Under Article 1490 of the Civil Code, spouses cannot sell property to each other, except: (a) when a separation of property was agreed upon in the marriage settlements; or (b) when there has been a judicial decree for the separation of property.
In addition, Article 1492 provides that the prohibition relating to spouses selling to one another is applicable even to sales in legal redemption, compromises and renunciations.
a. Status of Prohibited Sales Between Spouses
Contracts entered into in violation of Articles 1490 and 1492 are not merely voidable, but have been declared by the Supreme
28Art. 96, Family Code.
29Guiang v. Court of Appeals, 291 SCRA 372 (1998). 30Abalos v. Macatangay, Jr., 439 SCRA 64 (2004).
Court as being null and void.31 However, not anyone is given the right to assail the validity of the transaction. For instance, the spouses themselves, since they are parties to an illegal act, cannot avail themselves of the illegality of the sale on the ground of pari delicto;32 the courts will generally leave them as they are. Also, the creditors who became such only after the transaction, cannot attack the validity of the sale, for it cannot be said that they have been prejudiced by the transaction. Practically, the only persons who can question the sale are the following: the heirs of either of the spouses who have been prejudiced; prior creditors;33 and the State when it comes to the payment of the proper taxes due on the transactions.34
In Medina v. Collector of Internal Revenue,35 defi ciency sales tax were sought to be collected against the sales of lumber products by the wife to the public, although when the husband previously sold the lumber products to the wife (of course at a lower price) he had already paid the sales tax thereon. Considering that only the fi rst and original sales were taxable under the then Tax Code, the spouses held that the second and subsequent sales by the wife to the public could not be subjected to further sales tax. In addition, the spouses alleged that the sales between them were valid since they were governed by the complete separation of property regime pursuant to a pre-nuptial agreement executed between them.
Aside from the fact that the records of the alleged pre-nuptial agreement were non-existent, the Court determined that at the time of their marriage, the spouses had no properties to have warranted them to execute a pre-nuptial agreement for complete separation of property. The Court considered the sales between the spouses as void and non-existent in violation of Article 1490, and considered the sales by the wife to the public as the fi rst and original sales subject to the sales tax.
31Uy Sui Pin v. Cantollas, 70 Phil. 55 (1940); Medina v. Collector, 1 SCRA 302 (1961).
32Modina v. Court of Appeals, 317 SCRA 696 (1999).
33Ibid.
34Medina v. Collector of Internal Revenue, 1 SCRA 302 (1961). 351 SCRA 302 (1961).
b. Rationale for Prohibition
Medina gave the rationale for the relative incapacity of
spouses to sell properties to one another to be as follows: (a) To prevent a spouse defrauding his creditors
by transferring his properties to the other spouse;
(b) To avoid a situation where the dominant spouse would unduly take advantage of the weaker spouse, thereby effectively defrauding the latter; and
(c) To avoid an indirect violation of the prohi- bition against donations between spouses under Article 133 of the Civil Code.
Article 133 of the Civil Code, which declares void every donation between spouses during marriage, seeks to prevent the fi rst two evils enumerated above.36 Article 133 has been replaced by Article 87 of the Family Code which added the provision “The prohibition shall also apply to persons living together as husband and wife without a valid marriage.”
Therefore, the evils sought to be avoided under Articles 133 and 1490 are the same. But unlike Article 1490 which exempts from its prohibition sales between spouses governed by the complete separation of property regime, Article 133, and now Article 87 of the Family Code, do not make such exception in case of donations.
One explanation for the difference in this aspect between Articles 133 and 1490 is that a donation between spouses governed by the complete separation of property regime, being a gratuitous contract, would necessarily reduce the estate of the donor and increase the estate of the donee; while a sale between such spouses, being an onerous and commutative contract, would result in the separate estates of the spouses being of the same value as before the sale and no fraud could result, either to the
spouses or to their creditors.37 This position would also explain the reason why spouses governed by the absolute community of property regime cannot sell to one another because having the same estate between themselves, a sale is not possible because there simply cannot be a purchase of what a party-buyer already owns. The position however, does not explain why a sale between spouses of separate or paraphernal properties would not be allowed as an exception under Article 1490 when the spouses are governed by the conjugal partnership of gains.
