Tuazon vs. Fuentes

G.R. No. 241699
Co-owners dispute lease agreements on conjugal property; Supreme Court voids contracts due to lack of written consent, upholding Family Code protections.
contracts of lease declaration of nullity annulment

Case Summary (G.R. No. 241699)

Factual Background

Fuentes and Tuazon were registered co-owners of two parcels of land covered by Transfer Certificates of Title Nos. 146276 and 146277 in Pasay City, upon which the DM Building stood. The building had been occupied by companies owned or controlled by Tuazon and his family, namely World Wiser International, Inc. and Jerzon Manpower and Trading, Inc.. During pending nullity of marriage proceedings in Branch 260, the RTC on August 24, 2012 authorized Fuentes to sell the common properties to provide support pendente lite, and the property was sold under court order to Philippine Coast Guard Savings and Loan Association, Inc. (“PCGSLAI”). After the finality of the nullity judgment on October 31, 2012, the liquidation of the subject property proceeded. On August 8, 2014, Fuentes sent a notice to vacate to World Wiser. World Wiser and Jerzon remained in occupation, and World Wiser resisted eviction, prompting an unlawful detainer action in which World Wiser presented lease contracts executed by Tuazon in favor of World Wiser and Jerzon for the period July 1, 2012 to July 1, 2022.

Procedural History

Following Fuentes’ initiation of a complaint for declaration of nullity or annulment of the challenged lease contracts, the case was referred to mediation and later returned to the RTC because of non-appearance by the parties. Petitioners sought referral to a judicial dispute resolution, which the trial court denied on the ground that the validity of the leases could not be the subject of a compromise given ongoing liquidation proceedings in another case. The RTC conducted a trial on the merits and on December 14, 2015 declared both lease contracts null and void. The Court of Appeals affirmed the RTC in its April 6, 2018 Decision and denied a subsequent motion in its August 1, 2018 Resolution. The petitioners filed a petition for review on certiorari under Rule 45, Rules of Court to the Supreme Court, which denied the petition on August 4, 2021.

Trial Court Ruling

The RTC found the complaint meritorious and adjudged both lease contracts executed by Dennis Uy Tuazon in favor of World Wiser International, Inc. and Jerzon Manpower and Trading, Inc., each covering July 1, 2012 to July 1, 2022, as null and void. The court ordered that copies of its Decision be furnished to the Registry of Deeds of Pasay City. The RTC concluded that defendants failed to present sufficient evidence to warrant the relief they sought and noted the absence of written consent by Fuentes to the dispositions of common property.

Court of Appeals Ruling

The Court of Appeals affirmed the RTC. It found that Fuentes consistently maintained she did not enter into any lease and that she had been awarded exclusive administration and possession of the subject property in the nullity proceeding by the RTC order of September 8, 2014. The CA held that the leases constituted dispositions of conjugal or common property made without the written consent of the other spouse and therefore were void under the Family Code regime; it treated a lease of common property for more than one year as a conveyance or encumbrance requiring joinder. The CA also rejected petitioners’ claim of denial of due process from the RTC’s refusal to refer the case to judicial dispute resolution, citing the parties’ repeated nonappearance at mediation and the Mediator’s Report indicating lack of amenability to settlement.

Issues Presented

The principal issue presented to the Supreme Court was whether the Court of Appeals erred in declaring the contested contracts of lease null and void. Ancillary issues included whether the trial court’s failure to refer the case to judicial dispute resolution violated petitioners’ right to due process and whether the intervention by PCGSLAI should have been permitted.

Parties’ Contentions

Petitioners asserted that Fuentes knew of the execution of the leases prior to the unlawful detainer suit and that her inaction constituted implied consent. They contended the RTC should have conducted judicial dispute resolution and that the leases granted only possession, not title, thus not affecting liquidation proceedings. Petitioners also argued that World Wiser and Jerzon were not parties to the nullity proceedings and were thereby deprived of full opportunity to participate in alternative dispute resolution. Fuentes countered that mere knowledge of occupancy did not amount to written consent required by law, that she had been estranged from Tuazon since 2006 and therefore did not participate in the alleged transactions, and that petitioners’ failure to appear in mediation showed lack of interest in settlement and barred them from invoking procedural defects. Fuentes further maintained that petitioners’ delay and conduct amounted to laches.

Motion for Intervention by PCGSLAI

PCGSLAI moved to intervene in its capacity as the new registered owner. The Supreme Court denied the motion for lack of merit and for tardiness. The Court applied Section 2, Rule 19, Rules of Court, which requires motions to intervene to be filed before rendition of judgment by the trial court, and found that PCGSLAI belatedly filed its motion without justifying the delay despite the RTC’s approval of the contract to sell on September 8, 2014 prior to the filing of Fuentes’ complaint.

Supreme Court Ruling

The Supreme Court denied the petition and affirmed the decisions of the Court of Appeals. The Court held that under Article 124, Family Code, the administration and enjoyment of conjugal property belong to both spouses jointly and that dispositions or encumbrances by one spouse, in the absence of written consent by the other spouse or court authority when the other is incapacitated or unable to participate, are void. The Court rejected petitioners’ argument that Fuentes’ alleged knowledge of the transactions amounted to consent. The Court relied on precedent, including Jader-Manalo v. Camaisa and Alejo v. Sps. Cortez, which treat awareness of a transaction as not equivalent to the statutory written consent required for the disposition of conjugal property. The Court further found no reversible error in the RTC’s refusal to refer the case to judicial dispute resolution, noting that the 2020 guidelines in A.M. No. 19-10-20-SC make referral permissive when settlement remains possible and that the trial court properly exercised its discretion in concluding settlement was unlikely given petitioners’ conduct.

Legal Basis and Reasoning

The Court quoted and applied the text of Article 124, Family Code, emphasizing the categorical requirement of written consent for dispositions and encumbrances of conjugal property and the rule that in its absence the transaction is void. The Court invoked principles of statutory construction that a clear and unambiguous law must be applied as written, citing Abakada Guro Party List v. Hon. Exec. Ermita. The Court observed that the statutory regime protects the conjugal estate from unilateral dissipation by either spouse and supplies procedures for court authorization w

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