Nufable vs. Nufable

A co-owner may mortgage only his pro indiviso share in the co‑owned property, and a mortgage of the whole by one co-owner is void as to the shares of the other co‑owners; the foreclosure sale and subsequent purchase by a third party do not extinguish the co-ownership but instead impress the shares of the non‑consenting co‑owners with a constructive trust in their favor. The principle is anchored on Article 493 of the Civil Code and the rule that “no one can give what he does not have.”

Esdras Nufable owned a 948‑square‑meter parcel of land in Poblacion, Manjuyod, Negros Oriental. He died on August 9, 1965, leaving a last will and testament that devised the land to his four legitimate children — Angel Custodio, Generosa, Vilfor, and Marcelo, all surnamed Nufable — with the instruction that the land remain undivided and held in common, subject to the statutory limit of twenty years. On March 15, 1966, before the will was probated, Angel Custodio and his spouse Aquilina mortgaged the entire property to the Development Bank of the Philippines. The will was probated on March 30, 1966, and on June 6, 1966 the heirs submitted a settlement of estate, approved by the court, confirming they had taken possession of their respective shares according to the will and agreeing that the land remain undivided for community ownership. The mortgage later fell into delinquency, and the DBP foreclosed on February 26, 1973. On January 11, 1980, Nelson Nufable, son of Angel Custodio (who had died in 1978), purchased the property from DBP. Generosa, Vilfor, and Marcelo thereafter brought suit to recover their shares.

• The Decedent’s Will and Succession: Esdras Nufable died on August 9, 1965, leaving four legitimate children (Angel Custodio, Generosa, Vilfor, and Marcelo) and a last will that bequeathed to them a 948‑square‑meter parcel of land in Poblacion, Manjuyod, Negros Oriental. The will directed that the land remain undivided and in common, allowing any sibling to construct a house, with the restriction not to exceed twenty years. The will was admitted to probate on March 30, 1966. On June 6, 1966, the probate court approved a Settlement of Estate in which the heirs confirmed they had already taken possession of their respective shares in accordance with the will and agreed that the land “remains undivided for community ownership but respecting conditions imposed therein in the will.”

• The Mortgage to DBP: On March 15, 1966 — two weeks before probate and while the heirs’ successional rights had already vested by operation of law (Article 777, Civil Code) — Angel Custodio and his spouse Aquilina mortgaged the entire property to the Development Bank of the Philippines. The other heirs (Generosa, Vilfor, and Marcelo) had no knowledge of this mortgage and never consented to it.

• The Foreclosure and Purchase by Nelson Nufable: The mortgage loan fell into delinquency, and the DBP foreclosed the property on February 26, 1973, later consolidating ownership in its name. On January 11, 1980, Nelson Nufable (son of Angel Custodio, who had died on August 29, 1978) purchased the land from DBP.

• The Deed of Sale of June 17, 1966: Shortly after the probate and settlement, spouses Angel and Aquilina Nufable executed a notarized Deed of Sale conveying a three‑fourths portion of the same property to Generosa, Vilfor, and Marcelo for a consideration of ₱1,000.00. This sale was offered as evidence of recognition of the co-ownership, though petitioners contended it was fictitious and without consideration.

• The Complaint: Generosa, Vilfor, and Marcelo Nufable filed suit on July 25, 1985 to annul the sale between DBP and Nelson Nufable as to their three‑fourths share, to quiet title, and to recover damages. Petitioners defended on the ground that Angel Custodio was the exclusive owner, that the mortgage and foreclosure were valid, and that Nelson Nufable acquired full ownership from DBP. The trial court dismissed the complaint, but the Court of Appeals reversed upon finding that the property had been co-owned from the moment of the decedent’s death and that the mortgage of the whole was void as to the other heirs’ shares.

• Relevance of Probate: Petitioners argued that the probate of the will and the approved settlement of estate did not determine the ownership of the land as against third persons; the trial court correctly treated the will and probate as immaterial to the question of Nelson Nufable’s title acquired from DBP.

• Ownership Through Foreclosure: Petitioners maintained that the DBP became the absolute, exclusive, and lawful owner of the land through foreclosure, purchase at the auction sale, and consolidation of ownership. Since Nelson Nufable purchased the property directly from the DBP, any award of a share to respondents could be made only if the DBP’s title were first declared void, which neither the pleadings nor the evidence warranted.

• Non-Inclusion of DBP as Indispensable Party: Petitioners contended that the DBP was an indispensable party without whom no final determination could be had; its absence rendered the proceedings invalid, and it was respondents’ duty — not petitioners’ — to implead the bank and seek annulment of its title.

