A.C. No. 5819 - Heirs of Tan, Sr. vs. Beltran

Case Summary (A.C. No. 5819)

Petitioners’ Claim and Standing

Petitioners assert ownership through a court-approved Compromise Agreement (Partial Decision of the RTC of Makati in Civil Case No. 93-2289) that provided for transfer of title by deed of donation in favor of Cleodia and Ceamantha (as co-owners) upon reaching specified ages, with Cleodualdo retaining usufruct until age 65. Petitioners, as intended donees under the Partial Decision, sought to enjoin and stop execution affecting TCT No. 167907 when a levy and notice of sale were issued in the ejectment case against Michele and Matrai.

Respondents’ Claim and Underlying Judgment

Respondents obtained a judgment in an unlawful detainer action (MeTC, Muntinlupa, Branch 80) dated May 10, 2001 ordering Matrai and Michele to vacate leased premises and to pay rents, unpaid telephone bills and attorney’s fees. Pending appeal, the RTC issued an order permitting execution of the MeTC decision; the sheriff then issued a notice of sale covering TCT No. 167907, prompting petitioners’ third-party claim and motions to stop sale, which were denied by the RTC and subsequently affirmed by the Court of Appeals (CA).

Key Dates and Procedural History

Partial Decision approving Compromise Agreement: November 29, 2000 (RTC Makati, Civil Case No. 93-2289).
MeTC Decision in unlawful detainer against Matrai and Michele: May 10, 2001.
Annotation on TCT No. 167907 reflecting nullification of marriage and transfer by deed of donation: inscription recorded October 22, 2001 (instrument dated October 18, 2001).
Notice of levy on execution: issued November 28, 2001.
RTC Orders denying stop-sale motion and reconsideration: June 4, 2003 and July 31, 2003.
CA Decision dismissing petition: April 30, 2007.
Supreme Court temporary restraining order enjoining enforcement of subsequent RTC orders: issued July 11, 2007; Supreme Court final disposition granted petition and set aside lower courts’ decisions (as detailed below). The decision was rendered under the 1987 Philippine Constitution (decision date after 1990).

Applicable Law and Governing Principles

Applicable constitution: 1987 Philippine Constitution (decision date post-1990).
Property relations: Civil Code regime of conjugal partnership of gains governs the property relations of Cleodualdo and Michele because their marriage occurred before the Family Code’s effectivity (August 3, 1988).
Execution law principle: A court in executing judgments may levy only on properties unquestionably belonging to the judgment debtor; “one man’s goods shall not be sold for another man’s debts.” Sheriffs and courts lack authority to attach or levy property of third persons and may incur liability for wrongful levy.
Conjugal liability doctrine: Under the Civil Code, conjugal partnership or conjugal assets are liable for debts that redound to the benefit of the family or in circumstances where the spouse has authority to bind the conjugal partnership (e.g., purchases necessary for the support of the family, borrowings for that purpose when the husband fails to provide, administration transferred to wife, or moderate charitable donations).

Issues Presented

Whether the subject property (TCT No. 167907) could be levied and sold to satisfy a money judgment against Michele and Matrai when the title was in the name of Cleodualdo (married to Michele) and an annotation reflecting the Partial Decision’s disposition of the property had been recorded.
Whether Michele’s judgment obligation constituted a conjugal debt that redounded to the benefit of the family or otherwise bound the conjugal partnership such that the property was liable.
Whether the RTC and sheriff erred in proceeding with levy and execution despite the annotated Partial Decision and ownership provisions in the Compromise Agreement.

Court’s Analysis — Ownership on Title and the Identity of the Judgment Debtor

The Court emphasized that TCT No. 167907 on its face names “Cleodualdo M. Francisco, married to Michele U. Francisco” as registered owner, which indicates the property’s registration is in the name of Cleodualdo with his marital status noted. Because the marriage predated the Family Code, the conjugal partnership regime under the Civil Code applies; ownership thus implicated conjugal interests. The Court held that the execution power extends only to properties unquestionably belonging to the judgment debtor(s); in this case the MeTC judgment was against Michele and Matrai, not against Cleodualdo. Hence the general rule against selling one person’s goods for another’s debts applies.

Court’s Analysis — Execution Against a Non-Judgment Debtor and Duty to Heed Title Annotation

The Court found grave error in the RTC’s and sheriff’s proceeding with execution and levy. Annotations on the title (Entry No. 23341-42/T-167907) reflecting the nullification of marriage and the transfer by deed of donation to the children (with retained usufruct to Cleodualdo) had been entered before the notice of levy. That annotation should have alerted the RTC and the sheriff that the property’s status was encumbered by a court-ordered disposition in favor of the petitioners; they were therefore duty-bound to refrain from levying property not incontrovertibly belonging to the judgment debtors. The Court reiterated precedents holding a sheriff has no authority to attach or levy property of any person except the judgment debtor and that wrongful levies can expose the sheriff to liability.

