HELEN ALFONSO, PLAINTIFF-APPELLANT, VS. MARIA DONG-E, MARY JOAN D. PADUAON, LEONILA T. DONG-E, DIANA T. DONG-E, SPS. SANTOS B. BITOG AND MONICA H. BITOG, DEFENDANTS-APPELLEES.

Alfonso versus Dong-E

The Case

This is a lecture on Alfonso versus Dong-E, a decision of the Supreme Court through Justice Tijam. Helen Alfonso sued Maria Dong-E and the other Dong-E heirs, together with Spouses Santos and Monica Bitog, asking that the defendants be compelled to sell to her a one hundred twenty square meter lot and the building on it, that the sale of the larger parcel to the Bitog spouses be nullified, that their Torrens title be cancelled, and that she be paid damages for the destruction of her building. The case matters because it teaches three examinable lessons at once: the real nature of an action is determined by the body of the complaint and not by its caption, an action for reconveyance based on an implied trust prescribes in ten years from the issuance of the Torrens title, and good faith is always presumed, so that bad faith must be proved by the party who alleges it.

Procedural History

Helen Alfonso filed her complaint for specific performance and damages before the Regional Trial Court of Baguio City, Branch 7, in August 2003. The defendants moved to dismiss on the ground of prescription, but the trial court refused, ruling that the action was really one for ownership and possession and that the cause of action accrued only when the plaintiff discovered the demolition of her building in February 2003. The defendants brought that refusal to the Supreme Court on certiorari, and the Supreme Court dismissed the petition in May 2004. The plaintiff then filed an amended complaint impleading Spouses Bitog. After the plaintiff rested her case, Spouses Bitog filed a demurrer to evidence. The trial court granted the demurrer in an order dated August 20, 2009, and denied reconsideration in an order dated March 29, 2010. The plaintiff appealed directly to the Supreme Court, and the appeal was denied.

Facts

The story begins with a six hundred one square meter lot registered in the name of Jose Dong-E, married to Maria Dong-E. When Jose died in June 1986, two hundred fifty square meters of that lot were adjudicated to the Dong-E daughters, Mary Joan Dong-E Paduaon and Nora Dong-E, and were registered in their names. In June 2003, the Dong-E sisters sold that two hundred fifty square meter land to Spouses Bitog, and a new title was issued in the names of the spouses.

Long before that, in 1982, Maria Dong-E had offered a seven hundred fifty square meter untitled lot to Yolanda Alfonso and her mother Beatriz Pine for one hundred twelve thousand five hundred pesos. A downpayment was paid, the balance was completed by the end of 1984, and Maria executed a Waiver of Rights ceding her rights over that lot to Yolanda. Because squatters occupied that land and Maria failed to eject them, Maria allegedly offered the subject property in substitution. Helen Alfonso then assumed Yolanda's obligation, paid her, and occupied the building on the subject property, using it for her wood carvings and renting it out until 1999.

In 2003, Helen discovered that the building had been destroyed, allegedly by Spouses Bitog. She sued. The defendants answered that the Waiver of Rights was fictitious, that the true agreement was for an additional fifty thousand pesos, that the action had prescribed, and that the Bitog spouses were buyers in good faith. For their part, Spouses Bitog claimed they examined the title and found no encumbrance, and that at the time of the earlier transaction they were still residing elsewhere.

Issues

• Whether or not the plaintiff has shown that she is entitled to her claim, so as to merit the reversal of the trial court's grant of the demurrer to evidence.
• Whether or not the sale of the subject land to the plaintiff was valid.
• Whether or not the plaintiff can recover the property from Spouses Bitog, that is, whether or not the spouses were purchasers in bad faith.
• Whether or not the plaintiff's cause of action had prescribed.

Applicable Provisions

Article 173 of the Civil Code, which governs a sale made before the effectivity of the Family Code, provides:

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 is the provision that saves the first sale, because a sale made without the wife's consent is voidable and not void, and here nobody ever questioned it.

Article 124 of the Family Code, which the trial court wrongly applied, provides:

The administration and enjoyment of the conjugal partnership shall belong to both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for a proper remedy, which must be availed of within five years from the date of the contract implementing such decision. 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. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.

This provision took effect only on August 3, 1988, and so cannot reach a sale made in 1984.

Article 527 of the Civil Code provides:

Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof.

This is the provision on which the whole case turns, because the plaintiff alleged bad faith and therefore carried the burden of proving it.

Ruling

On the first issue, the Court held that the complaint, though captioned as one for specific performance, is actually an action for reconveyance, since it seeks to transfer to the plaintiff property wrongfully registered in another's name. The body of the pleading, not its title, determines the nature of an action.

On the second issue, the Court held that the sale by Maria Dong-E to the plaintiff was valid. The trial court erred in applying Article 124 of the Family Code, which took effect only on August 3, 1988. The governing law is Article 173 of the Civil Code, under which a sale by the husband without the wife's consent is merely voidable at the wife's instance within ten years, and since neither Jose during his lifetime nor his heirs ever disputed the sale, it stands as valid. The first sale being valid, Article 1422 of the Civil Code, which voids a contract that is the direct result of a previous illegal contract, does not apply.

On the third issue, the Court nevertheless sustained the dismissal, because the plaintiff failed to prove bad faith on the part of Spouses Bitog. Mere allegation is not evidence. The spouses categorically denied knowledge of the earlier sale, and the plaintiff's own evidence showed that no one was occupying the property when the spouses bought it in June 2003, since the tenant had left in 1999. Even an ocular inspection would not have notified them of the plaintiff's claim. The Court added that even on the supposition that the sale was void, a fraudulent document of sale may become the root of a valid title once the certificate of title has been transferred to the name of the forger or the person indicated by the forger, by the functioning of the Torrens system.

On the fourth issue, the Court held that the action had not prescribed. An action for reconveyance based on an implied trust prescribes in ten years from the issuance of the Torrens title. The Bitog title was registered on July 4, 2003, and the case was commenced on August 5, 2003, well within the period.

Doctrine

• The nature of an action is determined by the body of the complaint, not by its caption or heading.
• An action for reconveyance based on an implied trust prescribes in ten years from the issuance of the Torrens title over the property.
• A sale of conjugal property made before the effectivity of the Family Code is governed by Article 173 of the Civil Code, and is voidable, not void, at the instance of the wife within ten years; if never questioned, it is valid.
• Good faith is always presumed under Article 527 of the Civil Code, and the burden of proving bad faith rests on the party who alleges it; mere allegation is not evidence.
• Under the Torrens system, a fraudulent or forged document of sale may become the root of a valid title once the certificate of title has been transferred to the name of the forger or the person indicated by the forger.

Disposition

The appeal was denied, and the orders of the Regional Trial Court of Baguio City, Branch 7, dismissing the complaint and denying reconsideration, were affirmed. Spouses Bitog prevailed.

Remember This

The one line to memorize is that good faith is always presumed and bad faith must be proved by him who alleges it, so a plaintiff enforcing an unregistered right against a Torrens title must prove the buyer's bad faith and cannot rely on the weakness of the defense. Examiners like to use this case on the ten year prescriptive period for reconveyance based on implied trust, on the rule that the body of the complaint controls over its caption, and on the voidable character of a pre Family Code sale made without the wife's consent.