This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying that the Decision^[1] of the Court of Appeals (CA) dated September 25, 2002, and the CA Resolution^[2] dated March 31, 2003, denying petitioners' motion for reconsideration, be reversed and set aside.

The factual antecedents of the case are as follows.

Spouses Onesiforo and Rosario Alinas (petitioners) separated sometime in 1982, with Rosario moving to Pagadian City and Onesiforo moving to Manila.  They left behind two lots identified as Lot 896-B-9-A with a bodega standing on it and Lot 896-B-9-B with petitioners' house.  These two lots are the subject of the present petition.

Petitioner Onesiforo Alinas (Onesiforo) and respondent Victor Alinas (Victor) are brothers.  Petitioners allege that they entrusted their properties to Victor and Elena Alinas (respondent spouses) with the agreement that any income from rentals of the properties should be remitted to the Social Security System (SSS) and to the Rural Bank of Oroquieta City (RBO), as such rentals were believed sufficient to pay off petitioners' loans with said institutions.  Lot 896-B-9-A with the bodega was mortgaged as security for the loan obtained from the RBO, while Lot 896-B-9-B with the house was mortgaged to the SSS. Onesiforo alleges that he left blank papers with his signature on them to facilitate the administration of said properties.

Sometime in 1993, petitioners discovered that their two lots were already titled in the name of respondent spouses.

Records show that after Lot 896-B-9-A was extra-judicially foreclosed, Transfer Certificate of Title (TCT) No. T-11853^[3] covering said property was issued in the name of mortgagee RBO on November 13, 1987.  On May 2, 1988, the duly authorized representative of RBO executed a Deed of Installment Sale of Bank's Acquired Assets^[4] conveying Lot 896-B-9-A to respondent spouses.  RBO's TCT over Lot 896-B-9-A was then cancelled and on February 22, 1989, TCT No. T-12664^[5] covering said lot was issued in the name of respondent spouses.

Lot 896-B-9-B was also foreclosed by the SSS and on November 17, 1986, the Ex-Oficio City Sheriff of Ozamis City issued a Certificate of Sale^[6] over said property in favor of the SSS. However, pursuant to a Special Power of Attorney^[7] signed by Onesiforo in favor of Victor, dated March 10, 1989, the latter was able to redeem, on the same date, Lot 896-B-9-B from the SSS for the sum of P111,110.09.  On June 19, 1989, a Certificate of Redemption^[8] was issued by the SSS.

Onesiforo's signature also appears in an Absolute Deed of Sale^[9] likewise dated March 10, 1989, selling Lot 896-B-9-B to respondent spouses.  The records also show a notarized document dated March 10, 1989 and captioned Agreement^[10] whereby petitioner Onesiforo acknowledged that his brother Victor used his own money to redeem Lot 896-B-9-B from the SSS and, thus, Victor became the owner of said lot.  In the same Agreeement, petitioner Onesiforo waived whatever rights, claims, and interests he or his heirs, successors and assigns have or may have over the subject property.  On March 15, 1993, by virtue of said documents, TCT No. 17394^[11] covering Lot 896-B-9-B was issued in the name of respondent spouses.

On June 25, 1993, petitioners filed with the Regional Trial Court (RTC) of Ozamis City a complaint for recovery of possession and ownership of their conjugal properties with damages against respondent spouses.

After trial, the RTC rendered its Decision dated November 13, 1995, finding that:

1.  Plaintiffs have not proven that they entrusted defendant spouses with the care and administration of their properties.  It was Valeria Alinas, their mother, whom plaintiff Onesiforo requested/directed to "take care of everything and sell everything" and Teresita Nuñez, his elder sister, to whom he left a "verbal" authority to administer his properties.

2.  Plaintiffs have not proven their allegation that defendant spouses agreed to pay rent of P1,500.00 a month for the occupancy of plaintiffs' house, which rent was to be remitted to the SSS and Rural Bank of Oroquieta to pay off plaintiffs' loan and to keep for plaintiffs the rest of the rent after the loans would have been paid in full.

3.  Plaintiff Onesiforo's allegation that defendants concocted deeds of conveyances (Exh. "M", "N" & "O") with the use of his signatures in blank is not worthy of credence.  Why his family would conspire to rob him at a time when life had struck him with a cruel blow in the form of a failed marriage that sent him plummeting to the depths of despair is not explained and likewise defies comprehension.  That his signatures appear exactly on the spot where they ought to be in Exhs. "M", "N" & "O" belies his pretension that he affixed them on blank paper only for the purpose of facilitating his sister Terry's acts of administration.

