 4, 1979, and therefore, all property acquired during

the marriage, whether the acquisition appears to have been made, contracted or registered in thename of one or both spouses, is presumed to be conjugal unless the contrary is proved (Art. 116,New Family Code; Art. 160, Civil Code). Art. 117 of the Family Code enumerates what areconjugal partnership properties. Among others they are the following:

1) Those acquired by onerous title during the marriage at the expense of the commonfund, whether the acquisition be for the partnership, or for only one of the spouses;

2) Those obtained from the labor, industry, work or profession of either or both of thespouses;

3) The fruits, natural, industrial, or civil, due or received during the marriage from thecommon property, as well as the net fruits from the exclusive property of each spouse. . .

.

Applying the foregoing legal provisions, and without prejudice to requiring an inventory of whatare the parties conjugal properties and what are the exclusive properties of each spouse, it wasdisclosed during the proceedings in this case that the plaintiff who worked first as BranchManager and later as Vice-President of Far East Bank & Trust Co. received separation/retirementpackage from the said bank in the amount of P3,701,500.00 which after certain deductionsamounting toP26,164.21 gave him a net amount of P3,675,335.79 and actually paid to him onJanuary 9, 1995 (Exhs. 6, 7, 8, 9, 10, 11). Not having shown debts or obligations other than thosededucted from the said retirement/separation pay, under Art. 129 of the Family Code "The netremainder of the conjugal partnership properties shall constitute the profits, which shall be dividedequally between husband and wife, unless a different proportion or division was agreed upon inthe marriage settlement or unless there has been a voluntary waiver or forfeiture of such share as

provided in this Code." In this particular case, however, there had been no marriage settlementbetween the parties, nor had there been any voluntary waiver or valid forfeiture of the defendantwifes share in the conjugal partnership properties. The previous cession and transfer by theplaintiff of his one-half (1/2) share in their residential house and lot covered by T.C.T. No. S-35680 of the Registry of Deeds of Paraaque, Metro Manila, in favor of the defendant asstipulated in their Compromise Agreement dated July 12, 1993, and approved by the Court in itsPartial Decision dated August 6, 1993, was actually intended to be in full settlement of any and alldemands for past support. In reality, the defendant wife had allowed some concession in favor ofthe plaintiff husband, for were the law strictly to be followed, in the process of liquidation of theconjugal assets, the conjugal dwelling and the lot on which it is situated shall, unless otherwiseagreed upon by the parties, be adjudicated to the spouse with whom their only child has chosento remain (Art. 129, par. 9). Here, what was done was one-half (1/2) portion of the house wasceded to defendant so that she will not claim anymore for past unpaid support, while the other

half was transferred to their only child as his presumptive legitime.

Consequently, nothing yet has been given to the defendant wife by way of her share in theconjugal properties, and it is but just, lawful and fair, that she be given one-half (1/2) share of theseparation/retirement benefits received by the plaintiff the same being part of their conjugalpartnership properties having been obtained or derived from the labor, industry, work orprofession of said defendant husband in accordance with Art. 117, par. 2 of the Family Code. Forthe same reason, she is entitled to one-half (1/2) of the outstanding shares of stock of the plaintiffhusband with the Manila Memorial Park and the Provident Group of Companies. 22

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The Court of Appeals articulated on this matter as follows:

On Assignment of Error E, plaintiff-appellant assails the order of the trial court for him to give one-half of his separation/retirement benefits from Far East Bank & Trust Company and half of hisoutstanding shares in Manila Memorial Park and Provident Group of Companies to thedefendant-appellee as the latters share in the conjugal partnership.

On August 6, 1993, the trial court rendered a Partial Decision approving the CompromiseAgreement entered into by the parties. In the same Compromise Agreement, the parties hadagreed that henceforth, their conjugal partnership is dissolved. Thereafter, no steps were takenfor the liquidation of the conjugal partnership.

Finding that defendant-appellee is entitled to at least half of the separation/retirement benefitswhich plaintiff-appellant received from Far East Bank & Trust Company upon his retirement asVice-President of said company for the reason that the benefits accrued from plaintiffappellantsservice for the bank for a number of years, most of which while he was married to defendant-appellee, the trial court adjudicated the same. The same is true with the outstanding shares ofplaintiff-appellant in Manila Memorial Park and Provident Group of Companies. As these wereacquired by the plaintiff-appellant at the time he was married to defendant-appellee, the latter is

entitled to one-half thereof as her share in the conjugal partnership. We find no reason to disturbthe ruling of the trial court.23

Since the present case does not involve the annulment of a bigamous marriage, the provisions of Article50 in relation to Articles 41, 42 and 43 of the Family Code, providing for the dissolution of the absolutecommunity or conjugal partnership of gains, as the case may be, do not apply. Rather, the general ruleapplies, which is that in case a marriage is declared void ab initio, the property regime applicable and tobe liquidated, partitioned and distributed is that of equal co-ownership.

In Valdes v. Regional Trial Court, Branch 102, Quezon City,24this Court expounded on the consequencesof a void marriage on the property relations of the spouses and specified the applicable provisions of law:

The trial court correctly applied the law. In a void marriage, regardless of the cause thereof, the

property relations of the parties during the period of cohabitation is governed by the provisions ofArticle 147 or Article 148, such as the case may be, of the Family Code. Article 147 is a remakeof Article 144 of the Civil Code as interpreted and so applied in previous cases; it provides:

ART. 147. When a man and a woman who are capacitated to marry each other, liveexclusively with each other as husband and wife without the benefit of marriage or undera void marriage, their wages and salaries shall be owned by them in equal shares andthe property acquired by both of them through their work or industry shall be governed bythe rules on co-ownership.

In the absence of proof to the contrary, properties acquired while they lived together shallbe presumed to have been obtained by their joint efforts, work or industry, and shall beowned by them in equal shares. For purposes of this Article, a party who did notparticipate in the acquisition by the other party of any property shall be deemed to havecontributed jointly in the acquisition thereof if the former's efforts consisted in the careand maintenance of the family and of the household.

Neither party can encumber or dispose by acts inter vivosof his or her share in theproperty acquired during cohabitation and owned in common, without the consent of theother, until after the termination of their cohabitation.

