MELANIA A. ROXAS, PETITIONER, VS. THE HON. COURT OF APPEALS AND ANTONIO M. CAYETANO, RESPONDENTS.

Roxas versus Court of Appeals

The Case

This is a petition brought by Melania Roxas against her estranged husband, Antonio Roxas, and the lessee, Antonio Cayetano, arising from a contract of lease over conjugal real property entered into by the husband without the wife's knowledge and consent. The wife's complaint was dismissed by the trial court for failure to state a cause of action, and the Court of Appeals affirmed. The case matters because the Supreme Court uses it to answer a question that recurs in the bar examinations: is a lease of conjugal realty an encumbrance or alienation that requires the wife's consent? The Court holds that it is, and that the wife has a cause of action to annul the lease.

Procedural History

Melania Roxas filed a complaint in the Regional Trial Court against her husband and Antonio Cayetano, seeking redress for a lease executed over a portion of the conjugal lot without her marital consent. Cayetano moved to dismiss on the sole ground that the complaint states no cause of action. The trial court granted the motion and dismissed the complaint for failure to state a sufficient cause of action. The wife's motion for reconsideration was denied. She appealed directly to the Supreme Court, which referred the case to the Court of Appeals for proper determination and disposition. The Court of Appeals affirmed the trial court's order in its entirety. The wife then filed this petition, and the Supreme Court set aside the decision of the Court of Appeals and remanded the case to the Regional Trial Court for further proceedings.

Facts

Melania Roxas and Antonio Roxas were married but living separately. A conjugal lot stood at Quirino Highway in Novaliches, Quezon City, covered by a transfer certificate of title. The wife had planned to put up a flea market on the lot, with at least twenty stalls and a mini mart for grocery and dry goods, and had obtained the corresponding mayor's permit and municipal license, which had been approved since 1986.

Sometime on March 30, 1987, the husband entered into a contract of lease with Antonio Cayetano covering a portion of the conjugal lot, without the wife's previous knowledge and without her marital consent. When the wife attempted to renew her permit, it was disapproved because of a complaint lodged by Cayetano, whose own application for renewal for the same flea market business had allegedly been approved earlier. The wife alleged that she had spent 135,000 pesos on the planning and initial construction of her project, and that she expected a daily net income of at least 500 pesos.

She then filed her complaint, alleging that the illegal lease contract and the resulting deprivation of her business gave her a cause of action. Cayetano moved to dismiss for failure to state a cause of action, and the trial court dismissed the complaint. The Court of Appeals affirmed, and the case reached the Supreme Court.

Issues

• Whether or not a husband, as administrator of the conjugal partnership, may legally enter into a contract of lease involving conjugal real property without the knowledge and consent of the wife.
• Whether or not a lease is an encumbrance and or alienation within the scope of Article 166 of the New Civil Code.
• Whether or not the wife has a cause of action to annul the contract of lease entered into without her consent, against both her husband and the lessee.

Applicable Provisions

Article 165 of the New Civil Code provides:

The husband is the administrator of the conjugal partnership.

This establishes the husband's power of administration, which the Court says carries authority but not the acts of ownership.

Article 166 of the New Civil Code provides:

Unless the wife has been declared a non-compos mentis or a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership without the wife's consent. If she refuses unreasonably to give her consent, the court may compel her to grant the same.

This is the prohibition the Court applies, and the question is whether a lease falls within the terms alienate or encumber.

Article 1643 of the New Civil Code provides:

In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. However, no lease for more than ninety-nine years shall be valid.

This defines lease as a grant of use and possession, which supports the Court's conclusion that a lease burdens the land.

Article 173 of the Civil 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.

This is the remedy the Court recognizes in favor of the wife, and the basis of her cause of action.

Ruling

On the first issue, the Court holds that the husband, as administrator, may not enter into a lease of conjugal real property without the wife's consent where the law requires it. The husband is not an ordinary administrator. A mere administrator has no right to dispose of, sell, or otherwise alienate the property being administered, while the husband can do so in certain cases allowed by law, and he is not required to render an accounting. Acts done under administration do not need the prior consent of the wife. But administration does not include acts of ownership. While the husband can administer the conjugal assets unhampered, he cannot alienate or encumber the conjugal realty. The rule prevents abuse on the part of the husband and guarantees the rights of the wife, who is partly responsible for the acquisition of the property. Contracts entered into by the husband in violation of this prohibition are voidable and subject to annulment at the instance of the aggrieved wife.

On the second issue, the Court holds that a lease is an encumbrance and a qualified alienation. Under Article 1643, lease is a grant of use and possession, not merely of possession as the Court of Appeals opined. The right to possess does not always include the right to use. In a contract of lease, the lessor transfers his right of use in favor of the lessee, and the lessor's right of use is impaired; he may even be ejected by the lessee if he uses the leased realty. Therefore, lease is a burden on the land and an encumbrance on the land. The Court quotes with approval that an encumbrance is sometimes construed broadly to include not only liens such as mortgages and taxes, but also attachment, leases, inchoate dower rights, water rights, easements, and other restrictions on use. Lease is also a qualified alienation, with the lessee becoming, for all legal intents and purposes and subject to its terms, the owner of the thing affected by the lease. Thus, the joinder of the wife, although unnecessary for an oral lease of conjugal realty which does not exceed one year in duration, is required in a lease of conjugal realty for a period of more than one year, such a lease being considered a conveyance and encumbrance within the provisions requiring the joinder of the wife in the instrument by which real property is conveyed or encumbered.

On the third issue, the Court holds that the wife has a cause of action. The allegation that her estranged husband entered into a contract of lease with Cayetano without her marital consent being secured as required by law under Article 166 shows that she has a cause of action under Article 173 to file a case for annulment of the contract of lease. She has a cause of action not only against her husband but also against the lessee, Cayetano, who is a party to the contract of lease.

Doctrine

A lease of conjugal real property for a period of more than one year is an encumbrance and a qualified alienation under Article 166 of the New Civil Code, and the husband as administrator cannot enter into it without the wife's consent. The wife may, during the marriage and within ten years from the transaction questioned, ask the courts for the annulment of the contract entered into without her consent, and she may sue both her husband and the lessee. The husband's power of administration does not include acts of ownership; he may administer the conjugal assets unhampered, but he cannot alienate or encumber the conjugal realty without the wife's consent.

Disposition

The Supreme Court set aside the decision of the Court of Appeals and remanded the case to the Regional Trial Court for further proceedings, with the wife prevailing on the sufficiency of her cause of action.

Remember This

The line worth memorizing is that a lease is not a mere grant of possession but a grant of use, and so it is an encumbrance and a qualified alienation that requires the wife's consent. Examiners use this case to test whether a lease of conjugal realty falls under Article 166, and to test the wife's remedy of annulment under Article 173 against both the husband and the lessee.