c. Rationale for Exceptions to Prohibition under Article 1490
If one were to take at face value the two exceptions to the prohibition of sales between spouses (i.e., sales between spouses governed by complete separation of property regime), it would seem that the evils sought to be avoided also pertain to such situations, and indeed, there is greater danger of undue infl uence or fraud in situations where the spouses are governed by the complete separation of property regime. For in a complete separation of property regime, where the spouses are bound only by their separate properties to their separate creditors and not to the creditors of the other spouses, there would seem to be greater risk that by allowing spouses to sell to one another, as the law allows, the separate creditors of the selling spouses could equally, if not with greater degree, be defrauded.
In addition, just because spouses have a complete separation of property regime does not necessarily discount that one spouse cannot exercise undue infl uence or pressure on the other spouse. Indeed, the fact that one has a weak personality and that the other has a dominant personality cannot be erased or altered by entering into a complete separation of property regime, or any other regime for that matter. In a complete separation of property regime, the dominant spouse may unduly infl uence the weaker spouse, and with greater impunity, legally get away with it.
37Manonsong v. Estimo, 404 SCRA 683 (2003), used this same reasoning in distinguishing the difference in effect between a sale and donation on the legitimes of forced heirs.
Finally, Article 133 which prohibits donations between spouses, does not make an exception to spouses governed by the complete separation of property regime, and therefore donations between such spouses would be void. By allowing under Article 1490 spouses governed by complete separation of property regime to sell to one another, the law would allow the circumvention of the prohibition against donations between spouses governed by the complete separation of property regime. If Article 1490 were meant to be a stop-gap measure to Article 133, why would it leave sales between spouses governed by the complete separation of property regime, outside its pale?
If the matter is considered more closely, it would seem that the exception under Article 1490 on the restriction of sales between spouses, should apply more to spouses governed by the absolute community of property regime, because the evils sought to be avoided by the law cannot for practical purposes happen in such regime, since no matter what undue infl uence is exercised by the dominant spouse, or attempt to defraud the creditor of a spouse, or attempt to circumvent the prohibition against donation, such attempts would prove futile because of the continued existence of the common fund on which both spouses (and their heirs and creditors) can continue to claim. However, as discussed previously, a sale between spouses governed by the absolute community of property regime would be legally meaningless since they have the same estate and represent the same interest.
The key element, it seems to the author, to the exceptions provided for the restrictions under Article 1490, lies in the
psychology of the situation. Legally, there are only two ways
by which a complete separation of property regime could exist between married spouses, namely, by the execution of a pre- nuptial agreement stipulating such property regime to apply, or by the spouses going to court to ask for the dissolution of the prevailing conjugal partnership of gains or absolute community of property regimes.
In either case, the situation bespeaks clearly of hardness of heart on the part of the spouses, showing a business-like
approach to the relationship, rather than of two lovers falling head- over-heels for one another. Whereas, the conjugal partnership of gains or the absolute community of property regime exemplifi es spouses wishing to share most if not all with one another confi rming their romantic fervor. On the other hand, in a situation where spouses who before or at the time they say their “I do’s” would be so cold-hearted and unromantic to pause and stipulate complete separation of property, or who during marriage would be cold-blooded as to agree and seek court separation of their properties, clearly indicates that it would be unlikely that one spouse would allow the other spouse to infl uence him or her; or would allow his or her properties to be involved in a suit covering the creditors of the other spouse. After all, if a spouse takes time and effort to insulate his or her properties from the other spouse, why would he or she later on involve himself or herself in the fraudulent manipulations of the other spouse, and consequently open himself or herself (as well as his or her separate properties) to suits by creditors for fraud and recovery of damages?
But even the foregoing explanation does not adequately cover a situation where a dominant spouse would insist upon the complete separation of property regime, either at the time of the execution of the marriage settlements, or by judicial action during marriage, precisely to venture upon a future course of defraudation or being in a position to defraud either his weaker spouse or his separate creditors. In the end, the absolute prohibition under Article 133, now Article 87 of the Family Code, on donations between spouses, should also be made to apply to sales between spouses, irrespective of their property regime.