This Court, therefore, does not find that defendant spouses had schemed to obtain title to plaintiffs' properties or enriched themselves at the expense of plaintiffs.^[12]

with the following dispositive portion:

WHEREFORE, this Court renders judgment:

1. declaring [respondents] Victor Jr. and Elena Alinas owners of Lot  896-B-9-A with the building (bodega) standing thereon and affirming the validity of their acquisition thereof from the Rural Bank of Oroquieta, Inc.;
   
   
2. declaring [petitioners] Onesiforo and Rosario Alinas owners of Lot 896-B-9-B with the house standing thereon, plaintiff Onesiforo's sale thereof to defendants spouses without the consent of his wife being null and void and defendant spouses' redemption thereof from the SSS not having conferred its ownership to them;
   
   
3. ordering [petitioners] to reimburse [respondents] Victor Jr. and Elena Alinas the redemption sum of P111,100.09, paid by them to the SSS (without interest as it shall be compensated with the rental value of the house they occupy) within sixty days from the finality of this judgment;
   
   
4. ordering [respondents] to vacate the subject house within thirty days from receiving the reimbursement mentioned in No. 3 above; and
   
   
5. reinstating TCT No. T-7248 in the name of [petitioners] and cancelling TCT No. T-17394 in the name of [respondents].

No costs.

SO ORDERED.^[13]

Only respondent spouses appealed to the CA assailing the RTC's ruling that they acquired Lot 896-B-9-B from the SSS by mere redemption and not by purchase.  They likewise question the reimbursement by petitioners of the redemption price without interest.

On September 25, 2002, the CA promulgated herein assailed Decision, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing disquisitions, the first paragraph of the dispositive portion of the assailed decision is AFFIRMED and the rest MODIFIED as follows:

1. declaring [respondents] Victor Jr. and Elena Alinas owners of  Lot 896-B-9-A with the building (bodega) standing thereon and affirming the validity of their acquisition thereof from the Rural Bank of Oroquieta, Inc.;
   
   
2. declaring Onesiforo's sale of  Lot 896-B-9-B together with the house standing thereon to [respondents] in so far as Rosario Alinas, his wife's share of one half thereof is concerned, of no force and effect;
   
   
3. ordering [petitioners] Rosario Alinas to reimburse [respondents] the redemption amount of P55,550.00 with interest of 12% per annum from the time of redemption until fully paid.
   
   
4. ordering the [respondents] to convey and transfer one half portion of Lot 896-B-9-B unto Rosario Alinas, which comprises her share on the property simultaneous to the tender of the above redemption price, both to be accomplished within sixty (60) days from finality of this judgment.
   
   
5. in the event of failure of [respondents] to execute the acts as specified above, [petitioner] Rosario Alinas may proceed against them under Section 10, Rule 39 of the 1997 Rules of Civil Procedure.
   
   
6. on the other hand, failure of [petitioner] Rosario Alinas to reimburse the redemption price within sixty (60) days from the finality of this decision will render the conveyance and sale of her share by her husband to [respondents], of full force and effect.

No costs.

SO ORDERED.^[14]

Petitioners moved for reconsideration but the CA denied said motion per herein assailed Resolution dated March 31, 2003.

Hence, the present petition on the following grounds:

The Honorable Court of Appeals abuse [sic] its discretion in disregarding the testimony of the Register of Deeds, Atty. Nerio Nuñez, who swore that the signatures appearing on various TCTs were not his own;

The Honorable Court of Appeals manifestly abuse [sic] its discretion in declaring the respondents to be the owners of Lot  896-B-9-A with the building (bodega) standing thereon when they merely redeemed the property and are therefore mere trustees of the real owners of the property;

It was pure speculation and conjecture and surmise for the Honorable Court of Appeals to impose an obligation to reimburse upon petitioners without ordering respondents to account for the rentals of the properties from the time they occupied the same up to the present time and thereafter credit one against the other whichever is higher.^[15]

The first issue raised by petitioners deserves scant consideration.  By assailing the authenticity of the Registrar of Deeds' signature on the certificates of title, they are, in effect, questioning the validity of the certificates.

