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G.R. No. L-41715 June 18, 1976

ROSALIO BONILLA (a minor) SALVACION BONILLA(a minor) and PONCIANO BONILLA (their father)who represents the minors, petitioners,vs.LEON BARCENA, MAXIMA ARIAS BALLENA,ESPERANZA BARCENA, MANUEL BARCENA,AGUSTINA NERI, widow of JULIAN TAMAYO andHON. LEOPOLDO GIRONELLA of the Court of FirstInstance of Abra, respondents.

Federico Paredes for petitioners.

Demetrio V. Pre for private respondents.

MARTIN, J :

This is a petition for review1 of the Order of the Court of

First Instance of Abra in Civil Case No. 856, entitledFortunata Barcena vs. Leon Barcena, et al., denying themotions for reconsideration of its order dismissing thecomplaint in the aforementioned case.

On March 31, 1975 Fortunata Barcena, mother ofminors Rosalio Bonilla and Salvacion Bonilla and wife ofPonciano Bonilla, instituted a civil action in the Court ofFirst Instance of Abra, to quiet title over certain parcelsof land located in Abra.

On May 9, 1975, defendants filed a written motion todismiss the complaint, but before the hearing of themotion to dismiss, the counsel for the plaintiff moved toamend the complaint in order to include certainallegations therein. The motion to amend the complaintwas granted and on July 17, 1975, plaintiffs filed theiramended complaint.

On August 4, 1975, the defendants filed another motionto dismiss the complaint on the ground that FortunataBarcena is dead and, therefore, has no legal capacity tosue. Said motion to dismiss was heard on August 14,1975. In said hearing, counsel for the plaintiff confirmedthe death of Fortunata Barcena, and asked forsubstitution by her minor children and her husband, the

petitioners herein; but the court after the hearingimmediately dismissed the case on the ground that adead person cannot be a real party in interest and hasno legal personality to sue.

On August 19, 1975, counsel for the plaintiff received acopy of the order dismissing the complaint and on August 23, 1975, he moved to set aside the order of thedismissal pursuant to Sections 16 and 17 of Rule 3 ofthe Rules of Court. 2

On August 28, 1975, the court denied the motion forreconsideration filed by counsel for the plaintiff for lackof merit. On September 1, 1975, counsel for deceasedplaintiff filed a written manifestation praying that theminors Rosalio Bonilla and Salvacion Bonilla be allowedto substitute their deceased mother, but the courtdenied the counsel's prayer for lack of merit. From theorder, counsel for the deceased plaintiff filed a secondmotion for reconsideration of the order dismissing thecomplaint claiming that the same is in violation ofSections 16 and 17 of Rule 3 of the Rules of Court butthe same was denied.

Hence, this petition for review.

The Court reverses the respondent Court and sets asideits order dismissing the complaint in Civil Case No. 856and its orders denying the motion for reconsideration ofsaid order of dismissal. While it is true that a personwho is dead cannot sue in court, yet he can besubstituted by his heirs in pursuing the case up to itscompletion. The records of this case show that thedeath of Fortunata Barcena took place on July 9, 1975while the complaint was filed on March 31, 1975. Thismeans that when the complaint was filed on March 31,1975, Fortunata Barcena was still alive, and therefore,the court had acquired jurisdiction over her person. Ifthereafter she died, the Rules of Court prescribes theprocedure whereby a party who died during thependency of the proceeding can be substituted. UnderSection 16, Rule 3 of the Rules of Court "whenever aparty to a pending case dies ... it shall be the duty of hisattorney to inform the court promptly of such death ...and to give the name and residence of his executor,administrator, guardian or other legal representatives."

This duty was complied with by the counsel for thedeceased plaintiff when he manifested before therespondent Court that Fortunata Barcena died on July 9,1975 and asked for the proper substitution of parties inthe case. The respondent Court, however, instead ofallowing the substitution, dismissed the complaint on theground that a dead person has no legal personality tosue. This is a grave error. Article 777 of the Civil Codeprovides "that the rights to the succession aretransmitted from the moment of the death of thedecedent." From the moment of the death of thedecedent, the heirs become the absolute owners of hisproperty, subject to the rights and obligations of the

decedent, and they cannot be deprived of their rightsthereto except by the methods provided for by law.3

The moment of death is the determining factor when theheirs acquire a definite right to the inheritance whethersuch right be pure or contingent. 4 The right of the heirsto the property of the deceased vests in them evenbefore judicial declaration of their being heirs in thetestate or intestate proceedings. 5 When FortunataBarcena, therefore, died her claim or right to the parcelsof land in litigation in Civil Case No. 856, was notextinguished by her death but was transmitted to herheirs upon her death. Her heirs have thus acquiredinterest in the properties in litigation and became parties

in interest in the case. There is, therefore, no reason forthe respondent Court not to allow their substitution asparties in interest for the deceased plaintiff.

Under Section 17, Rule 3 of the Rules of Court "after aparty dies and the claim is not thereby extinguished, thecourt shall order, upon proper notice, the legalrepresentative of the deceased to appear and besubstituted for the deceased, within such time as maybe granted ... ." The question as to whether an actionsurvives or not depends on the nature of the action andthe damage sued for.

6 In the causes of action which

survive the wrong complained affects primarily andprincipally property and property rights, the injuries tothe person being merely incidental, while in the causesof action which do not survive the injury complained of isto the person, the property and rights of propertyaffected being incidental. 7 Following the foregoingcriterion the claim of the deceased plaintiff which is anaction to quiet title over the parcels of land in litigationaffects primarily and principally property and propertyrights and therefore is one that survives even after herdeath. It is, therefore, the duty of the respondent Courtto order the legal representative of the deceased plaintiffto appear and to be substituted for her. But what the



respondent Court did, upon being informed by thecounsel for the deceased plaintiff that the latter wasdead, was to dismiss the complaint. This should nothave been done for under the same Section 17, Rule 3of the Rules of Court, it is even the duty of the court, ifthe legal representative fails to appear, to order theopposing party to procure the appointment of a legalrepresentative of the deceased. In the instant case therespondent Court did not have to bother ordering the

opposing party to procure the appointment of a legalrepresentative of the deceased because her counselhas not only asked that the minor children besubstituted for her but also suggested that their uncle beappointed as guardian ad litem for them because theirfather is busy in Manila earning a living for the family.But the respondent Court refused the request forsubstitution on the ground that the children were stillminors and cannot sue in court. This is another graveerror because the respondent Court ought to haveknown that under the same Section 17, Rule 3 of theRules of Court, the court is directed to appoint aguardian ad litem for the minor heirs. Precisely in the

instant case, the counsel for the deceased plaintiff hassuggested to the respondent Court that the uncle of theminors be appointed to act as guardian ad litem forthem. Unquestionably, the respondent Court hasgravely abused its discretion in not complying with theclear provision of the Rules of Court in dismissing thecomplaint of the plaintiff in Civil Case No. 856 andrefusing the substitution of parties in the case.

IN VIEW OF THE FOREGOING, the order of therespondent Court dismissing the complaint in Civil CaseNo. 856 of the Court of First Instance of Abra and themotions for reconsideration of the order of dismissal of

said complaint are set aside and the respondent Courtis hereby directed to allow the substitution of the minorchildren, who are the petitioners therein for thedeceased plaintiff and to appoint a qualified person asguardian ad litem for them. Without pronouncement asto costs.

SO ORDERED.

Teehankee (Chairman), Makasiar, Esguerra and MuñozPalma, JJ., concur.

Footnotes

1 Which this Court treats as special civil action as per itsResolution dated February 11, 1976.

2 Section 16. Duty of Attorney upon which death,incapacity or incompetency of party . - Whenever a partyto a pending case dies, becomes incapacitated orincompetent, it shall be the duty of his attorney to informthe court promptly of such death, incapacity orincompetency, and to give the name and residence ofhis executor, administrator, guardian or other legalrepresentative.

Section 17. Death of party.— After a party dies and theclaim is not thereby extinguished, the court shall order,upon proper notice, the legal representative of thedeceased to appear and to be substituted for deceased,within a period of thirty (30) days, or within such time asmay be granted. If the legal representative fails toappear within said time, the court may order theopposing party to procure the appointment of a legalrepresentative of the within a time to be specified by thecourt, and the representative shall immediately appearfor and on behalf of the interest of the deceased. The

court charges involved in procuring such appointment, ifdefrayed by the opposing party, may be recovered ascosts. The heirs of the deceased may be allowed to besubstituted for the deceased, without requiring theappointment of an executor or administrator and thecourt may appoint guardian ad litem for the minor heirs.

3 Buan vs. Heirs of Buan, 53 Phil. 654.

4 Ibarle vs. Po, 92 Phil. 721.

5 Morales, et al. vs. Ybanez, 98 Phil. 677.

6 Iron Gate Bank vs. Brady, 184 U.S. 665, 22 SCT 529,46 L. ed. 739.

7 Wenber vs. St. Paul City Co., 97 Feb. 140 R. 39C.C.A. 79.

EN BANC

[G.R. No. L-8437. November 28, 1956.] ESTATE OF K. H. HEMADY, deceased, vs. LUZON

SURETY CO., INC., claimant-Appel lant .

D E C I S I O N

REYES, J. B. L., J .:

Appeal by Luzon Surety Co., Inc., from an order of theCourt of First Instance of Rizal, presided by JudgeHermogenes Caluag, dismissing its claim against theEstate of K. H. Hemady (Special Proceeding No. Q-293)for failure to state a cause of action.

The Luzon Surety Co. had filed a claim against theEstate based on twenty different indemnity agreements,or counter bonds, each subscribed by a distinct principaland by the deceased K. H. Hemady, a surety solidaryguarantor) in all of them, in consideration of the LuzonSurety Co.‘s of having guaranteed, the variousprincipals in favor of different creditors. The twentycounterbonds, or indemnity agreements, all containedthe following stipulations:chanroblesvirtuallawlibrary

―Premiums. — As consideration for this suretyship, theundersigned jointly and severally, agree to pay theCOMPANY the sum of ________________ (P______)

pesos, Philippines Currency, in advance as premiumthere of for every __________ months or fractionsthereof, this ________ or any renewal or substitutionthereof is in effect.

Indemnity. — The undersigned, jointly and severally,agree at all times to indemnify the COMPANY and keepit indemnified and hold and save it harmless from andagainst any and all damages, losses, costs, stamps,taxes, penalties, charges, and expenses of whatsoeverkind and nature which the COMPANY shall or may, atany time sustain or incur in consequence of havingbecome surety upon this bond or any extension,renewal, substitution or alteration thereof made at the

instance of the undersigned or any of them or any orderexecuted on behalf of the undersigned or any of them;chan roblesvirtualawlibraryand to pay, reimburse andmake good to the COMPANY, its successors andassigns, all sums and amount of money which it or itsrepresentatives shall pay or cause to be paid, orbecome liable to pay, on account of the undersigned orany of them, of whatsoever kind and nature, including15% of the amount involved in the litigation or othermatters growing out of or connected therewith forcounsel or attorney‘s fees, but in no case less than P25.It is hereby further agreed that in case of extension or



renewal of this ________ we equally bind ourselves forthe payment thereof under the same terms andconditions as above mentioned without the necessity ofexecuting another indemnity agreement for the purposeand that we hereby equally waive our right to be notifiedof any renewal or extension of this ________ which maybe granted under this indemnity agreement.

Interest on amount paid by the Company. — Any and all

sums of money so paid by the company shall bearinterest at the rate of 12% per annum which interest, ifnot paid, will be accummulated and added to the capitalquarterly order to earn the same interests as the capitaland the total sum thereof, the capital and interest, shallbe paid to the COMPANY as soon as the COMPANYshall have become liable therefore, whether it shall havepaid out such sums of money or any part thereof or not.

x x x x x x x x x

Waiver. — It is hereby agreed upon by and between theundersigned that any question which may arise betweenthem by reason of this document and which has to besubmitted for decision to Courts of Justice shall bebrought before the Court of competent jurisdiction in theCity of Manila, waiving for this purpose any other venue.Our right to be notified of the acceptance and approvalof this indemnity agreement is hereby likewise waived.

x x x x x x x x x

Our Liability Hereunder. — It shall not be necessary forthe COMPANY to bring suit against the principal uponhis default, or to exhaust the property of the principal,but the liability hereunder of the undersigned indemnitorshall be jointly and severally, a primary one, the sameas that of the principal, and shall be exigibleimmediately upon the occurrence of such default.‖ (Rec.

App. pp. 98- 102.)

The Luzon Surety Co., prayed for allowance, as acontingent claim, of the value of the twenty bonds it hadexecuted in consideration of the counterbonds, andfurther asked for judgment for the unpaid premiums anddocumentary stamps affixed to the bonds, with 12 percent interest thereon.

Before answer was filed, and upon motion of theadministratrix of Hemady‘s estate, the lower court, byorder of September 23, 1953, dismissed the claims ofLuzon Surety Co., on twogrounds:chanroblesvirtuallawlibrary (1) that the

premiums due and cost of documentary stamps werenot contemplated under the indemnity agreements to bea part of the undertaking of the guarantor (Hemady),since they were not liabilities incurred after theexecution of the counterbonds; chanroblesvirtualawlibraryand (2) that ―whatever losses mayoccur after Hemady‘s death, are not chargeable to hisestate, because upon his death he ceased to beguarantor.‖

Taking up the latter point first, since it is the one morefar reaching in effects, the reasoning of the court belowran as follows:chanroblesvirtuallawlibrary

―The administratrix further contends that upon the deathof Hemady, his liability as a guarantor terminated, andtherefore, in the absence of a showing that a loss ordamage was suffered, the claim cannot be consideredcontingent. This Court believes that there is merit in thiscontention and finds support in Article 2046 of the newCivil Code. It should be noted that a new requirementhas been added for a person to qualify as a guarantor,that is:chanroblesvirtuallawlibrary integrity. As correctlypointed out by the Administratrix, integrity is somethingpurely personal and is not transmissible. Upon the deathof Hemady, his integrity was not transmitted to his

estate or successors. Whatever loss therefore, mayoccur after Hemady‘s death, are not chargeable to hisestate because upon his death he ceased to be aguarantor.

Another clear and strong indication that the suretycompany has exclusively relied on the personality,character, honesty and integrity of the now deceased K.H. Hemady, was the fact that in the printed form of the

indemnity agreement there is a paragraph entitled‗Security by way of first mortgage, which was expresslywaived and renounced by the security company. Thesecurity company has not demanded from K. H.Hemady to comply with this requirement of givingsecurity by way of first mortgage. In the supportingpapers of the claim presented by Luzon SuretyCompany, no real property was mentioned in the list ofproperties mortgaged which appears at the back of theindemnity agreement.‖ (Rec. App., pp. 407-408).

We find this reasoning untenable. Under the presentCivil Code (Article 1311), as well as under the CivilCode of 1889 (Article 1257), the rule is that —

―Contracts take effect only as between the parties, theirassigns and heirs, except in the case where the rightsand obligations arising from the contract are nottransmissible by their nature, or by stipulation or byprovision of law.‖

While in our successional system the responsibility ofthe heirs for the debts of their decedent cannot exceedthe value of the inheritance they receive from him, theprinciple remains intact that these heirs succeed notonly to the rights of the deceased but also to hisobligations. Articles 774 and 776 of the New Civil Code(and Articles 659 and 661 of the preceding one)

expressly so provide, thereby confirming Article 1311already quoted.

―ART. 774. — Succession is a mode of acquisition byvirtue of which the property, rights and obligations to theextent of the value of the inheritance, of a person aretransmitted through his death to another or others eitherby his will or by operation of law.‖

―ART. 776. — The inheritance includes all the property,rights and obligations of a person which are notextinguished by his death.‖

In Mojica vs. Fernandez, 9 Phil. 403, this SupremeCourt ruled:chanroblesvirtuallawlibrary

―Under the Civil Code the heirs, by virtue of the rights ofsuccession are subrogated to all the rights andobligations of the deceased (Article 661) and cannot beregarded as third parties with respect to a contract towhich the deceased was a party, touching the estate ofthe deceased (Barrios vs. Dolor, 2 Phil. 44).

x x x x x x x x x

―The principle on which these decisions rest is notaffected by the provisions of the new Code of CivilProcedure, and, in accordance with that principle, theheirs of a deceased person cannot be held to be ―thirdpersons‖ in relation to any contracts touching the real

estate of their decedent which comes in to their handsby right of inheritance; chan roblesvirtualawlibrarytheytake such property subject to all the obligations restingthereon in the hands of him from whom they derive theirrights.‖

(See also Galasinao vs. Austria, 51 Off. Gaz. (No. 6) p.2874 and de Guzman vs. Salak, 91 Phil., 265).

The binding effect of contracts upon the heirs of thedeceased party is not altered by the provision in ourRules of Court that money debts of a deceased must beliquidated and paid from his estate before the residue is



distributed among said heirs (Rule 89). The reason isthat whatever payment is thus made from the estate isultimately a payment by the heirs and distributees, sincethe amount of the paid claim in fact diminishes orreduces the shares that the heirs would have beenentitled to receive.