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When only one of the parties to a void marriage is in good faith, the share of the party inbad faith in the co-ownership shall be forfeited in favor of their common children. In caseof default of or waiver by any or all of the common children or their descendants, eachvacant share shall belong to the respective surviving descendants. In the absence ofdescendants, such share shall belong to the innocent party. In all cases, the forfeitureshall take place upon termination of the cohabitation.

This peculiar kind of co-ownership applies when a man and a woman, suffering no legalimpediment to marry each other, so exclusively live together as husband and wife under a voidmarriage or without the benefit of marriage. The term "capacitated" in the provision (in the firstparagraph of the law) refers to the legal capacityof a party to contract marriage, i.e., any "male orfemale of the age of eighteen years or upwards not under any of the impediments mentioned inArticles 37 and 38" of the Code.

Under this property regime, property acquired by both spouses throughtheir workand industryshall be governed by the rules on equal co-ownership. Any propertyacquired during the union is prima facie presumed to have been obtained through their jointefforts. A party who did not participate in the acquisition of the property shall still be considered ashaving contributed thereto jointly if said party's "efforts consisted in the care and maintenance of

the family household." Unlike the conjugal partnership of gains, the fruits of the couple's separateproperty are not included in the co-ownership.

Article 147 of the Family Code, in substance and to the above extent, has clarified Article 144 ofthe Civil Code; in addition, the law now expressly provides that

(a) Neither party can dispose or encumber by act[s] inter vivos [of] his or her share in co-ownership property, without the consent of the other, during the period of cohabitation; and

(b) In the case of a void marriage, any party in bad faith shall forfeit his or her share in the co-ownership in favor of their common children; in default thereof or waiver by any or all of thecommon children, each vacant share shall belong to the respective surviving descendants, or stillin default thereof, to the innocent party. The forfeiture shall take place upon the termination of the

cohabitation or declaration of nullity of the marriage.

In deciding to take further cognizance of the issue on the settlement of the parties' commonproperty, the trial court acted neither imprudently nor precipitately; a court which had jurisdictionto declare the marriage a nullity must be deemed likewise clothed with authority to resolveincidental and consequential matters. Nor did it commit a reversible error in ruling that petitionerand private respondent own the "family home" and all their common property in equal shares, aswell as in concluding that, in the liquidation and partition of the property owned in common bythem, the provisions on co-ownership under the Civil Code, not Articles 50, 51 and 52, in relationto Articles 102 and 129, of the Family Code, should aptly prevail. The rules set up to govern theliquidation of either the absolute community or the conjugal partnership of gains, the property

regimes recognized for valid and voidable marriages (in the latter case until the contract isannulled), are irrelevant to the liquidation of the co-ownership that exists between common-lawspouses. The first paragraph of Article 50 of the Family Code, applying paragraphs (2), (3), (4)and (5) of Article 43, relates only, by its explicit terms, to voidablemarriages and, exceptionally,to voidmarriages under Article 40 of the Code, i.e., the declaration of nullity of a subsequentmarriage contracted by a spouse of a prior void marriage before the latter is judicially declaredvoid. The latter is a special rule that somehow recognizes the philosophy and an old doctrine thatvoid marriages are inexistent from the very beginning and no judicial decree is necessary toestablish their nullity. In now requiring forpurposes of remarriage, the declaration of nullity by

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final judgment of the previously contracted void marriage, the present law aims to do away withany continuing uncertainty on the status of the second marriage. It is not then illogical for theprovisions of Article 43, in relation to Articles 41 and 42, of the Family Code, on the effects of thetermination of a subsequent marriage contracted during the subsistence of a previous marriage tobe made applicablepro hac vice. In all other cases, it is not to be assumed that the law has alsomeant to have coincident property relations, on the one hand, between spouses in valid andvoidable marriages (before annulment) and, on the other, between common-law spouses orspouses of void marriages, leaving to ordain, in the latter case, the ordinary rules on co-ownership subject to the provision of Article 147 and Article 148 of the Family Code. It must bestressed, nevertheless, even as it may merely state the obvious, that the provisions of the FamilyCode on the "family home," i.e., the provisions found in Title V, Chapter 2, of the Family Code,remain in force and effect regardless of the property regime of the spouses.25

Since the properties ordered to be distributed by the court a quo were found, both by the trial court andthe Court of Appeals, to have been acquired during the union of the parties, the same would be coveredby the co-ownership. No fruits of a separate property of one of the parties appear to have been includedor involved in said distribution. The liquidation, partition and distribution of the properties owned incommon by the parties herein as ordered by the court a quoshould, therefore, be sustained, but on thebasis of co-ownership and not of the regime of conjugal partnership of gains.

As to the issue on custody of the parties over their only child, Javy Singh Buenaventura, it is now mootsince he is about to turn twenty-five years of age on May 27, 200526and has, therefore, attained the ageof majority.

With regard to the issues on support raised in the Petition for Certiorari, these would also now be moot,owing to the fact that the son, Javy Singh Buenaventura, as previously stated, has attained the age ofmajority.

WHEREFORE, the Decision of the Court of Appeals dated October 8, 1996 and its Resolution datedDecember 10, 1996 which are contested in the Petition for Review (G.R. No. 127449), are herebyMODIFIED, in that the award of moral and exemplary damages, attorneys fees, expenses of litigationand costs are deleted. The order giving respondent one-half of the retirement benefits of petitioner from

Far East Bank and Trust Co. and one-half of petitioners shares of stock in Manila Memorial Park and inthe Provident Group of Companies is sustained but on the basis of the liquidation, partition anddistribution of the co-ownership and not of the regime of conjugal partnership of gains. The rest ofsaid Decision and Resolution are AFFIRMED.

The Petition for Review on Certiorari(G.R. No. 127358) contesting the Court of Appeals Resolutions ofSeptember 2, 1996 and November 13, 1996 which increased the supportpendente litein favor of theparties son, Javy Singh Buenaventura, is now MOOT and ACADEMIC and is, accordingly, DISMISSED.

No costs.

SO ORDERED.

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ABING v WAEYAN

GARCIA, J.:

In this appeal by way of a petition for review under Rule 45 of the Rules of Court, petitioner John Abing(John, hereafter) seeks to set aside the Decision1dated October 24, 2000 of the Court of Appeals (CA)

in CA-G.R. SP No. 48675, reversing that of the Regional Trial Court (RTC) of Benguet, Branch 64, whichaffirmed an earlier decision of the Municipal Trial Court (MTC) of Mankayan, Benguet in an ejectment suitthereat commenced by the petitioner against the respondent.

