G.R. No. 51457 June 27, 1994
LUCIA EMBRADO and ORESTE TORREGIANI, petitioners, vs. COURT OF APPEALS, PACIFICO CIMAFRANCA, MARCOS SALIMBAGAT, EDA JIMENEZ and SANTIAGO JIMENEZ, respondents.

FACTS

Petitioners Lucia Embrado and Oreste Torregiani, spouses, filed an action for declaration of nullity of contract, annulment of sales, reconveyance and damages against respondents. The subject property is Lot No. 564, a 366-square meter lot in Dipolog City. The original owners, the Carpitanos, executed a Venta Definitiva (a notarized deed of sale in Spanish) on July 2, 1946, in favor of “Srta. LUCIA C. EMBRADO…soltera” (single), but the deed stipulated that its effects retroacted to April 15, 1941, the date the lot was allegedly actually sold to her. Lucia married Oreste Torregiani in 1943. Transfer Certificate of Title No. T-99 was issued on February 13, 1948, in the name of Lucia Embrado alone, later amended in 1970 to state she was “married to Oreste Torregiani.” The spouses built a residential/commercial building on the lot in 1958. On May 1, 1971, Lucia Embrado Torregiani, by an Absolute Deed of Sale, sold the lot, described as her “own paraphernal property,” to her adopted daughter, respondent Eda Jimenez, for P1,000.00. TCT No. T-99 was cancelled and a new title (TCT No. T-17103) was issued in Eda Jimenez’s name. Eda Jimenez subsequently sold portions of the lot to respondents Marcos Salimbagat and Pacifico Cimafranca. Petitioners alleged the sale to Eda Jimenez was void for lack of consideration, lack of Oreste Torregiani’s consent (claiming the lot was conjugal), and because Lucia was misled into signing a deed of sale believing it was for a mortgage to secure a loan. The trial court ruled in favor of the petitioners, declaring the sales void. The Court of Appeals reversed, holding the lot was Lucia’s paraphernal property and the subsequent buyers were in good faith.

ISSUE

1. Whether Lot No. 564 was the paraphernal property of Lucia Embrado or conjugal property of the spouses Torregiani.
2. Whether the sale of the lot by Lucia Embrado to Eda Jimenez was valid.
3. Whether vendees Marcos Salimbagat and Pacifico Cimafranca were buyers in good faith.

RULING

1. On the nature of the property: The Supreme Court agreed that Lot No. 564 was originally the paraphernal property of Lucia Embrado. The Venta Definitiva, which retroacted to 1941 (before her marriage), contained a positive assertion of her exclusive ownership, overcoming the presumption of conjugality under Article 160 of the Civil Code. However, the Court ruled that the lot became conjugal property upon the construction of a residential/commercial building in 1958. Applying Article 158 of the Civil Code, the building, presumed constructed with conjugal funds, made the land conjugal, subject to reimbursement of the land’s value to the spouse-owner (Lucia) upon liquidation of the partnership.
2. On the validity of the sale to Eda Jimenez: The Supreme Court declared the sale void ab initio. First, the Court found the consideration of P1,000.00 to be fictitious, as Eda Jimenez was financially incapable of paying it, and Lucia’s claim that she was misled into signing a deed of sale for a loan transaction was credible. Second, and decisively, since the property had become conjugal by 1958, Lucia could not validly dispose of it without her husband’s consent, as required by Article 172 of the Civil Code. The sale, being contrary to law, was null and void. The notarized deed was not conclusive and its nullity could be proven.
3. On the status of Salimbagat and Cimafranca: The subsequent sales to Salimbagat and Cimafranca produced no legal effects. Since Eda Jimenez acquired no valid title from the void sale, she could not transmit any title to them (quod nullum est, nullum producit effectum). Furthermore, they failed to prove they were purchasers in good faith. The Court noted they were declared buyers in bad faith by the trial court, and the appellate court’s contrary finding was not supported.
The Supreme Court reversed the decision of the Court of Appeals and reinstated the trial court’s judgment declaring the deeds of sale null and void, ordering reconveyance, cancellation of titles, and other reliefs.