Section 48 of Presidential Decree No. 1529 provides, thus:

Sec. 48.  Certificate not subject to collateral attack. - A certificate of title shall not be subject to collateral attack.  It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.

Pursuant to said provision, the Court ruled in De Pedro v. Romasan Development Corporation^[16] that:

It has been held that a certificate of title, once registered, should not thereafter be impugned, altered, changed, modified, enlarged or diminished except in a direct proceeding permitted by law.   x x x

The action of the petitioners against the respondents, based on the material allegations of the complaint, is one for recovery of possession of the subject property and damages.  However, such action is not a direct, but a collateral attack of TCT No. 236044.^[17]    (Emphasis supplied)

As in De Pedro, the complaint filed by herein petitioners with the RTC is also one for recovery of possession and ownership.  Verily, the present case is merely a collateral attack on TCT No. T-17394, which is not allowed by law and jurisprudence.

With regard to the second issue, petitioners' claim that it was the CA which declared respondent spouses owners of Lot 896-B-9-A (with bodega) is misleading.  It was the RTC which ruled that respondent spouses are the owners of Lot 896-B-9-A and, therefore, since only the respondent spouses appealed to the CA, the issue of ownership over Lot 896-B-9-A is not raised before the appellate court. Necessarily, the CA merely reiterated in the dispositive portion of its decision the RTC's ruling on respondent spouses' ownership of Lot 896-B-9-A.

It is a basic principle that no modification of judgment or affirmative relief can be granted to a party who did not appeal.^[18]  Hence, not having appealed from the RTC Decision, petitioners can no longer seek the reversal or modification of the trial court's ruling that respondent spouses had acquired ownership of Lot 896-B-9-A by virtue of the sale of the lot to them by RBO.

Furthermore, the CA did not commit any reversible error in affirming the trial court's factual findings as the records are indeed bereft of proof to support the petitioners' allegations that they left the care and administration of their properties to respondent spouses; and that there is an agreement between petitioners and respondent spouses regarding remittance to the SSS and the RBO of rental income from their properties.  Thus, respondent spouses may not be held responsible for the non-payment of the loan with RBO and the eventual foreclosure of petitioners' Lot 896-B-9-A.

Petitioners do not assail the validity of the foreclosure of said lot but argues that respondent spouses merely redeemed the property from RBO. This is, however, belied by evidence on record which shows that ownership over the lot had duly passed on to the RBO, as shown by TCT No. T-11853 registered in its name; and subsequently, RBO sold the lot with its improvements to respondent spouses.  Needless to stress, the sale was made after the redemption period had lapsed.  The trial court, therefore, correctly held that respondent spouses acquired their title over the lot from RBO and definitely not from petitioners.

However, with regard to Lot 896-B-9-B (with house), the Court finds it patently erroneous for the CA to have applied the principle of equity in sustaining the validity of the sale of Onesiforo's one-half share in the subject property to respondent spouses.

Although petitioners were married before the enactment of the Family Code on August 3, 1988, the sale in question occurred in 1989.  Thus, their property relations are governed by Chapter IV on Conjugal Partnership of Gains of the Family Code.

The CA ruling completely deviated from the clear dictate of Article 124 of the Family Code which provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly.  x x x

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 the powers of disposition or encumbrance which must have the 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.  x x x  (Underscoring and emphasis supplied)

In Homeowners Savings & Loan Bank v. Dailo,^[19] the Court categorically stated thus:

In Guiang v. Court of Appeals, it was held that the sale of a conjugal property requires the consent of both the husband and wife. In applying Article 124 of the Family Code, this Court declared that the absence of the consent of one renders the entire sale null and void, including the portion of the conjugal property pertaining to the husband who contracted the sale.   x x x

x x x x

x x x By express provision of Article 124 of the Family Code, in the absence of (court) authority or written consent of the other spouse, any disposition or encumbrance of the conjugal property shall be void. ^[20]

Thus, pursuant to Article 124 of the Family Code and jurisprudence, the sale of petitioners' conjugal property made by petitioner Onesiforo alone is void in its entirety.