In the main, the controversy is between a man and a woman who, during the good old days, livedtogether as husband and wife without the benefit of marriage. During their cohabitation, they acquiredproperties. Later, they parted ways, and with it this litigation between them involving one of their commonproperties.

The facts:

Sometime in 1986, John and respondent Juliet Waeyan (Juliet, for short) met and fell in love with eachother. In time, the duo cohabited as husband and wife without the benefit of marriage. Together, thecouple bought a 2-storey residential house from one Benjamin Macua which was erected on a lot ownedby a certain Alejandro Dio on Aurora Street, Mankayan, Benguet. Consequent to the purchase, the taxdeclaration of the 2-storey house was transferred in the name of Juliet.

On December 2, 1991, Juliet left for overseas employment in Korea. She would send money to John whodeposited the same in their joint bank account.

In 1992, the original 2-storey residential house underwent renovation. To it was annexed a new structurewhich housed a sari-sari store. This new structure and the sari-saristore thereat are the propertiesinvolved in this case.

In 1994, Juliet returned from Korea and continued to live with John. She managed the sari-saristore while

John worked as a mine employee of the Lepanto Consolidated Mining, Inc.

In 1995, the relationship between the two turned from bad to worse. Hence, they decided to partition theirproperties. For the purpose, they executed on October 7, 1995 a Memorandum of Agreement.Unfortunately, the document was left unsigned by the parties although signed by the witnesses thereto.Under their unsigned agreement, John shall leave the couples' dwelling with Juliet paying him the amountof P428,870.00 representing John's share in all their properties. On the same date October 7, 1995Juliet paid John the sum of P232,397.66 by way of partial payment of his share, with the balanceof P196,472.34 to be paid by Juliet in twelve monthly installment beginning November 1995.

Juliet, however, failed to make good the balance. On account thereof, John demanded of her to vacatethe annex structure housing the sari-saristore. Juliet refused, prompting John to file an ejectment suitagainst her before the MTC of Mankayan, Benguet.

In his complaint, John alleged that he alone spent for the construction of the annex structure with his ownfunds and thru money he borrowed from his relatives. In fact, he added that the tax declaration for thestructure was under his name. On this premise, John claimed exclusive ownership of the subjectstructure, which thereby gave him the right to eject Juliet therefrom upon the latter's failure to pay theagreed balance due him under the aforementionedMemorandum of Agreement.

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In her answer, Juliet countered that their original house was renovated thru their common funds and thatthe subject structure annexed thereto was merely an attachment or an extension of their originalresidential house, hence the same pertained to the two of them in common.

In a decision2dated March 15, 1997, the MTC, on its finding that the money used in the construction ofthe structure in question solely came from John, ruled that the same exclusively pertained to the latter,

and accordingly ordered Juliet's eviction therefrom, including the sari-saristore thereat, and required herto surrender possession thereof to John, thus:

WHEREFORE, judgment is rendered in favor of the plaintiff (John) and against the defendant(Juliet).

Defendant is hereby ordered to vacate the premises of the store in litigation covered by TaxDeclaration No. 96-001-00445 in the name of the Plaintiff and turn over possession thereof to thelatter.

Defendant is hereby further ordered to pay the Plaintiff the sum of P2,500.00 a month from thetime she withheld possession of the store in litigation in June 1996 until she vacates the sameand turn over possession thereof to the Plaintiff.

Defendant is finally ordered, to pay the sum of P5,000.00 to the Plaintiff by way of Attorney'sfees; and to pay the costs.

SO ORDERED.

On Juliet's appeal to the RTC, the latter, in its decision of July 29, 1995, affirmed that of the MTC.Undaunted, Juliet then went to the CA in CA-G.R. SP No. 48675.

As stated at the threshold hereof, the CA, in its Decision of October 24, 2000,3reversed that of the RTC,to wit:

WHEREFORE, the petition is GRANTED. The assailed decision of the Regional Trial Court ishereby reversed and set aside. Petitioner, Juliet Waeyan is entitled to possess the property andmaintain therein her business.

SO ORDERED.

Partly says the CA in its reversal disposition:

It is undisputed that the parties lived together as husband and wife without the benefit of marriagefrom 1986 to 1995 and that they acquired certain properties which must be divided between themupon the termination of their common law relationship.

xxx xxx xxx

. . . their property relations cannot be governed by the provision of the Civil Code on conjugalpartnership... but by the rule on co-ownership.

xxx xxx xxx

. . . the parties' share in respect of the properties they have accumulated during their cohabitationshall be equal unless there is proof to the contrary.

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To the CA, John's evidence failed to establish that he alone spent for the construction of the annexstructure. Hence, the same pertained to both, and being a co-owner herself, Juliet cannot be evictedtherefrom, adding that if ever, John's cause of action should have been for a sum of money "because heclaims that Juliet still owes him the payment for the extension." According to the CA, ejectment cannot lieagainst Juliet because Juliet's possession of the premises in dispute was not by virtue of a contract,express or implied, nor did she obtain such possession thru force, intimidation, threat, strategy or stealth.

Hence, John's present recourse, submitting that the CA erred in

1. not giving effect to the parties' Memorandum of Agreementwhich should have been bindingbetween them albeit unsigned by both;

2. in holding that the subject premises (annex structure housing the sari-sari store) is owned bythe two of them in common;

3. in ruling that the parties should settle their common properties in a separate action for partitioneven as the community character of the subject premises has not been proven.

We AFFIRM with modification.

Essentially, the issues raised center on the core question of whether or not the property subject of the suitpertains to the exclusive ownership of petitioner, John. Departing from the factual findings of the twocourts before it, the CA found that the premises in dispute is owned in common by Juliet and John, thelatter having failed to establish by the required quantum of proof that the money spent for the constructionthereof solely came from him. Being a co-owner of the same structure, Juliet may not be ejectedtherefrom.

While the question raised is essentially one of fact, of which the Court normally eschews from, yet, giventhe conflicting factual findings of the three courts below, the Court shall go by the exception 4to thegeneral rule and proceed to make its own assessment of the evidence.