Under our law, therefore, the general rule is that aparty‘s contractual rights and obligations are

transmissible to the successors. The rule is aconsequence of the progressive ―depersonalization‖ ofpatrimonial rights and duties that, as observed byVictorio Polacco, has characterized the history of theseinstitutions. From the Roman concept of a relation fromperson to person, the obligation has evolved into arelation from patrimony to patrimony, with the personsoccupying only a representative position, barring thoserare cases where the obligation is strictly personal, i.e.,is contracted intuitu personae, in consideration of itsperformance by a specific person and by no other. Thetransition is marked by the disappearance of theimprisonment for debt.

Of the three exceptions fixed by Article 1311, the natureof the obligation of the surety or guarantor does notwarrant the conclusion that his peculiar individualqualities are contemplated as a principal inducement forthe contract. What did the creditor Luzon Surety Co.expect of K. H. Hemady when it accepted the latter assurety in the counterbonds? Nothing but thereimbursement of the moneys that the Luzon Surety Co.might have to disburse on account of the obligations ofthe principal debtors. This reimbursement is a paymentof a sum of money, resulting from an obligation to give;chan roblesvirtualawlibraryand to the Luzon Surety Co.,it was indifferent that the reimbursement should be

made by Hemady himself or by some one else in hisbehalf, so long as the money was paid to it.

The second exception of Article 1311, p. 1, isintransmissibility by stipulation of the parties. Beingexceptional and contrary to the general rule, thisintransmissibility should not be easily implied, but mustbe expressly established, or at the very least, clearlyinferable from the provisions of the contract itself, andthe text of the agreements sued upon nowhere indicatethat they are non-transferable.

―(b) Intransmisibilidad por pacto. — Lo general es latransmisibilidad de darechos y obligaciones; chanroblesvirtualawlibraryle excepcion, la intransmisibilidad.Mientras nada se diga en contrario impera el principiode la transmision, como elemento natural a todarelacion juridica, salvo las personalisimas. Asi, para lano transmision, es menester el pacto expreso, porque sino, lo convenido entre partes trasciende a susherederos.

Siendo estos los continuadores de la personalidad delcausante, sobre ellos recaen los efectos de los vinculos juridicos creados por sus antecesores, y para evitarlo, siasi se quiere, es indespensable convension terminanteen tal sentido.

Por su esencia, el derecho y la obligacion tienden a ir

más allá de las personas que les dieron vida, y a ejercerpresion sobre los sucesores de esa persona; chanroblesvirtualawlibrarycuando no se quiera esto, seimpone una estipulacion limitativa expresamente de latransmisibilidad o de cuyos tirminos claramente sededuzca la concresion del concreto a las mismaspersonas que lo otorgon.‖ (Scaevola, Codigo Civil,Tomo XX, p. 541-542) (Emphasis supplied.)

Because under the law (Article 1311), a person whoenters into a contract is deemed to have contracted forhimself and his heirs and assigns, it is unnecessary for

him to expressly stipulate to that effect; chanroblesvirtualawlibraryhence, his failure to do so is nosign that he intended his bargain to terminate upon hisdeath. Similarly, that the Luzon Surety Co., did notrequire bondsman Hemady to execute a mortgageindicates nothing more than the company‘s faith andconfidence in the financial stability of the surety, but notthat his obligation was strictly personal.

The third exception to the transmissibility of obligationsunder Article 1311 exists when they are ―nottransmissible by operation of law‖. The provision makesreference to those cases where the law expresses thatthe rights or obligations are extinguished by death, as isthe case in legal support (Article 300), parental authority(Article 327), usufruct (Article 603), contracts for a pieceof work (Article 1726), partnership (Article 1830 andagency (Article 1919). By contract, the articles of theCivil Code that regulate guaranty or suretyship (Articles2047 to 2084) contain no provision that the guaranty isextinguished upon the death of the guarantor or thesurety.

The lower court sought to infer such a limitation from Art. 2056, to the effect that ―one who is obliged tofurnish a guarantor must present a person whopossesses integrity, capacity to bind himself, andsufficient property to answer for the obligation which heguarantees‖. It will be noted, however, that the lawrequires these qualities to be present only at the time ofthe perfection of the contract of guaranty. It is self-evident that once the contract has become perfectedand binding, the supervening incapacity of the guarantorwould not operate to exonerate him of the eventualliability he has contracted; chanroblesvirtualawlibraryand if that be true of his capacity to

bind himself, it should also be true of his integrity, whichis a quality mentioned in the article alongside thecapacity.

The foregoing concept is confirmed by the next Article2057, that runs as follows:chanroblesvirtuallawlibrary

―ART. 2057. — If the guarantor should be convicted infirst instance of a crime involving dishonesty or shouldbecome insolvent, the creditor may demand anotherwho has all the qualifications required in the precedingarticle. The case is excepted where the creditor hasrequired and stipulated that a specified person shouldbe guarantor.‖

From this article it should be immediately apparent thatthe supervening dishonesty of the guarantor (that is tosay, the disappearance of his integrity after he hasbecome bound) does not terminate the contract butmerely entitles the creditor to demand a replacement ofthe guarantor. But the step remains optional in thecreditor:chanroblesvirtuallawlibrary it is his right, not hisduty; chan roblesvirtualawlibraryhe may waive it if hechooses, and hold the guarantor to his bargain. Hence Article 2057 of the present Civil Code is incompatiblewith the trial court‘s stand that the requirement ofintegrity in the guarantor or surety makes the latter‘sundertaking strictly personal, so linked to his

individuality that the guaranty automatically terminatesupon his death.

The contracts of suretyship entered into by K. H.Hemady in favor of Luzon Surety Co. not beingrendered intransmissible due to the nature of theundertaking, nor by the stipulations of the contractsthemselves, nor by provision of law, his eventual liabilitythereunder necessarily passed upon his death to hisheirs. The contracts, therefore, give rise to contingentclaims provable against his estate under section 5, Rule87 (2 Moran, 1952 ed., p. 437; chan



roblesvirtualawlibraryGaskell & Co. vs. Tan Sit, 43 Phil.810, 814).

―The most common example of the contigent claim isthat which arises when a person is bound as surety orguarantor for a principal who is insolvent or dead. Underthe ordinary contract of suretyship the surety has noclaim whatever against his principal until he himselfpays something by way of satisfaction upon the

obligation which is secured. When he does this, thereinstantly arises in favor of the surety the right to compelthe principal to exonerate the surety. But until the suretyhas contributed something to the payment of the debt,or has performed the secured obligation in whole or inpart, he has no right of action against anybody — noclaim that could be reduced to judgment. (May vs. Vann,15 Pla., 553; chan roblesvirtualawlibraryGibson vs.Mithell, 16 Pla., 519; chan roblesvirtualawlibraryMaxeyvs. Carter, 10 Yarg. [Tenn.], 521 Reeves vs. Pulliam, 7Baxt. [Tenn.], 119; chan roblesvirtualawlibraryErnst vs.Nou, 63 Wis., 134.)‖

For Defendant administratrix it is averred that the above

doctrine refers to a case where the surety files claimsagainst the estate of the principal debtor; chanroblesvirtualawlibraryand it is urged that the rule doesnot apply to the case before us, where the late Hemadywas a surety, not a principal debtor. The argumentevinces a superficial view of the relations betweenparties. If under the Gaskell ruling, the Luzon SuretyCo., as guarantor, could file a contingent claim againstthe estate of the principal debtors if the latter should die,there is absolutely no reason why it could not file such aclaim against the estate of Hemady, since Hemady is asolidary co-debtor of his principals. What the LuzonSurety Co. may claim from the estate of a principal

debtor it may equally claim from the estate of Hemady,since, in view of the existing solidarity, the latter doesnot even enjoy the benefit of exhaustion of the assets ofthe principal debtor.

The foregoing ruling is of course without prejudice to theremedies of the administratrix against the principaldebtors under Articles 2071 and 2067 of the New CivilCode.

Our conclusion is that the solidary guarantor‘s liability isnot extinguished by his death, and that in such event,the Luzon Surety Co., had the right to file against theestate a contingent claim for reimbursement. It becomesunnecessary now to discuss the estate‘s liability forpremiums and stamp taxes, because irrespective of thesolution to this question, the Luzon Surety‘s claim didstate a cause of action, and its dismissal waserroneous.

Wherefore, the order appealed from is reversed, and therecords are ordered remanded to the court of origin,with instructions to proceed in accordance with law.Costs against the Administratrix- Appellee. SOORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. L-68053 May 7, 1990

LAURA ALVAREZ, FLORA ALVAREZ andRAYMUNDO ALVAREZ, petitioners,vs.THE HONORABLE INTERMEDIATE APELLATECOURT and JESUS YANES, ESTELITA YANES,ANTONIO YANES, ROSARIO YANES, andILUMINADO YANES, respondents.

Francisco G. Banzon for petitioner.

Renecio R. Espiritu for private respondents.

FERNAN, C.J.:

This is a petition for review on certiorari seeking thereversal of: (a) the decision of the Fourth Civil CasesDivision of the Intermediate Appellate Court dated August 31, 1983 in AC-G.R. CV No. 56626 entitled"Jesus Yanes et al. v. Dr. Rodolfo Siason et al."

affirming the decision dated July 8, 1974 of the Court ofFirst Instance of Negros Occidental insofar as it orderedthe petitioners to pay jointly and severally the privaterespondents the sum of P20,000.00 representing theactual value of Lots Nos. 773-A and 773-B of thecadastral survey of Murcia, Negros Occidental andreversing the subject decision insofar as it awarded thesums of P2,000.00, P5,000.00 and P2,000.00 as actualdamages, moral damages and attorney's fees,respectively and (b) the resolution of said appellatecourt dated May 30, 1984, denying the motion forreconsideration of its decision.

The real properties involved are two parcels of landidentified as Lot 773-A and Lot 773-B which wereoriginally known as Lot 773 of the cadastral survey ofMurcia, Negros Occidental. Lot 773, with an area of156,549 square meters, was registered in the name ofthe heirs of Aniceto Yanes under Original Certificate ofTitle No. RO-4858 (8804) issued on October 9, 1917 bythe Register of Deeds of Occidental Negros (Exh. A).

Aniceto Yanes was survived by his children, Rufino,Felipe and Teodora. Herein private respondents,Estelita, Iluminado and Jesus, are the children of Rufinowho died in 1962 while the other private respondents,

Antonio and Rosario Yanes, are children of Felipe.Teodora was survived by her child, Jovita (Jovito) Alib. 1

It is not clear why the latter is not included as a party inthis case.

Aniceto left his children Lots 773 and 823. Teodoracultivated only three hectares of Lot 823 as she couldnot attend to the other portions of the two lots which hada total area of around twenty-four hectares. The recorddoes not show whether the children of Felipe alsocultivated some portions of the lots but it is establishedthat Rufino and his children left the province to settle inother places as a result of the outbreak of World War II.

According to Estelita, from the "Japanese time up topeace time", they did not visit the parcels of land inquestion but "after liberation", when her brother wentthere to get their share of the sugar produced therein,he was informed that Fortunato Santiago, Fuentebella(Puentevella) and Alvarez were in possession of Lot773.

2

It is on record that on May 19, 1938, Fortunato D.Santiago was issued Transfer Certificate of Title No. RF2694 (29797) covering Lot 773-A with an area of 37,818square meters.

3 TCT No. RF 2694 describes Lot 773-A



as a portion of Lot 773 of the cadastral survey of Murciaand as originally registered under OCT No. 8804.

The bigger portion of Lot 773 with an area of 118,831square meters was also registered in the name ofFortunato D. Santiago on September 6, 1938 UnderTCT No. RT-2695 (28192 ).

4 Said transfer certificate of

title also contains a certification to the effect that Lot773-B was originally registered under OCT No. 8804.

On May 30, 1955, Santiago sold Lots 773-A and 773-Bto Monico B. Fuentebella, Jr. in consideration of the sumof P7,000.00.

5 Consequently, on February 20, 1956,

TCT Nos. T-19291 and T-19292 were issued inFuentebella's name.

6

After Fuentebella's death and during the settlement ofhis estate, the administratrix thereof (Arsenia R. Vda. deFuentebella, his wife) filed in Special Proceedings No.4373 in the Court of First Instance of Negros Occidental,a motion requesting authority to sell Lots 773-A and773-B.

7 By virtue of a court order granting said motion,

8 on March 24, 1958, Arsenia Vda. de Fuentebella soldsaid lots for P6,000.00 to Rosendo Alvarez.

9 Hence, on

April 1, 1958 TCT Nos. T-23165 and T-23166 coveringLots 773-A and 773-B were respectively issued toRosendo Alvarez.

10

Two years later or on May 26, 1960, Teodora Yanesand the children of her brother Rufino, namely, Estelita,Iluminado and Jesus, filed in the Court of First Instanceof Negros Occidental a complaint against FortunatoSantiago, Arsenia Vda. de Fuentebella, Alvarez and theRegister of Deeds of Negros Occidental for the "return"of the ownership and possession of Lots 773 and 823.They also prayed that an accounting of the produce ofthe land from 1944 up to the filing of the complaint bemade by the defendants, that after court approval ofsaid accounting, the share or money equivalent due theplaintiffs be delivered to them, and that defendants beordered to pay plaintiffs P500.00 as damages in theform of attorney's fees.

11

During the pendency in court of said case or onNovember 13, 1961, Alvarez sold Lots 773-A, 773-Band another lot for P25,000.00 to Dr. Rodolfo Siason. 12

Accordingly, TCT Nos. 30919 and 30920 were issued toSiason, 13 who thereafter, declared the two lots in hisname for assessment purposes. 14

Meanwhile, on November 6, 1962, Jesus Yanes, in hisown behalf and in behalf of the other plaintiffs, andassisted by their counsel, filed a manifestation in CivilCase No. 5022 stating that the therein plaintiffs"renounce, forfeit and quitclaims (sic ) any claim,monetary or otherwise, against the defendant ArseniaVda. de Fuentebella in connection with the above-entitled case."

15

On October 11, 1963, a decision was rendered by the

Court of First Instance of Negros Occidental in CivilCase No. 5022, the dispositive portion of which reads:

WHEREFORE, judgment is rendered, ordering thedefendant Rosendo Alvarez to reconvey to the plaintiffslots Nos. 773 and 823 of the Cadastral Survey ofMurcia, Negros Occidental, now covered by TransferCertificates of Title Nos. T-23165 and T-23166 in thename of said defendant, and thereafter to deliver thepossession of said lots to the plaintiffs. No specialpronouncement as to costs.

SO ORDERED.16

It will be noted that the above-mentioned manifestationof Jesus Yanes was not mentioned in the aforesaiddecision.

However, execution of said decision provedunsuccessful with respect to Lot 773. In his return of

service dated October 20, 1965, the sheriff stated thathe discovered that Lot 773 had been subdivided intoLots 773-A and 773-B; that they were "in the name" ofRodolfo Siason who had purchased them from Alvarez,and that Lot 773 could not be delivered to the plaintiffsas Siason was "not a party per writ of execution."

17

The execution of the decision in Civil Case No. 5022having met a hindrance, herein private respondents (theYaneses) filed on July 31, 1965, in the Court of FirstInstance of Negros Occidental a petition for theissuance of a new certificate of title and for a declarationof nullity of TCT Nos. T-23165 and T-23166 issued toRosendo Alvarez.

18 Thereafter, the court required

Rodolfo Siason to produce the certificates of titlecovering Lots 773 and 823.

Expectedly, Siason filed a manifestation stating that hepurchased Lots 773-A, 773-B and 658, not Lots 773 and823, "in good faith and for a valuable considerationwithout any knowledge of any lien or encumbrancesagainst said properties"; that the decision in thecadastral proceeding

19 could not be enforced against

him as he was not a party thereto; and that the decisionin Civil Case No. 5022 could neither be enforced againsthim not only because he was not a party-litigant thereinbut also because it had long become final andexecutory. 20 Finding said manifestation to be well-founded, the cadastral court, in its order of September4, 1965, nullified its previous order requiring Siason tosurrender the certificates of title mentioned therein. 21

In 1968, the Yaneses filed an ex-parte motion for theissuance of an alias writ of execution in Civil Case No.5022. Siason opposed it. 22

In its order of September 28,1968 in Civil Case No. 5022, the lower court, noting thatthe Yaneses had instituted another action for therecovery of the land in question, ruled that at the judgment therein could not be enforced against Siasonas he was not a party in the case. 23

The action filed by the Yaneses on February 21, 1968was for recovery of real property with damages.

24

Named defendants therein were Dr. Rodolfo Siason,Laura Alvarez, Flora Alvarez, Raymundo Alvarez andthe Register of Deeds of Negros Occidental. TheYaneses prayed for the cancellation of TCT Nos. T-19291 and 19292 issued to Siason (sic ) for being nulland void; the issuance of a new certificate of title in thename of the Yaneses "in accordance with the sheriffsreturn of service dated October 20, 1965;" Siason'sdelivery of possession of Lot 773 to the Yaneses; and if,delivery thereof could not be effected, or, if the issuanceof a new title could not be made, that the Alvarez andSiason jointly and severally pay the Yaneses the sum ofP45,000.00. They also prayed that Siason render anaccounting of the fruits of Lot 773 from November 13,1961 until the filing of the complaint; and that thedefendants jointly and severally pay the Yaneses moraldamages of P20,000.00 and exemplary damages ofP10,000.00 plus attorney's fees of P4, 000.00. 25

In his answer to the complaint, Siason alleged that thevalidity of his titles to Lots 773-A and 773-B, having



been passed upon by the court in its order of September4, 1965, had become res judicata and the Yaneseswere estopped from questioning said order. 26

On theirpart, the Alvarez stated in their answer that theYaneses' cause of action had been "barred by res judicata, statute of limitation and estoppel." 27

In its decision of July 8, 1974, the lower court found thatRodolfo Siason, who purchased the properties inquestion thru an agent as he was then in Mexicopursuing further medical studies, was a buyer in goodfaith for a valuable consideration. Although the Yaneseswere negligent in their failure to place a notice of lis pendens "before the Register of Deeds of NegrosOccidental in order to protect their rights over theproperty in question" in Civil Case No. 5022, equitydemanded that they recover the actual value of the landbecause the sale thereof executed between Alvarez andSiason was without court approval.

