TJ Lending Investors, Inc. vs. Spouses Ylade

G.R. No. 265651
TJ Lending Investors filed for a petition to surrender property title against the spouses Ylade, asserting its rights after a judgment debt. The court ruled the execution sale null, affirming the property as Arthur's exclusive property.
conjugal property execution sale certificate of title

Case Summary (G.R. No. 265651)

Factual Background: The Loan, the Collection Case, and the Execution

TJ Lending financed a loan in the principal amount of PHP 940,190.94 to Spouses Nenita Generosa-Cubing and Egmedio Cubing, evidenced by a promissory note executed by the spouses as principal debtors. To secure repayment, Lita—the sister of Nenita—signed a co-maker statement making her solidarily liable with the principal debtors. When the Spouses Cubing defaulted, TJ Lending instituted a Collection Case entitled “TJ Lending Investors, Inc., represented by its Collection Manager Eduardo M. Punzalan v. Sps. Nenita Generosa-Cubing and Egmedio Cubing, Sps. Roberto Bueno and Elimar Generosa-Bueno, and Sps. Lita Generosa-Ylade and Arthur Ylade.” The case was docketed as Civil Case No. 11-125134, and raffled to RTC Branch 173.

In a Decision dated June 22, 2012 in the Collection Case, the RTC Branch 173 held the borrowers and the co-maker liable under Articles 1157 and 1159 of the Civil Code. Specifically, it ordered Spouses Nenita Generosa-Cubing and Egmedio Cubing to pay TJ Lending and held Lita solidarily liable as co-maker. The RTC dismissed the action as to Arthur and the other named defendants because they were not signatories to the promissory note or co-maker statement. The RTC’s judgment therefore fixed the money obligation on the signatories it found liable, and the Decision became final and executory.

To satisfy the judgment, the Sheriff attached and levied upon the real property covered by TCT No. 170488. In the TCT, the property was stated to be registered in the name of Arthur C. Ylade, married to Lita Ylade. During the execution sale, TJ Lending emerged as the highest bidder and received a Certificate of Sale. The property was not redeemed within the one-year redemption period, prompting the RTC to issue a Final Deed of Sale to TJ Lending.

Arthur’s Challenge and the Petition for Surrender of Title

Arthur filed a Motion to Nullify Levy and Execution Sale and to Cancel the Certificate of Sale and the Final Deed of Sale in the RTC Branch 173. He argued that the judgment debt could not be satisfied with the property that he exclusively owned, because the Collection Case had been dismissed as to him and he was not among the judgment debtors found liable. The RTC Branch 173 denied the motion. It reasoned that Arthur had been declared in default in the Collection Case, which allegedly deprived him of standing to question the execution sale. It also held that Arthur waived objections by failing to redeem the property within the one-year period.

After the demand for surrender of the owner’s duplicate of TCT No. 170488 was not honored, TJ Lending filed a Petition for Surrender of Title in RTC Branch 4, Manila (Case No. P-16-0214). TJ Lending anchored its petition on the theory that the RTC Branch 173 had already issued a Final Deed of Sale in its favor, and that the Spouses Ylade must therefore surrender the owner’s duplicate of the title.

In their opposition, Arthur contended that the subject property was his exclusive property, which he acquired from the National Housing Authority (NHA) before his marriage to Lita on December 28, 1985. Although TCT No. 170488 was issued later on August 7, 1986, Arthur maintained that his exclusive acquisition predated the marriage. He further argued that if the property were considered conjugal, the money debt separately incurred by Lita could not automatically charge the conjugal properties unless it was shown that the debt redounded to the benefit of the family. Arthur insisted that the judgment debt had not been shown to benefit the family because Lita acted merely as co-maker for the principal debtors.

RTC Branch 4 Decision: Presumption of Conjugal Ownership

After due proceedings, the RTC Branch 4 granted the petition for surrender of title in a Decision dated August 20, 2018. The court found, based on Arthur’s testimony and the date of issuance of the title, that the subject property was acquired during the marriage. It therefore applied the presumption under Article 160 of the Civil Code that property of the marriage belongs to the conjugal partnership, unless proven to pertain exclusively to either spouse. The RTC concluded Arthur failed to rebut the presumption, and it therefore held the property could be attached and sold on execution to satisfy the judgment debt against Lita in the Collection Case.

