DIVERSIFIED CREDIT CORPORATION, PLAINTIFF-APPELLEE, VS. FELIPE ROSADO AND LUZ JAYME ROSADO, DEFENDANTS-APPELLANTS.

Diversified Credit Corporation versus Rosado

The Case

This is a case about a husband who built a house on land that his wife owned only in common with twelve other persons, and who then claimed that the building of that house converted his wife's undivided share into conjugal property, so that the wife's later sale of the land to a corporation was void. The plaintiff, Diversified Credit Corporation, sued the spouses Felipe Rosado and Luz Jayme Rosado to recover possession of a parcel of land in Bacolod City which it had bought and which had been registered in its name. The defendants resisted on the theory that the land had become conjugal property under the Civil Code. The case matters because it fixes the rule that a co-owner holds only an ideal or abstract share until partition, and that no house can be built on an abstract share so as to trigger the conjugal partnership rule on buildings constructed on the separate property of a spouse.

Procedural History

The action began in the Municipal Court of Bacolod City, which ordered the spouses Rosado to surrender and vacate the land, to pay one hundred pesos a month from the filing of the complaint until actual vacating, and to pay five hundred pesos in attorney's fees plus costs. The defendants appealed to the Court of First Instance of Bacolod City, where the case was submitted on a stipulation of facts. The Court of First Instance rejected the husband's claim of conjugal ownership, held that the defendants were in estoppel because of a letter asking for six months within which to vacate, and affirmed the inferior court. Felipe Rosado then appealed to the Court of Appeals, which certified the appeal to the Supreme Court because it involved no questions of fact.

Facts

Lot 62-B of the Bacolod Cadastre belonged to thirteen co-owners, and among them was Luz Jayme, the wife of Felipe Rosado, who owned a one-thirteenth part pro indiviso. Sometime in 1957, Felipe Rosado built a house on the lot, at a time when the whole property had not yet been partitioned among the thirteen co-owners. He later claimed that this was a conjugal house worth eight thousand pesos.

On May 11, 1964, Luz Jayme Rosado, together with the other co-owners, signed a deed of sale of the property in favor of Diversified Credit Corporation. Felipe Rosado did not give his conformity to that deed. The title was transferred to the corporation upon registration of the sale in June 1964.

On October 19, 1964, the corporation demanded that the spouses vacate the premises and remove the house, but Felipe Rosado refused. On October 31, 1964, he wrote the corporation asking for six months within which to vacate. The corporation did not answer and did not accept the offer, and on November 25, 1964, it filed its complaint. The stipulation of facts also stated that the portion of the lot on which the house stands would earn a monthly rental of fifty pesos.

Issues

• Whether or not the construction of a conjugal house on the lot converted the wife's one-thirteenth undivided share into conjugal property under Article 158 of the Civil Code, so that the deed of sale was void as to that share.
• Whether or not the husband, as manager of the conjugal partnership and legal usufructuary of the wife's share, could be deprived of his usufructuary rights by a contract between the wife and the corporation.
• Whether or not the husband should be reimbursed the value of the conjugal house constructed on the lot.
• Whether or not the husband was properly ordered to pay attorney's fees of five hundred pesos.

Applicable Provisions

The second paragraph of Article 158 of the Civil Code provides:

Buildings constructed, at the expense of the partnership, during the marriage on land belonging to one of the spouses, also pertain to the partnership, but the value of the land shall be reimbursed to the spouse who owns the same.

This is the provision the husband invoked, and its application turns on whether the land on which the house was built belonged to the wife alone, which the Court held it did not.

Ruling

On the first issue, the Court held that the husband's thesis was legally untenable. It laid down the basic principle of co-ownership that no individual co-owner can claim title to any definite portion of the land owned in common until partition. Before partition, all that the co-owner has is an ideal, or abstract, quota or proportionate share in the entire thing owned in common. The Court cited its own rulings that a co-owner may freely sell his undivided interest but may not sell a divided part of the real estate owned in common, may not convey a physical portion of the land, and may not even adjudicate to himself any determinate portion of the land owned in common.

Since the share of the wife was at no time physically determined, it could not validly be claimed that the house constructed by her husband was built on land belonging to her, and Article 158 could not apply. On her one-thirteenth ideal or abstract undivided share, no house could be erected. The claim of conversion of the wife's share from paraphernal to conjugal character was therefore rejected for lack of factual or legal basis. This disposed of the usufructuary argument as well, since it rested on the same failed premise that the wife owned the land on which the house stood.

On the second issue, the Court held that the lower court did not err in ordering the husband to vacate the land without reimbursement, since he knew that the land occupied by the house did not belong exclusively to his wife but to the other owners as well, and there was no proof on record that the house occupied only one-thirteenth of the total area. The construction was not done in good faith. On the third issue, reimbursement of the value of the house was denied for the same reason. On the fourth issue, the Court affirmed the award of attorney's fees by affirming the judgment of the Court of First Instance in its entirety.

Doctrine

A co-owner in a property held in common has only an ideal or abstract proportionate share in the entire thing until partition. He may sell his undivided interest, but he may not sell, convey, or adjudicate to himself any definite or physical portion of the land owned in common. Because no house can be erected on an abstract share, the rule in the second paragraph of Article 158 of the Civil Code, that buildings constructed at the expense of the conjugal partnership on land belonging to one of the spouses pertain to the partnership, cannot apply where the spouse owns only an undivided share in co-ownership. A husband who builds a conjugal house on land owned in common by his wife and others, knowing that the land does not belong exclusively to her, acts without good faith and is not entitled to reimbursement for the value of the house when he is ordered to vacate.

Disposition

The Supreme Court affirmed the judgment of the Court of First Instance, with costs against the appellant Felipe Rosado.

Remember This

Memorize the line that before partition a co-owner has only an ideal or abstract share, so no house can be built on it and Article 158 of the Civil Code cannot be made to convert it into conjugal property. Examiners use this case to test co-ownership and the conjugal partnership rule on buildings, often paired with the rule that a co-owner may not convey a physical portion of the land owned in common.