Case Digest: FLORES V. LINDO

FLORES V. LINDO 

G.R. No. 183984, [April 13, 2011]

FACTS:

Respondent Edna Lindo obtained a loan from Petitioner Arturo Flores amounting to P400,000 and secured it with a Deed of Real Estate Mortgage. The mortgage covered property in the name of Edna and her husband, co-respondent Enrico Lindo, Jr. Edna likewise signed a Promissory Note and the Deed for herself and for Enrico as his attorney-in-fact.

She issued three checks as partial loan payments, all of which were dishonored for insufficiency of funds. Flores therefore filed a complaint for foreclosure of the mortgage with damages. The RTC ruled that petitioner was not entitled to judicial foreclosure as the Deed was without consent and authority of Edna’s husband. The Deed was executed on October 31, 1995, while the Special Power of Attorney was executed by Enrico only on November 4, 1995. Accordingly, the mortgage is void pursuant to Article 96 of the Family Code. The RTC, however, ruled that petitioner may still recover the loan through a personal action against Edna, but that it had no jurisdiction over the said personal action which should be filed where plaintiff or defendant resides.

Petitioner filed a complaint for sum of money and damages. The respondents alleged that Enrico was not a party to the loan because it was contracted by Edna without Enrico’s signature. They also prayed for the dismissal of the case on grounds of improper venue, res judicata and forum-shopping. The RTC ruled that res judicata will not apply to rights, claims or demands which, though growing out of the same subject matter, constitute separate or distinct causes of action.

The Court of Appeals set aside the RTC ruling. It noted that petitioner allowed the earlier decision of the RTC to become final and executory without asking the courts for an alternative relief. The Court of Appeals stated that petitioner merely relied on the declarations of these courts that he could file a separate personal action and thus failed to observe the rules and settled jurisprudence on multiplicity of suits, closing petitioner’s avenue for recovery of the loan.

ISSUES:

(1)  Whether the promissory note and deed of mortgage are void

(2)     Whether  there  remains  an  available  remedy  for petitioner

HELD:

(1) NO. Article 124 of the Family Code provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husband’s decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. (Emphasis supplied)

Article 124 of the Family Code of which applies to conjugal partnership property, is a reproduction of Article 96 of the Family Code which applies to community property.

Both Article 96 and Article 127 of the Family Code provide that the powers do not include disposition or encumbrance without the written consent of the other spouse. Any disposition or encumbrance without the written consent shall be void. However, both provisions also state that “the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse x x x beforethe offer is withdrawn by either or both offerors.”

In this case, the Promissory Note and the Deed of Real Estate Mortgage were executed on 31 October 1995. The Special Power of Attorney was executed on 4 November

1995. The execution of the SPA is the acceptance by the other spouse that perfected the continuing offer as a binding contract between the parties, making the Deed of Real Estate Mortgage a valid contract.

(2) YES. In Chieng v. Santos, this Court ruled that a mortgage-creditor may institute against the mortgage-debtor either a personal action for debt or a real action to foreclose the mortgage. The Court ruled that the remedies are alternative and not cumulative and held that the filing of a criminal action for violation of Batas Pambansa Blg. 22 was in effect a collection suit or a suit for the recovery of the mortgage-debt. In that case, however, this Court pro hac vice, ruled that respondents could still be held liable for the balance of the loan, applying the principle that no person may unjustly enrich himself at the expense of another.

The principle of unjust enrichment is provided under Article 22 of the Civil Code which provides:

Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

There is unjust enrichment “when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience.” The principle of unjust enrichment requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at the expense of another. The main objective of the principle against unjust enrichment is to prevent one from enriching himself at the expense of another without just cause or consideration. The principle is applicable in this case considering that Edna admitted obtaining a loan from petitioners, and the same has not been fully paid without just cause. The Deed was declared void erroneously at the instance of Edna, first when she raised it as a defense before the RTC, Branch 33 and second, when she filed an action for declaratory relief before the RTC, Branch 93. Petitioner could not be expected to ask the RTC, Branch 33 for an alternative remedy, as what the Court of Appeals ruled that he should have done, because the RTC, Branch 33 already stated that it had no jurisdiction over any personal action that petitioner might have against Edna.

Edna should not be allowed to unjustly enrich herself because of the erroneous decisions of the two trial courts when she questioned the validity of the Deed.