Property cases – Donation – Finals

G.R. No. 143826, August 28, 2003

HEIRS OF IGNACIA AGUILAR-REYES, vs. Spouses CIPRIANO MIJARES and FLORENTINA
MIJARES

Doctrine:
Under the regime of the Civil Code, the alienation or encumbrance of a conjugal real property
requires the consent of the wife. The absence of such consent renders the entire transaction 1 merely
voidable and not void.2 The wife may, during the marriage and within ten years from the transaction
questioned, bring an action for the annulment of the contract entered into by her husband without
her consent.

Facts:
The controversy stemmed from a dispute over Lot No. 4349-B-2,6 approximately 396 square meters,
previously covered by Transfer Certificate of Title (TCT) No. 205445, located in Balintawak, Quezon
City and registered in the name of Spouses Vicente Reyes and Ignacia Aguilar-Reyes.7 Said lot and
the apartments built thereon were part of the spouses’ conjugal properties having been purchased
using conjugal funds from their garments business.8

Vicente and Ignacia were married in 1960, but had been separated de facto since 1974.9 Sometime in
1984, Ignacia learned that on March 1, 1983, Vicente sold Lot No. 4349-B-2 to respondent spouses
Cipriano and Florentina Mijares for P40,000.00.10 As a consequence thereof, TCT No. 205445 was
cancelled and TCT No. 306087 was issued on April 19, 1983 in the name of respondent
spouses.11 She likewise found out that Vicente filed a petition for administration and appointment of
guardian with the Metropolitan Trial Court of Quezon City, Branch XXI. Vicente misrepresented
therein that his wife, Ignacia, died on March 22, 1982, and that he and their 5 minor children were
her only heirs.12 On September 29, 1983, the court appointed Vicente as the guardian of their minor
children.13 Subsequently, in its Order dated October 14, 1983, the court authorized Vicente to sell the
estate of Ignacia.14

On August 9, 1984, Ignacia, through her counsel, sent a letter to respondent spouses demanding the
return of her ½ share in the lot. Failing to settle the matter amicably, Ignacia filed on June 4, 1996 a
complaint15 for annulment of sale against respondent spouses. The complaint was thereafter
amended to include Vicente Reyes as one of the defendants.16

In their answer, respondent spouses claimed that they are purchasers in good faith and that the sale
was valid because it was duly approved by the court.17 Vicente Reyes, on the other hand, contended
that what he sold to the spouses was only his share in Lot No. 4349-B-2, excluding the share of his
wife, and that he never represented that the latter was already dead.18 He likewise testified that
respondent spouses, through the counsel they provided him, took advantage of his illiteracy by filing
a petition for the issuance of letters of administration and appointment of guardian without his
knowledge.19

On February 15, 1990, the court a quo rendered a decision declaring the sale of Lot No. 4349-B-2
void with respect to the share of Ignacia. It held that the purchase price of the lot was P110,000.00
and ordered Vicente to return ½ thereof or P55,000.00 to respondent spouses.

Issue 1: What is the status of the sale of Lot No. 4349-B-2 to respondent spouses?

Ruling 1:

Articles 166 and 173 of the Civil Code,29 the governing laws at the time the assailed sale was
contracted, provide:

Art.166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil
interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real
property of the conjugal partnership without the wife’s consent. If she refuses unreasonably to give
her consent, the court may compel her to grant the same…

Art. 173. The wife may, during the marriage and within ten years from the transaction questioned,
ask the courts for the annulment of any contract of the husband entered into without her consent,
when such consent is required, or any act or contract of the husband which tends to defraud her or
impair her interest in the conjugal partnership property. Should the wife fail to exercise this right,
she or her heirs after the dissolution of the marriage, may demand the value of property fraudulently
alienated by the husband.
Pursuant to the foregoing provisions, the husband could not alienate or encumber any conjugal real
property without the consent, express or implied, of the wife otherwise, the contract is voidable.
Indeed, in several cases30 the Court had ruled that such alienation or encumbrance by the husband is
void. The better view, however, is to consider the transaction as merely voidable and not void. 31 This
is consistent with Article 173 of the Civil Code pursuant to which the wife could, during the marriage
and within 10 years from the questioned transaction, seek its annulment.32

In the case of Heirs of Christina Ayuste v. Court of Appeals,33 it was categorically held that –

There is no ambiguity in the wording of the law. A sale of real property of the conjugal partnership
made by the husband without the consent of his wife is voidable. The action for annulment must be
brought during the marriage and within ten years from the questioned transaction by the wife. Where
the law speaks in clear and categorical language, there is no room for interpretation — there is room
only for application.34

Likewise, in Spouses Guiang v. Court of Appeals,35 the Court quoted with approval the ruling of the
trial court that under the Civil Code, the encumbrance or alienation of a conjugal real property by the
husband absent the wife’s consent, is voidable and not void. Thus –

…Under Article 166 of the Civil Code, the husband cannot generally alienate or encumber any real
property of the conjugal partnership without the wife’s consent. The alienation or encumbrance if so
made however is not null and void. It is merely voidable. The offended wife may bring an action to
annul the said alienation or encumbrance. Thus, the provision of Article 173 of the Civil Code of the
Philippines, to wit:

Art. 173. The wife may, during the marriage and within ten years from the transaction questioned,
ask the courts for the annulment of any contract of the husband entered into without her consent,
when such consent is required, or any act or contract of the husband which tends to defraud her or
impair her interest in the conjugal partnership property. Should the wife fail to exercise this right,
she or her heirs after the dissolution of the marriage, may demand the value of property fraudulently
alienated by the husband.

