G.R. No. L-31618 and L-31625, August 17, 1983
EFREN R. MENDOZA and INOCENCIA R. DE MENDOZA, and JULIA R. DE REYES, petitioners, vs. PONCIANO S. REYES and THE COURT OF APPEALS, respondents.

FACTS

The case originated from a complaint filed by Ponciano S. Reyes seeking the annulment of a deed of sale covering two lots in Quezon City. The properties were sold by his wife, Julia R. de Reyes, to the spouses Efren and Inocencia Mendoza without his knowledge or consent. Ponciano alleged the properties were conjugal. The Mendozas and Julia contended the lots were Julia’s exclusive paraphernal property, and the Mendozas were innocent purchasers for value. The Court of First Instance ruled in favor of the vendors and vendees, declaring the properties paraphernal and the sale valid. The Court of Appeals reversed this decision, declaring the sale null and void with respect to Ponciano’s one-half conjugal share, ordering the cancellation of the Mendozas’ titles and the issuance of new ones reflecting co-ownership, and awarding Ponciano accrued rentals and attorney’s fees.

ISSUE

The primary issue is whether the disputed properties are conjugal, thus requiring the husband’s consent for their sale, or paraphernal, which the wife could alienate alone. A corollary issue is whether the Mendozas were purchasers in good faith.

RULING

The Supreme Court affirmed the Court of Appeals, ruling the properties were conjugal. The legal logic is anchored on the presumption under the Civil Code that property acquired during marriage is conjugal. This presumption was not overcome. Crucially, the lots were purchased on installment in 1947 during the marriage. The down payments and subsequent full payments were sourced from loans obtained from the Rehabilitation Finance Corporation (RFC), which were secured by mortgages signed by both spouses. The application of these conjugal funds to pay for the properties indelibly stamped them with a conjugal character. Registration of the titles in the wife’s name alone does not convert conjugal property into paraphernal property. The Court emphasized that the Torrens system does not relieve registered land from rights incident to marriage. The Mendozas cannot claim good faith. The RFC mortgages, executed by both spouses and annotated on the titles, served as constructive notice that the properties were likely conjugal and that the husband had an interest. Furthermore, the Mendozas had previously required Ponciano’s consent for a mere lease of the same properties, making their failure to seek his consent for the absolute sale indicative of bad faith. The petitions were denied.