In the Philippines, co-ownership of property is a common scenario, especially among heirs. This case clarifies that when co-owners sell a property without the consent of all, the sale is only valid for the seller’s share. The Supreme Court emphasized that a buyer cannot claim ‘good faith’ if they knew about the co-ownership. This ruling protects the rights of all co-owners, ensuring that no one can be deprived of their property share without their explicit consent. This principle is crucial for understanding property transactions involving inherited lands.

Selling Shared Land: Can One Owner’s Deal Undermine Others’ Rights?

This case, Extraordinary Development Corporation v. Herminia F. Samson-Bico and Ely B. Flestado, revolves around a parcel of land in Binangonan, Rizal, originally owned by Apolonio Ballesteros. Upon Apolonio’s death, the land was inherited by his children, Juan and Irenea. When Juan’s heirs sold the entire property to Extraordinary Development Corporation (EDC) without Irenea’s heirs’ consent, a legal battle ensued. The central question was whether Juan’s heirs could validly sell the entire property, thereby extinguishing the rights of Irenea’s heirs, who were also co-owners. This case highlights the complexities of co-ownership and the limitations on a co-owner’s right to dispose of property without the consent of all.

The Regional Trial Court (RTC) initially ruled in favor of Irenea’s heirs, declaring the sale null and void to the extent of their one-half share. EDC appealed, arguing that it was a buyer in good faith and unaware of the co-ownership. The Court of Appeals (CA) affirmed the RTC’s decision with modifications, clarifying that the sale was valid only to the extent of Juan’s heirs’ share. The CA also ordered Juan’s heirs to return a portion of the purchase price to EDC and removed the award of damages. Dissatisfied, EDC elevated the case to the Supreme Court, insisting that Irenea’s heirs had failed to adequately prove their co-ownership and reiterating its claim as a buyer in good faith.

The Supreme Court (SC) upheld the Court of Appeals’ decision, emphasizing that the respondents (Irenea’s heirs) had convincingly established their co-ownership. The Court noted that Herminia, one of Irenea’s heirs, provided clear testimony regarding her lineage and relationship to Apolonio Ballesteros. Moreover, Juan’s heirs, in their answer to the complaint and during trial, admitted to the co-ownership. These admissions were deemed judicial admissions, which, according to Sec. 4, Rule 129 of the Revised Rules of Court, do not require further proof.

Sec. 4. Judicial admissions. – An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.

Such admissions are binding and cannot be contradicted unless proven to be made through palpable mistake. The SC also cited Juan’s testimony, where he acknowledged that Irenea’s heirs were co-owners of the property. These testimonies solidified the claim of co-ownership, dismissing EDC’s argument that it was an innocent purchaser.

Addressing EDC’s claim of being a buyer in good faith, the Supreme Court reiterated the principle that no one can give what one does not have (nemo dat quod non habet). Thus, Juan’s heirs could only sell their share of the property, not the entire parcel. The SC agreed with the Court of Appeals that EDC merely stepped into the shoes of the sellers (Juan’s heirs) and could not have a better right than them. The Court emphasized that in a contract of sale, the seller must have the right to transfer ownership at the time of delivery, as stipulated in Article 1459 of the Civil Code.

Article 1459 of the Civil Code provides that the thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.

Building on this principle, the Supreme Court cited Article 493 of the Civil Code, which recognizes a co-owner’s right to dispose of their pro indiviso share. This means that Juan’s heirs had the right to sell their undivided share, but not the entire property without the consent of Irenea’s heirs. The sale was therefore valid only to the extent of Juan’s heirs’ interest.

Art. 493. Each co-owner shall have the full ownership of his part of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership.

Furthermore, the Court addressed EDC’s claim of a denial of due process. It was established that EDC had been given ample opportunity to present its case but failed to do so due to the repeated absence of its counsel. The Supreme Court reiterated that due process is satisfied when parties are given a fair opportunity to be heard, and when EDC squandered these chances, it could not claim a denial of due process.

In line with this, the SC agreed with the Court of Appeals’ decision to order Juan’s heirs to return one-half of the purchase price to EDC. This was to prevent unjust enrichment, where one party benefits unfairly at the expense of another. The Supreme Court affirmed the appellate court’s decision to deny the claim for moral and exemplary damages, as well as attorney’s fees, due to a lack of substantiation.

FAQs

What was the key issue in this case?	The key issue was whether the heirs of one co-owner could validly sell an entire property without the consent of the other co-owners, and whether the buyer could claim to be an innocent purchaser in good faith.
What is co-ownership?	Co-ownership exists when two or more persons own an undivided thing. Each co-owner has rights to the whole property but does not own a specific portion until partition.
Can a co-owner sell their share of the property?	Yes, Article 493 of the Civil Code allows a co-owner to alienate, assign, or mortgage their pro indiviso share, but the effect of such alienation is limited to the portion that may be allotted to them upon the termination of the co-ownership.
What does ‘good faith’ mean in the context of property sales?	‘Good faith’ means that the buyer purchased the property believing that the seller had the right to sell it, and without knowledge of any defects or claims against the title. However, knowledge of co-ownership negates a claim of good faith.
What is a judicial admission?	A judicial admission is a statement made by a party in the course of legal proceedings that is accepted as evidence, relieving the opposing party from having to prove the fact. It is conclusive unless shown to be made through palpable mistake.
What happens if a co-owner sells the entire property without consent?	The sale is valid only to the extent of the selling co-owner’s share. The other co-owners retain their rights and ownership of their respective shares.
What is unjust enrichment?	Unjust enrichment occurs when one person unjustly benefits at the expense of another. In this case, the court ordered the return of a portion of the purchase price to prevent the sellers from retaining money they were not entitled to.
Why was Extraordinary Development Corporation (EDC) not considered a buyer in good faith?	EDC was aware of the co-ownership through prior communication with one of the co-owners (Herminia), and therefore could not claim to be an innocent purchaser.

In conclusion, the Supreme Court’s decision in Extraordinary Development Corporation v. Herminia F. Samson-Bico and Ely B. Flestado reinforces the importance of respecting co-ownership rights in property transactions. It serves as a reminder that a buyer cannot claim good faith if they are aware of existing co-ownership, and that sellers can only transfer the rights they legally possess. This ruling ensures fairness and protects the interests of all parties involved in co-owned properties.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: EXTRAORDINARY DEVELOPMENT CORPORATION VS. HERMINIA F. SAMSON-BICO AND ELY B. FLESTADO, G.R. No. 191090, October 13, 2014