G.R. No. 233217 . October 06, 2021
ALBERTO C. HIDALGO, PETITIONER, VS. CONRADO BASCUGUIN AND EVELYN FLAMINIANO HIDALGO, RESPONDENTS.

FACTS

During their marriage, petitioner Alberto C. Hidalgo and his wife, respondent Evelyn Flaminiano Hidalgo, acquired a house and lot in Lian, Batangas as conjugal property. Alberto worked abroad in Dubai. Upon his return to the Philippines in March 2004, he discovered that Evelyn had sold the property to respondent Conrado Bascuguin on December 9, 2002, under a “Kasulatan ng Bilihan ng Bahay at Lupa na Muling Mabibili” (a pacto de retro sale) for P300,000.00, without his consent. Alberto alleged his signature on the document was forged, as he was still abroad on the transaction date, returning only on December 23, 2002. He sent a demand letter to Bascuguin declaring the sale void and offering to refund the purchase price with interest. Bascuguin responded by demanding P900,000.00 and threatening ejectment. Alberto filed a Complaint for annulment of sale and damages against Evelyn and Bascuguin. The Regional Trial Court declared the transaction an equitable mortgage and ordered the Hidalgo spouses to reimburse Bascuguin the P300,000.00 with legal interest, and Bascuguin to return the title upon payment. On appeal, the Court of Appeals reversed the trial court, declared the pacto de retro sale void for lack of Alberto’s consent under Article 124 of the Family Code, and ordered the mutual restitution of the purchase price (with interest) and the property title. Alberto’s Motion for Partial Reconsideration was denied by the Court of Appeals for being filed late. Alberto then filed the present Petition for Review on Certiorari.

ISSUE

1. Whether the petition must be denied outright due to procedural grounds.
2. Whether the sale is null and void.
3. Whether respondent Bascuguin is entitled to reimbursement of the purchase price.
4. Whether petitioner Alberto is entitled to damages.

RULING

1. On the procedural issue: The Court found the petition meritorious and decided to resolve it on substantive grounds. While the negligence of counsel in failing to notify the court of a change of address generally binds the client, the Court considered the circumstances—the closure of counsel’s office and the death of an office administrator—and opted to relax the rules in the interest of substantial justice.
2. On the validity of the sale: The sale is NULL AND VOID. Under Article 124 of the Family Code, any alienation or encumbrance of conjugal property requires the consent of both spouses. The absence of such consent renders the act void. The pacto de retro sale executed by Evelyn alone without Alberto’s consent is void. The Court of Appeals correctly reversed the trial court’s characterization of the contract as an equitable mortgage, as the nullity of the contract made such determination unnecessary.
3. On reimbursement: YES, respondent Bascuguin is entitled to reimbursement of the purchase price. While the sale is void, the principle of mutual restitution under Article 1398 of the Civil Code applies. Parties to a void contract must restore to each other what they have received. Therefore, the Hidalgo spouses must return the P300,000.00 to Bascuguin. The Court modified the interest rate: legal interest at 6% per annum shall run from the date of the Court of Appeals Decision (October 6, 2021) until full payment.
4. On damages: NO, petitioner Alberto is not entitled to damages. The Court found no basis for an award of moral or exemplary damages. Alberto failed to substantiate his claim of mental anguish with clear and convincing evidence. Furthermore, Bascuguin’s act of purchasing the property, even if from only one spouse, did not constitute gross negligence or bad faith warranting exemplary damages. Attorney’s fees were also not awarded as the case did not fall under any of the exceptions enumerated in Article 2208 of the Civil Code.
The Court DENIED the petition and AFFIRMED the Court of Appeals Decision with MODIFICATION regarding the interest. The void pacto de retro sale is set aside. The Hidalgo spouses are ordered to jointly and severally return P300,000.00 to Bascuguin with legal interest at 6% per annum from October 6, 2021 until full payment. Bascuguin is ordered to return the property title to the Hidalgo spouses. No damages or attorney’s fees are awarded.