First and foremost, it is undisputed that the parties hereto lived together as husband and wife from 1986to 1995 without the benefit of marriage. Neither is it disputed that sometime in December 1991, Juliet leftfor Korea and worked thereat, sending money to John which the latter deposited in their joint account. Infact, Juliet was still in Korea when the annex structure was constructed in 1992.

Other than John's bare allegation that he alone, thru his own funds and money he borrowed from hisrelatives, spent for the construction of the annex structure, evidence is wanting to support such nakedclaim. For sure, John even failed to reveal how much he spent therefor. Neither did he divulge the namesof the alleged relatives from whom he made his borrowings, let alone the amount of money he borrowedfrom them. All that petitioner could offer by way of reinforcing his claim of spending his own funds andborrowed money in putting up the subject structure was the affidavit executed by a certain ManuelMacaraeg to the effect that petitioner borrowed P30,000.00 from him. Even then, Macaraeg stated in hisaffidavit that it was sometime in 1990 when John borrowed said amount from him. With the petitioner's

own admission that the subject structure was constructed only in 1992, or two years after heborrowed P30,000.00 from Macaraeg, it is even doubtful whether the amount he allegedly borrowed fromthe latter went into the construction of the structure in dispute. More, it is noted that while petitioner wasable to present in evidence the Macaraeg affidavit, he failed to introduce similar affidavits, if any, of hisclose relatives from whom he claimed to have made similar borrowings. For sure, not a single relativecame forward to confirm petitioner's tale. In short, there is a paucity of evidence, testimonial ordocumentary, to support petitioner's self-serving allegation that the annex structure which housed thesari-sari store was put up thru his own funds and/or money borrowed by him. Sure, petitioner has in hisfavor the tax declaration covering the subject structure. We have, however, ruled time and again that taxdeclarations do not prove ownership but at best an indicia of claims of ownership. 5Payment of taxes is

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not proof of ownership, any more than indicating possession in the concept of an owner. 6Neither taxreceipts nor declaration of ownership for taxation purposes are evidence of ownership or of the right topossess realty when not supported by other effective proofs.7

In this connection, Article 147 of the Family Code is instructive. It reads:

Art. 147. When a man and a woman who are capacitated to marry each other, live exclusivelywith each other as husband and wife without the benefit of marriage or under a void marriage,their wages and salaries shall be owned by them in equal shares and the property acquired byboth of them through their work or industry shall be governed by the rules on co-ownership.

In the absence of proof to the contrary, properties acquired while they lived together shall bepresumed to have been obtained by their joint efforts, work or industry, and shall be owned bythem in equal shares. For purposes of this Article, a party who did not participate in theacquisition by other party of any property shall be deemed to have contributed jointly in theacquisition thereof if the former's efforts consisted in the care and maintenance of the family andof the household.

The law is clear. In the absence, as here, of proofs to the contrary, any property acquired by common-law

spouses during their period of cohabitation is presumed to have been obtained thru their joint efforts andis owned by them in equal shares. Their property relationship is governed by the rules on co-ownership.And under this regime, they owned their properties in common "in equal shares." Being herself a co-owner of the structure in question, Juliet, as correctly ruled by the CA, may not be ejected therefrom.

True it is that under Article 4878of the Civil Code, a co-owner may bring an action for ejectment against aco-owner who takes exclusive possession and asserts exclusive ownership of a common property. Itbears stressing, however, that in this case, evidence is totally wanting to establish John's or Juliet'sexclusive ownership of the property in question. Neither did Juliet obtain possession thereof by virtue of acontract, express or implied, or thru intimidation, threat, strategy or stealth. As borne by the record, Julietwas in possession of the subject structure and the sari-saristore thereat by virtue of her being a co-ownerthereof. As such, she is as much entitled to enjoy its possession and ownership as John.

We, however, disagree with the ruling of the CA that the subject Memorandum of Agreement, beingunsigned by Juliet and John, has no binding effect between them.

It is a matter of record that pursuant to said Agreement, Juliet did pay John the amount of P232,397.66,as initial payment for John's share in their common properties, with the balance of P196,472.34 payablein twelve monthly installments beginning November 1995. It is also a matter of record that the Agreementwas signed by the witnesses thereto. Hence, the irrelevant circumstances that the Agreement was leftunsigned by Juliet and John cannot adversely affect its binding force or effect between them, asevidently, Juliet's initial payment of P232,397.66 to John was in fulfillment of what the parties had agreedupon thereunder. However, and as correctly held by the CA, Juliet's failure to pay John the balance of thelatter's share in their common properties could at best give rise to an action for a sum of money againstJuliet, or for rescission of the said agreement and not for ejectment.

WHEREFORE, the petition is DENIEDand the assailed CA Decision is AFFIRMED, except that portionthereof denying effect to the parties' Memorandum of Agreement for being unsigned by both.

Costs against petitioner.

SO ORDERED.

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METROBANK v PASCUAL

VELASCO, JR., J.:

Respondent Nicholson Pascual and Florencia Nevalga were married on January 19, 1985. During theunion, Florencia bought from spouses Clarito and Belen Sering a 250-square meter lot with a three-doorapartment standing thereon located in Makati City. Subsequently, Transfer Certificate of Title (TCT) No.S-101473/T-510 covering the purchased lot was canceled and, in lieu thereof, TCT No. 156283 1of theRegistry of Deeds of Makati City was issued in the name of Florencia, "married to Nelson Pascual" a.k.a.Nicholson Pascual.

In 1994, Florencia filed a suit for the declaration of nullity of marriage under Article 36 of the Family Code,docketed as Civil Case No. Q-95-23533. After trial, the Regional Trial Court (RTC), Branch 94 in QuezonCity rendered, on July 31, 1995, a Decision,2declaring the marriage of Nicholson and Florencia null andvoid on the ground of psychological incapacity on the part of Nicholson. In the same decision, theRTC, inter alia,ordered the dissolution and liquidation of the ex-spouses conjugal partnership of gains.Subsequent events saw the couple going their separate ways without liquidating their conjugalpartnership.

