In a significant ruling, the Supreme Court affirmed that the sale of conjugal property without the written consent of both spouses is entirely void, reinforcing the protective measures enshrined in the Family Code. This decision clarifies the rights and obligations of parties involved in property transactions where marital assets are concerned. The case underscores the importance of due diligence in verifying property titles and obtaining necessary consents to ensure the validity of real estate deals. The ruling emphasizes that even if one spouse is managing the property, disposition requires the explicit agreement of the other to protect the family’s interests.

Property Disputes: Can One Spouse’s Signature Seal a Land Deal?

The case of Mario Siochi v. Alfredo Gozon, et al. and Inter-Dimensional Realty, Inc. v. Mario Siochi, et al. revolves around a contested agreement to buy and sell a 30,000 sq.m. parcel of land in Malabon, Metro Manila. The land, covered by TCT No. 5357, was registered under the name of “Alfredo Gozon (Alfredo), married to Elvira Gozon (Elvira).” The legal battle ensued when Alfredo, while facing a legal separation case filed by Elvira, entered into an agreement with Mario Siochi to sell the property without Elvira’s explicit written consent. This situation brought to the forefront the critical question of whether one spouse could unilaterally dispose of conjugal property and the legal ramifications thereof. The Supreme Court was tasked with determining the validity of the sale and the rights of the parties involved, including the buyer, the spouses, and a third-party realty company.

The factual backdrop reveals a series of transactions that complicated the property’s ownership. Elvira Gozon initiated legal separation proceedings against Alfredo in 1991, and a notice of lis pendens was annotated on the property’s title. Despite this pending legal matter, Alfredo entered into an Agreement to Buy and Sell with Mario Siochi in 1993 for P18 million. Siochi paid P5 million as earnest money and took possession of the property. However, Alfredo failed to fulfill key stipulations in the agreement, such as securing Elvira’s affidavit confirming the property as his exclusive asset and removing the notice of lis pendens. This failure to comply with the agreement’s terms became a central point of contention.

Adding to the complexity, the Cavite Regional Trial Court (RTC) rendered a decision in the legal separation case in 1994, declaring the property as conjugal. Subsequently, Alfredo executed a Deed of Donation, transferring the property to his daughter, Winifred Gozon, who then sold it to Inter-Dimensional Realty, Inc. (IDRI) for P18 million, facilitated by a Special Power of Attorney granted to Alfredo. These transactions occurred without the notice of lis pendens and the Agreement with Siochi being properly annotated on the new titles, leading to further legal disputes and claims of bad faith.

The Malabon RTC initially ruled in favor of Siochi, approving the Agreement to Buy and Sell concerning Alfredo’s share of the property. The court nullified the Deed of Donation to Winifred and the subsequent sale to IDRI. Damages were awarded against Alfredo, Winifred, and the Register of Deeds. The Court of Appeals (CA), however, modified this decision, declaring the sale to Siochi void due to the lack of Elvira’s consent and the forfeiture of Alfredo’s share in favor of Winifred. The CA also reduced the damages awarded to Siochi and IDRI. This conflicting series of decisions set the stage for the Supreme Court’s intervention to clarify the applicable laws and establish a definitive ruling on the validity of the property transactions.

The Supreme Court anchored its analysis on Article 124 of the Family Code, which governs the administration and disposition of conjugal partnership property. This provision stipulates that both spouses must jointly administer conjugal property. In cases where one spouse is incapacitated or unable to participate, the other spouse may assume sole administrative powers, but these powers do not extend to disposition or encumbrance without court authority or the written consent of the other spouse. The court emphasized the critical importance of spousal consent in transactions involving conjugal property.

“In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void.”

Without such consent or authority, the disposition is considered void. The absence of consent from one spouse invalidates the entire sale, even concerning the portion of the conjugal property belonging to the spouse who executed the sale.

Applying this principle, the Supreme Court found that Alfredo’s Agreement with Siochi was void because Elvira did not provide written consent. The court rejected Siochi’s argument that the agreement should be treated as a continuing offer that could be perfected by Elvira’s subsequent acceptance. The donation of the property to Winifred and its subsequent sale to IDRI indicated that the offer had been withdrawn, precluding any possibility of acceptance. This part is very important, as the Court ruled that the agreement to sell was void due to lack of consent.

