SPOUSES ARNULFO AND NENITA BIAZON AND SPOUSES HERMOGENES AND MILDRED INTON REPRESENTED BY THEIR ATTORNEY-IN-FACT NORBERTO S. CASILANG, PLAINTIFFS-APPELLANTS, VS. PASCUAL ESPIRIT…

Biazon versus Espiritu Santo

The Case

This is the case of Biazon versus Espiritu Santo, a suit for specific performance with damages brought by buyers of a parcel of land against the co-owners who sold it. The buyers, the spouses Biazon and the spouses Inton, had paid only half of the purchase price and, under a supplementary agreement, chose to keep only one half of the land rather than pay the balance. When the vendors refused to cause the subdivision and convey that half, the buyers went to court. The case matters because it settles two questions every reviewee must know: whether an authorized co-owner binds all his co-owners when he signs a deed of sale, and whether a co-owner may alienate his undivided share without the consent of the rest.

Procedural History

The buyers filed a complaint for specific performance with damages before the Regional Trial Court in Morong, Rizal. The trial court dismissed the complaint and declared the Deed of Sale with Mortgage and the Supplementary Agreement, both dated August 20, 1985, unenforceable. It nonetheless ordered the defendants and the legal heirs of the deceased defendants to jointly and solidarily reimburse the buyers 237,948 pesos with interest, and it dismissed the defendants' counterclaim. The buyers appealed. For reasons not known, no appellee's brief was filed. The appeal reached the Supreme Court, which granted it.

Facts

Lot 4843-D, a parcel of 39,658 square meters, was inherited by the vendors from the late Luis Espiritu Santo, as set down in a Deed of Extrajudicial Settlement of Estate dated April 15, 1985. On August 14, 1985, the vendors executed a Special Power of Attorney authorizing Pascual Espiritu Santo to sell the lot. On August 20, 1985, the buyers and Pascual Espiritu Santo, acting for himself and his co-owners, executed the Deed of Sale with Mortgage and, on the same day, a Supplementary Agreement.

Because the payment was not in full, the Supplementary Agreement provided that should the buyers fail to pay the balance within the agreed period, they would be entitled to only one half of the property, the eastern portion of 19,829 square meters, whose purchase price of 237,948 pesos had been fully paid. In that event the vendors would not exercise their right of foreclosure and would cause the subdivision of the lot.

The buyers failed to pay the balance and opted to enforce the Supplementary Agreement, demanding that the vendors cause the subdivision. The vendors refused. The buyers then filed their complaint on October 29, 1998. The vendors answered that the Supplementary Agreement was executed without the consent of all the co-owners, that the buyers breached the agreement by not paying in full, and that several of the defendants were already deceased. The trial court declared several defendants in default and later rendered the assailed decision.

Issues

• Whether or not the trial court erred in declaring the non-answering defendants in default and then holding that no complete determination of the issues could be had for non-inclusion of indispensable parties.
• Whether or not the trial court erred in declaring the Deed of Sale with Mortgage and the Supplementary Agreement unenforceable.

Applicable Provisions

The decision rests on the settled doctrine of co-ownership, which the Court states in these words:

A co-owner has full ownership of his pro-indiviso share and has the right to alienate, assign or mortgage it, and substitute another person in its enjoyment.

This rule bears on the case because it means the segregation of the eastern half may be effected against the aliquot shares of the vendors even though not all the co-owners were impleaded.

Ruling

On the first issue, the Court held that the trial court erred. When the case was filed, Pascual Espiritu Santo, Valentina Fernando, Osmundo Alejo and Tiburcio Alejo were already deceased, a fact known to the buyers and to the trial court because it was alleged in the answer. The buyers should have amended their complaint to implead the legal heirs or representatives of the deceased. Instead, the trial court declared the deceased in default and rendered judgment against them. But this defect did not make the partition legally impossible, because jurisdiction was acquired over most, though not all, of the co-owners.

On the second issue, the Court held that the agreements were enforceable. The defense that not all the co-owners signed is a blatant falsity, because Pascual Espiritu signed for the co-owners under a Special Power of Attorney, and his signatures are as good as theirs. Equally useless is the claim that the buyers breached the sale, because the Supplementary Agreement clearly allowed them to buy only one half of the area with the one half of the consideration already paid, and to forego the rest by simply not paying the remaining half. The Court put it plainly:

The exercise of an allowed option cannot be deemed a breach of the agreement.

And because a co-owner may alienate his undivided share, a segregation affecting only the aliquot portions of the appellees may be effected.

Doctrine

First, a co-owner has full ownership of his pro-indiviso share and may alienate, assign or mortgage it, and substitute another in its enjoyment. Not all acts affecting a co-owned property must involve all the co-owners. Second, a sale signed by one co-owner duly authorized under a Special Power of Attorney binds all the co-owners, and his signature is as good as theirs. Third, where an agreement expressly allows the buyer to keep only one half upon failure to pay the balance, the exercise of that option is not a breach. Fourth, the failure to implead the heirs of deceased co-owners is a procedural defect that does not defeat a valid claim against the shares of the co-owners actually impleaded.

Disposition

The appeal was granted, the trial court's decision was reversed and set aside, and the appellees were directed to perform their obligations under the Deed of Sale with Mortgage and the Supplementary Agreement by conveying to the appellants their respective and proportionate shares in the 19,829 square meters eastern portion of Lot 4843-D.

Remember This

Memorize this line: a co-owner has full ownership of his pro-indiviso share and may alienate it, and a sale signed by an authorized co-owner binds them all. Examiners use this case to test co-ownership, agency by Special Power of Attorney, and the rule that exercising an allowed option is not a breach.