On April 30, 1997, Florencia, together with spouses Norberto and Elvira Oliveros, obtained a PhP 58million loan from petitioner Metropolitan Bank and Trust Co. (Metrobank). To secure the obligation,Florencia and the spouses Oliveros executed several real estate mortgages (REMs) on their properties,including one involving the lot covered by TCT No. 156283. Among the documents Florencia submitted toprocure the loan were a copy of TCT No. 156283, a photocopy of the marriage-nullifying RTC decision,and a document denominated as "Waiver" that Nicholson purportedly executed on April 9, 1995. Thewaiver, made in favor of Florencia, covered the conjugal properties of the ex-spouses listed therein, butdid not incidentally include the lot in question.

Due to the failure of Florencia and the spouses Oliveros to pay their loan obligation when it fell due,Metrobank, on November 29, 1999, initiated foreclosure proceedings under Act No. 3135, as amended,before the Office of the Notary Public of Makati City. Subsequently, Metrobank caused the publication ofthe notice of sale on three issues of Remate.3At the auction sale on January 21, 2000, Metrobankemerged as the highest bidder.

Getting wind of the foreclosure proceedings, Nicholson filed on June 28, 2000, before the RTC in MakatiCity, a Complaint to declare the nullity of the mortgage of the disputed property, docketed as Civil CaseNo. 00-789 and eventually raffled to Branch 65 of the court. In it, Nicholson alleged that the property,which is still conjugal property, was mortgaged without his consent.

Metrobank, in itsAnswer with Counterclaim and Cross-Claim,4alleged that the disputed lot, beingregistered in Florencias name, was paraphernal. Metrobank also asserted having approved the mortgage

in good faith.

Florencia did not file an answer within the reglementary period and, hence, was subsequently declared indefault.

The RTC Declared the REM Invalid

After trial on the merits, the RTC rendered, on September 24, 2001, judgment finding for Nicholson.The falloreads:

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PREMISES CONSIDERED, the Court renders judgment declaring the real estate mortgage onthe property covered by [TCT] No. 156283 of the Registry of Deeds for the City of Makati as wellas all proceedings thereon null and void.

The Court further orders defendants [Metrobank and Florencia] jointly and severally to payplaintiff [Nicholson]:

1. PhP100,000.00 by way of moral damages;

2. PhP75,000.00 by way of attorneys fees; and

3. The costs.

SO ORDERED.5

Even as it declared the invalidity of the mortgage, the trial court found the said lot to be conjugal, thesame having been acquired during the existence of the marriage of Nicholson and Florencia. In so ruling,the RTC invoked Art. 116 of the Family Code, providing that "all property acquired during the marriage,whether the acquisition appears to have been made, contracted or registered in the name of one or bothspouses, is presumed to be conjugal unless the contrary is proved." To the trial court, Metrobank had notovercome the presumptive conjugal nature of the lot. And being conjugal, the RTC concluded that thedisputed property may not be validly encumbered by Florencia without Nicholsons consent.

The RTC also found the deed of waiver Florencia submitted to Metrobank to be fatally defective. For letalone the fact that Nicholson denied executing the same and that the signature of the notarizing officerwas a forgery, the waiver document was allegedly executed on April 9, 1995 or a little over three monthsbefore the issuance of the RTC decision declaring the nullity of marriage between Nicholson andFlorencia.

The trial court also declared Metrobank as a mortgagee in bad faith on account of negligence, stating theobservation that certain data appeared in the supporting contract documents, which, if properly

scrutinized, would have put the bank on guard against approving the mortgage. Among the data referredto was the date of execution of the deed of waiver.

The RTC dismissed Metrobanks counterclaim and cross-claim against the ex-spouses.

Metrobanks motion for reconsideration was denied. Undeterred, Metrobank appealed to the Court ofAppeals (CA), the appeal docketed as CA-G.R. CV No. 74874.

The CA Affirmed with Modification the RTCs Decision

On January 28, 2004, the CA rendered a Decision affirmatory of that of the RTC, except for the awardtherein of moral damages and attorneys fees which the CA ordered deleted. The dispositive portion ofthe CAs Decision reads:

WHEREFORE, premises considered, the appealed decision is hereby AFFIRMED WITHMODIFICATION with respect to the award of moral damages and attorneys fees which is herebyDELETED.

SO ORDERED.6

Like the RTC earlier held, the CA ruled that Metrobank failed to overthrow the presumption established inArt. 116 of the Family Code. And also decreed as going against Metrobank was Florencias failure to

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comply with the prescriptions of the succeeding Art. 124 of the Code on the disposition of conjugalpartnership property. Art. 124 states:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong toboth spouses jointly. In case of disagreement, the husbands decision shall prevail, subject torecourse to the court by the wife for proper remedy x x x.

In the event that one spouse is incapacitated or otherwise unable to participate in theadministration of the conjugal properties, the other spouse may assume sole powers ofadministration. These powers do not include disposition or encumbrance without authority of thecourt or written consent of the other spouse. In the absence of such authority or consent, thedisposition or encumbrance shall be void. However, the transaction shall be construed as acontinuing offer on the part of the consenting spouse and the third person, and may be perfectedas a binding contract upon the acceptance by the other spouse or authorization by the courtbefore the offer is withdrawn by either or both offerors.

As to the deletion of the award of moral damages and attorneys fees, the CA, in gist, held that Metrobankdid not enter into the mortgage contract out of ill-will or for some fraudulent purpose, moral obliquity, orlike dishonest considerations as to justify damages.

Metrobank moved but was denied reconsideration by the CA.

Thus, Metrobank filed this Petition for Review on Certiorari under Rule 45, raising the following issues forconsideration:

a. Whether or not the [CA] erred in declaring subject property as conjugal by applying Article 116of the Family Code.

b. Whether or not the [CA] erred in not holding that the declaration of nullity of marriage betweenthe respondent Nicholson Pascual and Florencia Nevalga ipso factodissolved the regime ofcommunity of property of the spouses.

c. Whether or not the [CA] erred in ruling that the petitioner is an innocent purchaser for value. 7

Our Ruling

A modification of the CAs Decision is in order.