28 The dispositive

portion of the decision states:

IN VIEW OF THE FOREGOING CONSIDERATION, judgment is hereby rendered in the following manner:

A. The case against the defendant Dr. Rodolfo Siasonand the Register of Deeds are (sic ) hereby dismmissed,

B. The defendants, Laura, Flora and Raymundo, allsurnamed Alvarez being the legitimate children of thedeceased Rosendo Alvarez are hereby ordered to pay jointly and severally the plaintiffs the sum of P20,000.00representing the actual value of Lots Nos. 773-A and773-B of Murcia Cadastre, Negros Occidental; the sumof P2,000.00 as actual damages suffered by the plaintiff;the sum of P5,000.00 representing moral damages andthe sum of P2.000 as attorney's fees, all with legal rateof interest from date of the filing of this complaint up tofinal payment.

C. The cross-claim filed by the defendant Dr. RodolfoSiason against the defendants, Laura, Flora andRaymundo, all surnamed Alvarez is hereby dismissed.

D. Defendants, Laura, Flora and Raymundo, allsurnamed Alvarez are hereby ordered to pay the costsof this suit.

SO ORDERED.29

The Alvarez appealed to the then Intermediate Appellate Court which in its decision of August 31, 198330

affirmed the lower court's decision "insofar as itordered defendants-appellants to pay jointly andseverally the plaintiffs-appellees the sum of P20,000.00representing the actual value of Lots Nos. 773-A and773-B of the cadastral survey of Murcia, NegrosOccidental, and is reversed insofar as it awarded thesums of P2,000.00, P5,000.00 and P2,000.00 as actualdamages, moral damages and attorney's fees,respectively." 31

The dispositive portion of said decision

reads:

WHEREFORE, the decision appealed from is affirmedinsofar as it ordered defendants-appellants to pay jointlyand severally the plaintiffs- appellees the sum ofP20,000.00 representing the actual value of Lots Nos.773-A and 773-B of the cadastral survey of Murcia,Negros Occidental, and is reversed insofar as itawarded the sums of P2,000.00, P5,000.00 andP2,000.00 as actual damages, moral damages andattorney's fees, respectively. No costs.

SO ORDERED.32

Finding no cogent reason to grant appellants motion forreconsideration, said appellate court denied the same.

Hence, the instant petition. ln their memorandumpetitioners raised the following issues:

1. Whethere or not the defense of prescription andestoppel had been timely and properly invoked andraised by the petitioners in the lower court.

2. Whether or not the cause and/or causes of action ofthe private respondents, if ever there are any, asalleged in their complaint dated February 21, 1968which has been docketed in the trial court as Civil CaseNo. 8474 supra, are forever barred by statute oflimitation and/or prescription of action and estoppel.

3. Whether or not the late Rosendo Alvarez, adefendant in Civil Case No. 5022, supra and father of

the petitioners become a privy and/or party to the waiver(Exhibit 4-defendant Siason) in Civil Case No. 8474,supra where the private respondents had unqualifiedlyand absolutely waived, renounced and quitclaimed alltheir alleged rights and interests, if ever there is any, onLots Nos. 773-A and 773-B of Murcia Cadastre asappearing in their written manifestation dated November6, 1962 (Exhibits "4" Siason) which had not beencontroverted or even impliedly or indirectly denied bythem.

4. Whether or not the liability or liabilities of Rosendo Alvarez arising from the sale of Lots Nos. 773-A and

773-B of Murcia Cadastre to Dr. Rodolfo Siason, if everthere is any, could be legally passed or transmitted byoperations (sic ) of law to the petitioners without violationof law and due process .

33

The petition is devoid of merit.

As correctly ruled by the Court of Appeals, it ispowerless and for that matter so is the Supreme Court,to review the decision in Civil Case No. 5022 ordering Alvarez to reconvey the lots in dispute to herein privaterespondents. Said decision had long become final andexecutory and with the possible exception of Dr. Siason,

who was not a party to said case, the decision in CivilCase No. 5022 is the law of the case between theparties thereto. It ended when Alvarez or his heirs failedto appeal the decision against them.

34

Thus, it is axiomatic that when a right or fact has been judicially tried and determined by a court of competent jurisdiction, so long as it remains unreversed, it shouldbe conclusive upon the parties and those in privity withthem in law or estate.

35 As consistently ruled by this

Court, every litigation must come to an end. Access tothe court is guaranteed. But there must be a limit to it.Once a litigant's right has been adjudicated in a valid

final judgment of a competent court, he should not begranted an unbridled license to return for another try.The prevailing party should not be harassed bysubsequent suits. For, if endless litigation were to beallowed, unscrupulous litigations will multiply in numberto the detriment of the administration of justice. 36

There is no dispute that the rights of the Yaneses to theproperties in question have been finally adjudicated inCivil Case No. 5022. As found by the lower court, fromthe uncontroverted evidence presented, the Yaneseshave been illegally deprived of ownership and



possession of the lots in question.37

In fact, Civil CaseNo. 8474 now under review, arose from the failure toexecute Civil Case No. 5022, as subject lots can nolonger be reconveyed to private respondents Yaneses,the same having been sold during the pendency of thecase by the petitioners' father to Dr. Siason who did notknow about the controversy, there being no lis pendensannotated on the titles. Hence, it was also settledbeyond question that Dr. Siason is a purchaser in good

faith.

Under the circumstances, the trial court did not annulthe sale executed by Alvarez in favor of Dr. Siason onNovember 11, 1961 but in fact sustained it. The trialcourt ordered the heirs of Rosendo Alvarez who lost inCivil Case No. 5022 to pay the plaintiffs (privaterespondents herein) the amount of P20,000.00representing the actual value of the subdivided lots indispute. It did not order defendant Siason to pay saidamount.

38

As to the propriety of the present case, it has long beenestablished that the sole remedy of the landownerwhose property has been wrongfully or erroneouslyregistered in another's name is to bring an ordinaryaction in the ordinary court of justice for reconveyanceor, if the property has passed into the hands of aninnocent purchaser for value, for damages.

39 "It is one

thing to protect an innocent third party; it is entirely adifferent matter and one devoid of justification if deceitwould be rewarded by allowing the perpetrator to enjoythe fruits of his nefarious decided As clearly revealed bythe undeviating line of decisions coming from this Court,such an undesirable eventuality is precisely sought tobe guarded against." 40

The issue on the right to the properties in litigationhaving been finally adjudicated in Civil Case No. 5022 infavor of private respondents, it cannot now be reopenedin the instant case on the pretext that the defenses ofprescription and estoppel have not been properlyconsidered by the lower court. Petitioners could haveappealed in the former case but they did not. They havetherefore foreclosed their rights, if any, and they cannotnow be heard to complain in another case in order todefeat the enforcement of a judgment which has longingbecome final and executory.

Petitioners further contend that the liability arising fromthe sale of Lots No. 773-A and 773-B made by Rosendo Alvarez to Dr. Rodolfo Siason should be the sole liabilityof the late Rosendo Alvarez or of his estate, after hisdeath.

Such contention is untenable for it overlooks thedoctrine obtaining in this jurisdiction on the generaltransmissibility of the rights and obligations of thedeceased to his legitimate children and heirs. Thus, thepertinent provisions of the Civil Code state:

Art. 774. Succession is a mode of acquisition by virtueof which the property, rights and obligations to theextent of the value of the inheritance, of a person aretransmitted through his death to another or others eitherby his will or by operation of law.

Art. 776. The inheritance includes all the property, rightsand obligations of a person which are not extinguishedby his death.

Art. 1311. Contract stake effect only between theparties, their assigns and heirs except in case where the

rights and obligations arising from the contract are nottransmissible by their nature, or by stipulation or byprovision of law. The heir is not liable beyond the valueof the property received from the decedent.

As explained by this Court through Associate JusticeJ.B.L. Reyes in the case of Estate of Hemady vs. LuzonSurety Co., Inc.

41

The binding effect of contracts upon the heirs of thedeceased party is not altered by the provision of ourRules of Court that money debts of a deceased must beliquidated and paid from his estate before the residue isdistributed among said heirs (Rule 89). The reason isthat whatever payment is thus made from the state isultimately a payment by the heirs or distributees, sincethe amount of the paid claim in fact diminishes orreduces the shares that the heirs would have beenentitled to receive.

Under our law, therefore. the general rule is that a

party's contractual rights and obligations aretransmissible to the successors.

The rule is a consequence of the progressive"depersonalization" of patrimonial rights and duties that,as observed by Victorio Polacco has characterized thehistory of these institutions. From the Roman concept ofa relation from person to person, the obligation hasevolved into a relation from patrimony to patrimony withthe persons occupying only a representative position,barring those rare cases where the obligation is strictlypersonal, i .e., is contracted intuitu personae, inconsideration of its performance by a specific personand by no other.

xxx xxx xxx

Petitioners being the heirs of the late Rosendo Alvarez,they cannot escape the legal consequences of theirfather's transaction, which gave rise to the present claimfor damages. That petitioners did not inherit the propertyinvolved herein is of no moment because by legalfiction, the monetary equivalent thereof devolved intothe mass of their father's hereditary estate, and we haveruled that the hereditary assets are always liable in theirtotality for the payment of the debts of the estate.

42

It must, however, be made clear that petitioners areliable only to the extent of the value of their inheritance.With this clarification and considering petitioners'admission that there are other properties left by thedeceased which are sufficient to cover the amountadjudged in favor of private respondents, we see nocogent reason to disturb the findings and conclusions ofthe Court of Appeals.

WHEREFORE, subject to the clarification herein abovestated, the assailed decision of the Court of Appeals ishereby AFFIRMED. Costs against petitioners.

SO ORDERED.

Gutierrez, Jr., Feliciano and Cortes, JJ., concur.

Bidin J., took no part.

[G.R. No. 146006. August 22, 2005]

LEE vs . QUEZON CITY RTC



THIRD DIVISION

Sirs/Mesdames:

Quoted hereunder, for your information, is a resolutionof this Court dated AUG 22 2005.

G.R. No. 146006 (JOSE C. LEE AND ALMA

AGGABAO, in their capacities as President andcorporate Secretary, respectively, of the PhilippineInternational Life Insurance Company, and FILIPINOLOAN ASSISTANCE GROUP, vs. REGIONAL TRIALCOURT OF QUEZON CITY, BRANCH 85 presided byJUDGE PEDRO M. AREOLA, BRANCH CLERK OFCOURT JANICE Y. ANTERO, DEPUTY SHERIFFS ADENAUER G. RIVERA and PEDRO L. BORJA, all ofthe Regional Trial Court of Quezon City Branch 85, MA.DIVINA ENDERES claiming to be Special Administratrix, and other persons/public officers actingfor and in their behalf.)

This resolves the motion for reconsideration filed bypetitioners Jose C. Lee and Alma Aggabao of ourresolution dated April 22, 2005[1]cralaw finding thepetitioners guilty of indirect contempt.

Petitioners were cited for contempt for their refusal tocomply with the final and executory decision of thisCourt dated February 23, 2004. Petitioners' non-compliance, as president and corporate secretary,respectively, of Philippine International Life InsuranceCompany (Philinterlife), with the directives stated in theorders we affirmed in our February 23, 2004 decisionwas evident from the sheriff's repor t[2]cralaw and the

dilatory motion to suspend execution/period ofcompliance by reason of alleged "supervening events"which they filed[3]cralaw with the probate court.

Petitioners now come to us again, raising argumentswhich have already been passed upon. Therefore, thismotion for reconsideration must be denied with finality.

At the outset, we must emphasize that petitioners havealready paid the fine imposed on them.[4]cralaw Theyare bound by such payment which was madeunconditionally.

Petitioners dispute the following statement in our April22, 2005 resolution:

We call particular attention to the fact that in ourFebruary 23, 2004 decision, we noted that petitioners,with the rest of the FLAG-controlled directors andstockholders, increased the authorized capital stock ofPhilinterlife, diluting in the process the 2,029 shares ofthe estate representing 50.725% of Philinterlife. Weobserved that this was obviously calculated to make itdifficult for the estate to reassume its controlling interestin Philinterlife. Thus, we ruled that, considering thenullity of the sale of the 2,029 shares to FLAG, the

increase in Philinterlife's authorized capital stock wasvoid ab initio. Consequently, any approval by theSecurities and Exchange Commission of this increasewould likewise be void ab initio.

[5]cralaw

Petitioners take issue with the "50.725%"[6]cralaw figureand claim that this is an "additional declaration" whichstill has to be proved. This claim is incorrect. Thisfigure[7]cralaw is not an "additional declaration" as it wasmentioned in our February 23, 2004 decision.[8]cralaw Itwas never challenged nor disputed.

Next, they assail our ruling that the increase inPhilinterlife's authorized capital stock was void ab initio. Again, this is not the first time this matter was taken up. As stated in our April 22, 2005 resolution, our February23, 2004 decision held that:

It goes without saying that the increase in Philinterlife'sauthorized capital stock, approved on the vote ofpetitioners' non-existent shareholdings and obviouslycalculated to make it difficult for Dr. Ortañez's estate toreassume its controlling interest in Philinterlife, waslikewise void ab initio.

[9]cralaw

In fact, petitioners questioned this when they sought areconsideration[10]cralaw of our February 23, 2004decision. We denied their motion for reconsideration forlack of merit in a resolution dated May 26,2004.[11]cralaw

Petitioners argue that the nullification of the increase inauthorized capital stock of Philinterlife will adversely

affect the interests of stockholders who were not partiesto this case and are independent of petitioner FilipinoLoan Assistance Group (FLAG).[12]cralaw To nullify theincrease will deprive them of their property without dueprocess.[13]cralaw In addition, they assert that theincreases in authorized capital stock in 1987 and 2001were done in compliance with governmentalrequirements for insurance companies.[14]cralaw

By petitioners' own allegation, the so-called"independent stockholders"

[15]cralaw acquired their

shares in 1983.[16]

cralaw Petitioners named thefollowing as stockholders independent and separatefrom FLAG: Jose C. Lee, Rodrigo Gatchalian(predecessor of Carmelita Tan), Benjamin Lee, AngelOng, Amparo Sarmiento, Jose Gachalian, AntonioGatchalian, Luis Gatchalia, Brenda Ortañez, ManuelHizon and Ma. Paz Lee.

Obviously, Jose C. Lee is a party to this case andcannot escaped its effects.[17]cralaw The others,although not parties to this case, cannot claim to beunaware of the probate proceedings which commencedin 1980 and which involved a big chunk of Philinterlife'sshares. Petitioners themselves admit that in 1983, theestate's 2,029 shares represented 40.58% interest inthe company.[18]cralaw Moreover, these stockholdersparticipated in the management of the company: in1983, Rodrigo Gatchalian was Philinerlife's presidentand chairman of the board of directors while AmparoSarmiento was its corporate secretary and BenjaminLee, Jose Gatchalian and Brenda Ortañez weremembers of the boar d[19]cralaw; in 1989, Angel Ong andMa. Paz Lee were also members of the board.

[20]cralaw

It is incredible that they now claim to have no knowledgeof this case.

Even if they were not part of Philinterlife's management,

it is difficult to believe that they, as stockholders, neverbothered to inquire from their board and corporateofficers, who were all embroiled in the controversy (norwere they apprised by these officers) of thecircumstances surrounding the 2,029 shares underlitigation. In any case, the information could have beeneasily obtained by them since these facts appeared inpublic judicial records. They were charged withknowledge and could not feign ignorance of these factsso as to escape the legal effects of the eventualoutcome of the controversy.

http://www.chanrobles.com/scresolutions/resolutions/2005/august/146006.php#_ftn1












































































Besides, the time-honored legal maxim of caveatemptor

[21]cralaw should have placed these stockholderson guard. They bought their shares, which could beaffected by the litigation embroiling Philinterlife, at theirown risk. It is safe to presume that, as prudent businessinvestors, they bought into the company only after a duediligence audit and therefore should have been aware ofthe legal consequences that could normally come withthe purchase of shares in a corporation entangled in a

bitter suit. Since they claim to be stockholders since1983, they cannot now belatedly protest after the case,which they had knowledge of, has been finally resolved.

The declaration that the increase in authorized capitalstock was void ab initio flows naturally from our rulingthat the ownership of the 2,029 shares never left theestate. Throughout the pendency of these proceedingswhich commenced in 1980, the estate of Dr. Ortañez,including the 2,029 shares of stock in Philinterlife, wasin custodia legis or under the custody and jurisdiction ofthe court.[22]cralaw Where the estate of the deceasedperson is already the subject of a testate or in testate

proceeding, the administrator cannot enter into any transaction involving it without prior approval of theprobate court.[23]cralaw Clearly, the intention is toprotect the interests of the estate while the respectiverights of the parties are being litigated.