This particular provision giving the wife ten (10) years x x x during [the] marriage to annul the
alienation or encumbrance was not carried over to the Family Code. It is thus clear that any
alienation or encumbrance made after August 3, 1988 when the Family Code took effect by the
husband of the conjugal partnership property without the consent of the wife is null and void…

In the case at bar, there is no dispute that Lot No. 4349-B-2, is a conjugal property having been
purchased using the conjugal funds of the spouses during the subsistence of their marriage. It is
beyond cavil therefore that the sale of said lot to respondent spouses without the knowledge and
consent of Ignacia is voidable. Her action to annul the March 1, 1983 sale which was filed on June 4,
1986, before her demise is perfectly within the 10 year prescriptive period under Article 173 of the
Civil Code. Even if we reckon the period from November 25, 1978 which was the date when Vicente
and the respondent spouses entered into a contract concerning Lot No. 4349-B-2, Ignacia’s action
would still be within the prescribed period.

Issue 2: Assuming that the sale is annullable, should it be annulled in its entirety or only with
respect to the share of Ignacia?

Ruling 2:

Anent the second issue, the trial court correctly annulled the voidable sale of Lot No. 4349-B-2 in its
entirety. In Bucoy v. Paulino,36 a case involving the annulment of sale with assumption of mortgages
executed by the husband without the consent of the wife, it was held that the alienation or
encumbrance must be annulled in its entirety and not only insofar as the share of the wife in the
conjugal property is concerned. Although the transaction in the said case was declared void and not
merely voidable, the rationale for the annulment of the whole transaction is the same thus –

The plain meaning attached to the plain language of the law is that the contract, in its entirety,
executed by the husband without the wife's consent, may be annulled by the wife. Had Congress
intended to limit such annulment in so far as the contract shall "prejudice" the wife, such limitation
should have been spelled out in the statute. It is not the legitimate concern of this Court to recast the
law. As Mr. Justice Jose B. L. Reyes of this Court and Judge Ricardo C. Puno of the Court of First
Instance correctly stated, "[t]he rule (in the first sentence of Article 173) revokes Baello vs.
Villanueva, 54 Phil. 213 and Coque vs. Navas Sioca, 45 Phil. 430," in which cases annulment was
held to refer only to the extent of the one-half interest of the wife…
The necessity to strike down the contract of July 5, 1963 as a whole, not merely as to the share of
the wife, is not without its basis in the common-sense rule. To be underscored here is that upon the
provisions of Articles 161, 162 and 163 of the Civil Code, the conjugal partnership is liable for many
obligations while the conjugal partnership exists. Not only that. The conjugal property is even subject
to the payment of debts contracted by either spouse before the marriage, as those for the payment
of fines and indemnities imposed upon them after the responsibilities in Article 161 have been
covered (Article 163, par. 3), if it turns out that the spouse who is bound thereby, "should have no
exclusive property or if it should be insufficient." These are considerations that go beyond the mere
equitable share of the wife in the property. These are reasons enough for the husband to be stopped
from disposing of the conjugal property without the consent of the wife. Even more fundamental is
the fact that the nullity is decreed by the Code not on the basis of prejudice but lack of consent of an
indispensable party to the contract under Article 166.

Issue 3: Are respondent spouses purchasers in good faith?

Ruling 3:

With respect to the third issue, the Court finds that respondent spouses are not purchasers in good
faith. A purchaser 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 belief that the person from whom he receives the thing was
the owner and could convey title to the property. A purchaser cannot close his eyes to facts which
should put a reasonable man on his guard and still claim he acted in good faith.38

In the instant case, there existed circumstances that should have placed respondent spouses on
guard. The death certificate of Ignacia, shows that she died on March 22, 1982. The same death
certificate, however, reveals that – (1) it was issued by the Office of the Civil Registrar of Lubao
Pampanga on March 10, 1982; (2) the alleged death of Ignacia was reported to the Office of the
Civil Registrar on March 4, 1982; and (3) her burial or cremation would be on March 8,
1982.39 These obvious flaws in the death certificate should have prompted respondents to
investigate further, especially so that respondent Florentina Mijares admitted on cross examination
that she asked for the death certificate of Ignacia because she was suspicious that Ignacia was still
alive.40 Moreover, respondent spouses had all the opportunity to verify the claim of Vicente that he is
a widower because it was their lawyer, Atty. Rodriguito S. Saet, who represented Vicente in the
special proceedings before the Metropolitan Trial Court.

Neither can respondent spouses rely on the alleged court approval of the sale. Note that the Order
issued by the Metropolitan Trial Court of Quezon City, Branch XXXI, appointing Vicente as guardian of
his 5 minor children, as well as the Order authorizing him to sell the estate of Ignacia were issued
only on September 29, 1983 and October 14, 1983, respectively. On the other hand, the sale of the
entire Lot No. 4349-B-2 to respondent spouses appears to have been made not on March 1, 1983,
but even as early as November 25, 1978. In the "Agreement" dated November 25, 1978, Vicente in
consideration of the amount of P110,000.00, sold to Cipriano Mijares Lot No. 4349-B-2 on installment
basis, with the first installment due on or before July 31, 1979.41 This was followed by a
"Memorandum of Understanding" executed on July 30, 1979, by Vicente and Cipriano – (1)
acknowledging Cipriano’s receipt of Vicente’s down payment in the amount of P50,000.00; and (2)
authorizing Florentina Mijares to collect rentals.42 On July 14, 1981, Vicente and Cipriano executed
another "Memorandum of Agreement," stating, among other, that out of the purchase price of
P110,000.00 Vicente had remaining balance of P19,000.00.43 Clearly therefore, the special
proceedings before the Metropolitan Trial Court of Quezon City, Branch XXXI, could not have been
the basis of respondent spouses’ claim of good faith because the sale of Lot No. 4349-B-2 occurred
prior thereto.