Court’s Analysis — Whether Michele’s Obligation Redounded to the Family or Bound the Conjugal Partnership

The Court applied the Civil Code criteria for binding conjugal assets to the spouse’s obligations and noted those specific circumstances were not established. Michele’s liability arose from an unlawful detainer action in connection with a lease of a different property (264 Lanka Drive), entered into with Matrai while Michele was living separately from Cleodualdo. The record showed Michele and Matrai purported to be husband and wife

Case Syllabus (A.C. No. 5819)

Procedural History

Petition for review on certiorari under Rule 45 assails the Court of Appeals (CA) Decision dated April 30, 2007, which affirmed the Regional Trial Court (RTC) Orders dated June 4, 2003 and July 31, 2003 denying petitioners' motion to stop execution sale.
Partial Decision of the RTC of Makati, Branch 144, dated November 29, 2000, approved the Compromise Agreement in Civil Case No. 93-2289 (declaration of nullity of marriage) containing provisions regarding transfer of title of a house and lot to the minor children.
Metropolitan Trial Court (MeTC) of Muntinlupa City, Branch 80, rendered a Decision dated May 10, 2001 in an unlawful detainer case filed by respondents against George Zoltan Matrai and Michele, ordering vacatur of leased premises and payment of rentals, unpaid telephone bills and attorney's fees.
Pending appeal, the RTC of Muntinlupa, Branch 256, issued an order granting respondents' prayer for execution of the MeTC Decision, followed by a notice of sale by execution covering the property under TCT No. T-167907 in the name of Cleodualdo M. Francisco.
Petitioners' grandmother, acting as guardian-in-fact and attorney-in-fact, filed an Affidavit of Third Party Claim and a Very Urgent Motion to Stop Sale by Execution; RTC denied the motion in the Order dated June 4, 2003; motion for reconsideration was denied per RTC Order dated July 31, 2003.
Petitioners filed a petition for certiorari with the CA; while pending, the RTC issued an Order dated July 8, 2005 granting respondents' petition for issuance of a new certificate of title, and an Order dated February 13, 2006 granting respondents' motion for issuance of a writ of possession.
CA dismissed the petition on April 30, 2007, affirming the RTC Orders dated June 4, 2003 and July 31, 2003; costs were imposed against petitioners.
The Supreme Court issued a temporary restraining order on July 11, 2007 enjoining enforcement of the RTC orders (cancellation of TCT No. 167907 and issuance of writ of possession) until further orders.
The Supreme Court ultimately granted the petition, nullified and set aside the CA Decision dated April 30, 2007 and the RTC Orders of June 4, 2003 and July 31, 2003, made the TRO of July 11, 2007 permanent, and imposed costs against respondents. Decision rendered September 17, 2008.

Parties and Relevant Relationships

Petitioners: Cleodia U. Francisco and Ceamantha U. Francisco, minors and children of Cleodualdo M. Francisco (Cleodualdo) and Michele Uriarte Francisco (Michele); represented by their grandmother Dra. Maida G. Uriarte as attorney-in-fact and guardian-in-fact.
Respondents: Spouses Jorge C. Gonzales and Purificacion W. Gonzales, plaintiffs in the unlawful detainer action against Matrai and Michele.
Third parties/other actors: George Zoltan Matrai (co-defendant in unlawful detainer); sheriff and Register of Deeds (actors in execution and title cancellation).
Marital history: Cleodualdo and Michele were married on June 12, 1986 (prior to the Family Code's effectivity on August 3, 1988), therefore their property relations are governed by the Civil Code regime of conjugal partnership of gains.

Property and Transactional Facts

Subject property: house and lot located in Ayala Alabang Village, Muntinlupa City; described as Transfer Certificate of Title No. 167907 in the name of "Cleodualdo M. Francisco, married to Michele U. Francisco," with an area of 414 square meters and located at 410 Taal St., Ayala Alabang Village.
Compromise Agreement (approved in the Partial Decision dated November 29, 2000) provided that title and ownership of the conjugal property would be transferred by deed of donation to Cleodia and Ceamantha as co-owners when they reach ages nineteen (19) and eighteen (18), respectively, subject to specified conditions, including that Cleodualdo shall retain usufructuary rights until age 65.
In the unlawful detainer case, Matrai and Michele leased premises at 264 Lanka Drive, Ayala Alabang Village; MeTC ordered them to vacate and to pay rentals, telephone bills and attorney's fees.
Annotation on TCT No. 167907 prior to levy: Entry No. 23341-42/T-167907 — "Nullification of Marriage By order of the Court RTC, NCR, Branch 144, Makati City dated July 4, 2001, which become final and executory on October 18, 2001 declaring the Marriage Contract between Michelle Uriarte and Cleodualdo M. Francisco, Jr. is null & void ab initio and title of ownership of the conjugal property consisting of the above-described property shall be transferred by way of a Deed of Donation to Cleodia Michaela U. Francisco and Ceamantha Maica U. Francisco, as co-owners when they reach nineteen (19) and eighteen (18) yrs. old to the condition that Cleodualdo, shall retain usufructuary rights over the property until he reaches the age of 65 yrs. Old." Date of instrument - Oct 18, 2001; Date of inscription - Oct 22, 2001.
Respondents alleged that the lease at Lanka Drive redounded to the benefit of the family; petitioners and Michele purportedly live