It is true that in a number of cases, this Court abstained from applying the literal import of a particular provision of law if doing so would lead to unjust, unfair and absurd results.^[21]

In the present case, the Court does not see how applying Article 124 of the Family Code would lead to injustice or absurdity.  It should be noted that respondent spouses were well aware that Lot 896-B-9-B is a conjugal property of petitioners. They also knew that the disposition being made by Onesiforo is without the consent of his wife, as they knew that petitioners had separated, and, the sale documents do not bear the signature of petitioner Rosario.  The fact that Onesiforo had to execute two documents, namely: the Absolute Deed of Sale dated March 10, 1989 and a notarized Agreement likewise dated March 10, 1989, reveals that they had full knowledge of the severe infirmities of the sale.  As held in Heirs of Aguilar-Reyes v. Spouses Mijares,^[22] "a purchaser cannot close his eyes to facts which should put a reasonable man on his guard and still claim he acted in good faith."^[23]  Such being the case, no injustice is being foisted on respondent spouses as they risked transacting with Onesiforo alone despite their knowledge that the subject property is a conjugal property.

Verily, the sale of Lot 896-B-9-B to respondent spouses is entirely null and void.

However, in consonance with the salutary principle of non-enrichment at another's expense, the Court agrees with the CA that petitioners should reimburse respondent spouses the redemption price paid for Lot 896-B-9-B in the amount of P111,110.09 with legal interest from the time of filing of the complaint.

In Heirs of Aguilar-Reyes, the husband's sale of conjugal property without the consent of the wife was annulled but the spouses were ordered to refund the purchase price to the buyers, it was ruled that an interest of 12% per annum on the purchase price to be refunded is not proper.  The Court elucidated as follows:

The trial court, however, erred in imposing 12% interest per annum on the amount due the respondents.  In Eastern Shipping Lines, Inc. v. Court of Appeals, it was held that interest on obligations not constituting a loan or forbearance of money is six percent (6%) annually.  If the purchase price could be established with certainty at the time of the filing of the complaint, the six percent (6%) interest should be computed from the date the complaint was filed until finality of the decision.  In Lui vs. Loy, involving a suit for reconveyance and annulment of title filed by the first buyer against the seller and the second buyer, the Court, ruling in favor of the first buyer and annulling the second sale, ordered the seller to refund to the second buyer (who was not a purchaser in good faith) the purchase price of the lots.  It was held therein that the 6% interest should be computed from the date of the filing of the complaint by the first buyer.  After the judgment becomes final and executory until the obligation is satisfied, the amount due shall earn interest at 12% per year, the interim period being deemed equivalent to a forbearance of credit.

Accordingly, the amount of P110,000.00 due the respondent spouses which could be determined with certainty at the time of the filing of the complaint shall earn 6% interest per annum from June 4, 1986 until the finality of this decision.  If the adjudged principal and the interest (or any part thereof) remain unpaid thereafter, the interest rate shall be twelve percent (12%) per annum computed from the time the judgment becomes final and executory until it is fully satisfied.^[24]

Thus, herein petitioners should reimburse respondent spouses the redemption price plus interest at the rate of 6% per annum from the date of filing of the complaint, and after the judgment becomes final and executory, the amount due shall earn 12% interest per annum until the obligation is satisfied.

Petitioners pray that said redemption price and interest be offset or compensated against the rentals for the house and bodega.

The records show that the testimonial evidence for rentals was only with regard to the bodega.^[25]   However, the Court has affirmed the ruling of the RTC that Lot 896-B-9-A with the bodega had been validly purchased by respondent spouses from the RBO and a TCT over said property was issued in the name of respondent spouses on February 22, 1989.  Testimonial evidence shows that the bodega was leased out by respondent spouses only beginning January of 1990 when ownership had been transferred to them.^[26]  Hence, any rentals earned from the lease of said bodega rightfully belongs to respondent spouses and cannot be offset against petitioners' obligation to respondent spouses.

As to rentals for Lot 896-B-9-B and the house thereon, respondent Victor testified that they never agreed to rent the house and when they finally took over the same, it was practically inhabitable and so they even incurred expenses to repair the house.^[27]  There is absolutely no proof of the rental value for the house, considering the condition it was in; as well as for the lot respondent spouses are occupying.

Respondent spouses, having knowledge of the flaw in their mode of acquisition, are deemed to be possessors in bad faith under Article 526^[28] of the Civil Code.  However, they have a right to be refunded for necessary expenses on the property as provided under Article 546^[29] of the same Code. Unfortunately, there is no credible proof to support respondent spouses' allegation that they spent more than P400,000.00 to repair and make the house habitable.