As shown by the figures provided by the petitioners, theincreases in authorized capital stock in 1987 and 2001,both carried out without the approval of the probatecourt, diluted the interest of the estate in Philinterlife.For still unexplained reasons, the shares of the estate ofDr. Ortañez in Philinterlife went down from50.725%[24]cralaw in 1980 to 40.58% in 1983.[25]cralaw

Philinterlife's authorized capital stock was increasedfrom P5 million to P10 million in 1987. Consequently, in1989, the estate's interest went down to20.29%.[26]cralaw In 2001, the authorized capital stockwas again increased to P50 million. As a result, theestate now owns a miniscule 4.05%.[27]cralaw

The law provides a mechanism by which the estatecould have preserved its proportionate interest in thecompany.[28]cralaw For unexplained reasons, theestate's interest was wittingly or unwittingly allowed toshrink. To tolerate this situation will not only negate thecontrol of the probate court over assets brought into

custodia legis but will also frustrate the protection giventhem.

We need not discuss the other issues raised for theyhave already been exhaustively discussed in our April22, 2005 resolution.

ACCORDINGLY, the motion for reconsideration ishereby DENIED WITH FINALITY. No further pleadingsshall be entertained.

SO ORDERED.

Very truly yours,

(Sgd.) LUCITA ABJELINA-SORIANO Clerk of Court


Manila

EN BANC

G.R. No. L-28040 August 18, 1972

TESTATE ESTATE OF JOSEFA TANGCO, JOSE DEBORJA, administrator-appellee; JOSE DE BORJA,as administrator, CAYETANO DE BORJA, MATILDEDE BORJA and CRISANTO DE BORJA (deceased)

as Children of Josefa Tangco, appellees,vs.TASIANA VDA. DE DE BORJA, SpecialAdministratrix of the Testate Estate of Francisco deBorja, appellant. .

G.R. No L-28568 August 18, 1972

TESTATE ESTATE OF THE LATE FRANCISCO DEBORJA, TASIANA O. VDA. DE DE BORJA, special Administratrix appellee,vs.JOSE DE BORJA, oppositor-appellant.

G.R. No. L-28611 August 18, 1972

TASIANA 0. VDA. DE BORJA, as Administratrix ofthe Testate Estate of the late Francisco de Borja,plaintiff-appellee,vs.JOSE DE BORJA, as Administrator of the TestateEstate of the late Josefa Tangco, defendant-appellant.

L-28040

Pelaez, Jalandoni & Jamir for administrator-appellee.

Quiogue & Quiogue for appellee Matilde de Borja.

Andres Matias for appellee Cayetano de Borja.

Sevilla & Aquino for appellant.

L-28568

Sevilla & Aquino for special administratrix-appellee.

Pelaez, Jalandoni & Jamir for oppositor-appellant.

L-28611

Sevilla & Aquino for plaintiff-appellee.

Pelaez, Jalandoni & Jamir and David Gueverra fordefendant-appellant.

REYES, J.B.L., J .: p

Of these cases, the first, numbered L-28040 is anappeal by Tasiana Ongsingco Vda. de de Borja, specialadministratrix of the testate estate of Francisco deBorja, 1 from the approval of a compromise agreementby the Court of First Instance of Rizal, Branch I, in itsSpecial Proceeding No. R-7866, entitled, "TestateEstate of Josefa Tangco, Jose de Borja, Administrator".

Case No. L-28568 is an appeal by administrator JoseBorja from the disapproval of the same compromiseagreement by the Court of First Instance of Nueva Ecija,


































Branch II, in its Special Proceeding No. 832, entitled,"Testate Estate of Francisco de Borja, Tasiana O. Vda.de de Borja, Special Administratrix".

And Case No. L-28611 is an appeal by administratorJose de Borja from the decision of the Court of FirstInstance of Rizal, Branch X, in its Civil Case No. 7452,declaring the Hacienda Jalajala Poblacion, which is themain object of the aforesaid compromise agreement, asthe separate and exclusive property of the lateFrancisco de Borja and not a conjugal asset of thecommunity with his first wife, Josefa Tangco, and thatsaid hacienda pertains exclusively to his testate estate,which is under administrator in Special Proceeding No.832 of the Court of First Instance of Nueva Ecija,Branch II.

It is uncontested that Francisco de Borja, upon thedeath of his wife Josefa Tangco on 6 October 1940,filed a petition for the probate of her will which wasdocketed as Special Proceeding No. R-7866 of theCourt of First Instance of Rizal, Branch I. The will wasprobated on 2 April 1941. In 1946, Francisco de Borjawas appointed executor and administrator: in 1952, theirson, Jose de Borja, was appointed co-administrator.When Francisco died, on 14 April 1954, Jose becamethe sole administrator of the testate estate of his mother,Josefa Tangco. While a widower Francisco de Borjaallegedly took unto himself a second wife, TasianaOngsingco. Upon Francisco's death, Tasiana institutedtestate proceedings in the Court of First Instance ofNueva Ecija, where, in 1955, she was appointed specialadministratrix. The validity of Tasiana's marriage toFrancisco was questioned in said proceeding.

The relationship between the children of the firstmarriage and Tasiana Ongsingco has been plaguedwith several court suits and counter-suits; including thethree cases at bar, some eighteen (18) cases remainpending determination in the courts. The testate estateof Josefa Tangco alone has been unsettled for morethan a quarter of a century. In order to put an end to allthese litigations, a compromise agreement was enteredinto on 12 October 1963, 2

by and between "[T]he heirand son of Francisco de Borja by his first marriage,namely, Jose de Borja personally and as administratorof the Testate Estate of Josefa Tangco," and "[T]he heirand surviving spouse of Francisco de Borja by his

second marriage, Tasiana Ongsingco Vda. de Borja,assisted by her lawyer, Atty. Luis Panaguiton Jr." Theterms and conditions of the compromise agreement areas follows:

A G R E E M E N T

THIS AGREEMENT made and entered into by andbetween

The heir and son of Francisco de Borja by his firstmarriage, namely, Jose de Borja personally and asadministrator of the Testate Estate of Josefa Tangco,

A N D

The heir and surviving spouse of Francisco de Borja byhis second marriage, Tasiana Ongsingco Vda. de Borja,assisted by her lawyer, Atty. Luis Panaguiton Jr.

W I T N E S S E T H

THAT it is the mutual desire of all the parties hereinterminate and settle, with finality, the various court

litigations, controversies, claims, counterclaims, etc.,between them in connection with the administration,settlement, partition, adjudication and distribution of theassets as well as liabilities of the estates of Franciscode Borja and Josefa Tangco, first spouse of Franciscode Borja.

THAT with this end in view, the parties herein haveagreed voluntarily and without any reservations to enterinto and execute this agreement under the followingterms and conditions:

1. That the parties agree to sell the Poblacion portion ofthe Jalajala properties situated in Jalajala, Rizal,presently under administration in the Testate Estate ofJosefa Tangco (Sp. Proc. No. 7866, Rizal), morespecifically described as follows:

Linda al Norte con el Rio Puwang que la separa de la jurisdiccion del Municipio de Pililla de la Provincia deRizal, y con el pico del Monte Zambrano; al Oeste con

Laguna de Bay; por el Sur con los herederos deMarcelo de Borja; y por el Este con los terrenos de laFamilia Maronilla

with a segregated area of approximately 1,313 hectaresat the amount of P0.30 per square meter.

2. That Jose de Borja agrees and obligates himself topay Tasiana Ongsingco Vda. de de Borja the totalamount of Eight Hundred Thousand Pesos (P800,000)Philippine Currency, in cash, which represent P200,000as his share in the payment and P600,000 as pro-ratashares of the heirs Crisanto, Cayetano and Matilde, all

surnamed de Borja and this shall be considered as fulland complete payment and settlement of her hereditaryshare in the estate of the late Francisco de Borja as wellas the estate of Josefa Tangco, Sp. Proc. No. 832-Nueva Ecija and Sp. Proc. No. 7866-Rizal, respectively,and to any properties bequeathed or devised in herfavor by the late Francisco de Borja by Last Will andTestament or by Donation Inter Vivos or Mortis Causaor purportedly conveyed to her for consideration orotherwise. The funds for this payment shall be takenfrom and shall depend upon the receipt of full paymentof the proceeds of the sale of Jalajala, "Poblacion."

3. That Tasiana Ongsingco Vda. de de Borja herebyassumes payment of that particular obligation incurredby the late Francisco de Borja in favor of theRehabilitation Finance Corporation, now DevelopmentBank of the Philippines, amounting to approximatelyP30,000.00 and also assumes payment of her 1/5 shareof the Estate and Inheritance taxes on the Estate of thelate Francisco de Borja or the sum of P3,500.00, moreor less, which shall be deducted by the buyer ofJalajala, "Poblacion" from the payment to be made toTasiana Ongsingco Vda. de Borja under paragraph 2 ofthis Agreement and paid directly to the DevelopmentBank of the Philippines and the heirs-children ofFrancisco de Borja.

4. Thereafter, the buyer of Jalajala "Poblacion" is herebyauthorized to pay directly to Tasiana Ongsingco Vda. dede Borja the balance of the payment due her underparagraph 2 of this Agreement (approximatelyP766,500.00) and issue in the name of TasianaOngsingco Vda. de de Borja, corresponding certifiedchecks/treasury warrants, who, in turn, will issue thecorresponding receipt to Jose de Borja.



5. In consideration of above payment to TasianaOngsingco Vda. de de Borja, Jose de Borja personallyand as administrator of the Testate Estate of JosefaTangco, and Tasiana Ongsingco Vda. de de Borja, forthemselves and for their heirs, successors, executors,administrators, and assigns, hereby forever mutuallyrenounce, withdraw, waive, remise, release anddischarge any and all manner of action or actions,cause or causes of action, suits, debts, sum or sums of

money, accounts, damages, claims and demandswhatsoever, in law or in equity, which they ever had, ornow have or may have against each other, morespecifically Sp. Proceedings Nos. 7866 and 1955, CFI-Rizal, and Sp. Proc. No. 832-Nueva Ecija, Civil CaseNo. 3033, CFI Nueva Ecija and Civil Case No. 7452-CFI, Rizal, as well as the case filed against ManuelQuijal for perjury with the Provincial Fiscal of Rizal, theintention being to completely, absolutely and finallyrelease each other, their heirs, successors, and assigns,from any and all liability, arising wholly or partially,directly or indirectly, from the administration, settlement,and distribution of the assets as well as liabilities of the

estates of Francisco de Borja and Josefa Tangco, firstspouse of Francisco de Borja, and lastly, TasianaOngsingco Vda. de de Borja expressly and specificallyrenounce absolutely her rights as heir over anyhereditary share in the estate of Francisco de Borja.

6. That Tasiana Ongsingco Vda. de de Borja, uponreceipt of the payment under paragraph 4 hereof, shalldeliver to the heir Jose de Borja all the papers, titles anddocuments belonging to Francisco de Borja which are inher possession and said heir Jose de Borja shall issuein turn the corresponding receive thereof.

7. That this agreement shall take effect only upon thefulfillment of the sale of the properties mentioned underparagraph 1 of this agreement and upon receipt of thetotal and full payment of the proceeds of the sale of theJalajala property "Poblacion", otherwise, the non-fulfillment of the said sale will render this instrumentNULL AND VOID AND WITHOUT EFFECTTHEREAFTER.

IN WITNESS WHEREOF, the parties hereto have herunto set their hands in the City of Manila, Philippines,the 12th of October, 1963.

On 16 May 1966, Jose de Borja submitted for Courtapproval the agreement of 12 October 1963 to the Courtof First Instance of Rizal, in Special Proceeding No. R-7866; and again, on 8 August 1966, to the Court of FirstInstance of Nueva Ecija, in Special Proceeding No. 832.Tasiana Ongsingco Vda. de de Borja opposed in bothinstances. The Rizal court approved the compromiseagreement, but the Nueva Ecija court declared it voidand unenforceable. Special administratrix TasianaOngsingco Vda. de de Borja appealed the Rizal Court'sorder of approval (now Supreme Court G.R. case No. L-28040), while administrator Jose de Borja appealed theorder of disapproval (G.R. case No. L-28568) by the

Court of First Instance of Nueva Ecija.

The genuineness and due execution of thecompromised agreement of 12 October 1963 is notdisputed, but its validity is, nevertheless, attacked byTasiana Ongsingco on the ground that: (1) the heirscannot enter into such kind of agreement without firstprobating the will of Francisco de Borja; (2) that thesame involves a compromise on the validity of themarriage between Francisco de Borja and TasianaOngsingco; and (3) that even if it were valid, it hasceased to have force and effect.

In assailing the validity of the agreement of 12 October1963, Tasiana Ongsingco and the Probate Court ofNueva Ecija rely on this Court's decision in Guevara vs.Guevara. 74 Phil. 479, wherein the Court's majority heldthe view that the presentation of a will for probate ismandatory and that the settlement and distribution of anestate on the basis of intestacy when the decedent left awill, is against the law and public policy. It is likewisepointed out by appellant Tasiana Ongsingco that

Section 1 of Rule 74 of the Revised Rules explicitlyconditions the validity of an extrajudicial settlement of adecedent's estate by agreement between heirs, uponthe facts that "(if) the decedent left no will and no debts,and the heirs are all of age, or the minors arerepresented by their judicial and legal representatives..." The will of Francisco de Borja having been submittedto the Nueva Ecija Court and still pending probate whenthe 1963 agreement was made, those circumstances, itis argued, bar the validity of the agreement.

Upon the other hand, in claiming the validity of thecompromise agreement, Jose de Borja stresses that at

the time it was entered into, on 12 October 1963, thegoverning provision was Section 1, Rule 74 of theoriginal Rules of Court of 1940, which allowed theextrajudicial settlement of the estate of a deceasedperson regardless of whether he left a will or not. Healso relies on the dissenting opinion of Justice Moran, inGuevara vs. Guevara, 74 Phil. 479, wherein wasexpressed the view that if the parties have alreadydivided the estate in accordance with a decedent's will,the probate of the will is a useless ceremony; and if theyhave divided the estate in a different manner, theprobate of the will is worse than useless.

The doctrine of Guevara vs. Guevara, ante, is notapplicable to the case at bar. This is apparent from anexamination of the terms of the agreement betweenJose de Borja and Tasiana Ongsingco. Paragraph 2 ofsaid agreement specifically stipulates that the sum ofP800,000 payable to Tasiana Ongsingco —

shall be considered as full — complete payment — settlement of her hereditary share in the estate of thelate Francisco de Borja as well as the estate of JosefaTangco, ... and to any properties bequeathed or devisedin her favor by the late Francisco de Borja by Last Willand Testament or by Donation Inter Vivos or Mortis

Causa or purportedly conveyed to her for considerationor otherwise.

This provision evidences beyond doubt that the ruling inthe Guevara case is not applicable to the cases at bar.There was here no attempt to settle or distribute theestate of Francisco de Borja among the heirs theretobefore the probate of his will. The clear object of thecontract was merely the conveyance by TasianaOngsingco of any and all her individual share andinterest, actual or eventual in the estate of Francisco deBorja and Josefa Tangco. There is no stipulation as toany other claimant, creditor or legatee. And as a

hereditary share in a decedent's estate is transmitted orvested immediately from the moment of the death ofsuch causante or predecessor in interest (Civil Code ofthe Philippines, Art. 777) 3

there is no legal bar to asuccessor (with requisite contracting capacity) disposingof her or his hereditary share immediately after suchdeath, even if the actual extent of such share is notdetermined until the subsequent liquidation of theestate.

4 Of course, the effect of such alienation is to be

deemed limited to what is ultimately adjudicated to thevendor heir. However, the aleatory character of thecontract does not affect the validity of the transaction;



neither does the coetaneous agreement that thenumerous litigations between the parties (the approvingorder of the Rizal Court enumerates fourteen of them,Rec. App. pp. 79-82) are to be considered settled andshould be dismissed, although such stipulation, asnoted by the Rizal Court, gives the contract thecharacter of a compromise that the law favors, forobvious reasons, if only because it serves to avoid amultiplicity of suits.

It is likewise worthy of note in this connection that as thesurviving spouse of Francisco de Borja, TasianaOngsingco was his compulsory heir under article 995 etseq. of the present Civil Code. Wherefore, barringunworthiness or valid disinheritance, her successionalinterest existed independent of Francisco de Borja's lastwill and testament and would exist even if such will werenot probated at all. Thus, the prerequisite of a previousprobate of the will, as established in the Guevara andanalogous cases, can not apply to the case of TasianaOngsingco Vda. de de Borja.

Since the compromise contract Annex A was enteredinto by and between "Jose de Borja personally and asadministrator of the Testate Estate of Josefa Tangco" onthe one hand, and on the other, "the heir and survivingspouse of Francisco de Borja by his second marriage,Tasiana Ongsingco Vda. de de Borja", it is clear that thetransaction was binding on both in their individualcapacities, upon the perfection of the contract, evenwithout previous authority of the Court to enter into thesame. The only difference between an extrajudicialcompromise and one that is submitted and approved bythe Court, is that the latter can be enforced by executionproceedings. Art. 2037 of the Civil Code is explicit on

the point:

8. Art. 2037. A compromise has upon the parties theeffect and authority of res judicata; but there shall be noexecution except in compliance with a judicialcompromise.

