G.R. No.

159889 June 5, 2008

WALTER VILLANUEVA AND AURORA VILLANUEVA, petitioners,

DECISION

QUISUMBING, J.:

This petition for review on certiorari seeks the modification of the Decision1 dated December 17,
2002 of the Court of Appeals in CA-G.R. CV. No. 68383, which had affirmed the Joint
Decision2 dated July 19, 2000 of the Regional Trial Court (RTC) of Dipolog City, Branch 6, in Civil
Case No. 4460. The RTC annulled the sale made by respondent Florentino Chiong in favor of
petitioners Walter and Aurora Villanueva conveying a portion of a parcel of land which respondents
acquired during their marriage.

The pertinent facts are as follows:

Respondents Florentino and Elisera Chiong were married sometime in January 1960 but have been
separated in fact since 1975. During their marriage, they acquired Lot No. 997-D-1 situated at
Poblacion, Dipolog City and covered by Transfer Certificate of Title (TCT) No. (T-19393)-
2325,3 issued by the Registry of Deeds of Zamboanga del Norte. Sometime in 1985, Florentino sold
the one-half western portion of the lot to petitioners for P8,000, payable in installments. Thereafter,
Florentino allowed petitioners to occupy4 the lot and build a store, a shop, and a house thereon.
Shortly after their last installment payment on December 13, 1986,5 petitioners demanded from
respondents the execution of a deed of sale in their favor. Elisera, however, refused to sign a deed
of sale.

On July 5, 1991, Elisera filed with the RTC a Complaint6 for Quieting of Title with Damages,
docketed as Civil Case No. 4383. On February 12, 1992, petitioners filed with the RTC a
Complaint7 for Specific Performance with Damages, docketed as Civil Case No. 4460. Upon proper
motion, the RTC consolidated these two cases.8

On May 13, 1992, Florentino executed the questioned Deed of Absolute Sale9 in favor of petitioners.

On July 19, 2000, the RTC, in its Joint Decision, annulled the deed of absolute sale dated May 13,
1992, and ordered petitioners to vacate the lot and remove all improvements therein. The RTC
likewise dismissed Civil Case No. 4460, but ordered Florentino to return to petitioners the
consideration of the sale with interest from May 13, 1992.10 The fallo of the decision reads:

WHEREFORE, by preponderance of evidence, judgment is hereby rendered as follows:

For Civil Case No. 4383, (a) annulling the Deed of Sale executed by Florentino Chiong in
favor of Walter Villanueva, dated May 13, 1992 (Exhibit "2"); ordering defendant Walter
Villanueva to vacate the entire land in question and to remove all buildings therein, subject to
[i]ndemnity of whatever damages he may incur by virtue of the removal of such buildings,
within a period of 60 days from the finality of this decision; award of damages is hereby
denied for lack of proof.
 In Civil Case No. 4460, complaint is hereby dismissed, but defendant Florentino Chiong,
having received the amount of P8,000.00 as consideration of the sale of the land subject of
the controversy, the sale being annulled by this Court, is ordered to return the said amount to
[the] spouses Villanueva, with interest to be computed from the date of the annulled deed of
sale, until the same is fully paid, within the period of 60 days from finality of this judgment.
Until such amount is returned, together with the interest, [the] spouses Villanueva may
continue to occupy the premises in question.

No pronouncement as to costs.

IT IS SO ORDERED.11

The Court of Appeals affirmed the RTC's decision:

WHEREFORE, premises considered, the appealed decision dated July 19, 2000 of the
Regional Trial Court, Branch 6, Dipolog City is hereby AFFIRMED.

SO ORDERED.12

Petitioners sought reconsideration, but to no avail. Hence, this petition.

Petitioners assign the following errors as issues for our resolution:

I.

THAT THE COURT A QUO AS WELL AS THE HONORABLE COURT OF APPEALS ...
GRAVELY ERRED IN NOT HOLDING THAT THE LAND IN QUESTION BELONGED
SOLELY TO RESPONDENT FLORENTINO CHIONG AND ULTIMATELY TO THE HEREIN
PETITIONERS.

II.

THAT THE LOWER COURT AS WELL AS THE HONORABLE COURT OF APPEALS …

Simply put, the basic issues are: (1) Is the subject lot an exclusive property of Florentino or a
conjugal property of respondents? (2) Was its sale by Florentino without Elisera's consent valid?

Petitioners contend that the Court of Appeals erred when it held that the lot is conjugal property.
They claim that the lot belongs exclusively to Florentino because respondents were already
separated in fact at the time of sale and that the share of Elisera, which pertains to the eastern part
of Lot No. 997-D-1, had previously been sold to Spouses Jesus Y. Castro and Aida Cuenca. They
also aver that while there was no formal liquidation of respondents' properties, their separation in
fact resulted in its actual liquidation. Further, assuming arguendo that the lot is still conjugal, the
transaction should not be entirely voided as Florentino had one-half share over it.