• Co-ownership and Successional Rights: Respondents asserted that the property belonged in common to all four children from the moment of their father’s death; Angel Custodio could dispose of only his undivided one‑fourth share. The probated will and the court‑approved settlement confirmed the co-ownership, and the mortgage of the entire property was void as to their three‑fourths share because they never consented or benefitted from the loan.

• Constructive Trust: Respondents argued that the DBP could not have acquired valid title to the three‑fourths share, and any consolidation of title over the whole property merely impressed that portion with a constructive trust in their favor. Nelson Nufable, as a subsequent purchaser, stepped into the DBP’s shoes and likewise held the three‑fourths share in trust.

• Waiver of Non‑Inclusion of DBP: Respondents pointed out that petitioners never raised the defense of failure to implead DBP in their Answer; under the Rules of Court, the objection was therefore waived and could not be raised for the first time on appeal.

• Relevance of Probate and Successional Rights: Whether the probate of Esdras Nufable’s will and the approved settlement of estate were pertinent in determining the ownership rights of the parties and the validity of the mortgage and subsequent sale.

• Validity of Mortgage and Effect of Foreclosure: Whether Angel Custodio Nufable could validly mortgage the entire co-owned property, and whether the foreclosure by DBP and the subsequent purchase by Nelson Nufable extinguished respondents’ co-ownership shares.

• Indispensable Party: Whether the DBP was an indispensable party whose non-inclusion deprived the court of jurisdiction or precluded a valid adjudication of the case.

• Relevance of Probate and Successional Rights: The probate of the will and the court‑approved settlement of estate were properly considered. The heirs’ successional rights transmitted upon the death of Esdras Nufable on August 9, 1965, pursuant to Article 777 of the Civil Code. The probated will explicitly directed that the land remain undivided, and the heirs’ agreement — approved by the probate court — confirmed that they had already taken possession of their respective shares and that the property would be held in community ownership. The trial court therefore erred in disregarding these facts; they were central to establishing the co-ownership that limited Angel Custodio’s right to encumber.

• Validity of Mortgage and Effect of Foreclosure: As a co-owner, Angel Custodio had full ownership only of his one‑fourth pro indiviso share and could alienate, assign, or mortgage only that portion under Article 493 of the Civil Code. The mortgage of the entirety was void as to the remaining three‑fourths share of Generosa, Vilfor, and Marcelo, who neither knew of nor consented to the transaction and never benefitted from the loan. Upon foreclosure, the DBP could validly acquire only the share actually mortgaged; with respect to the three‑fourths share, the property was held in trust for the true owners by operation of law (Articles 1451 and 1456). Consequently, when Nelson Nufable purchased the land from DBP, he merely substituted the bank and took the property subject to the same constructive trust. The co-ownership was not dissolved, and respondents retained their rights to the three‑fourths portion. The ruling in Noel v. Court of Appeals that a buyer at a public auction acquires only the share of the judgment debtor and holds the remainder in constructive trust for the heirs of the other spouse was directly applicable.

• Indispensable Party: The DBP was not an indispensable party. Respondents did not seek to annul the foreclosure or challenge the validity of the DBP’s acquisition; the core issue was whether Nelson Nufable, having purchased from DBP, could assert exclusive ownership over the entire property as against the co-owners. The interests of the DBP were separable from those of the existing parties, and a final determination could be made without the DBP’s presence. Moreover, petitioners waived the objection by failing to raise it in their Answer, as required by Section 2, Rule 9 of the Rules of Court.

• Co-owner’s right to alienate or encumber (Art. 493, Civil Code) — A co-owner has full ownership of his pro indiviso share and may alienate, assign, or mortgage it. However, a co-owner cannot dispose of or encumber the shares of the other co-owners; any act purporting to do so is void as to those shares on the principle that “no one can give what he does not have.” In this case, Angel Custodio’s mortgage of the entire property was valid only as to his one‑fourth share.

• Transmission of successional rights (Art. 777, Civil Code) — The rights to a decedent’s succession are transmitted from the moment of death, regardless of the date of probate or approval of the settlement. The heirs acquired their shares in 1965, prior to the mortgage, and thus Angel could not have been the exclusive owner at the time he mortgaged the property in March 1966.

• Implied or constructive trust (Arts. 1451 and 1456, Civil Code) — When land passes by succession to a person and the legal title is placed in the name of another, a trust is established by implication of law for the benefit of the true owner (Art. 1451). Similarly, if property is acquired through mistake or fraud, the person obtaining it is considered a trustee of an implied trust for the benefit of the person from whom it comes (Art. 1456). These provisions were applied to the three‑fourths share that DBP acquired through the foreclosure of a mortgage executed by only one co-owner; the bank held that portion in trust for respondents, and the subsequent buyer stepped into the same fiduciary position.