It is argued by Tasiana Ongsingco that while theagreement Annex A expressed no definite period for itsperformance, the same was intended to have aresolutory period of 60 days for its effectiveness. Insupport of such contention, it is averred that such a limitwas expressly stipulated in an agreement in similar

terms entered into by said Ongsingco with the brothersand sister of Jose de Borja, to wit, Crisanto, Matilde andCayetano, all surnamed de Borja, except that theconsideration was fixed at P600,000 (Opposition, Annex/Rec. of Appeal, L-28040, pp. 39- 46) and whichcontained the following clause:

III. That this agreement shall take effect only upon theconsummation of the sale of the property mentionedherein and upon receipt of the total and full payment ofthe proceeds of the sale by the herein owner heirs-children of Francisco de Borja, namely, Crisanto,Cayetano and Matilde, all surnamed de Borja; Provided

that if no sale of the said property mentioned herein isconsummated, or the non-receipt of the purchase pricethereof by the said owners within the period of sixty (60)days from the date hereof, this agreement will becomenull and void and of no further effect.

Ongsingco's argument loses validity when it isconsidered that Jose de Borja was not a party to thisparticular contract (Annex 1), and that the sameappears not to have been finalized, since it bears nodate, the day being left blank "this — day of October1963"; and while signed by the parties, it was not

notarized, although plainly intended to be so done, sinceit carries a proposed notarial ratification clause.Furthermore, the compromise contract with Jose deBorja (Annex A), provides in its par. 2 heretoforetranscribed that of the total consideration of P800, 000to be paid to Ongsingco, P600,000 represent the"prorata share of the heirs Crisanto, Cayetano andMatilde all surnamed de Borja" which corresponds to theconsideration of P600,000 recited in Annex 1, and that

circumstance is proof that the duly notarized contractentered into wit Jose de Borja under date 12 October1963 (Annex A), was designed to absorb and supersedethe separate unformalize agreement with the other threeBorja heirs. Hence, the 60 days resolutory term in thecontract with the latter (Annex 1) not being repeated in Annex A, can not apply to the formal compromise withJose de Borja. It is moreover manifest that thestipulation that the sale of the Hacienda de Jalajala wasto be made within sixty days from the date of theagreement with Jose de Borja's co-heirs (Annex 1) wasplainly omitted in Annex A as improper and ineffective,since the Hacienda de Jalajala (Poblacion) that was to

be sold to raise the P800,000 to be paid to Ongsingcofor her share formed part of the estate of Francisco deBorja and could not be sold until authorized by theProbate Court. The Court of First Instance of Rizal sounderstood it, and in approving the compromise it fixeda term of 120 days counted from the finality of the ordernow under appeal, for the carrying out by the parties forthe terms of the contract.

This brings us to the plea that the Court of First Instanceof Rizal had no jurisdiction to approve the compromisewith Jose de Borja (Annex A) because TasianaOngsingco was not an heir in the estate of Josefa

Tangco pending settlement in the Rizal Court, but shewas an heir of Francisco de Borja, whose estate wasthe object of Special Proceeding No. 832 of the Court ofFirst Instance of Nueva Ecija. This circumstance isirrelevant, since what was sold by Tasiana Ongsingcowas only her eventual share in the estate of her latehusband, not the estate itself; and as already shown,that eventual share she owned from the time ofFrancisco's death and the Court of Nueva Ecija couldnot bar her selling it. As owner of her undividedhereditary share, Tasiana could dispose of it in favor ofwhomsoever she chose. Such alienation is expresslyrecognized and provided for by article 1088 of thepresent Civil Code:

Art. 1088. Should any of the heirs sell his hereditaryrights to a stranger before the partition, any or all of theco-heirs may be subrogated to the rights of thepurchaser by reimbursing him for the price of the sale,provided they do so within the period of one month fromthe time they were notified in writing of the sale of thevendor.

If a sale of a hereditary right can be made to a stranger,then a fortiori sale thereof to a coheir could not beforbidden.

Tasiana Ongsingco further argues that her contract withJose de Borja (Annex "A") is void because it amounts toa compromise as to her status and marriage with thelate Francisco de Borja. The point is without merit, forthe very opening paragraph of the agreement with Josede Borja (Annex "A") describes her as "the heir andsurviving spouse of Francisco de Borja by his secondmarriage, Tasiana Ongsingco Vda. de de Borja", whichis in itself definite admission of her civil status. There isnothing in the text of the agreement that would showthat this recognition of Ongsingco's status as the



surviving spouse of Francisco de Borja was only madein consideration of the cession of her hereditary rights.

It is finally charged by appellant Ongsingco, as well asby the Court of First Instance of Nueva Ecija in its orderof 21 September 1964, in Special Proceedings No. 832(Amended Record on Appeal in L-28568, page 157),that the compromise agreement of 13 October 1963(Annex "A") had been abandoned, as shown by the factthat, after its execution, the Court of First Instance ofNueva Ecija, in its order of 21 September 1964, haddeclared that "no amicable settlement had been arrivedat by the parties", and that Jose de Borja himself, in amotion of 17 June 1964, had stated that the proposedamicable settlement "had failed to materialize".

It is difficult to believe, however, that the amicablesettlement referred to in the order and motion above-mentioned was the compromise agreement of 13October 1963, which already had been formally signedand executed by the parties and duly notarized. Whatthe record discloses is that some time after itsformalization, Ongsingco had unilaterally attempted toback out from the compromise agreement, pleadingvarious reasons restated in the opposition to the Court'sapproval of Annex "A" (Record on Appeal, L-20840,page 23): that the same was invalid because of thelapse of the allegedly intended resolutory period of 60days and because the contract was not preceded by theprobate of Francisco de Borja's will, as required by thisCourt's Guevarra vs. Guevara ruling; that Annex "A"involved a compromise affecting Ongsingco's status aswife and widow of Francisco de Borja, etc., all of whichobjections have been already discussed. It was naturalthat in view of the widow's attitude, Jose de Borja should

attempt to reach a new settlement or novatoryagreement before seeking judicial sanction andenforcement of Annex "A", since the latter step mightultimately entail a longer delay in attaining final remedy.That the attempt to reach another settlement failed isapparent from the letter of Ongsingco's counsel to Josede Borja quoted in pages 35-36 of the brief for appellantOngsingco in G.R. No. 28040; and it is more thanprobable that the order of 21 September 1964 and themotion of 17 June 1964 referred to the failure of theparties' quest for a more satisfactory compromise. Butthe inability to reach a novatory accord can notinvalidate the original compromise (Annex "A") and

justifies the act of Jose de Borja in finally seeking acourt order for its approval and enforcement from theCourt of First Instance of Rizal, which, as heretoforedescribed, decreed that the agreement be ultimatelyperformed within 120 days from the finality of the order,now under appeal.

We conclude that in so doing, the Rizal court acted inaccordance with law, and, therefore, its order should beupheld, while the contrary resolution of the Court of FirstInstance of Nueva Ecija should be, and is, reversed.

In her brief, Tasiana Ongsingco also pleads that the

time elapsed in the appeal has affected her unfavorably,in that while the purchasing power of the agreed price ofP800,000 has diminished, the value of the Jalajalaproperty has increased. But the fact is that her delay inreceiving the payment of the agreed price for herhereditary interest was primarily due to her attempts tonullify the agreement (Annex "A") she had formallyentered into with the advice of her counsel, AttorneyPanaguiton. And as to the devaluation de facto of ourcurrency, what We said in Dizon Rivera vs. Dizon, L-24561, 30 June 1970, 33 SCRA 554, that "estateswould never be settled if there were to be a revaluation

with every subsequent fluctuation in the values ofcurrency and properties of the estate", is particularlyopposite in the present case.

Coming now to Case G.R. No. L-28611, the issue iswhether the Hacienda de Jalajala (Poblacion),concededly acquired by Francisco de Borja during hismarriage to his first wife, Josefa Tangco, is thehusband's private property (as contended by his secondspouse, Tasiana Ongsingco), or whether it forms part ofthe conjugal (ganancial) partnership with JosefaTangco. The Court of First Instance of Rizal (JudgeHerminio Mariano, presiding) declared that there wasadequate evidence to overcome the presumption infavor of its conjugal character established by Article 160of the Civil Code.

We are of the opinion that this question as betweenTasiana Ongsingco and Jose de Borja has becomemoot and academic, in view of the conclusion reachedby this Court in the two preceding cases (G.R. No. L-28568), upholding as valid the cession of TasianaOngsingco's eventual share in the estate of her latehusband, Francisco de Borja, for the sum of P800,000with the accompanying reciprocal quit-claims betweenthe parties. But as the question may affect the rights ofpossible creditors and legatees, its resolution is stillimperative.

It is undisputed that the Hacienda Jalajala, of around4,363 hectares, had been originally acquired jointly byFrancisco de Borja, Bernardo de Borja and Marcelo deBorja and their title thereto was duly registered in theirnames as co-owners in Land Registration Case No. 528of the province of Rizal, G.L.R.O. Rec. No. 26403 (De

Barjo vs. Jugo, 54 Phil. 465). Subsequently, in 1931, theHacienda was partitioned among the co-owners: thePunta section went to Marcelo de Borja; theBagombong section to Bernardo de Borja, and the partin Jalajala proper (Poblacion) corresponded toFrancisco de Borja (V. De Borja vs. De Borja 101 Phil.911, 932).

The lot allotted to Francisco was described as —

Una Parcela de terreno en Poblacion, Jalajala: N.Puang River; E. Hermogena Romero; S. Heirs ofMarcelo de Borja O. Laguna de Bay; containing an areaof 13,488,870 sq. m. more or less, assessed atP297,410. (Record on Appeal, pages 7 and 105)

On 20 November 1962, Tasiana O. Vda. de Borja, as Administratrix of the Testate Estate of Francisco deBorja, instituted a complaint in the Court of FirstInstance of Rizal (Civil Case No. 7452) against Jose deBorja, in his capacity as Administrator of Josefa Tangco(Francisco de Borja's first wife), seeking to have theHacienda above described declared exclusive privateproperty of Francisco, while in his answer defendant(now appellant) Jose de Borja claimed that it wasconjugal property of his parents (Francisco de Borja andJosefa Tangco), conformably to the presumptionestablished by Article 160 of the Philippine Civil Code(reproducing Article 1407 of the Civil Code of 1889), tothe effect that:

Art. 160. All property of the marriage is presumed tobelong to the conjugal partnership, unless it be provedthat it pertains exclusively to the husband or to the wife.



Defendant Jose de Borja further counterclaimed fordamages, compensatory, moral and exemplary, as wellas for attorney's fees.

After trial, the Court of First Instance of Rizal, per JudgeHerminio Mariano, held that the plaintiff had adducedsufficient evidence to rebut the presumption, anddeclared the Hacienda de Jalajala (Poblacion) to be theexclusive private property of the late Francisco de Borja,and his Administratrix, Tasiana Ongsingco Vda. deBorja, to be entitled to its possession. Defendant Josede Borja then appealed to this Court.

The evidence reveals, and the appealed order admits,that the character of the Hacienda in question as ownedby the conjugal partnership De Borja-Tangco wassolemnly admitted by the late Francisco de Borja noless than two times: first, in the Reamended Inventorythat, as executor of the estate of his deceased wifeJosefa Tangco, he filed in the Special Proceedings No.7866 of the Court of First Instance of Rizal on 23 July1953 (Exhibit "2"); and again, in the Reamended Accounting of the same date, also filed in theproceedings aforesaid (Exhibit "7"). Similarly, theplaintiff Tasiana O. Vda. de Borja, herself, as oppositorin the Estate of Josefa Tangco, submitted therein aninventory dated 7 September 1954 (Exhibit "3") listingthe Jalajala property among the "Conjugal Properties ofthe Spouses Francisco de Borja and Josefa Tangco". And once more, Tasiana Ongsingco, as administratrix ofthe Estate of Francisco de Borja, in Special ProceedingsNo. 832 of the Court of First Instance of Nueva Ecija,submitted therein in December, 1955, an inventorywherein she listed the Jalajala Hacienda under theheading "Conjugal Property of the Deceased Spouses

Francisco de Borja and Josefa Tangco, which are in thepossession of the Administrator of the Testate Estate ofthe Deceased Josefa Tangco in Special ProceedingsNo. 7866 of the Court of First Instance of Rizal" (Exhibit"4").

Notwithstanding the four statements aforesaid, and thefact that they are plain admissions against interest madeby both Francisco de Borja and the Administratrix of hisestate, in the course of judicial proceedings in the Rizaland Nueva Ecija Courts, supporting the legalpresumption in favor of the conjugal community, theCourt below declared that the Hacienda de Jalajala

(Poblacion) was not conjugal property, but the privateexclusive property of the late Francisco de Borja. It didso on the strength of the following evidences: (a) thesworn statement by Francis de Borja on 6 August 1951(Exhibit "F") that —

He tomado possession del pedazo de terreno yadelimitado (equivalente a 1/4 parte, 337 hectareas)adjunto a mi terreno personal y exclusivo (Poblacion deJalajala, Rizal).

and (b) the testimony of Gregorio de Borja, son ofBernardo de Borja, that the entire Hacienda had been

bought at a foreclosure sale for P40,100.00, of whichamount P25,100 was contributed by Bernardo de Borjaand P15,000. by Marcelo de Borja; that upon receipt ofa subsequent demand from the provincial treasurer forrealty taxes the sum of P17,000, Marcelo told hisbrother Bernardo that Francisco (son of Marcelo)wanted also to be a co-owner, and upon Bernardo'sassent to the proposal, Marcelo issue a check forP17,000.00 to pay the back taxes and said that theamount would represent Francisco's contribution in thepurchase of the Hacienda. The witness further testifiedthat —

Marcelo de Borja said that that money was entrusted tohim by Francisco de Borja when he was still a bachelorand which he derived from his business transactions.(Hearing, 2 February 1965, t.s.n., pages 13-15)(Emphasis supplied)

The Court below, reasoning that not only Francisco'ssworn statement overweighed the admissions in theinventories relied upon by defendant-appellant Jose deBorja since probate courts can not finally determinequestions of ownership of inventoried property, but thatthe testimony of Gregorio de Borja showed thatFrancisco de Borja acquired his share of the originalHacienda with his private funds, for which reason thatshare can not be regarded as conjugal partnershipproperty, but as exclusive property of the buyer,pursuant to Article 1396(4) of Civil Code of 1889 and Article 148(4) of the Civil Code of the Philippines.

The following shall be the exclusive property of eachspouse:

xxx xxx xxx

(4) That which is purchased with exclusive money of thewife or of the husband.

We find the conclusions of the lower court to beuntenable. In the first place, witness Gregorio de Borja'stestimony as to the source of the money paid byFrancisco for his share was plain hearsay, henceinadmissible and of no probative value, since he wasmerely repeating what Marcelo de Borja had told him(Gregorio). There is no way of ascertaining the truth of

the statement, since both Marcelo and Francisco deBorja were already dead when Gregorio testified. Inaddition, the statement itself is improbable, since therewas no need or occasion for Marcelo de Borja to explainto Gregorio how and when Francisco de Borja hadearned the P17,000.00 entrusted to Marcelo. A ring ofartificiality is clearly discernible in this portion ofGregorio's testimony.

As to Francisco de Borja's affidavit, Exhibit "F", thequoted portion thereof (ante, page 14) does not clearlydemonstrate that the "mi terreno personal y exclusivo(Poblacion de Jalajala, Rizal) " refers precisely to the

Hacienda in question. The inventories (Exhibits 3 and 4)disclose that there were two real properties in Jalajalaowned by Francisco de Borja, one of 72.038 sq. m.,assessed at P44,600, and a much bigger one of1,357.260.70 sq. m., which is evidently the Hacienda deJalajala (Poblacion). To which of these lands did theaffidavit of Francisco de Borja (Exhibit "F") refer to? Inaddition, Francisco's characterization of the land as "miterreno personal y exclusivo" is plainly self-serving, andnot admissible in the absence of cross examination.

It may be true that the inventories relied upon bydefendant-appellant (Exhibits "2", "3", "4" and "7") are

not conclusive on the conjugal character of the propertyin question; but as already noted, they are clearadmissions against the pecuniary interest of thedeclarants, Francisco de Borja and his executor-widow,Tasiana Ongsingco, and as such of much greaterprobative weight than the self-serving statement ofFrancisco (Exhibit "F"). Plainly, the legal presumption infavor of the conjugal character of the Hacienda deJalajala (Poblacion) now in dispute has not beenrebutted but actually confirmed by proof. Hence, theappealed order should be reversed and the Hacienda



de Jalajala (Poblacion) declared property of the conjugalpartnership of Francisco de Borja and Josefa Tangco.

No error having been assigned against the ruling of thelower court that claims for damages should be ventilatedin the corresponding special proceedings for thesettlement of the estates of the deceased, the samerequires no pro announcement from this Court.

IN VIEW OF THE FOREGOING, the appealed order ofthe Court of First Instance of Rizal in Case No. L-28040is hereby affirmed; while those involved in Cases Nos.L-28568 and L-28611 are reversed and set aside. Costsagainst the appellant Tasiana Ongsingco Vda. de Borjain all three (3) cases.

Concepcion, C.J., Makalintal, Zaldivar, Castro,Teehankee, Barredo, Makasiar, Antonio and Esguerra,JJ., concur.

Fernando, J., took no part.