Elisera, for her part, counters that the sale of the lot to petitioners without her knowledge, consent or
authority, was void because the lot is conjugal property. She adds that the sale was neither
authorized by any competent court nor did it redound to her or their children's benefit. As proof of the
lot's conjugal nature, she presented a transfer certificate of title, a real property tax declaration, and
a Memorandum of Agreement14 dated November 19, 1979 which she and her husband had executed
for the administration of their conjugal properties.15

Anent the first issue, petitioners' contention that the lot belongs exclusively to Florentino because of
his separation in fact from his wife, Elisera, at the time of sale dissolved their property relations, is
bereft of merit. Respondents' separation in fact neither affected the conjugal nature of the lot nor
prejudiced Elisera's interest over it. Under Article 17816 of the Civil Code, the separation in fact
between husband and wife without judicial approval shall not affect the conjugal partnership. The lot
retains its conjugal nature.

Likewise, under Article 16017 of the Civil Code, all property acquired by the spouses during the
marriage is presumed to belong to the conjugal partnership of gains, unless it is proved that it
pertains exclusively to the husband or to the wife. Petitioners' mere insistence as to the lot's
supposed exclusive nature is insufficient to overcome such presumption when taken against all the
evidence for respondents.

On the basis alone of the certificate of title, it cannot be presumed that the lot was acquired during
the marriage and that it is conjugal property since it was registered "in the name of Florentino
Chiong, Filipino, of legal age, married to Elisera Chiong… ."18 But Elisera also presented a real
property tax declaration acknowledging her and Florentino as owners of the lot. In addition,
Florentino and Elisera categorically declared in the Memorandum of Agreement they executed that
the lot is a conjugal property.19 Moreover, the conjugal nature of the lot was admitted by Florentino in
the Deed of Absolute Sale dated May 13, 1992, where he declared his capacity to sell as a co-owner
of the subject lot.20

Anent the second issue, the sale by Florentino without Elisera's consent is not, however, void ab
initio. In Vda. de Ramones v. Agbayani,21 citing Villaranda v. Villaranda,22 we held that without the
wife's consent, the husband's alienation or encumbrance of conjugal property prior to the effectivity
of the Family Code on August 3, 1988 is not void, but merely voidable. Articles 166 and 173 of the
Civil Code 23 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…

This article shall not apply to property acquired by the conjugal partnership before the
effective date of this Code.

ART. 173. The wife may, during the marriage, and within ten years from the
transaction questioned, askthe 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.
(Emphasis supplied.)

Applying Article 166, the consent of both Elisera and Florentino is necessary for the sale of a
conjugal property to be valid. In this case, the requisite consent of Elisera was not obtained when
Florentino verbally sold the lot in 1985 and executed the Deed of Absolute Sale on May 13, 1992.
Accordingly, the contract entered by Florentino is annullable at Elisera's instance, during the
marriage and within ten years from the transaction questioned, conformably with Article 173.
Fortunately, Elisera timely questioned the sale when she filed Civil Case No. 4383 on July 5, 1991,
perfectly within ten years from the date of sale and execution of the deed.

Petitioners finally contend that, assuming arguendo the property is still conjugal, the transaction
should not be entirely voided as Florentino had one-half share over the lot. Petitioners' stance lacks
merit. In Heirs of Ignacia Aguilar-Reyes v. Mijares 24 citing Bucoy v. Paulino, et al.,25 a case involving
the annulment of sale executed by the husband without the consent of the wife, it was held that the
alienation 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… .26

Now, if a voidable contract is annulled, the restoration of what has been given is proper.27 Article
1398 of the Civil Code provides:

An obligation having been annulled, the contracting parties shall restore to each other the
things which have been the subject matter of the contract, with their fruits, and the price with
its interest, except in cases provided by law.

In obligations to render service, the value thereof shall be the basis for damages.

The effect of annulment of the contract is to wipe it out of existence, and to restore the
parties, insofar as legally and equitably possible, to their original situation before the contract was
entered into.28

Strictly applying Article 1398 to the instant case, petitioners should return to respondents the land
with its fruits29and respondent Florentino should return to petitioners the sum of P8,000, which he
received as the price of the land, together with interest thereon.

On the matter of fruits and interests, we take into consideration that petitioners have been using the
land and have derived benefit from it just as respondent Florentino has used the price of the land in
the sum of P8,000. Hence, if, as ordered by the lower court, Florentino is to pay a reasonable
amount or legal interest for the use of the money then petitioners should also be required to pay a
reasonable amount for the use of the land.30 Under the particular circumstances of this case,
however, it would be equitable to consider the two amounts as offsetting each other. Hence, the
award of the trial court for the payment of interest should be deleted.

WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision dated December 17,
2002 of the Court of Appeals in CA-G.R. CV. No. 68383 affirming the Joint Decision dated July 19,
2000 of the Regional Trial Court of Dipolog City, Branch 6, in Civil Case No. 4460 is
hereby AFFIRMED with MODIFICATION. The order for the payment of interest is DELETED.

SO ORDERED.