Respondent spouses cannot deny knowledge that at the time of the sale in 1978, Vicente was
married to Ignacia and that the latter did not give her conformity to the sale. This is so because the
1978 "Agreement" described Vicente as "married" but the conformity of his wife to the sale did not
appear in the deed. Obviously, the execution of another deed of sale in 1983 over the same Lot No.
4349-B-2, after the alleged death of Ignacia on March 22, 1982, as well as the institution of the
special proceedings were, intended to correct the absence of Ignacia’s consent to the sale. Even
assuming that respondent spouses believed in good faith that Ignacia really died on March 22, 1982,
after they purchased the lot, the fact remains that the sale of Lot No. 4349-B-2 prior to Ignacia’s
alleged demise was without her consent and therefore subject to annulment. The October 14, 1983
order authorizing the sale of the estate of Ignacia, could not have validated the sale of Lot No. 4349-
B-2 because said order was issued on the assumption that Ignacia was already dead and that the
sale dated March 1, 1983 was never categorically approved in the said order.
The fact that the 5 minor children44 of Vicente represented by the latter, signed the March 1, 1983
deed of sale of Lot No. 4349-B-2 will not estop them from assailing the validity thereof. Not only
were they too young at that time to understand the repercussions of the sale, they likewise had no
right to sell the property of their mother who, when they signed the deed, was very much alive.

If a voidable contract is annulled, the restoration of what has been given is proper. The relationship
between parties in any contract even if subsequently annulled must always be characterized and
punctuated by good faith and fair dealing. Hence, for the sake of justice and equity, and in
consonance with the salutary principle of non-enrichment at another’s expense, the Court sustains
the trial court’s order directing Vicente to refund to respondent spouses the amount of P110,000.00
which they have paid as purchase price of Lot No. 4349-B-2.45 The court a quo correctly found that
the subject of the sale was the entire Lot No. 4349-B-2 and that the consideration thereof is not
P40,000.00 as stated in the March 1, 1983 deed of sale, but P110,000.00 as evidenced by the – (1)
"Agreement" dated November 25, 1978 as well as the July 30, 1979 "Memorandum of
Understanding" and the July 14, 1981 "Memorandum of Agreement" which served as receipts of the
installment payments made by respondent Cipriano Mijares; and (2) the receipt duly signed by
Vicente Reyes acknowledging receipt of the amount of P110,000.00 from respondent spouses as
payment of the sale of the controverted lot.46

The trial court, however, erred in imposing 12% interest per annum on the amount due the
respondents. In Eastern Shipping Lines, Inc. v. Court of Appeals,47 it was held that interest on
obligations not constituting a loan or forbearance of money is six percent (6%) annually. If the
purchase price could be established with certainty at the time of the filing of the complaint, the six
percent (6%) interest should be computed from the date the complaint was filed until finality of the
decision. In Lui v. Loy,48 involving a suit for reconveyance and annulment of title filed by the first
buyer against the seller and the second buyer, the Court, ruling in favor of the first buyer and
annulling the second sale, ordered the seller to refund to the second buyer (who was not a purchaser
in good faith) the purchase price of the lots. It was held therein that the 6% interest should be
computed from the date of the filing of the complaint by the first buyer. After the judgment becomes
final and executory until the obligation is satisfied, the amount due shall earn interest at 12% per
year, the interim period being deemed equivalent to a forbearance of credit.49

Accordingly, the amount of P110,000.00 due the respondent spouses which could be determined with
certainty at the time of the filing of the complaint shall earn 6% interest per annum from June 4,
1986 until the finality of this decision. If the adjudged principal and the interest (or any part thereof)
remain unpaid thereafter, the interest rate shall be twelve percent (12%) per annum computed from
the time the judgment becomes final and executory until it is fully satisfied.

G.R. No. 106755, February 1, 2002

APOLINARIA AUSTRIA-MAGAT, vs.

HON. COURT OF APPEALS and FLORENTINO LUMUBOS, DOMINGO COMIA, TEODORA
CARAMPOT, ERNESTO APOLO, SEGUNDA SUMPELO, MAMERTO SUMPELO and RICARDO
SUMPELO,

Facts:

Basilisa Comerciante is a mother of five (5) children, namely, Rosario Austria, Consolacion Austria,
herein petitioner Apolinaria Austria-Magat, Leonardo, and one of herein respondents, Florentino
Lumubos. Leonardo died in a Japanese concentration camp at Tarlac during World War II.

In 1953, Basilisa bought a parcel of residential land together with the improvement thereon covered
and described in Transfer Certificate of Title No. RT-4036 (T-3268) and known as Lot 1, Block 1,
Cavite Beach Subdivision, with an area of 150 square meters, located in Bagong Pook, San Antonio,
Cavite City.

On December 17, 1975, Basilisa executed a document designated as "Kasulatan sa Kaloobpala

(Donation)".

On February 6, 1979, Basilisa executed a Deed of Absolute Sale of the subject house and lot in favor
of herein petitioner Apolinaria Austria-Magat for Five Thousand Pesos (₱5,000.00). As the result of
the registration of that sale, Transfer Certificate of Title (TCT for brevity) No. RT-4036 in the name of
the donor was cancelled and in lieu thereof TCT No. T-10434 was issued by the Register of Deeds of
Cavite City in favor of petitioner Apolinaria Austria-Magat on February 8, 1979.
On September 21, 1983, herein respondents Teodora Carampot, Domingo Comia, and Ernesto Apolo
(representing their deceased mother Consolacion Austria), Ricardo, Mamerto and Segunda, all
surnamed Sumpelo (representing their deceased mother Rosario Austria) and Florentino Lumubos
filed before the Regional Trial Court of Cavite an action, docketed as Civil Case No. 4426 against the
petitioner for annulment of TCT No. T-10434 and other relevant documents, and for reconveyance
and damages.

On August 15,1986, the trial court dismissed Civil Case No. 4426 per its Decision.

On appeal, the decision of the trial court was reversed by the Court of Appeals in its subject decision.