Manila

EN BANC

G.R. No. L-15499 February 28, 1962

ANGELA M. BUTTE, plaintiff-appellant,

vs.MANUEL UY and SONS, INC., defendant-appellee.

Delgado, Flores and Macapagal for plaintiff-appellant.Pelaez and Jalandoni for defendant-appellee.

REYES, J.B.L., J .:

Appeal from a decision of the Court of First instance ofManila dismissing the action for legal redemption filedby plaintiff-appellant.

It appears that Jose V. Ramirez, during his lifetime, was

a co-owner of a house and lot located at Sta. Cruz,Manila, as shown by Transfer Certificate of Title No.52789, issued in the name of the following co-owners:Marie Garnier Vda. de Ramirez, 1/6; Jose V. Ramirez,1/6; Jose E. Ramirez, 1/6; Rita de Ramirez, 1/6; andJose Ma. Ramirez, 1/6.

On October 20, 1951, Jose V. Ramirez died.Subsequently, Special Proceeding No. 15026 wasinstituted to settle his estate, that included the one-sixth(1/6) undivided share in the aforementioned property. And although his last will and testament, wherein hebequeathed his estate to his children and grandchildren

and one-third (1/3) of the free portion to Mrs. Angela M.Butte, hereinafter referred to as plaintiff-appellant, hasbeen admitted to probate, the estate proceedings arestill pending up to the present on account of the claimsof creditors which exceed the assets of the deceased.The Bank of the Philippine Islands was appointed judicial administrator.

Meanwhile, on December 9, 1958, Mrs. Marie GarnierVda. de Ramirez, one of the co-owners of the late JoseV. Ramirez in the Sta. Cruz property, sold her undivided1/6 share to Manuel Uy & Sons, Inc. defendant-

appellant herein, for the sum of P500,000.00. After theexecution by her attorney-in-fact, Mrs. Elsa R.Chambers, of an affidavit to the effect that formalnotices of the sale had been sent to all possibleredemptioners, the deed of sale was duly registered andTransfer Certificate of Title No. 52789 was cancelled inlieu of which a new one was issued in the name of thevendee and the other-co-owners.

On the same day (December 9, 1958), Manuel Uy &Sons, Inc. sent a letter to the Bank of the PhilippineIslands as judicial administrator of the estate of the lateJose V. Ramirez informing it of the above-mentionedsale. This letter, together with that of the bank, wasforwarded by the latter to Mrs. Butte c/o her counselDelgado, Flores & Macapagal, Escolta, Manila, andhaving received the same on December 10, 1958, saidlaw office delivered them to plaintiff-appellant's son, Mr.Miguel Papa, who in turn personally handed the lettersto his mother, Mrs. Butte, on December 11 and 12,1958. Aside from this letter of defendant-appellant, thevendor, thru her attorney-in-fact Mrs. Chambers, wrote

said bank on December 11, 1958 confirming vendee'sletter regarding the sale of her 1/6 share in the Sta. Cruzproperty for the sum of P500,000.00. Said letter wasreceived by the bank on December 15, 1958 and havingendorsed it to Mrs. Butte's counsel, the latter receivedthe same on December 16, 1958. Appellant receivedthe letter on December 19, 1958.

On January 15, 1959, Mrs. Angela M. Butte, thru Atty.Resplandor Sobretodo, sent a letter and a PhilippineNational Bank cashier's check in the amount ofP500,000.00 to Manuel Uy & Sons, Inc. offering toredeem the 1/6 share sold by Mrs. Marie Garnier Vda.

de Ramirez. This tender having been refused, plaintiffon the same day consigned the amount in court andfiled the corresponding action for legal redemption.Without prejudice to the determination by the court ofthe reasonable and fair market value of the propertysold which she alleged to be grossly excessive, plaintiffprayed for conveyance of the property, and for actual,moral and exemplary damages.

After the filing by defendant of its answer containing acounterclaim, and plaintiff's reply thereto, trial was held,after which the court rendered decision on May 13,1959, dismissing plaintiff's complaint on the grounds

that she has no right to redeem the property and that, ifever she had any, she exercised the same beyond thestatutory 30-day period for legal redemptions providedby the Civil Code. The counterclaim of defendant fordamages was likewise dismissed for not beingsufficiently established. Both parties appealed directly tothis Court.

Based on the foregoing facts, the main issues posed inthis appeal are: (1) whether or not plaintiff-appellant,having been bequeathed 1/3 of the free portion of theestate of Jose V. Ramirez, can exercise the right oflegal redemption over the 1/6 share sold by Mrs. Marie

Garnier Vda. de Ramirez despite the presence of the judicial administrator and pending the final distribution ofher share in the testate proceedings; and (2) whether ornot she exercised the right of legal redemption withinthe period prescribed by law.

The applicable law involved in the present case iscontained in Articles 1620, p. 1, and 1623 of the CivilCode of the Philippines, which read as follows:

ART. 1620. A co-owner of a thing may exercise the rightof redemption in case the shares of all the other-co-



owners or of any of them, are sold to a third person. Ifthe price of the alienation is grossly excessive, theredemptioner shall pay only a reasonable one.

Should two or more co-owners desire to exercise theright of redemption, they may only do so in proportion tothe share they may respectively have in the thing ownedin common. (1522a)

ART. 1623. The right of legal predemption orredemption shall not be exercised except within thirtydays from the notice in writing by the respective vendor,or by the vendor, as the case may be. The deed of saleshall not be accorded in the Registry of Property, unlessaccompanied by an affidavit of the vendor that he hasgiven written notice thereof at all possibleredemptioners.

The right of redemption of co-owners excludes that ofadjoining owners. (1524a)

That the appellant Angela M. Butte is entitled toexercise the right of legal redemption is clear. Astestamentary heir of the estate of J.V. Ramirez, she andher co-heirs acquired an interest in the undivided one-sixth (1/6) share owned by her predecessor (causante)in the Santa Cruz property, from the moment of thedeath of the aforesaid co-owner, J.V. Ramirez. By law,the rights to the succession of a deceased persons aretransmitted to his heirs from the moment of his death,and the right of succession includes all property rightsand obligations that survive the decedent.

ART. 776. The inheritance includes all the property,

rights and obligations of a person which are notextinguished by his death. (659)

ART. 777. The rights to the succession are transmittedfrom the moment of the death of the decedent. (657a)

ART. 947. The legatee or devisee acquires a right to thepure and simple legacies or devisees from the death ofthe testator, and transmits it to his heirs. (881a)

The principle of transmission as of the time of thepredecessor's death is basic in our Civil Code, and issupported by other related articles. Thus, the capacity of

the heir is determined as of the time the decedent died(Art. 1034); the legitime is to be computed as of thesame moment(Art. 908), and so is the in officiousness ofthe donation inter vivos (Art. 771). Similarly, the legaciesof credit and remission are valid only in the amount dueand outstanding at the death of the testator (Art.935),and the fruits accruing after that instant aredeemed to pertain to the legatee (Art. 948).

As a consequence of this fundamental rule ofsuccession, the heirs of Jose V. Ramirez acquired hisundivided share in the Sta. Cruz property from themoment of his death, and from that instant, they

became co-owners in the aforesaid property, togetherwith the original surviving co-owners of their decedent(causante). A co-owner of an undivided share isnecessarily a co-owner of the whole. Wherefore, anyone of the Ramirez heirs, as such co-owner, becameentitled to exercise the right of legal redemption(retracto de comuneros) as soon as another co-owner(Maria Garnier Vda. de Ramirez) had sold her undividedshare to a stranger, Manuel Uy & Sons, Inc. This right ofredemption vested exclusively in consideration of theredemptioner's share which the law nowhere takes intoaccount.

The situation is in no wise altered by the existence of a judicial administrator of the estate of Jose V. Ramirezwhile under the Rules of Court the administrator has theright to the possession of the real and personal estate ofthe deceased, so far as needed for the payment of thedecedent's debts and the expenses of administration(sec. 3, Rule 85), and the administrator may bring ordefend actions for the recovery or protection of theproperty or rights of the deceased (sec. 2, Rule 88),

such rights of possession and administration do notinclude the right of legal redemption of the undividedshare sold to Uy & Company by Mrs. Garnier Ramirez.The reason is obvious: this right of legal redemptiononly came into existence when the sale to Uy & Sons,Inc. was perfected, eight (8) years after the death ofJose V. Ramirez, and formed no part of his estate. Theredemption right vested in the heirs originally, in theirindividual capacity, they did not derivatively acquire itfrom their decedent, for when Jose V. Ramirez died,none of the other co-owners of the Sta. Cruz propertyhad as yet sold his undivided share to a stranger.Hence, there was nothing to redeem and no right of

redemption; and if the late Ramirez had no such right athis death, he could not transmit it to his own heirs. Muchless could Ramirez acquire such right of redemptioneight years after his death, when the sale to Uy & Sons,Inc. was made; because death extinguishes civilpersonality, and, therefore, all further juridical capacityto acquire or transmit rights and obligations of any kind(Civil Code of the Phil., Art. 42).

It is argued that the actual share of appellant Mrs. Buttein the estate of Jose V. Ramirez has not beenspecifically determined as yet, that it is still contingent;and that the liquidation of estate of Jose V. Ramirez

may require the alienation of the decedent's undividedportion in the Sta. Cruz property, in which event Mrs.Butte would have no interest in said undivided portion.Even if it were true, the fact would remain that so longas that undivided share remains in the estate, the heirsof Jose V. Ramirez own it, as the deceased did own itbefore his demise, so that his heirs are now as muchco-owners of the Sta. Cruz property as Jose V. Ramirezwas himself a co-owner thereof during his lifetime. Asco-owners of the property, the heirs of Jose V. Ramirez,or any one of them, became personally vested with rightof legal redemption as soon as Mrs. Garnier sold herown pro-indiviso interest to Uy & Sons. Even ifsubsequently, the undivided share of Ramirez (and ofhis heirs) should eventually be sold to satisfy thecreditors of the estate, it would not destroy theirownership of it before the sale, but would only convey ortransfer it as in turn sold (of it actually is sold) to pay hiscreditors. Hence, the right of any of the Ramirez heirs toredeem the Garnier share will not be retroactivelyaffected. All that the law requires is that the legalredemptioner should be a co-owner at the time theundivided share of another co-owner is sold to astranger. Whether or not the redemptioner will continuebeing a co-owner after exercising the legal redemptioneris irrelevant for the purposes of law.

Nor it can be argued that if the original share of Ramirezis sold by the administrator, his heirs would stand in lawas never having acquired that share. This would only betrue if the inheritance is repudiated or the heir's qualityas such is voided. But where the heirship is undisputed,the purchaser of hereditary property is not deemed tohave acquired the title directly from the deceasedRamirez, because a dead man can not convey title, norfrom the administrator who owns no part of the estate;the purchaser can only derive his title from the Ramirez



heirs, represented by the administrator, as their trusteeor legal representative.

The right of appellant Angela M. Butte to make theredemption being established, the next point of inquiry iswhether she had made or tendered the redemption pricewithin the 30 days from notices as prescribed by law.This period, be it noted, is peremptory, because thepolicy of the law is not to leave the purchaser's title inuncertainty beyond the established 30-day period. Inconsidering whether or not the offer to redeem wastimely, we think that the notice given by the vendee(buyer) should not be taken into account. The text of Article 1623 clearly and expressly prescribes that thethirty days for making the redemption are to be countedfrom notice in writing by the vendor. Under the old law(Civ. Code of 1889, Art. 1524), it was immaterial whogave the notice; so long as the redeeming co-ownerlearned of the alienation in favor of the stranger, theredemption period began to run. It is thus apparent thatthe Philippine legislature in Article 1623 deliberatelyselected a particular method of giving notice, and that

method must be deemed exclusive (39 Am. Jur., 237;Payne vs. State, 12 S.W. [2d] 528). As ruled in Wamplervs. Lecompte, 150 Atl. 458 (affd. in 75 Law Ed. [U.S.]275) —

Why these provisions were inserted in the statute weare not informed, but we may assume until the contraryis shown, that a state of facts in respect thereto existed,which warranted the legislature in so legislating.

The reasons for requiring that the notice should begiven by the seller, and not by the buyer, are easilydivined. The seller of an undivided interest is in the best

position to know who are his co-owners that under thelaw must be notified of the sale. Also, the notice by theseller removes all doubts as to the fact of the sale, itsperfection; and its validity, the notice being areaffirmation thereof, so that the party need notentertain doubt that the seller may still contest thealienation. This assurance would not exist if the noticeshould be given by the buyer.

The notice which became operative is that given by Mrs.Chambers, in her capacity as attorney-in-fact of thevendor Marie Garnier Vda. de Ramirez. Under date ofDecember 11, 1958, she wrote the Administrator Bank

of the Philippine Islands that her principal's one-sixth(1/6) share in the Sta. Cruz property had been sold toManuel Uy & Sons, Inc. for P500,000.00. The Bankreceived this notice on December 15, 1958, and on thesame day endorsed it to Mrs. Butte, care of Delgado,Flores and Macapagal (her attorneys), who received thesame on December 16, 1958. Mrs. Butte tenderedredemption and upon the vendee's refusal, judiciallyconsigned the price of P500,000.00 on January 15,1959. The latter date was the last one of the thirty daysallowed by the Code for the redemption, counted byexcluding December 16, 1958 and including January 15,1959, pursuant to Article 13 of the Civil Code.

Therefore, the redemption was made in due time.

The date of receipt of the vendor's notice by the Administrator Bank (December 15) can not be countedas determining the start of thirty days; for the Administrator of the estate was not a properredemptioner, since, as previously shown, the right toredeem the share of Marie Garnier did not form part ofthe estate of Jose V. Ramirez.

We find no jurisdiction for appellant's claim that theP500,000,00. paid by Uy & Sons, Inc. for the Garnier

share is grossly excessive. Gross excess cannot bepredicated on mere individual estimates of market priceby a single realtor.

The redemption and consignation having been properlymade, the Uy counterclaim for damages and attorney'sfees predicated on the assumption that plaintiff's actionwas clearly unfounded, becomes untenable.

PREMISES CONSIDERED, the judgment appealedfrom is hereby reversed and set aside, and another oneentered:

(a) Declaring the consignation of P500,000,00 made byappellant Angela M. Butte duly and properly made;

(b) Declaring that said appellant properly exercised indue time the legal redemption of the one-sixth (1/6)undivided portion of the land covered by Certificate ofTitle No. 59363 of the Office of the Register of Deeds ofthe City of Manila, sold on December 9, 1958 by Marie

Garnier Vda. de Ramirez to appellant Manuel Uy &Sons, Inc.

(c) Ordering appellant Manuel Uy & Sons, Inc. to acceptthe consigned price and to convey to Angela M. Buttethe undivided portion above referred to, within 30 daysfrom the time our decision becomes final, andsubsequently to account for the rentals and fruits of theredeemed share from and after January 15, 1958, untilits conveyance; and.

(d) Ordering the return of the records to the court oforigin for further proceedings conformable to this

opinion.

Without finding as to costs.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador,Concepcion, Barrera and Dizon, JJ., concur.Paredes and De Leon, JJ., took no part.


Manila

EN BANC

G.R. No. L-4963 January 29, 1953

MARIA USON, plaintiff-appellee,vs.MARIA DEL ROSARIO, CONCEPCION NEBREDA,CONRADO NEBREDA, DOMINADOR NEBREDA,AND FAUSTINO NEBREDA, Jr., defendants-appellants.

Priscilo Evangelista for appellee.Brigido G. Estrada for appellant.

BAUTISTA ANGELO, J.:

This is an action for recovery of the ownership andpossession of five (5) parcels of land situated in theMunicipality of Labrador, Province of Pangasinan, filedby Maria Uson against Maria del Rosario and her fourchildren named Concepcion, Conrado, Dominador, andFaustino, surnamed Nebreda, who are all of minor age,before the Court of First Instance of Pangasinan.



Maria Uson was the lawful wife of Faustino Nebredawho upon his death in 1945 left the lands involved inthis litigation. Faustino Nebreda left no other heir excepthis widow Maria Uson. However, plaintiff claims thatwhen Faustino Nebreda died in 1945, his common-lawwife Maria del Rosario took possession illegally of saidlands thus depriving her of their possession andenjoyment.

Defendants in their answer set up as special defensethat on February 21, 1931, Maria Uson and herhusband, the late Faustino Nebreda, executed a publicdocument whereby they agreed to separate as husbandand wife and, in consideration of their separation, MariaUson was given a parcel of land by way of alimony andin return she renounced her right to inherit any otherproperty that may be left by her husband upon his death(Exhibit 1).

After trial, at which both parties presented theirrespective evidence, the court rendered decisionordering the defendants to restore to the plaintiff theownership and possession of the lands in disputewithout special pronouncement as to costs. Defendantsinterposed the present appeal.

There is no dispute that Maria Uson, plaintiff-appellee, isthe lawful wife of Faustino Nebreda, former owner of thefive parcels of lands litigated in the present case. Thereis likewise no dispute that Maria del Rosario, one of thedefendants-appellants, was merely a common-law wifeof the late Faustino Nebreda with whom she had fourillegitimate children, her now co-defendants. It likewiseappears that Faustino Nebreda died in 1945 much priorto the effectivity of the new Civil Code. With this

background, it is evident that when Faustino Nebredadied in 1945 the five parcels of land he was seized of atthe time passed from the moment of his death to hisonly heir, his widow Maria Uson (Article 657, old CivilCode).As this Court aptly said, "The property belongs tothe heirs at the moment of the death of the ancestor ascompletely as if the ancestor had executed anddelivered to them a deed for the same before his death"(Ilustre vs. Alaras Frondosa, 17 Phil., 321). From thatmoment, therefore, the rights of inheritance of MariaUson over the lands in question became vested.