Court of Appeals Reversal

Arthur appealed to the Court of Appeals, which docketed the appeal as CA-G.R. CV No. 112633. In its Decision dated July 5, 2022, the CA reversed and set aside the RTC Branch 4 decision and dismissed the Petition for Surrender of Title for lack of merit. It found the evidence insufficient to prove that the subject property was acquired during the marriage. The CA acknowledged that TCT No. 170488 stated that Arthur was “married to Lita Ylade,” but it held that this phrase was merely descriptive of civil status and not conclusive proof of conjugal ownership.

The CA further ruled that even if the property were assumed conjugal, execution required proof that the judgment debt in the Collection Case redounded to the benefit of the Spouses Ylade and their family. As the record lacked proof of benefit to the family, the CA concluded the execution sale of the subject property to satisfy a money judgment against Lita was improper. The CA’s subsequent Resolution dated February 14, 2023 denied TJ Lending’s motion for reconsideration.

The Parties’ Contentions Before the Court

TJ Lending argued that the CA erred in requiring proof sufficient to overcome the presumption of conjugal property under Article 160. It maintained that the Spouses Ylade should be compelled to surrender the owner’s duplicate of TCT No. 170488 because the RTC Branch 173 had already issued the Final Deed of Sale in TJ Lending’s favor. The Court, however, proceeded without a comment from Arthur, because Arthur did not file one despite the Court’s directive.

The central issue before the Court was whether the CA committed reversible error when it ruled that the subject property was Arthur’s exclusive property and could not be sold on execution to satisfy the judgment against Lita in the Collection Case.

Legal Basis and Reasoning: Failure to Prove Conjugal Acquisition and the Illegality of the Levy

The Court denied the Petition for lack of merit. It affirmed the CA’s conclusion that the subject property could not be treated as conjugal based on the evidence presented. The Court emphasized that the marriage between Arthur and Lita was celebrated on December 28, 1985, before the Family Code took effect in 1988; thus, their property regime fell under the conjugal partnership of gains provisions of the Civil Code.

Under Article 160 of the Civil Code, property is presumed conjugal unless proved to be exclusively owned by either spouse. The Court held that the presumption operates only if the party invoking it proves an essential condition: acquisition during the marriage. It reiterated the principle that proof of acquisition during coverture is a condition sine qua non for the presumption to apply. The Court found that TJ Lending failed to present preponderant evidence showing when the subject property was acquired.

TJ Lending relied on TCT No. 170488, pointing out that the TCT described the registered owner as “married to Lita Ylade” and that the title was issued on August 7, 1986, during the subsistence of the marriage. The Court disagreed and adopted the reasoning in Jorge v. Marcelo. It held that a TCT notation that the owner is “married to” another person is merely descriptive of the owner’s civil status. It does not establish that the property is conjugal or that it was acquired during marriage. The Court also rejected the attempt to equate issuance of the title with acquisition of the property, explaining that under the Torrens system, registration does not confer or vest title; it confirms title already existing. Therefore, the date of issuance of TCT No. 170488 did not prove that Arthur acquired the property during the marriage. With no preponderant showing of acquisition during coverture, the Court treated the property registered in Arthur’s name as his exclusive property.

On that premise, the Court addressed TJ Lending’s reliance on the Final Deed of Sale and the surrender of title. It held that money judgments are enforceable only against property unquestionably belonging to the judgment debtor. The Court reiterated that the sheriff’s power in execution extends only to properties unquestionably belonging to the judgment debtor, and that levy upon property of a third person is illegal. An execution sale not preceded by a valid levy is void. Accordingly, because Arthur was not among the judgment debtors adjudged liable in the Collection Case, the levy upon his exclusive property to satisfy Lita’s judgment liability was illegal and rendered the execution sale void.

The Court further explained that TJ Lending acquired no valid title by virtue of the execution sale. It invoked nemo dat quod non habet, underscoring that a buyer can acquire no more than what the seller can legally transfer. It also applied the principle of caveat emptor in execution sales, stating that the sheriff does not warrant the title and the purchaser obtains only the judgment debtor’s rights at the time of levy. Since neither Lita nor any judgment debtor held title to Arthur’s exclusive property at the time of levy, the purchaser could not obtain rights over that property.

Arthur’s Remedies and

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