Ruling:

The provisions in the subject deed of donation that are crucial for the determination of the class to
which the donation belongs are, as follows:

xxx xxx xxx

xxx(I)binibigay ko at ipinagkakaloob ng ganap at hindi mababawi sa naulit na apat na anak ko at sa

kanilang mga tagapagmana, ang aking lupang residential o tirahan sampu ng aking bahay nakatirik
doon na nasa Bagong Pook din, San Antonio, Lungsod ng Kabite

xxx xxx xxx

Na ang Kaloob palang ito ay magkakabisa lamang simula sa araw na ako’y pumanaw sa mundo, xxx.

xxx xxx xxx

Na ang titulo numero TCT-T-2260 (RT-4036) ng Lungsod ng Kabite, bahay sa loteng tirahan ng
Bagong Pook na nababanggit sa nasabing kasulatan, ay mananatili sa poder o possesion ng Ina, na si
Basilisa Comerciante habang siya ay nabubuhay at

Gayon din ang nasabing Titulo ay hindi mapapasangla o maipagbibili ang lupa habang maybuhay ang
nasabing Basilisa Comerciante xxx.

It has been held that whether the donation is inter vivos or mortis causa depends on whether the
donor intended to transfer ownership over the properties upon the execution of the
deed.10 In Bonsato v. Court of Appeals,11 this Court enumerated the characteristics of a
donation mortis causa, to wit:

(1) It conveys no title or ownership to the transferee before the death of the transferor; or,
what amounts to the same thing, that the transferor should retain the ownership (full or
naked) and control of the property while alive;

(2) That before his death, the transfer should be revocable by the transferor at will, ad nutum;
but revocability may be provided for indirectly by means of a reserved power in the donor to
dispose of the properties conveyed;

(3) That the transfer should be void if the transferor should survive the transferee.

Significant to the resolution of this issue is the irrevocable character of the donation in the case at
bar. In Cuevas v. Cuevas,12 we ruled that when the deed of donation provides that the donor will not
dispose or take away the property donated (thus making the donation irrevocable), he in effect is
making a donation inter vivos. He parts away with his naked title but maintains beneficial ownership
while he lives. It remains to be a donation inter vivos despite an express provision that the donor
continues to be in possession and enjoyment of the donated property while he is alive. In
the Bonsato case, we held that:

(W)hat is most significant [in determining the type of donation] is the absence of stipulation that the
donor could revoke the donations; on the contrary, the deeds expressly declare them to be
"irrevocable", a quality absolutely incompatible with the idea of conveyances mortis causa where
revocability is of the essence of the act, to the extent that a testator can not lawfully waive or restrict
his right of revocation (Old Civil Code, Art.737; New Civil Code, Art. 828).13
Construing together the provisions of the deed of donation, we find and so hold that in the case at
bar the donation is inter vivos. The express irrevocability of the same ("hindi na mababawi") is the
distinctive standard that identifies that document as a donation inter vivos. The other provisions
therein which seemingly make the donation mortis causa do not go against the irrevocable character
of the subject donation. According to the petitioner, the provisions which state that the same will
only take effect upon the death of the donor and that there is a prohibition to alienate, encumber,
dispose, or sell the same, are proofs that the donation is mortis causa. We disagree. The said
provisions should be harmonized with its express irrevocability. In Bonsato where the donation per
the deed of donation would also take effect upon the death of the donor with reservation for the
donor to enjoy the fruits of the land, the Court held that the said statements only mean that "after
the donor’s death, the donation will take effect so as to make the donees the absolute owners of the
donated property, free from all liens and encumbrances; for it must be remembered that the donor
reserved for himself a share of the fruits of the land donated."14

In Gestopa v. Court of Appeals,15 this Court held that the prohibition to alienate does not necessarily
defeat the inter vivos character of the donation. It even highlights the fact that what remains with
the donor is the right of usufruct and not anymore the naked title of ownership over the property
donated. In the case at bar, the provision in the deed of donation that the donated property will
remain in the possession of the donor just goes to show that the donor has given up his naked title of
ownership thereto and has maintained only the right to use (jus utendi) and possess (jus possidendi)
the subject donated property.

Thus, we arrive at no other conclusion in that the petitioner’s cited provisions are only necessary
assurances that during the donor’s lifetime, the latter would still enjoy the right of possession over
the property; but, his naked title of ownership has been passed on to the donees; and that upon the
donor’s death, the donees would get all the rights of ownership over the same including the right to
use and possess the same.

Furthermore, it also appeared that the provision in the deed of donation regarding the prohibition to
alienate the subject property is couched in general terms such that even the donor is deemed
included in the said prohibition ("Gayon din ang nasabing Titulo ay hindi mapapasangla o maipagbibili
ang lupa habang maybuhay ang nasabing Basilisa Comerciante"). Both the donor and the donees
were prohibited from alienating and encumbering the property during the lifetime of the donor. If the
donor intended to maintain full ownership over the said property until her death, she could have
expressly stated therein a reservation of her right to dispose of the same. The prohibition on the
donor to alienate the said property during her lifetime is proof that naked ownership over the
property has been transferred to the donees. It also supports the irrevocable nature of the donation
considering that the donor has already divested herself of the right to dispose of the donated
property. On the other hand, the prohibition on the donees only meant that they may not mortgage
or dispose the donated property while the donor enjoys and possesses the property during her
lifetime. However, it is clear that the donees were already the owners of the subject property due to
the irrevocable character of the donation.

