PNB v. Garcia (G.R. No. 182839; June 02, 2014)


Jose Garcia Sr. (Jose Sr.) acquired a parcel of residential land with all its improvements located in in Barrio Olango, Mallig, Isabela registered under his name with a TCT No. T-44422 during his marriage with Ligaya Garcia. Ligaya died on January 21, 1987.

The marriage of Jose Sr. and Ligaya produced the following children: Nora, Jose Jr., Bobby and Jimmy, all surnamed Garcia, who are the respondents in the present case.

Sometime in 1989, the spouses Rogelio and Celedonia Garcia (Spouses Garcia) obtained a loan facility from the petitioner, Philippine National Bank (petitioner bank), initially for P150,000.00. The loan was secured by a Real Estate Mortgage over their property covered by TCT No. 177585. The spouses Garcia increased their loan to P220,000.00 and eventually to P600,000.00. As security for the increased loan, they offered their property covered by TCT No. 75324 and the subject property covered by TCT No. T-44422.Jose Sr. agreed to accommodate the spouses Garcia by offering the subject property as additional collateral security for the latters increased loan. For this purpose, Jose Sr. executed Special Powers of Attorney (SPAs) expressly authorizing the Spouses Garcia to apply for, borrow, or secure any loan from the petitioner bank, and to convey and transfer the subject property by way of mortgage. Jose Sr. also executedan Amendment of Real Estate Mortgage in favor of the petitioner bank. The SPAs and the Amendment of Real Estate Mortgage are both inscribed on TCT No. T-44422. All of these transactions, however, were without the knowledge and consent of Jose Sr.s children.

On maturity of the loan on April 20, 1994,the spouses Garcia failed to pay their loan to the petitioner bank despite repeated demands.

Respondents filed before the RTC a Complaint for Nullity of the Amendment of Real Estate Mortgage, Damages with Preliminary Injunction against the spouses Garcia and the petitioner bank. They claimed that the Amendment of Real Estate Mortgage was null and void as to respondents Nora, Jose Jr., Bobby and Jimmy as they were not parties to the contract.

The respondents alleged that the subject property was a conjugal property of Jose Sr. and his deceased spouse, Ligaya, as they acquired the subject property during their marriage; that upon Ligayas death, Jose Sr., together with his children Nora, Jose Jr., Bobby and Jimmy, by law, became owners pro indiviso of the subject property; that the real estate mortgage executed by Jose Sr.could not bind his children as they did not give their consent or approval to the encumbrance; and that the real estate mortgage was also void as to Jose Sr. since he never benefitted from the loan.

In their answer, the Spouses Garcia alleged that Jose Sr. was indebted to them in the amount of P133,800.00. To settle this indebtedness, Jose Sr. volunteered to give the subject property as additional security for their (the Garcias) loan to the petitioner bank.

The petitioner bank, on the other hand, claimed that the mortgage was made in good faith and for value, and maintained that the respondents complaint stated no cause of action against it.

The RTC dismissed the complaint for lack of cause of action. The court held that the subject property was a conjugal property since it was acquired by Jose Sr. during his marriage with his now deceased wife. As a conjugal property, it is presumed that upon the death of his spouse, one-half of the property passed on to Jose Sr., while the other half went to Jose and his children as co-owners and as forced heirs of his deceased spouse. Without the consent of the children, the trial court ruled that the conjugal property could only be transferred or encumbered to the extent of Jose Sr.s share in the conjugal partnership, plus his share as an heir in the other half pertaining to the estate of his deceased spouse.

The RTC nevertheless declared that by virtue of the SPA executed by Nora, Jose Jr., Bobby and Jimmy in this suit, they are already estopped from questioning the mortgage and from alleging lack of consent or knowledge in the transaction. It held Jose Sr. liable as an accommodation party and upheld the petitioner banks right to collect the debt.

The CA upheld the trial courts finding that the subject property was conjugal, but reversed and set aside its ruling in so far as it declared valid and binding the Amendment of Real Estate Mortgage between the petitioner bank, on one hand, and the spouses Garcia and Jose Sr., on the other hand, with respect to respondents Nora, Jose Jr., Bobby and Jimmy. Relying on the Courts ruling inNufable v. Nufable, 369 Phil. 135, the CA ruled that the encumbrance Jose Sr. made over the entire conjugal property, without his childrens conformity, was null and void because a mere part owner could not alienate the shares of the other co-owners.

The CA also declared that the conjugal property could only be liable to the extent of Jose Sr.'s shares; Jose Sr.s acts could not affect his children's pro-indiviso shares in the subject property. It disagreed with the trial courts estoppel theory and held that their execution of the SPA should not be construed as acquiescence to the mortgage transaction. Lastly, it ruled that Jose Sr. could not escape liability from the mortgage since he voluntarily bound himself as the Spouses Garcia's accommodation mortgagor.

ISSUE: Did the CA decide the case erroneously?

Since Jose Sr. and Ligaya were married prior to the effectivity of the Family Code, their property relations were governed by the conjugal partnership of gains as provided under Article 119 of the Civil Code. Under Article 160 of the Civil Code, all property of the marriage is presumed to belong to the conjugal partnership, unless it can be proven that it pertains exclusively to the husband or to the wife.

Because of the petitioner banks failure to rebut the allegation that the subject property was acquired during the formers marriage to Ligaya, the legal presumption of the conjugal nature of the property, in line with Article 160 of the Civil Code, applies to this property. Proof of the subject propertys acquisition during the subsistence of marriage suffices to render the statutory presumption operative. Go v. Yamane, 522 Phil. 653, 663 (2006).

Registration of a property alone in the name of one spouse does not destroy its conjugal nature. What is material is the time when the property was acquired.Tarrosa v. De Leon, G.R. No. 185063, July 23, 2009. The registration of the property is not conclusive evidence of the exclusive ownership of the husband or the wife. Although the property appears to be registered in the name of the husband, it has the inherent character of conjugal property if it was acquired for valuable consideration during marriage.It retains its conjugal nature. xxx

Upon the death of Ligaya on January 21, 1987, the conjugal partnership was automatically dissolved and terminated pursuant to Article 175(1) of the Civil Code, and the successional rights of her heirs vest, as provided under Article 777 of the Civil Code, which states that the rights to the succession are transmitted from the moment of the death of the decedent.

Consequently, the conjugal partnership was converted into an implied ordinary co-ownership between the surviving spouse, on the one hand, and the heirs of the deceased, on the other. This resulting ordinary co-ownership among the heirs is governed by Article 493 of the Civil Code.

Under this provision, each co-owner has the full ownership of his part or share in the co-ownership and may, therefore, alienate, assign or mortgage it except when personal rights are involved. Should a co-owner alienate or mortgage the co-owned property itself, the alienation or mortgage shall remain valid but only to the extent of the portion which may be allotted to him in the division upon the termination of the co-ownership.Aguirre v. CA, G.R. No. 122249, January 29, 2004

As correctly emphasized by the trial court, Jose Sr.s right in the subject property islimited only to his share in the conjugal partnership as well as his share as an heir on the other half of the estate which is his deceased spouses share. Accordingly, the mortgage contract is void insofar as it extends to the undivided shares of his children (Nora, Jose Jr., Bobby and Jimmy) because they did not give their consent to the transaction.

Accordingly, the Amendment of Real Estate Mortgage constituted by Jose Sr. over the entire property without his co-owners consent is not necessarily void in its entirety. The right of the petitioner bank as mortgagee is limited though only to the portion which may be allotted to Jose Sr. in the event of a division and liquidation of the subject property. AFFIRMED.

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