The Disputed Property is Conjugal

It is Metrobanks threshold posture that Art. 160 of the Civil Code providing that "[a]ll property of themarriage is presumed to belong to the conjugal partnership, unless it be prove[n] that it pertainsexclusively to the husband or to the wife," applies. To Metrobank, Art. 116 of the Family Code could notbe of governing application inasmuch as Nicholson and Florencia contracted marriage before the

effectivity of the Family Code on August 3, 1988. CitingManongsong v. Estimo,8Metrobank asserts thatthe presumption of conjugal ownership under Art. 160 of the Civil Code applies when there is proof thatthe property was acquired during the marriage. Metrobank adds, however, that for the presumption ofconjugal ownership to operate, evidence must be adduced to prove that not only was the propertyacquired during the marriage but that conjugal funds were used for the acquisition, a burden Nicholsonallegedly failed to discharge.

To bolster its thesis on the paraphernal nature of the disputed property, Metrobank cites Francisco v.Court of Appeals

9and Jocson v. Court of Appeals,10among other cases, where this Court held that a

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property registered in the name of a certain person with a description of being married is no proof that theproperty was acquired during the spouses marriage.

On the other hand, Nicholson, banking on De Leon v. Rehabilitation Finance Corporation11and Wong v.IAC,12contends that Metrobank failed to overcome the legal presumption that the disputed property isconjugal. He asserts that Metrobanksarguments on the matter of presumption are misleading as only

one postulate needs to be shown for the presumption in favor of conjugal ownership to arise, that is, thefact of acquisition during marriage. Nicholson dismisses, as inapplicable, Franciscoand Jocson,notingthat they are relevant only when there is no indication as to the exact date of acquisition of the propertyalleged to be conjugal.

As a final point, Nicholson invites attention to the fact that Metrobank had virtually recognized theconjugal nature of the property in at least three instances. The first was when the bank lumped him withFlorencia in Civil Case No. 00-789 as co-mortgagors and when they were referred to as "spouses" in thepetition for extrajudicial foreclosure of mortgage. Then came the published notice of foreclosure salewhere Nicholson was again designated as co-mortgagor. And third, in its demand-letter13to vacate thedisputed lot, Metrobank addressed Nicholson and Florencia as "spouses," albeit the finality of the decreeof nullity of marriage between them had long set in.

We find for Nicholson.

First,while Metrobank is correct in saying that Art. 160 of the Civil Code, not Art. 116 of the Family Code,is the applicable legal provision since the property was acquired prior to the enactment of the FamilyCode, it errs in its theory that, before conjugal ownership could be legally presumed, there must be ashowing that the property was acquired during marriage using conjugal funds.Contrary to Metrobankssubmission, the Court did not, inManongsong,14add the matter of the use of conjugal funds as anessential requirement for the presumption of conjugal ownership to arise. Nicholson is correct in pointingout that only proof of acquisition during the marriage is needed to raise the presumption that the propertyis conjugal. Indeed, if proof on the use of conjugal is still required as a necessary condition before thepresumption can arise, then the legal presumption set forth in the law would veritably be a superfluity. Aswe stressed in Castro v. Miat:

Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of themarriage is presumed to be conjugal partnership, unless it be prove[n] that it pertains exclusivelyto the husband or to the wife." This article does not require proof that the property wasacquired with funds of the partnership.The presumption applies even when the manner inwhich the property was acquired does not appear.15(Emphasis supplied.)

Second,Franciscoand Jocsondo not reinforce Metrobanks theory. Metrobank would thrust on the Court,invoking the two cases, the argument that the registration of the property in the name of "FlorenciaNevalga, married to Nelson Pascual" operates to describe only the marital status of the title holder, butnot as proof that the property was acquired during the existence of the marriage.

Metrobank is wrong. As Nicholson aptly points out, if proof obtains on the acquisition of the propertyduring the existence of the marriage, then the presumption of conjugal ownership applies. The correct

lesson of Francisco andJocsonis that proof of acquisition during the marital coverture is a condition sinequa nonfor the operation of the presumption in favor of conjugal ownership. When there is no showing asto when the property was acquired by the spouse, the fact that a title is in the name of the spouse is anindication that the property belongs exclusively to said spouse.16

The Court, to be sure, has taken stock of Nicholsons arguments regardin g Metrobank having implicitlyacknowledged, thus being in virtual estoppel to question, the conjugal ownership of the disputed lot, thebank having named the former in the foreclosure proceedings below as either the spouse of Florencia orher co-mortgagor. It is felt, however, that there is no compelling reason to delve into the matter of

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estoppel, the same having been raised only for the first time in this petition. Besides, however Nicholsonwas designated below does not really change, one way or another, the classification of the lot in question.

Termination of Conjugal Property Regime doesnot ipso factoEnd the Nature of Conjugal Ownership

Metrobank next maintains that, contrary to the CAs holding, Art. 129 of the Family Code is inapplicable.Art. 129 in part reads:

Art. 129. Upon the dissolution of the conjugal partnership regime, the following procedure shallapply:

x x x x

(7) The net remainder of the conjugal partnership properties shall constitute the profits, whichshall be divided equally between husband and wife, unless a different proportion or division wasagreed upon in the marriage settlements or unless there has been a voluntary waiver or forfeitureof such share as provided in this Code.

Apropos the aforequoted provision, Metrobank asserts that the waiver executed by Nicholson,effected as it were before the dissolution of the conjugal property regime, vested on Florencia fullownership of all the properties acquired during the marriage.

Nicholson counters that the mere declaration of nullity of marriage, without more, does not automaticallyresult in a regime of complete separation when it is shown that there was no liquidation of the conjugalassets.

We again find for Nicholson.

While the declared nullity of marriage of Nicholson and Florencia severed their marital bond anddissolved the conjugal partnership, the character of the properties acquired before such declaration

continues to subsist as conjugal properties until and after the liquidation and partition of the partnership.This conclusion holds true whether we apply Art. 129 of the Family Code on liquidation of the conjugalpartnerships assets and liabilities which is generally prospective in application, or Section 7, Chapter 4,Title IV, Book I (Arts. 179 to 185) of the Civil Code on the subject, Conjugal Partnership of Gains. For, therelevant provisions of both Codes first require the liquidation of the conjugal properties before a regime ofseparation of property reigns.