The petitioner argues that the subsequent and contemporaneous acts of the donor would show that
her intention was to maintain control over her properties while she was still living. We disagree.
Respondent Domingo Comia testified that sometime in 1977 or prior to the sale of the subject house
and lot, his grandmother, the donor in the case at bar, delivered the title of the said property to him;
and that the act of the donor was a manifestation that she was acknowledging the ownership of the
donees over the property donated.16 Moreover, Atty. Viniegra testified that when the donor sold the
lot to the petitioner herein, she was not doing so in accordance with the agreement and intent of the
parties in the deed of donation; that she was disregarding the provision in the deed of donation
prohibiting the alienation of the subject property; and that she knew that the prohibition covers her
as well as the donees.17

Another indication in the deed of donation that the donation is inter vivos is the acceptance clause
therein of the donees. We have ruled that an acceptance clause is a mark that the donation is inter
vivos. Acceptance is a requirement for donations inter vivos. On the other hand, donations mortis
causa, being in the form of a will, are not required to be accepted by the donees during the donor’s
lifetime.18

We now rule on whether the donor validly revoked the donation when one of her daughters and
donees, Consolacion Austria, violated the prohibition to encumber the property. When Consolacion
Austria mortgaged the subject property to a certain Baby Santos, the donor, Basilisa Comerciante,
asked one of the respondents herein, Domingo Comia, to redeem the property, which the latter did.
After the petitioner in turn redeemed the property from respondent Domingo, the donor, Basilisa,
sold the property to the petitioner who is one of the donees.
The act of selling the subject property to the petitioner herein cannot be considered as a valid act of
revocation of the deed of donation for the reason that a formal case to revoke the donation must be
filed pursuant to Article 764 of the Civil Code19 which speaks of an action that has a prescriptive
period of four (4) years from non-compliance with the condition stated in the deed of donation. The
rule that there can be automatic revocation without benefit of a court action does not apply to the
case at bar for the reason that the subject deed of donation is devoid of any provision providing for
automatic revocation in event of non-compliance with the any of the conditions set forth therein.
Thus, a court action is necessary to be filed within four (4) years from the non-compliance of the
condition violated. As regards the ground of estoppel, the donor, Basilisa, cannot invoke the violation
of the provision on the prohibition to encumber the subject property as a basis to revoke the
donation thereof inasmuch as she acknowledged the validity of the mortgage executed by the donee,
Consolacion Austria, when the said donor asked respondent Domingo Comia to redeem the same.
Thereafter, the donor, Basilisa likewise asked respondent Florentino Lumubos and the petitioner
herein to redeem the same.20 Those acts implied that the donees have the right of control and naked
title of ownership over the property considering that the donor, Basilisa condoned and acknowledged
the validity of the mortgage executed by one of the donees, Consolacion Austria.

Anent the second issue, the petitioner asserts that the action, against the petitioner, for annulment
of TCT No. T-10434 and other relevant documents, for reconveyance and damages, filed by the
respondents on September 21, 1983 on the ground of fraud and/or implied trust has already
prescribed. The sale happened on February 6, 1979 and its registration was made on February 8,
1979 when TCT No. RT-4036 in the name of the donor was cancelled and in lieu thereof TCT No. T-
10434 in the name of the petitioner was issued.1âwphi1 Thus, more than four (4) years have passed
since the sale of the subject real estate property was registered and the said new title thereto was
issued to the petitioner. The petitioner contends that an action for reconveyance of property on the
ground of alleged fraud must be filed within four (4) years from the discovery of fraud which is from
the date of registration of the deed of sale on February 8, 1979; and that the same prescriptive
period also applies to a suit predicated on a trust relationship that is rooted on fraud of breach of
trust.

When one’s property is registered in another’s name without the former’s consent, an implied trust is
created by law in favor of the true owner. Article 1144 of the New Civil Code provides:

Art. 1144. The following actions must be brought within ten years from the time the right of action
accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment. (n)

Thus, an action for reconveyance of the title to the rightful owner prescribes in ten (10) years from
the issuance of the title.21 It is only when fraud has been committed that the action will be barred
after four (4) years.22

However, the four-year prescriptive period is not applicable to the case at bar for the reason that
there is no fraud in this case. The findings of fact of the appellate court which are entitled to great
respect, are devoid of any finding of fraud. The records do not show that the donor, Basilisa, and the
petitioner ever intended to defraud the respondents herein with respect to the sale and ownership of
the said property. On the other hand, the sale was grounded upon their honest but erroneous
interpretation of the deed of donation that it is mortis causa, not inter vivos; and that the donor still
had the rights to sell or dispose of the donated property and to revoke the donation.

There being no fraud in the trust relationship between the donor and the donees including the herein
petitioner, the action for reconveyance prescribes in ten (10) years. Considering that TCT No. T-
10434 in the name of the petitioner and covering the subject property was issued only on February
8, 1979, the filing of the complaint in the case at bar in 1983 was well within the ten-year
prescriptive period.

The Court of Appeals, therefore, committed no reversible error in its appealed Decision.

G.R. No. L-17900, June 21, 1922

EUGENIO CAGAOAN, vs. FELIX CAGAOAN and the REGISTER OF DEEDS OF THE PROVINCE
OF PANGASINAN,
Facts:

It appears from the evidence that the plaintiff and the defendant Felix Cagaoan are brothers, the
sons of Gregorio Cagaoan. On November 3, 1915, Gregorio Cagaoan executed a deed of gift of four
parcels of land situated in the municipality of Tayug, Province of Pangasinan, in favor of Felix
Cagaoan and on October 26, 1918, he executed a similar deed in favor of Eugenio Cagaoan for a
parcel of land which, apparently, is the same as that described as parcel No. 4 in the deed of gift
executed in favor of Felix. Both of the deeds of gift are free from formal defects and were duly
accepted by the donees.

Eugenio Cagaoan went into possession of the parcel donated to him immediately after the execution
of the deed of gift in his favor, but on account of variance between the land description given in the
deed and that appearing in the registry, he failed to get the donation recorded with the register of
deeds. The deed given Felix was duly recorded on June 10, 1919, but though he appears to have
held possession of parcels Nos. 1,2, and 3 described in his deed, at least since the year 1915, he has
never had possession of parcel No. 4. Gregorio Cagaoan died on December 16, 1918.

This action was brought to have Eugenio Cagaoan declared the owner of the parcel donated to him,
to set aside for fraud the donation made in favor of Felix Cagaoan and to have the record of the
same in the registry of deeds cancelled. The defendant Felix Cagaoan has presented cross-complaint
asking that he awarded the possession of the land, with damages for its unlawful detention by the
plaintiff.

