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25 August 2010
Respondent-spouses mortgaged a residential lot
(which the wife inherited) to the GSIS to secure a
housing loan (!!")# Thereafter$ the% used the
mone% loaned to construct a residential house on
said lot#
It is alleged that &'()* granted the spouses a
+!!" loan$ which the latter used to pa% the de,t
to GSIS# The ,alance of the loan (-!!") will ,e
deli.ered ,% &'()S upon surrender of the title the propert% and an of of
rights ( the propert%) to ,e e/ecuted ,% the
hus,and# 0hile the spouses were a,le to turn the title$ no was signed ,% the
hus,and# Conse1uentl%$ &'()* refused to gi.e
the -!!" ,alance of the loan and since the
spouses could no longer return the !!" (which
was alread% paid to GSIS)$ &'()* "ept the title the propert% and su,se1uentl%$ caused the
issuance of a new one in his own name#
The spouses then filed a case for the annulment
of the purported sale of the propert% in fa.or of
&'()*# The RTC ruled that the propert% was the
wife2s e/clusi.e paraphernal propert% (since she
inherited it from her father) and as such$ the sale
is .alid e.en without the hus,and2s consent#
The CA re.ersed and ruled that while the
propert% was originall% e/clusi.e paraphernal
propert% of the wife$ it ,ecame con3ugal propert%
when it was used as a collateral for a housing
loan that was paid through con3ugal funds#
4ence$ the sale is .oid#
ISSUE (1): Is the property paraphernal or
R'5I(G: 6ARA647R(A5# As a general rule$ all
propert% ac1uired during the marriage is
presumed to ,e con3ugal unless the contrar% is
pro.ed# In this case$ clear e.idence that the wife
inherited the lot from her father has sufficientl%
re,utted this presumption of con3ugal ownership#
Conse1uentl%$ the residential lot is the wife2s
e/clusi.e paraphernal propert% (pursuant to
Article 8 and 9!8 of FC)#
It was error for the CA to appl% Article 9:; of the
CC and the ruling on Calili!Canullas" True$
respondents were married during the
of the CC and thus its pro.isions should go.ern
their propert% relations# 0ith the enactment of
the FC$ the pro.isions of the latter on
con3ugal partnership of gains superseded those of
the CC# Thus$ it is the FC that go.erns the
present case and not the CC# And under Article
9! of the FC (which supersedes Article 9:; of
the CC)$ when the cost of the impro.ement and
an% resulting increase in the .alue are more than
the .alue of the propert% at the time of the
impro.ement$ the entire propert% shall ,elong to
the con3ugal partnership$ su,3ect to
reim,ursement< otherwise$ the propert% shall ,e
retained in ownership ,% the owner-spouse$
li"ewise su,3ect to reim,ursement for the cost of
In this case$ the hus,and onl% paid a small
portion of the GSIS loan (+!")# Thus$ it is fairl%
reasona,le to assume that the .alue of the
residential lot is considera,l% more than the
contri,ution paid ,% the hus,and# Thus$ the
propert% remained the e/clusi.e paraphernal
propert% of the wife at the time she contracted
with &'()*< the written consent of the hus,and
was not necessar%#
ISSUE (2): #as the transaction a sale or
e$uita%le ortgage?
R'5I(G: 7='ITA>57 &)RTGAG7# 'nder Article
9+! of the CC$ a contract is presumed an
e1uita,le mortgage when: (a) price of sale with
right to repurchase is unusuall% inade1uate< (,)
.endor remains in possession as lessee or
otherwise< (c) upon or after the e/piration of the
right to repurchase$ another instrument
e/tending the period of redemption is e/ecuted<
(d) purchase retains for himself a part of the
purchase price< (e) .endor ,inds himself to pa%
the ta/es on the thing sold< and$ (f) in an% other
case it ma% ,e fairl% inferred that the real
intention of the parties is for the transaction to
secure the pa%ment of a de,t#
In this case$ considering that (a) the spouses
remained in possession of the propert% (al,eit as
lessees thereof)< (,) &'()* retained a portion
of the ?purchase price2 (!!")< (c) it was the
spouses who paid real propert% ta/es on the
propert%< and$ (d) it was the wife who secure the
pa%ment of the principal de,t with the su,3ect
propert% @ the parties clearl% intended an
e1uita,le mortgage and not a contract of sale#