Set-off or compensation is governed by Article 1279 of the Civil Code which provides, thus:

Article 1279.  In order that compensation may be proper, it is necessary:

1. That each one of the obligors be bound principally, and that he be at the time a principal creditor of the other;
   
   
2. That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;
   
   
3. That the two debts be due;
   
   
4. That they be liquidated and demandable;
   
   
5. That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

Therefore, under paragraph 4 of the foregoing provision, compensation or set-off is allowed only if the debts of both parties against each other is already liquidated and demandable. To liquidate means "to make the amount of indebtedness or an obligation clear and settled in the form of money."^[30]  In the present case, no definite amounts for rentals nor for expenses for repairs on subject house has been determined.   Thus, in the absence of evidence upon which to base the amount of rentals, no compensation or set-off can take place between petitioners and respondent spouses.

While the courts are empowered to set an amount as reasonable compensation to the owners for the use of their property, this Court cannot set such amount based on mere surmises and conjecture

WHEREFORE, the petition is PARTLY GRANTED.  The Decision of the Court of Appeals dated September 25, 2002 is MODIFIED to read as follows:

1.  declaring respondent spouses Victor Jr. and Elena Alinas owners of  Lot 896-B-9-A with the building (bodega) standing thereon and affirming the validity of their acquisition thereof from the Rural Bank of Oroquieta, Inc.;

2.  declaring Onesiforo's sale of Lot 896-B-9-B together with the house standing thereon to respondent spouses null and void ab initio;

3.  ordering petitioners to jointly and severally reimburse respondent spouses the redemption amount of P111,110.09 with interest at 6% per annum from the date of filing of the complaint, until finality of this decision.  After this decision becomes final, interest at the rate of 12% per annum on the principal and interest (or any part thereof) shall be imposed until full payment;

4.  ordering the respondent spouses to convey and transfer Lot 896-B-9-B  to petitioners and vacate said premises within fifteen (15) days from finality of this Decision; and

5.  in the event of failure of respondent spouses to execute the acts as specified above, petitioners may proceed against them under Section 10, Rule 39 of the 1997 Rules of Civil Procedure.

No costs.

SO ORDERED.

Ynares-Santiago, (Chairperson), Chico-Nazario, Nachura, and Reyes, JJ., concur.

---

^[1] Penned by Associate Justice Josefina Guevara-Salonga, with Associate Justices Rodrigo V. Cosico and Edgardo F. Sundiam, concurring; rollo, pp. 10-23.

^[2] Id. at 9.

^[3] Exh. "7," records, pp. 207-208.

^[4] Exh. "6," id. at 201-203.

^[5] Exh. "7-C" to "7-G," id. at 209-210.

^[6] Exh. "11," id. at 222-223.

^[7] Exh. "M," id. at 99-100.

^[8] Exh. "Q," id. at 27.

^[9] Exh. "O," id. at 101.

^[10] Exh. "9," id. at 216-217.

^[11] Exh. "15," id at 227.

^[12] Records, p. 246.

^[13] Id. at 248-249.

^[14] Rollo, pp. 60-61.

^[15] Id. at 29-30.

^[16] G.R. No. 158002, February 28, 2005, 452 SCRA 564.

^[17] Id. at 575-576.

^[18] Filinvest Credit Corporation v. Intermediate Appellate Court, G.R. No. L-65935, September 30, 1988; Del Castillo v. Del Castillo, G.R. No. L-33186, June 27, 1988, 162 SCRA 556, 561.

^[19] G.R. No. 153802, March 11, 2005, 453 SCRA 283.

^[20] Id. at 289-291.

^[21] Solid Homes, Inc. v. Tan, G.R. Nos. 145156-57, July 29, 2005, 465 SCRA 137, 149.

^[22] 457 Phil. 120 (2003).

^[23] Id. at 136-137.

^[24] Id. at 140.

^[25] TSN, June 21, 1995, pp. 17-19.

^[26] Id. at 34.

^[27] Id. at 5-6, 12.

^[28] Article 526.  He is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.

He is deemed a possessor in bad faith who possesses in any case contrary to the foregoing.

x x x x

^[29] Article 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor.

x x x x

^[30] Philippine Legal Encyclopedia, 2000 Reprint, p. 530.