The trial court rendered judgment for the defendant ordering that the plaintiff surrender possession
of the parcel in question to him and pay the costs. From this judgment the plaintiff appealed.

Ruling:

There is no doubt that Gregorio Cagaoan signed both of the deeds of gift by means of his thumb-
print and that therefore both of them are authentic, but there are strong indications in the evidence
that some form of deception was practiced upon him at the time of the execution of the deed in favor
of Felix Cagaoan and that he never intended to donate the parcel now in dispute to Felix. In fact, in
view of the difficulty of obtaining direct evidence of fraud where the person deceived cannot be
produced as witness, we might, perhaps be justified in holding that the circumstances shown by the
evidence and which remain unexplained by the defendant, constitute sufficient evidence of fraud.
But, be this as tit may, we think the judgment of the court below must be reversed for another
reason. The case seems to use to be analogous to one where the same real property has been sold
by the same vendor to two difference vendees. In such cases, under article 1473 of the Civil Code,
the property goes to the vendee who first records his title in the registry of property. If the sale is
not recorded by either vendee, the property goes to the one who first takes possession of its in good,
faith, and in the absence of both record and possession, to the one who present oldest title, provided
there is good faith.

The supreme court of Spain has frequently held that inscription in the registry of property gives no
preference of priority where the person relying on the inscription had full notice beforehand of the
adverse claim. For instance, in sentence of July 9, 1900, the court held that "the provision of article
34 of the Mortgage Law presuppose that the cause of annulment or resolution of the right of the
obligor which is not recorded in the property registry were unknown to the obligee at the time of
contracting, because if the latter knew those causes, he did not have the character of a third person,
and the basis of that legal fiction upon which the guaranty of registry rests was lacking."

In sentence of May 123, 1908, it was held that "although article 1473, in its second paragraph,
creates a preference for the title of ownership of realty first registered, this provision must be
understood as being based always upon the good faith required in the first paragraph thereof, and it
cannot be conceived that the legislator had intended to do away with, or to sanction, bad faith by
requiring compliance with a mere formality (the act of registration) which does not always control
even when third persons are involved." (See also Obras Pias vs. Devera Ignacio, 17 Phil., 45.)

It clearly appears that Felix Cagaoan had full notice of the plaintiff's claim to the land before he had
his deed of gift recorded with the register of deeds. Under the decisions above cited he was therefore
not a third person within the meaning of article 34 of the Mortgage Law, and his position was,
consequently, in now wise improved by the inscription of his document. The plaintiff Eugenio
Cagaoan having first taken possession in good faith must therefore be considered to have the better
right to the land in question.
The judgment appealed from is therefore reversed, the plaintiff Eugenio Cagaoan is declared the
owner of the land in question, the cross-complaint of the defendant Felix Cagaoan is dismissed, and
it is ordered that the register of deeds cancel the inscription of The land in question in the name of
Felix Cagaoan, who will pay the costs of this action in both instances. So Ordered.

G.R. No. 122134, October 3, 2003

ROMANA LOCQUIAO VALENCIA and CONSTANCIA L. VALENCIA, petitioners,

vs.
BENITO A. LOCQUIAO, now deceased and substituted by JIMMY LOCQUIAO, TOMASA MARA
and the REGISTRAR OF DEEDS OF PANGASINAN, respondents.

x----------------------------x

CONSTANCIA L. VALENCIA, petitioner,

vs.
BENITO A. LOCQUIAO, now deceased and substituted by JIMMY LOCQUIAO, respondent.

Facts:

On May 22, 1944, Herminigildo and Raymunda Locquiao executed a deed of donation propter
nuptias which was written in the Ilocano dialect, denominated as Inventario Ti Sagut9 in favor of their
son, respondent Benito Locquiao (hereafter, respondent Benito) and his prospective bride,
respondent Tomasa Mara (hereafter, respondent Tomasa). By the terms of the deed, the donees
were gifted with four (4) parcels of land, including the land in question, as well as a male cow and
one-third (1/3) portion of the conjugal house of the donor parents, in consideration of the impending
marriage of the donees.

The donees took their marriage vows on June 4, 1944 and the fact of their marriage was inscribed at
the back of O.C.T. No. 18383.10

Herminigildo and Raymunda died on December 15, 1962 and January 9, 1968, respectively, leaving
as heirs their six (6) children, namely: respondent Benito, Marciano, Lucio, Emeteria, Anastacia, and
petitioner Romana, all surnamed Locquiao11 . With the permission of respondents Benito and Tomasa,
petitioner Romana Valencia (hereinafter, Romana) took possession and cultivated the subject
land.12 When respondent Romana’s husband got sick sometime in 1977, her daughter petitioner
Constancia Valencia (hereafter, petitioner Constancia) took over, and since then, has been in
possession of the land.13

Meanwhile, respondents Benito and Tomasa registered the Inventario Ti Sagut with the Office of the
Register of Deeds of Pangasinan on May 15, 1970.14 In due course, the original title was cancelled
and in lieu thereof Transfer Certificate of Title No. 8489715 was issued in the name of the respondents
Benito and Tomasa.