• Effect of foreclosure on co-owned property — A foreclosure sale does not convey title to shares that the mortgagor never owned. Where a co-owner mortgages the whole property without the consent of the other co-owners, the foreclosure is effective only as to the mortgagor’s aliquot share; the remainder is held in constructive trust for the lawful owners. Registration of the property in the buyer’s name does not operate to vest ownership over the shares not validly mortgaged.

• Indispensable vs. necessary parties — An indispensable party is one without whom no final determination can be had; a necessary or proper party is one whose presence is needed for complete relief but whose interest is separable. Where the absent party’s interest is distinct and a final decree can be rendered without affecting that party, the action may proceed without its inclusion, under Sections 7, 8, and 11 of Rule 3 of the Rules of Court.

• “Well‑entrenched is the rule that a co-owner can only alienate his pro indiviso share in the co-owned property.”

• “[A] co-owner does not lose his part ownership of a co-owned property when his share is mortgaged by another co-owner without the former's knowledge and consent.”

• “[W]hen land passes by succession to any person and he causes the legal title to be put in the name of another, a trust is established by implication of law for the benefit of the true owner.”

• “Registration of property is not a means of acquiring ownership.”

• “[A] foreclosure would be ineffective unless the mortgagor has title to the property to be foreclosed.”

• “[T]he rule is that indispensable parties … shall be joined either as plaintiffs or defendants; … as to necessary parties … the court may, in its discretion, proceed in the action without making such persons parties, and the judgment rendered therein shall be without prejudice to the rights of such persons.”

• Mercado v. Court of Appeals, 240 SCRA 616 — Followed. A co‑owner can only alienate his pro indiviso share; he cannot alienate the shares of other co‑owners.

• Tan v. Intermediate Appellate Court, 186 SCRA 322 — Applied. A mortgage of inherited property is not binding against co‑heirs who never benefitted from the loan.

• Magallon v. Montejo, 146 SCRA 282 — Applied. A foreclosure is ineffective as to shares held in trust for the rightful owners.

• Noel v. Court of Appeals, 240 SCRA 78 — Followed. A buyer at a public auction to satisfy a judgment against a widow acquired only the widow’s one‑half interest; the other half belonging to the heirs of the deceased husband became impressed with a constructive trust in their behalf.

• Adille v. Court of Appeals, 157 SCRA 455 — Cited. Registration does not vest ownership; it merely confirms a title already existing.

• Acain v. Intermediate Appellate Court, 155 SCRA 100 — Cited. Probate courts are limited to passing upon the extrinsic validity of the will; intrinsic validity is determined after probate.

• Acebedo v. Abesamis, 217 SCRA 186 — Cited. Court approval of an extrajudicial settlement is necessary for its validity.

• Castro, Jr. v. Court of Appeals, 250 SCRA 661 — Cited. A foreclosure is ineffective unless the mortgagor has title to the property.

• Imson v. Court of Appeals, 239 SCRA 58 and Servicewide Specialists, Inc. v. Court of Appeals, 251 SCRA 70 — Cited for the definition of necessary/proper parties.

• Article 493, Civil Code — Governs the rights of co‑owners. Applied to limit Angel Custodio’s right to mortgage only his one‑fourth pro indiviso share.

• Article 777, Civil Code — Successional rights transmit upon death. Applied to fix the moment when the co‑ownership was created, which preceded the mortgage.

• Article 870, Civil Code — A disposition declaring property inalienable for more than twenty years is void. The decedent’s restriction on partition was valid within this limit.

• Article 1451, Civil Code — Implied trust when land passes by succession and legal title is placed in another’s name. Applied to the three‑fourths share held by DBP.

• Article 1456, Civil Code — Implied trust when property is acquired through mistake or fraud. Applied as an alternative basis for the constructive trust.

• Article 1458, Civil Code — By a contract of sale, the vendor obligates himself to transfer ownership and deliver the thing sold. Applied to underscore that DBP could only convey what it validly owned — the one‑fourth share.

• Sections 7, 8, and 11, Rule 3, Rules of Court — Define indispensable and necessary parties and the court’s discretion to proceed in the absence of a necessary party. Applied to hold that DBP was not indispensable.

• Section 2, Rule 9, Rules of Court — Defenses not pleaded in a motion to dismiss or answer are deemed waived. Petitioners’ objection to the non‑inclusion of DBP was waived.

Justices Vitug, Panganiban, and Purisima concurred. Justice Romero was abroad on official business leave.