In Dael v. Intermediate Appellate Court,we ruled that pending its liquidation following its dissolution, theconjugal partnership of gains is converted into an implied ordinary co-ownership among the survivingspouse and the other heirs of the deceased.17

In this pre-liquidation scenario, Art. 493 of the Civil Code shall govern the property relationship betweenthe former spouses, where:

Each co-owner shall have the full ownership of his part and of the fruits and benefits pertainingthereto, and he may therefore alienate, assign or mortgage it, and even substitute another personin its enjoyment, except when personal rights are involved. But the effect of the alienation orthe mortgage, with respect to the co-owners, shall be limited to the portion which may beallotted to him in the division upon the termination of the co-ownership. (Emphasissupplied.)

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In the case at bar, Florencia constituted the mortgage on the disputed lot on April 30, 1997, or a little lessthan two years after the dissolution of the conjugal partnership on July 31, 1995, but before the liquidationof the partnership. Be that as it may, what governed the property relations of the former spouses whenthe mortgage was given is the aforequoted Art. 493. Under it, Florencia has the right to mortgage or evensell her one-half (1/2) undivided interest in the disputed property even without the consent of Nicholson.However, the rights of Metrobank, as mortgagee, are limited only to the 1/2 undivided portion thatFlorencia owned. Accordingly, the mortgage contract insofar as it covered the remaining 1/2 undividedportion of the lot is null and void, Nicholson not having consented to the mortgage of his undivided half.

The conclusion would have, however, been different if Nicholson indeed duly waived his share in theconjugal partnership. But, as found by the courts a quo,the April 9, 1995 deed of waiver allegedlyexecuted by Nicholson three months prior to the dissolution of the marriage and the conjugal partnershipof gains on July 31, 1995 bore his forged signature, not to mention that of the notarizing officer. Aspurious deed of waiver does not transfer any right at all, albeit it may become the root of a valid title inthe hands of an innocent buyer for value.

Upon the foregoing perspective, Metrobanks right, as mortgagee and as the successful bidder at theauction of the lot, is confined only to the 1/2 undivided portion thereof heretofore pertaining in ownershipto Florencia. The other undivided half belongs to Nicholson. As owner pro indivisoof a portion of the lot in

question, Metrobank may ask for the partition of the lot and its property rights "shall be limited to theportion which may be allotted to [the bank] in the division upon the termination of the co-ownership."18This disposition is in line with the well-established principle that the binding force of acontract must be recognized as far as it is legally possible to do soquando res non valet ut ago, valeatquantum valere potest.19

In view of our resolution on the validity of the auction of the lot in favor of Metrobank, there is hardly aneed to discuss at length whether or not Metrobank was a mortgagee in good faith. Suffice it to state forthe nonce that where the mortgagee is a banking institution, the general rule that a purchaser ormortgagee of the land need not look beyond the four corners of the title is inapplicable. 20Unlike privateindividuals, it behooves banks to exercise greater care and due diligence before entering into a mortgagecontract. The ascertainment of the status or condition of the property offered as security and the validityof the mortgagors title must be standard and indispensable part of the banks operation.

21A bank that

failed to observe due diligence cannot be accorded the status of a bona fidemortgagee,

22

as here.

But as found by the CA, however, Metrobanks failure to comply with the due diligence requirement wasnot the result of a dishonest purpose, some moral obliquity or breach of a known duty for some interest orill-will that partakes of fraud that would justify damages.

WHEREFORE,the petition is PARTLY GRANTED.The appealed Decision of the CA dated January 28,2004, upholding with modification the Decision of the RTC, Branch 65 in Makati City, in Civil Case No. 00-789, isAFFIRMEDwith the MODIFICATIONthat the REM over the lot covered by TCT No. 156283 of theRegistry of Deeds of Makati City is hereby declared valid only insofar as the pro indivisoshare ofFlorencia thereon is concerned.

As modified, the Decision of the RTC shall read:

PREMISES CONSIDERED,the real estate mortgage on the property covered by TCT No. 156283 of theRegistry of Deeds of Makati City and all proceedings thereon are NULLand VOIDwith respect to theundivided 1/2 portion of the disputed property owned by Nicholson, but VALIDwith respect to the otherundivided 1/2 portion belonging to Florencia.

The claims of Nicholson for moral damages and attorneys fees are DENIEDfor lack of merit.

No pronouncement as to costs.

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SO ORDERED.

DIO v DIO

CARPIO, J .:

The Case

Before the Court is a petition for review1assailing the 18 October 2006 Decision2and the 12 March 2007Order3of the Regional Trial Court of Las Pias City, Branch 254 (trial court) in Civil Case No. LP-01-0149.

The Antecedent Facts

Alain M. Dio (petitioner) and Ma. Caridad L. Dio (respondent) were childhood friends and sweethearts.They started living together in 1984 until they decided to separate in 1994. In 1996, petitioner andrespondent decided to live together again. On 14 January 1998, they were married before Mayor VergelAguilar of Las Pias City.

On 30 May 2001, petitioner filed an action for Declaration of Nullity of Marriage against respondent, citingpsychological incapacity under Article 36 of the Family Code. Petitioner alleged that respondent failed inher marital obligation to give love and support to him, and had abandoned her responsibility to the family,choosing instead to go on shopping sprees and gallivanting with her friends that depleted the familyassets. Petitioner further alleged that respondent was not faithful, and would at times become violent and

hurt him.

Extrajudicial service of summons was effected upon respondent who, at the time of the filing of thepetition, was already living in the United States of America. Despite receipt of the summons, respondentdid not file an answer to the petition within the reglementary period. Petitioner later learned thatrespondent filed a petition for divorce/dissolution of her marriage with petitioner, which was granted by theSuperior Court of California on 25 May 2001. Petitioner also learned that on 5 October 2001, respondentmarried a certain Manuel V. Alcantara.

On 30 April 2002, the Office of the Las Pias prosecutor found that there were no indicative facts ofcollusion between the parties and the case was set for trial on the merits.

Dr. Nedy L. Tayag (Dr. Tayag), a clinical psychologist, submitted a psychological report establishing that

respondent was suffering from Narcissistic Personality Disorder which was deeply ingrained in her systemsince her early formative years. Dr. Tayag found that respondents disorder was long-lasting and bynature, incurable.

In its 18 October 2006 Decision, the trial court granted the petition on the ground that respondent waspsychologically incapacited to comply with the essential marital obligations at the time of the celebrationof the marriage.