On March 18, 1973, the heirs of the Locquiao spouses, including respondent Benito and petitioner
Romana, executed a Deed of Partition with Recognition of Rights,16 wherein they distributed among
only three (3) of them, the twelve (12) parcels of land left by their common progenitors, excluding
the land in question and other lots disposed of by the Locquiao spouses earlier. Contained in the
deed is a statement that respondent Benito and Marciano Locquiao, along with the heirs of Lucio
Locquiao, "have already received our shares in the estates of our parents, by virtue of previous
donations and conveyances," and that for that reason the heirs of Lucio Locquaio were not made
parties to the deed. All the living children of the Locquaio spouses at the time, including petitioner
Romana, confirmed the previous dispositions and waived their rights to whomsoever the properties
covered by the deed of partition were adjudicated.17

Later on, disagreements among five (5) heirs or groups of heirs, including petitioner Romana,
concerning the distribution of two (2) of the lots covered by the deed of partition which are Lots No.
2467 and 5567 of the Urdaneta Cadastral Survey surfaced. As their differences were settled, the
heirs concerned executed a Deed of Compromise Agreement18 on June 12, 1976, which provided for
the re-distribution of the two (2) lots. Although not directly involved in the discord, Benito signed the
compromise agreement together with his feuding siblings, nephews and nieces. Significantly, all the
signatories to the compromise agreement, including petitioner Romana, confirmed all the other
stipulations and provisions of the deed of partition.19

Sometime in 1983, the apparent calm pervading among the heirs was disturbed when petitioner
Constancia filed an action for annulment of title against the respondents before the Regional Trial
Court of Pangasinan.20 The record shows that the case was dismissed by the trial court but it does
not indicate the reason for the dismissal.21

On December 13, 1983, respondent Benito filed with the Municipal Trial Court.

On November 25, 1985, the Municipal Trial Court rendered a Decision,23 ordering the defendant in
the case, petitioner Constancia, to vacate the land in question.

Petitioners Romana and Constancia countered with a Complaint24 for the annulment of Transfer
Certificate of Title No. 84897 against respondents Benito and Tomasa 25 which they filed with the
Regional Trial Court. Meanwhile, the decision in the ejectment case was appealed to the same RTC
where the case for annulment of title was also pending. Finding that the question of ownership was
the central issue in both cases, the court issued an Order26 suspending the proceedings in the
ejectment case until it shall have decided the ownership issue in the title annulment case.

After trial, the RTC rendered a Decision27 dated January 30, 1989 dismissing the complaint for
annulment of title on the grounds of prescription and laches. It likewise ruled that the Inventario Ti
Sagut is a valid public document which transmitted ownership over the subject land to the
respondents. With the dismissal of the complaint and the confirmation of the respondents’ title over
the subject property, the RTC affirmed in toto the decision of the MTC in the ejectment case28 .

Dissatisfied, petitioners elevated the two (2) decisions to the respondent Court of Appeals. On
November 24, 1994, the Court of Appeals rendered the assailed Decision affirming the appealed RTC
decisions.

Issue 1: whether the donation propter nuptias is authentic

Ruling 1:

The Inventario Ti Sagut which contains the donation propter nuptias was executed and notarized on
May 22, 1944. It was presented to the Register of Deeds of Pangasinan for registration on May 15,
1970. The photocopy of the document presented in evidence as Exhibit "8" was reproduced from the
original kept in the Registry of Deeds of Pangasinan.31

The petitioners have launched a two-pronged attack against the validity of the donation propter
nuptias, to wit: first, the Inventario Ti Sagut is not authentic; and second, even assuming that it is
authentic, it is void for the donee’s failure to accept the donation in a public instrument.

To buttress their claim that the document was falsified, the petitioners rely mainly on
the Certification32 dated July 9, 1984 of the Records Management and Archives Office that there was
no notarial record for the year 1944 of Cipriano V. Abenojar who notarized the document on May 22,
1944 and that therefore a copy of the document was not available.

The certification is not sufficient to prove the alleged inexistence or spuriousness of the challenged
document. The appellate court is correct in pointing out that the mere absence of the notarial record
does not prove that the notary public does not have a valid notarial commission and neither does the
absence of a file copy of the document with the archives effect evidence of the falsification of the
document.33 This Court ruled that the failure of the notary public to furnish a copy of the
deed to the appropriate office is a ground for disciplining him, but certainly not for
invalidating the document or for setting aside the transaction therein involved.34

Moreover, the heirs of the Locquaio spouses, including petitioner Romana, made reference in the
deed of partition and the compromise agreement to the previous donations made by the spouses in
favor of some of the heirs. As pointed out by the RTC,35 respondent Benito was not allotted any share
in the deed of partition precisely because he received his share by virtue of previous donations. His
name was mentioned in the deed of partition only with respect to the middle portion of Lot No. 2638
which is the eleventh (11th) parcel in the deed but that is the same one-third (1/3) portion of Lot No.
2638 covered by O.C.T. No. 18259 included in the donation propter nuptias.1awphi1.nét Similarly,
Marciano Locquiao and the heirs of Lucio Locquiao were not allocated any more share in the deed of
partition since they received theirs by virtue of prior donations or conveyances.

The pertinent provisions of the deed of partition read:

…
That the heirs of Lucio Locquiao are not included in this Partition by reason of the fact that in the
same manner as we, BENITO and MARCIANO LOCQUIAO are concerned, we have already
received our shares in the estate of our parents by virtue of previous donations and
conveyances, and that we hereby confirm said dispositions, waiving our rights to
whomsoever will these properties will now be adjudicated;

That we, the Parties herein, do hereby waive and renounce as against each other any claim or
claims that we may have against one or some of us, and that we recognize the rights of
ownership of our co-heirs with respect to those parcels already distributed and
adjudicated and that in the event that one of us is cultivating or in possession of any one of the
parcels of land already adjudicated in favor of another heir or has been conveyed, donated or
disposed of previously, in favor of another heir, we do hereby renounce and waive our right
of possession in favor of the heir in whose favor the donation or conveyance was made
previously.36 (Emphasis supplied)

The exclusion of the subject property in the deed of partition dispels any doubt as to the authenticity
of the earlier Inventario Ti Sagut.

Issue 2: whether acceptance of the donation by the donees is required.

Ruling 2: YES. Implied acceptance is sufficient.

Concerning the issue of form, petitioners insist that based on a provision43 of the Civil Code of Spain
(Old Civil Code), the acceptance by the donees should be made in a public instrument. This argument
was rejected by the RTC and the appellate court on the theory that the implied acceptance of the
donation had flowed from the celebration of the marriage between the respondents, followed by the
registration of the fact of marriage at the back of OCT No. 18383.