The claim of the defendants that Maria Uson had

relinquished her right over the lands in questionbecause she expressly renounced to inherit any futureproperty that her husband may acquire and leave uponhis death in the deed of separation they had enteredinto on February 21, 1931, cannot be entertained for thesimple reason that future inheritance cannot be thesubject of a contract nor can it be renounced (1Manresa, 123, sixth edition; Tolentino on Civil Code, p.12; Osorio vs. Osorio and Ynchausti Steamship Co., 41Phil., 531).

But defendants contend that, while it is true that the fourminor defendants are illegitimate children of the late

Faustino Nebreda and under the old Civil Code are notentitled to any successional rights, however, under thenew Civil Code which became in force in June, 1950,they are given the status and rights of natural childrenand are entitled to the successional rights which the lawaccords to the latter (article 2264 and article 287, newCivil Code), and because these successional rightswere declared for the first time in the new code, theyshall be given retroactive effect even though the eventwhich gave rise to them may have occurred under theprior legislation (Article 2253, new Civil Code).

There is no merit in this claim. Article 2253 abovereferred to provides indeed that rights which aredeclared for the first time shall have retroactive effecteven though the event which gave rise to them mayhave occurred under the former legislation, but this is soonly when the new rights do not prejudice any vested oracquired right of the same origin. Thus, said articleprovides that "if a right should be declared for the firsttime in this Code, it shall be effective at once, even

though the act or event which gives rise thereto mayhave been done or may have occurred under the priorlegislation, provided said new right does not prejudice orimpair any vested or acquired right, of the same origin." As already stated in the early part of this decision, theright of ownership of Maria Uson over the lands inquestion became vested in 1945 upon the death of herlate husband and this is so because of the imperativeprovision of the law which commands that the rights tosuccession are transmitted from the moment of death(Article 657, old Civil Code). The new right recognizedby the new Civil Code in favor of the illegitimate childrenof the deceased cannot, therefore, be asserted to the

impairment of the vested right of Maria Uson over thelands in dispute.

As regards the claim that Maria Uson, while herdeceased husband was lying in state, in a gesture ofpity or compassion, agreed to assign the lands inquestion to the minor children for the reason that theywere acquired while the deceased was living with theirmother and Maria Uson wanted to assuage somewhatthe wrong she has done to them, this much can be said;apart from the fact that this claim is disputed, we are ofthe opinion that said assignment, if any, partakes of thenature of a donation of real property, inasmuch as it

involves no material consideration, and in order that itmay be valid it shall be made in a public document andmust be accepted either in the same document or in aseparate one (Article 633, old Civil Code). Inasmuch asthis essential formality has not been followed, it resultsthat the alleged assignment or donation has no valideffect.

WHEREFORE, the decision appealed from is affirmed,without costs.

Paras, C.J., Pablo, Bengzon, Padilla, Tuason,Montemayor, Reyes, Jugo and Labrador, JJ., concur.

BLAS VS. SANTOS 1 SCRA 899

SCRA 899 – Succession – Promise

Sometime before 1898, Simeon Blas married MartaCruz with whom he had three children. He also hadgrandchildren from his children with Marta Cruz. In1898, Marta Cruz died. In 1899, Blas married MaximaSantos (they had no children) but the properties he andhis former wife acquired during the first marriage werenot liquidated.

In 1936, Simeon Blas executed a will disposing half ofhis properties in favor of Maxima the other half forpayment of debts, Blas also named a few devisees andlegatees therein. In lieu of this, Maxima executed adocument whereby she intimated that she understandsthe will of her husband; that she promises that she‘ll begiving, upon her death, one-half of the properties she‘llbe acquiring to the heirs and legatees named in the willof his husband; that she can select or choose any ofthem depending upon the respect, service, and



treatment accorded to her by saidlegatees/heirs/devisees.

In 1937, Simeon Blas died. In 1956, Maxima died andRosalina Santos became administratrix of her estate. Inthe same year, Maria Gervacio Blas, child of SimeonBlas in his first marriage, together with three othergrandchildren of Simeon Blas (heirs of Simeon Blas),learned that Maxima did not fulfill her promise as it waslearned that Maxima only disposed not even one-tenthof the properties she acquired from Simeon Blas.

The heirs are now contending that they did not partitionSimeon Blas‘ property precisely because Maximapromised that they‘ll be receiving properties upon herdeath.

ISSUE: Whether or not the heirs should receiveproperties based on the promise of Maxima.

HELD: Yes. The promise is valid and enforceable upon

her death. Though it is not a will (it lacks the formality)nor a donation, it is still enforceable because saidpromise was actually executed to avoid litigation(partition of Simeon Blas‘ estate) hence it is acompromise.

It is not disputed that this document was prepared at theinstance of Simeon Blas for the reason that the conjugalproperties of his first marriage had not been liquidated.It is an obligation or promise made by the maker totransmit one-half of her share in the conjugal propertiesacquired with her husband, which properties are statedor declared to be conjugal properties in the will of the

husband.

Justice Bautista Angelo, dissenting:

It should be noted that Maxima Santos‘ promise totransmit is predicated on the condition that she canfreely choose and select from among the heirs andlegatees of her husband those to whom she would liketo give and bequeath depending on the respect, serviceand companionship that they may render to her. Hercommitment is not an absolute promise to give to all butonly to whom she may choose and select. And here thispromise has been substantially complied with when she

disposed one-tenth of the property to some legateesnamed in Simeon‘s will.

PhilippineLaw.info » Jurisprudence » 1970 » June »PhilippineLaw.info » Jurisprudence » SCRA » Vol. 33 »

THIRD DIVISION

[G.R. No. 125888. August 13, 1998]

SPOUSES ERNESTO and EVELYN SICAD, petitioners,vs. COURT OF APPEALS, CATALINO VALDERRAMA,JUDY CRISTINA M. VALDERRAMA and JESUS ANTONIO VALDERRAMA, respondents.

DECISION

NARVASA, C.J .:

The issue raised in the appeal by certiorari at barcenters on the character of a deed of donation executedby the late Aurora Virto Vda. De Montinola of the City ofIloilo – as either inter vivos or mortis causa. That deed,

entitled ―DEED OF DONATION INTER VIVOS,‖i[1] wasexecuted by Montinola on December 11, 1979. Itnamed as donees her grandchildren, namely: CatalinoValderrama, Judy Cristina M. Valderrama and Jesus Antonio Valderrama; and treated of a parcel of land, Lot3231 of the Cadastral Survey of Panay, Capiz, coveredby Transfer Certificate Title No. T-16105 in the name ofMontinola. The deed also contained the signatures ofthe donees in acknowledgment of the acceptance of the

donation.

Montinola‘s Secretary, Gloria Salvilla, afterwardspresented the deed for recording in the PropertyRegistry, and the Register of Deeds cancelled TCT No.T-16105 (the donor‘s title) and, in it place, issued TCTNo. T-16622 on February 7, 1980, in the names of thedonees.ii[2] Montinola however retained the owner‘sduplicate copy of the new title (No. T-16622), as well asthe property itself, until she transferred the same ten(10) years later, on July 10, 1990, to the spouses,Ernesto and Evelyn Sicad.

On March 12, 1987, Aurora Montinola drew up a deedof revocation of the donation,iii[3] and caused it to beannotated as an adverse claim on TCT No. T-16622(issued, as aforestated, in her grandchildren‘s names).Then on August 24, 1990, she filed a petition with theRegional Trial Court in Roxas City for the cancellation ofsaid TCT No. T-16622 and the reinstatement of TCTNo. T-16105 (in her name), the case being docketed asSpecial Proceeding No. 3311. Her petition was foundedon the theory that the donation to her three (3)grandchildren was one mortis causa which thus had tocomply with the formalities of a will; and since it had not,the donation was void and could not effectively serve as

basis for the cancellation of TCT No. T-16105 and theissuance in its place of TCT No. T-16622.

The donees (Montinola‘s grandchildren) opposed thepetition. In their opposition dated August 29, 1990, theyaverred that the donation in their favor was one intervivos which, having fully complied with the requirementstherefor set out in Article 729 of the Civil Code, wasperfectly valid and efficacious. They also expresseddoubt about the sincerity of their grandmother‘s intentionto recover the donated property, since she had notpursued the matter of its revocation after having itannotated as an adverse claim.

The case, originally treated as a special proceeding,was subsequently considered by the lower Court as anordinary civil action in view of the allegations and issuesraised in the pleadings. Pre-trial was had, followed bytrial on the merits which was concluded with the filing ofthe parties‘ memoranda. The Trial Court then rendered judgment on March 27, 1991, holding that the donationwas indeed one inter vivos, and dismissing AuroraMontinola‘s petition for lack of merit.iv[4] The matter ofits revocation was not passed upon.

Montinola elevated the case to the Court of Appeals, her

appeal being docketed as CA-G.R. CV No. 33202. Shehowever died on March 10, 1993,v[5] while appeal waspending.

Shortly after Montinola‘s demise, a ―Manifestation andMotion‖ dated March 31, 1993 was filed by ErnestoSicad and Evelyn Bofill-Sicad, herein petitioners,vi[6] inwhich they (a) alleged that they had become the ownersof the property covered by TCT No. T-16622 in virtue ofa ―deed of definite sale dated May 25, 1992 ‖accomplished by Montinola in their favor, which wasconfirmed by ―an affidavit dated November 26, 1997

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also executed by the latter, and (b) prayed that they besubstituted as appellants and allowed to prosecute thecase in their own behalf.

Another motion was subsequently presented under dateof April 7, 1993, this time by the legal heirs of AuroraMontinola, namely: Ofelia M. de Leon, Estela M. Jaenand Teresita M. Valderrma. They declared that theywere not interested in pursuing the case, and asked thatthe appeal be withdrawn. Montinola‘s counsel opposedthe motion.

On June 21, 1993, the Court of Appeals issued aResolution: (a) ordering the substitution of the personsabove mentioned – Ofelia M. de Leon, Estela M. Jaenand Teresita M. Valderama – as plaintiffs-appellant inplace of the late Aurora Montinola, as well as the joinderof the spouses Ernesto and Evelyn Bofill-Sicad asadditional appellants;vii[7] and (b) denying the motionfor the withdrawal of the appeal.

On June 30, 1995, the Eighth Division of the Court of Appeals promulgated its Decision on the case affirmingthe judgment of the Regional Trial Court;viii[8] and onJuly 31, 1996, it denied the separate motions forreconsideration filed by Ofelia M. de Leon, Estela M.Jaen, and Teresita M. Valderrama, on the one hand,and by the spouses, Ernest and Evelyn Sicad, on theother.ix[9]

The Sicad Spouses have appealed to this Court; andhere, they contend that the following errors werecommitted by the Appellate Tribunal, to wit:

1) ―** in ruling that the donation was inter vivos and innot giving due weight to the revocation of thedonation; and

2) ― ** in not ordering that the case be remanded forfurther reception of evidence.‖x[10]

The Comment filed for private respondents (the donees)under date of December 19, 1996 deals with what theyconsider the ― principal issue in this case ** (i.e.) whetherthe donation is mortis causa or inter vivos‖ and set forththe argument that the ―donor clearly intended to effectthe immediate transfer of ownership to the donees,‖ that

the prohibition in the deed of donation ―against sellingthe property within ten (10) years after the death of thedonor does not indicate that the donation is mortiscausa,‖ that the donor‘s ―alleged act of physicallykeeping the title does not suggest any intention to deferthe effectivity of the donation,‖ that the ―payment of realproperty taxes is consistent with the donor‘s reservationof the right of usufruct,‖ that the donor‘s intent ―is notdetermined by ** (her) self-serving post executiondeclarations,‖ the ―donation was never effectivelyrevoked,‖ and petitioners ―have waived their right toquestion the proceedings in the trial court.‖xi[11]

The Reply of the Sicad Spouses dated March 14, 1997reiterates their thesis that the donation was mortiscausa, that ―the circumstances surrounding theexecution of the deed, and the subsequent actions ofthe donor incontrovertibly signify the donor‘s intent totransfer the property only after her death,‖ that the donor―did not intend to give effect to the donation,‖ and thatthe procedure adopted by the Trial Court in the casewas fatally defective.xii[12] A ―Rejoinder‖ dated April 3,1997 was then submitted by the Valderamas, traversingthe assertions of the Reply.xiii[13]

Considering the focus of the opposing parties, and theirconflicting theories, on the intention of Aurora Montinolain executing the document entitled ―Deed of DonationInter Vivos,‖ it is needful to review the circumstances ofthe signing of that document by Montinola, as ostensibledonor, and her grandchildren, as ostensible donees.

The evidence establishes that on December 11, 1979,when the deed of donation prepared by Montinol‘slawyer (Atty. Treñas) was read and explained by thelatter to the parties. Montinola expressed her wish thatthe donation take effect only after ten (10) years fromher death, and that the deed include a prohibition on thesale of the poperty for such period. Accordingly, a newproviso was inserted in the deed reading: ―however, thedonees shall not sell or encumber the properties hereindonated within 10 years after the death of thedonor .‖xiv[14] The actuality of the subsequent insertionof this new proviso is apparent on the face of theinstrument; the intercalation is easily perceived andidentified – it was clearly typed on a different machine,and is crammed into the space between the penultimate

paragraph of the deed and that immediately precedingit.xv[15]

Not only did Aurora Montinola ordered the insertion inthe deed of that restrictive proviso, but also, afterrecordation of the deed of donation, she never stoppedtreating the property as her own. She continued, asexplicitly authorized in the deed itself, to possess heproperty, enjoy its fruits and otherwise exercise therights of dominion, paying the property taxes as they felldue – all these she did until she transferred the propertyto the Sicad Spouses on July 10, 1990. She did notgive the new certificate of title to the ostensible donees

but retained too, until she delivered it to the Sicads onthe occasion of the sale of the property to them. In anyevent, the delivery of the title to the donees would haveserved no useful purpose since, as just stated, theywere prohibited to effect any sale or encumbrancethereof for a period of ten (10) years after theostensible donor‘s decease. And consistent with theseacts denoting retention of ownership of the property wasMontinola‘s openly expressed view that the donationwas ineffectual and could not be given affect even afterten (10) years from her death. For this view she soughtto obtain judicial approval. She brought suit on August24, 1990 to cancel TCT no. T-16622 (issued to her

grandchildren) premised precisely on the invalidity of thedonation for failure to comply with the requisites oftestamentary dispositions. Before that, she attemptedto undo the conveyance to her grandchildren byexecution a deed of revocation of the donation onMarch 12, 1987, and causing annotation thereof as anadverse claim on said TCT No. T-16622. She alsoexercised indisputable acts of ownership over saidproperty by executing, as just stated, deeds intended topass title over it to third parties – petitionerherein.xvi[16]

As already intimated, the real nature of a deed is to be

ascertained by both its language and the intention of theparties as demonstrated by the circumstances attendantupon its execution. In this respect, case law has laiddown significant parameters. Thus, in a decisionhanded down in 1946,xvii[17] this Court construed adeed purporting to be a donation inter vivos to be intruth one mortis causa because it stipulated (like theone now being inquired into) ―that all rents, proceeds,fruits, of the donated properties shall remain for theexclusive benefit and disposal of the donor, MargaritaDavid, during her lifetime; and that, without theknowledge and consent of the donor, the donated



properties could not be disposed of in any way, whetherby sale, mortgage, barter, or in any other way possible.‖On these essential premises, the Court said, such adonation must be deemed one ―mortis causa, becausethe combined effect of the circumstances surroundingthe execution of the deed of donation and of the above-quoted clauses thereof ** (was that) the most essentialelements of ownership – the right to dispose of thedonated properties and the right to enjoy the products,

profits, possession – remained with Margarita Davidduring her lifetime, and would accrue to the donees onlyafter Margarita David‘s death.‖ So, too, in the case atbar, did these rights remain with Aurora Montinoladuring her lifetime, and could not pass to the doneesuntil ten (10) years after her death.

In another case decided in 1954 involving similar issue,Bonsato v. Court of Appeals,xviii[18] this Courtemphasized that the decisive characteristics of adonation mortis causa, which it had taken into accountin David v. Sison, were that ―the donor not only reservedfor herself all the fruits of the property allegedly

conveyed, but what is even more important, especiallyprovided that ‗without knowledge and consent of thedonor, the donated properties could not be disposed ofin any way,; thereby denying to the transferees the mostessential attribute of ownership, the power to dispose ofthe properties.‖

A donation which purports to be one inter vivos butwithholds form the donee that right to dispose of thedonated property during the donor‘s lifetime is in truthone mortis causa. In a donation mortis causa ― the rightof disposition is not transferred to the donee while thedonor is still alive.‖xix[19]

In the instant case, nothing of any consequence wastransferred by the deed of donation in question toMontinola‘s grandchildren, the ostensible donees. Theydid not get possession of the property donated. Theydid not acquire the right to the fruits thereof, or any otherright of dominion over the property. More importantly,they did not acquire the right to dispose of the property – this would accrue to them only after ten (10) yearsfrom Montinola‘s death. Indeed, they never even laidhands on the certificate of title to the same. They weretherefore simply ―paper owners‖ of the donatedproperty. All these circumstances, including, to repeat,

the explicit provisions of the deed of donation – reserving the exercise of rights of ownership to thedonee and prohibiting the sale or encumbrance of theproperty until ten (10) years after her death – ineluctablylead to the conclusion that the donation in question wasa donation mortis causa, contemplating a transfer ofownership to the donees only after the donor‘s demise.