The Decision of the Trial Court

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The trial court ruled that based on the evidence presented, petitioner was able to establish respondentspsychological incapacity. The trial court ruled that even without Dr. Tayags psychological report, theallegations in the complaint, substantiated in the witness stand, clearly made out a case of psychologicalincapacity against respondent. The trial court found that respondent committed acts which hurt andembarrassed petitioner and the rest of the family, and that respondent failed to observe mutual love,respect and fidelity required of her under Article 68 of the Family Code. The trial court also ruled thatrespondent abandoned petitioner when she obtained a divorce abroad and married another man.

The dispositive portion of the trial courts decision reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1. Declaring the marriage between plaintiff ALAIN M. DIO and defendant MA. CARIDAD L.DIO on January 14, 1998, and all its effects under the law, as NULL and VOID from thebeginning; and

2. Dissolving the regime of absolute community of property.

A DECREE OF ABSOLUTE NULLITY OF MARRIAGE shall only be issued upon compliance with

Article[s] 50 and 51 of the Family Code.

Let copies of this Decision be furnished the parties, the Office of the Solicitor General, Office of the CityProsecutor, Las Pias City and the Office of the Local Civil Registrar of Las Pias City, for theirinformation and guidance.

SO ORDERED.4

Petitioner filed a motion for partial reconsideration questioning the dissolution of the absolute communityof property and the ruling that the decree of annulment shall only be issued upon compliance with Articles50 and 51 of the Family Code.

In its 12 March 2007 Order, the trial court partially granted the motion and modified its 18 October 2006Decision as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1) Declaring the marriage between plaintiff ALAIN M. DIO and defendant MA. CARIDAD L.DIO on January 14, 1998, and all its effects under the law, as NULL and VOID from thebeginning; and

2) Dissolving the regime of absolute community of property.

A DECREE OF ABSOLUTE NULLITY OF MARRIAGE shall be issued after liquidation, partition anddistribution of the parties properties under Article 147 of the Family Code.

Let copies of this Order be furnished the parties, the Office of the Solicitor General, the Office of the CityProsecutor of Las Pias City and the Local Civil Registrar of Las Pias City, for their information andguidance.5

Hence, the petition before this Court.

The Issue

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The sole issue in this case is whether the trial court erred when it ordered that a decree of absolute nullityof marriage shall only be issued after liquidation, partition, and distribution of the parties properties underArticle 147 of the Family Code.

The Ruling of this Court

The petition has merit.

Petitioner assails the ruling of the trial court ordering that a decree of absolute nullity of marriage shallonly be issued after liquidation, partition, and distribution of the parties properties under Article 147 of theFamily Code. Petitioner argues that Section 19(1) of the Rule on Declaration of Absolute Nullity of NullMarriages and Annulment of Voidable Marriages6(the Rule) does not apply to Article 147 of the FamilyCode.

We agree with petitioner.

The Court has ruled in Valdes v. RTC, Branch 102, Quezon Citythat in a void marriage, regardless of itscause, the property relations of the parties during the period of cohabitation is governed either by Article147 or Article 148 of the Family Code.7Article 147 of the Family Code applies to union of parties who are

legally capacitated and not barred by any impediment to contract marriage, but whose marriage isnonetheless void,8such as petitioner and respondent in the case before the Court.

Article 147 of the Family Code provides:

Article 147. When a man and a woman who are capacitated to marry each other, live exclusively witheach other as husband and wife without the benefit of marriage or under a void marriage, their wages andsalaries shall be owned by them in equal shares and the property acquired by both of them through theirwork or industry shall be governed by the rules on co-ownership.

In the absence of proof to the contrary, properties acquired while they lived together shall be presumed tohave been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares.

For purposes of this Article, a party who did not participate in the acquisition by the other party of anyproperty shall be deemed to have contributed jointly in the acquisition thereof if the formers effortsconsisted in the care and maintenance of the family and of the household.

Neither party can encumber or dispose by acts inter vivosof his or her share in the property acquiredduring cohabitation and owned in common, without the consent of the other, until after the termination oftheir cohabitation.

When only one of the parties to a void marriage is in good faith, the share of the party in bad faith in theco-ownership shall be forfeited in favor of their common children. In case of default of or waiver by any orall of the common children or their descendants, each vacant share shall belong to the respectivesurviving descendants. In the absence of descendants, such share shall belong to the innocent party. Inall cases, the forfeiture shall take place upon termination of the cohabitation.

For Article 147 of the Family Code to apply, the following elements must be present:

1. The man and the woman must be capacitated to marry each other;

2. They live exclusively with each other as husband and wife; and

3. Their union is without the benefit of marriage, or their marriage is void. 9

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All these elements are present in this case and there is no question that Article 147 of the Family Codeapplies to the property relations between petitioner and respondent.

We agree with petitioner that the trial court erred in ordering that a decree of absolute nullity of marriageshall be issued only after liquidation, partition and distribution of the parties properties under Article 147of the Family Code. The ruling has no basis because Section 19(1) of the Rule does not apply to cases

governed under Articles 147 and 148 of the Family Code. Section 19(1) of the Rule provides:

Sec. 19. Decision. - (1) If the court renders a decision granting the petition, it shall declare therein that thedecree of absolute nullity or decree of annulment shall be issued by the court only after compliance withArticles 50 and 51 of the Family Code as implemented under the Rule on Liquidation, Partition andDistribution of Properties.

The pertinent provisions of the Family Code cited in Section 19(1) of the Rule are:

Article 50. The effects provided for in paragraphs (2), (3), (4) and (5) of Article 43 and in Article 44 shallalso apply in proper cases to marriages which are declared void ab initioor annulled by final judgmentunder Articles 40 and 45.10

The final judgment in such cases shall provide for the liquidation, partition and distribution of theproperties of the spouses, the custody and support of the common children, and the delivery of theirpresumptive legitimes, unless such matters had been adjudicated in previous judicial proceedings.

All creditors of the spouses as well as of the absolute community of the conjugal partnership shall benotified of the proceedings for liquidation.

In the partition, the conjugal dwelling and the lot on which it is situated, shall be adjudicated inaccordance with the provisions of Articles 102 and 129.

Article 51. In said partition, the value of the presumptive legitimes of all common children, computed as ofthe date of the final judgment of the trial court, shall be delivered in cash, property or sound securities,

unless the parties, by mutual agreement judicially approved, had