The petitioners, the appellate court and the trial court all erred in applying the requirements on
ordinary donations to the present case instead of the rules on donation propter nuptias. Underlying
the blunder is their failure to take into account the fundamental dichotomy between the two kinds of
donations.

Unlike ordinary donations, donations propter nuptias or donations by reason of marriage are those
"made before its celebration, in consideration of the same and in favor of one or both of the future
spouses."44 The distinction is crucial because the two classes of donations are not governed by
exactly the same rules, especially as regards the formal essential requisites.

Under the Old Civil Code, donations propter nuptias must be made in a public instrument in which the
property donated must be specifically described.45 However, Article 1330 of the same Code provides
that "acceptance is not necessary to the validity of such gifts". In other words, the celebration
of the marriage between the beneficiary couple, in tandem with compliance with the prescribed form,
was enough to effectuate the donation propter nuptias under the Old Civil Code.

Under the New Civil Code, the rules are different. Article 127 thereof provides that the form of
donations propter nuptias are regulated by the Statute of Frauds. Article 1403, paragraph 2, which
contains the Statute of Frauds requires that the contracts mentioned thereunder need be in writing
only to be enforceable. However, as provided in Article 129, express acceptance "is not
necessary for the validity of these donations." Thus, implied acceptance is sufficient.

Issue 3: If donee’s acceptance is required, in what form should the acceptance appear.

Ruling 3: The Old Civil Code

The pivotal question, therefore, is which formal requirements should be applied with respect to the
donation propter nuptias at hand. Those under the Old Civil Code or the New Civil Code?

It is settled that only laws existing at the time of the execution of a contract are applicable thereto
and not later statutes, unless the latter are specifically intended to have retroactive
effect.46 Consequently, it is the Old Civil Code which applies in this case since the donation propter
nuptias was executed in 1944 and the New Civil Code took effect only on August 30, 1950.47 The fact
that in 1944 the Philippines was still under Japanese occupation is of no consequence. It is a well-
known rule of the Law of Nations that municipal laws, as contra-distinguished from laws of political
nature, are not abrogated by a change of sovereignty.48 This Court specifically held that during the
Japanese occupation period, the Old Civil Code was in force.49 As a consequence, applying Article
1330 of the Old Civil Code in the determination of the validity of the questioned donation, it does not
matter whether or not the donees had accepted the donation. The validity of the donation is
unaffected in either case.

Even the petitioners agree that the Old Civil Code should be applied. However, they invoked the
wrong provisions50 thereof.

Even if the provisions of the New Civil Code were to be applied, the case of the petitioners would
collapse just the same. As earlier shown, even implied acceptance of a donation propter
nuptias suffices under the New Civil Code.

Issue 4: whether the action is barred by prescription and laches.

Ruling 4: YES

With the genuineness of the donation propter nuptias and compliance with the applicable mandatory
form requirements fully established, petitioners’ hypothesis that their action is imprescriptible cannot
take off.

Viewing petitioners’ action for reconveyance from whatever feasible legal angle, it is definitely barred
by prescription. Petitioners’ right to file an action for the reconveyance of the land accrued in 1944,
when the Inventario Ti Sagut was executed. It must be remembered that before the effectivity of the
New Civil Code in 1950, the Old Code of Civil Procedure (Act No. 190) governed prescription.52 Under
the Old Code of Civil Procedure, an action for recovery of the title to, or possession of, real property,
or an interest therein, can only be brought within ten years after the cause of such action
accrues.53 Thus, petitioners’ action, which was filed on December 23, 1985, or more than forty (40)
years from the execution of the deed of donation on May 22, 1944, was clearly time-barred.

Even following petitioners’ theory that the prescriptive period should commence from the time of
discovery of the alleged fraud, the conclusion would still be the same. As early as May 15, 1970,
when the deed of donation was registered and the transfer certificate of title was issued, petitioners
were considered to have constructive knowledge of the alleged fraud, following the jurisprudential
rule that registration of a deed in the public real estate registry is constructive notice to the whole
world of its contents, as well as all interests, legal and equitable, included therein.54 As it is now
settled that the prescriptive period for the reconveyance of property allegedly registered through
fraud is ten (10) years, reckoned from the date of the issuance of the certificate of title,55 the action
filed on December 23, 1985 has clearly prescribed.

In any event, independent of prescription, petitioners’ action is dismissible on the ground of laches.
The elements of laches are present in this case, viz:

(1) conduct on the part of the defendant, or one under whom he claims, giving rise to the
situation that led to the complaint and for which the complainant seeks a remedy;

(2) delay in asserting the complainant’s rights, having had knowledge or notice of defendant’s
conduct and having been afforded an opportunity to institute a suit;

(3) lack of knowledge or notice on the part of the defendant that the complainant would assert
the right on which he bases his suit, and

(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or
the suit is not held barred.56

Of the facts which support the finding of laches, stress should be made of the following: (a) the
petitioners Romana unquestionably gained actual knowledge of the donation propter nuptias when
the deed of partition was executed in 1973 and the information must have surfaced again when the
compromise agreement was forged in 1976, and; (b) as petitioner Romana was a party-signatory to
the two documents, she definitely had the opportunity to question the donation propter nuptias on
both occasions, and she should have done so if she were of the mindset, given the fact that she was
still in possession of the land in dispute at the time. But she did not make any move. She tarried for
eleven (11) more years from the execution of the deed of partition until she, together with petitioner
Constancia, filed the annulment case in 1985.

Anent the ejectment case, we find the issues raised by the petitioners to be factual and, therefore,
beyond this Court’s power of review. Not being a trier of facts, the Court is not tasked to go over the
proofs presented by the parties and analyze, assess, and weigh them to ascertain if the trial court
and the appellate court were correct in according them superior credit in this or that piece of
evidence of one party or the other.57 In any event, implicit in the affirmance of the Court of Appeals
is the existence of substantial evidence supporting the decisions of the courts below.

WHEREFORE, finding no reversible error in the assailed decision, the same is hereby AFFIRMED.