Furthermore, the Supreme Court clarified the CA’s misinterpretation regarding the forfeiture of Alfredo’s share in the property. The CA had incorrectly stated that Alfredo’s one-half share was forfeited in favor of Winifred based on the Cavite RTC’s decision in the legal separation case. Citing Articles 63 and 43 of the Family Code, the Court explained that only Alfredo’s share in the net profits of the conjugal partnership was forfeited, not his share in the conjugal property itself. Article 63 specifies that an offending spouse in a legal separation case forfeits their right to any share of the net profits earned by the conjugal partnership. This distinction is crucial, as it preserves the offending spouse’s ownership rights over the property while penalizing them regarding the financial gains from the marriage. The Court emphasized that Article 102(4) defines net profits as “the increase in value between the market value of the community property at the time of the celebration of the marriage and the market value at the time of its dissolution.”

The Supreme Court also addressed the issue of whether IDRI was a buyer in good faith. The Court agreed with the CA’s finding that IDRI was not a buyer in good faith, as it had actual knowledge of facts and circumstances that should have prompted a reasonable person to inquire further about the vendor’s title to the property. IDRI’s representative knew about the notice of lis pendens on the title and the pending legal separation case. This knowledge should have alerted IDRI to the potential issues surrounding the property’s ownership and the need for Elvira’s consent. The Court further noted that the cancellation of the notice of lis pendens was irregular, as it was done at Alfredo’s request without a court order or Elvira’s verified petition, as required by Section 77 of Presidential Decree No. 1529. Due diligence would have revealed that Alfredo’s donation of the property to Winifred lacked Elvira’s consent, a violation of Article 125 of the Family Code. Given these factors, IDRI could not claim to be an innocent purchaser for value.

Despite affirming the CA’s decision, the Supreme Court reinstated the Malabon RTC’s order for the reimbursement of the P18 million paid by IDRI for the property, which had been inadvertently omitted in the CA’s dispositive portion. This modification ensured that IDRI would recover the funds it had expended on the void transaction, with legal interest computed from the finality of the decision. This decision highlights the importance of the concept of due diligence in real estate transactions. It is a reminder that purchasers must be vigilant and thoroughly investigate the title and any potential encumbrances or disputes associated with the property.

FAQs

What was the key issue in this case?	The key issue was whether the sale of conjugal property by one spouse without the written consent of the other spouse is valid under the Family Code.
What does the Family Code say about selling conjugal property?	Article 124 of the Family Code requires the written consent of both spouses for the disposition or encumbrance of conjugal property. Without such consent, the transaction is void.
What is a notice of lis pendens?	A notice of lis pendens is a warning recorded against property alerting potential buyers that the title is subject to pending litigation. Its cancellation requires a court order or a verified petition from the party who registered it.
What does it mean to be a buyer in good faith?	A buyer in good faith is someone who purchases property without knowledge of any defects in the seller’s title. They must exercise due diligence in verifying the title’s validity.
What is the consequence of being the offending spouse in a legal separation case?	The offending spouse in a legal separation case forfeits their share of the net profits earned by the conjugal partnership. However, this does not include the forfeiture of their share in the conjugal property itself.
Can a donation of conjugal property be made by one spouse alone?	No, Article 125 of the Family Code states that neither spouse may donate conjugal property without the consent of the other.
What should a buyer do to ensure they are purchasing property legally?	A buyer should conduct a thorough investigation of the property’s title, including checking for any notices of lis pendens, pending litigation, or other encumbrances. They should also verify that all necessary consents have been obtained.
What was the Supreme Court’s final ruling?	The Supreme Court affirmed that the sale of the conjugal property was void due to the lack of Elvira’s written consent. The Court also ordered the reimbursement of the P18 million paid by Inter-Dimensional Realty, Inc. for the property, with legal interest.

The Supreme Court’s decision in this case serves as a crucial reminder of the importance of adhering to the provisions of the Family Code regarding the disposition of conjugal property. It underscores the necessity of obtaining the written consent of both spouses to ensure the validity of property transactions. Buyers must exercise due diligence in verifying property titles and investigating any potential issues that may affect ownership rights. Failure to do so may result in the invalidation of the sale and significant financial losses.

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: Mario Siochi vs Alfredo Gozon, G.R. No. 169900, March 18, 2010