The case of Alejandro v. Geraldezxx[20] cited by theCourt of Appeals in support of its challenged judgmentis not quite relevant. For in the deed of donation therein issue, there was a partial relinquishment of the rightto dispose of the property, in the event only that this

became necessary ―to defr ay the expenses and supportof the donors.‖ That limited right to dispose of thedonated lots, said this Court, ―implies that ownershiphad passed to ** (the donees) by means of the donationand **, therefore, the donation was already effectiveduring the donor‘s lifetime. That is the characteristic ofa donation inter vivos.‖ On the other hand, in the caseat bar, the donees were expressly prohibited to makeany disposition of any nature or for any purposewhatever during the donor‘s lifetime, and until ten (10)years after her death – a prohibition which, it may beadded, makes inapplicable the ruling in Castro v. Court

of Appealsxxi[21] where no such prohibition wasimposed, and the donor retained only the usufruct overthe property.

The Valderramas‘ argument that the donation is intervivos in character and that the prohibition against theirdisposition of the donated property is merely a conditionwhich, if violated, would give cause for its revocation,begs the question. It assumes that they have the rightto make a disposition of the property, which they do not.The argument also makes no sense, because if theyhad the right to dispose of the property and did in factdispose of it to a third person, the revocation of thedonation they speak of would be of no utility or benefit tothe donor, since such a revocation would notnecessarily result in the restoration of the donor‘sownership and enjoyment of the property.

It is also error to suppose that the donation under reviewshould be deemed one inter vivos simply becausefounded on considerations of love and affection. In Alejandro v. Geraldez, supra,xxii[22] this Court alsoobserved that ―the fact that the donation is given inconsideration of love and affection ** is not acharacteristic of donation inter vivos (solely) becausetransfers mortis causa may also be made for the samereason.‖ Similarly, in Bonsato v. Court of Appeals,supra, this Court opined that the fact ―that theconveyance was due to the affection of the donor to thedonees and services rendered by the latter,is of noparticular significance in determining whether the deeds,Exh. ‗1‘ and ‗2,‘ constitute transfers inter vivos or not,because a legacy may have identicalmotivation.‖xxiii[23]

Finally, it is germane to advert to the legal principle in Article 1378 of the Civil Code to the effect that in thecase of doubt relative to a gratuitous contract, theconstruction must be that entailing ―the leasttransmission of rights and interests.‖xxiv[24]

The donation in question, though denominated intervivos, is in truth one mortis causa; it is void because theessential requisites for its validity have not beencomplied with.

WHEREFORE, the Decision of the Court of Appeals inCA-G.R. CV No. 33202 dated June 30, 1995 as well asthe Resolution denying reconsideration thereof and theDecision of the Regional Trial Court in Special Case No.3311 are SET ASIDE. The Deed of Donation InterVivos (Exh. ―A‖) executed by Aurora Virto Vda. DeMontinola on December 11, 1979 in favor of Catalino M.Valderrama, Judy Cristina M. Valderrama and Jesus Antonio M. Valderrama is declared null and void. TheRegister of Deed of Roxas City is directed to cancelTransfer Certificate of Title No. T-16622, revive andreinstate Transfer Certificate of Title No. T-16105.

SO ORDERED.

Romero, Kapunan, and Purisima, JJ., concur.

G.R. No. L-24561, Dizon-Rivera v. Dizon et al., 33SCRA 554


Manila



EN BANC

DECISION

June 30, 1970

G.R. No. L-24561MARINA DIZON-RIVERA, executrix-appellee,

vs.ESTELA DIZON, TOMAS V. DIZON, BERNARDITADIZON, JOSEFINA DIZON, ANGELINA DIZON andLILIA DIZON, oppositors-appellants.

Punzalan, Yabut & Eusebio for executrix-appellee.Leonardo Abola for oppositors-appellants.

Teehankee, J .:

Appeal from orders of the Court of First Instance ofPampanga approving the Executrix-appellee's project ofpartition instead of Oppositors-Appellants' proposed

counter-project of partition. 1

On January 28, 1961, the testatrix, Agripina J. Valdez, awidow, died in Angeles, Pampanga, and was survivedby seven compulsory heirs, to wit, six legitimate childrennamed Estela Dizon, Tomas V. Dizon, Bernardita Dizon,Marina Dizon (herein executrix-appellee), AngelinaDizon and Josefina Dizon, and a legitimategranddaughter named Lilia Dizon, who is the onlylegitimate child and heir of Ramon Dizon, a pre-deceased legitimate son of the said decedent. Six ofthese seven compulsory heirs (except Marina Dizon, theexecutrix-appellee) are the oppositors-appellants.

The deceased testatrix left a last will executed onFebruary 2, 1960 and written in the Pampango dialect.Named beneficiaries in her will were the above-namedcompulsory heirs, together with seven other legitimategrandchildren, namely Pablo Rivera, Jr., Gilbert D.Garcia, Cayetano Dizon, Francisco Rivera, Agripina Ayson, Jolly Jimenez and Laureano Tiambon.

In her will, the testatrix divided, distributed and disposedof all her properties appraised at P1,801,960.00 (excepttwo small parcels of land appraised at P5,849.60,household furniture valued at P2,500.00, a bank deposit

in the sum of P409.95 and ten shares of PampangaSugar Development Company valued at P350.00)among her above-named heirs.

Testate proceedings were in due course commenced 2and by order dated March 13, 1961, the last will andtestament of the decedent was duly allowed andadmitted to probate, and the appellee Marina Dizon-Rivera was appointed executrix of the testatrix' estate,and upon her filing her bond and oath of office, letterstestamentary were duly issued to her.

After the executrix filed her inventory of the estate, Dr. Adelaido Bernardo of Angeles, Pampanga wasappointed commissioner to appraise the properties ofthe estate. He filed in due course his report of appraisaland the same was approved in toto by the lower courton December 12, 1963 upon joint petition of the parties.

The real and personal properties of the testatrix at thetime of her death thus had a total appraised value ofP1,811,695.60, and the legitime of each of the sevencompulsory heirs amounted to P129,362.11. 3 (¹/7 ofthe half of the estate reserved for the legitime of

legitimate children and descendants). 4 In her will, thetestatrix "commanded that her property be divided" inaccordance with her testamentary disposition, wherebyshe devised and bequeathed specific real propertiescomprising practically the entire bulk of her estateamong her six children and eight grandchildren. Theappraised values of the real properties thus respectivelydevised by the testatrix to the beneficiaries named inher will, are as follows:

1. Estela Dizon ....................................... P 98,474.80

2. Angelina Dizon .................................. 106,307.06

3. Bernardita Dizon .................................. 51,968.17

4. Josefina Dizon ...................................... 52,056.39

5. Tomas Dizon ....................................... 131,987.41

6. Lilia Dizon .............................................. 72,182.47

7. Marina Dizon ..................................... 1,148,063.71

8. Pablo Rivera, Jr. ...................................... 69,280.00

9. Lilia Dizon, Gilbert Garcia,

Cayetano Dizon, Francisco Rivera,

Agripina Ayson, Dioli or Jolly

Jimenez, Laureano Tiamzon ................. 72,540.00

Total Value ...................... P1,801,960.01

The executrix filed her project of partition datedFebruary 5, 1964, in substance adjudicating the estateas follows:

(1) with the figure of P129,254.96 as legitime for a basisMarina (exacultrix-appellee) and Tomas (appellant) areadmittedly considered to have received in the will morethan their respective legitime, while the rest of theappellants, namely, Estela, Bernardita, Angelina,

Josefina and Lilia received less than their respectivelegitime;

(2) thus, to each of the latter are adjudicated theproperties respectively given them in the will, plus cashand/or properties, to complete their respective legitimesto P129,254.96; (3) on the other hand, Marina andTomas are adjudicated the properties that they receivedin the will less the cash and/or properties necessary tocomplete the prejudiced legitime mentioned in number 2above;

(4) the adjudications made in the will in favor of the

grandchildren remain untouched.

On the other hand oppositors submitted their owncounter-project of partition dated February 14, 1964,wherein they proposed the distribution of the estate onthe following basis:

(a) all the testamentary dispositions were proportionallyreduced to the value of one-half (½) of the entire estate,the value of the said one-half (½) amounting toP905,534.78; (b) the shares of the Oppositors- Appellants should consist of their legitime, plus the



devises in their favor proportionally reduced; (c) inpayment of the total shares of the appellants in theentire estate, the properties devised to them plus otherproperties left by the Testatrix and/or cash areadjudicated to them; and (d) to the grandchildren whoare not compulsory heirs are adjudicated the propertiesrespectively devised to them subject to reimbursementby Gilbert D. Garcia, et al., of the sums by which thedevise in their favor should be proportionally reduced.

Under the oppositors' counter-project of partition, thetestamentary disposition made by the testatrix ofpractically her whole estate of P1,801,960.01, as abovestated, were proposed to be reduced to the amounts setforth after the names of the respective heirs anddevisees totalling one-half thereof as follows:

1. Estela Dizon ........................................... P 49,485.56

2. Angelina Dizon ......................................... 53,421.42

3. Bernardita Dizon ....................................... 26,115.04

4. Josefina Dizon .......................................... 26,159.38

5. Tomas V. Dizon ......................................... 65,874.04

6. Lilia Dizon .................................................. 36,273.13

7. Marina Dizon ........................................... 576,938.82

8. Pablo Rivera, Jr. ......................................... 34,814.50

9. Grandchildren Gilbert Garcia et al .......... 36,452.80

T o t a l ................................................... P905,534.78

while the other half of the estate (P905,534.78) wouldbe deemed as constituting the legitime of the executrix-appellee and oppositors-appellants, to be dividedamong them in seven equal parts of P129,362.11 astheir respective legitimes.

The lower court, after hearing, sustained and approvedthe executrix' project of partition, ruling that "(A)rticles906 and 907 of the New Civil Code specifically provide

that when the legitime is impaired or prejudiced, thesame shall be completed and satisfied. While it is truethat this process has been followed and adhered to inthe two projects of partition, it is observed that theexecutrix and the oppositors differ in respect to thesource from which the portion or portions shall be takenin order to fully restore the impaired legitime. Theproposition of the oppositors, if upheld, will substantiallyresult in a distribution of intestacy, which is incontroversion of Article 791 of the New Civil Code"adding that "the testatrix has chosen to favor certainheirs in her will for reasons of her own, cannot bedoubted. This is legally permissible within the limitation

of the law, as aforecited." With reference to the paymentin cash of some P230,552.38, principally by theexecutrix as the largest beneficiary of the will to be paidto her five co-heirs, the oppositors (excluding TomasDizon), to complete their impaired legitimes, the lowercourt ruled that "(T)he payment in cash so as to makethe proper adjustment to meet with the requirements ofthe law in respect to legitimes which have beenimpaired is, in our opinion, a practical and valid solutionin order to give effect to the last wishes of the testatrix."

From the lower court's orders of approval, oppositors-appellants have filed this appeal, and raise anew thefollowing issues: .

1. Whether or not the testamentary dispositions made inthe testatrix' will are in the nature of devises imputableto the free portion of her estate, and therefore subject toreduction;

2. Whether the appellants are entitled to the devise plustheir legitime under Article 1063, or merely to demandcompletion of their legitime under Article 906 of the CivilCode; and

3. Whether the appellants may be compelled to acceptpayment in cash on account of their legitime, instead ofsome of the real properties left by the Testatrix;

which were adversely decided against them in theproceedings below.

The issues raised present a matter of determining theavowed intention of the testatrix which is "the life andsoul of a will." 5 In consonance therewith, our Civil Codeincluded the new provisions found in Articles 788 and791 thereof that "(I)f a testamentary disposition admitsof different interpretations, in case of doubt, thatinterpretation by which the disposition is to be operativeshall be preferred" and "(T)he words of a will are toreceive an interpretation which will give to everyexpression some effect, rather than one which willrender any of the expressions inoperative; and of twomodes of interpreting a will, that is to be preferred whichwill prevent intestacy." In Villanueva vs. Juico 6 for

violation of these rules of interpretation as well as ofRule 123, section 59 of the old Rules of Court, 7 theCourt, speaking through Mr. Justice J.B.L. Reyes,overturned the lower court's decision and stressed that"the intention and wishes of the testator, when clearlyexpressed in his will, constitute the fixed law ofinterpretation, and all questions raised at the trial,relative to its execution and fulfillment, must be settledin accordance therewith, following the plain and literalmeaning of the testator's words, unless it clearlyappears that his intention was otherwise." 8

The testator's wishes and intention constitute the first

and principal law in the matter of testaments, and toparaphrase an early decision of the Supreme Court ofSpain, 9 when expressed clearly and precisely in hislast will amount to the only law whose mandate mustimperatively be faithfully obeyed and complied with byhis executors, heirs and devisees and legatees, andneither these interested parties nor the courts maysubstitute their own criterion for the testator's will.Guided and restricted by these fundamental premises,the Court finds for the appellee.

1. Decisive of the issues at bar is the fact that thetestatrix' testamentary disposition was in the nature of a

partition of her estate by will. Thus, in the thirdparagraph of her will, after commanding that upon herdeath all her obligations as well as the expenses of herlast illness and funeral and the expenses for probate ofher last will and for the administration of her property inaccordance with law, be paid, she expressly providedthat "it is my wish and I command that my property bedivided" in accordance with the dispositions immediatelythereafter following, whereby she specified each realproperty in her estate and designated the particular heiramong her seven compulsory heirs and seven othergrandchildren to whom she bequeathed the same. This



was a valid partition 10 of her estate, as contemplatedand authorized in the first paragraph of Article 1080 ofthe Civil Code, providing that "(S)hould a person make apartition of his estate by an act inter vivos or by will,such partition shall be respected, insofar as it does notprejudice the legitime of the compulsory heirs." Thisright of a testator to partition his estate is subject only tothe right of compulsory heirs to their legitime. The CivilCode thus provides the safeguard for the right of such

compulsory heirs:

ART. 906. Any compulsory heir to whom the testatorhas left by any title less than the legitime belonging tohim may demand that the same be fully satisfied.

ART. 907. Testamentary dispositions that impair ordiminish the legitime of the compulsory heirs shall bereduced on petition of the same, insofar as they may beinofficious or excessive.

This was properly complied with in the executrix-

appellee's project of partition, wherein the fiveoppositors-appellants namely Estela, Bernardita, Angelina, Josefina and Lilia, were adjudicated theproperties respectively distributed and assigned to themby the testatrix in her will, and the differential tocomplete their respective legitimes of P129,362.11 eachwere taken from the cash and/or properties of theexecutrix-appellee, Marina, and their co-oppositor-appellant, Tomas, who admittedly were favored by thetestatrix and received in the partition by will more thantheir respective legitimes.

2. This right of a testator to partition his estate by willwas recognized even in Article 1056 of the old CivilCode which has been reproduced now as Article 1080of the present Civil Code. The only amendment in theprovision was that Article 1080 "now permits any person(not a testator, as under the old law) to partition hisestate by act inter vivos." 11 This was intended to repealthe then prevailing doctrine 12 that for a testator topartition his estate by an act inter vivos, he must firstmake a will with all the formalities provided by law. Authoritative commentators doubt the efficacy of theamendment 13 but the question does not here concernus, for this is a clear case of partition by will, dulyadmitted to probate, which perforce must be given fullvalidity and effect. Aside from the provisions of Articles

906 and 907 above quoted, other codal provisionssupport the executrix-appellee's project of partition asapproved by the lower court rather than the counter-project of partition proposed by oppositors-appellantswhereby they would reduce the testamentary dispositionor partition made by the testatrix to one-half and limit thesame, which they would consider as mere devises orlegacies, to one-half of the estate as the disposable freeportion, and apply the other half of the estate topayment of the legitimes of the seven compulsory heirs.Oppositors' proposal would amount substantially to adistribution by intestacy and pro tanto nullify thetestatrix' will, contrary to Article 791 of the Civil Code. It

would further run counter to the provisions of Article1091 of the Civil Code that "(A) partition legally madeconfers upon each heir the exclusive ownership of theproperty adjudicated to him."

3. In Habana vs. Imbo, 14 the Court upheld thedistribution made in the will of the deceased testatorPedro Teves of two large coconut plantations in favor ofhis daughter, Concepcion, as against adverse claims ofother compulsory heirs, as being a partition by will,which should be respected insofar as it does notprejudice the legitime of the compulsory heirs, in

accordance with Article 1080 of the Civil Code. Inupholding the sale made by Concepcion to a stranger ofthe plantations thus partitioned in her favor in thedeceased's will which was being questioned by theother compulsory heirs, the Court ruled that"Concepcion Teves by operation of law, became theabsolute owner of said lots because 'A partition legallymade confers upon each heir the exclusive ownership ofthe property adjudicated to him' (Article 1091, New Civil

Code), from the death of her ancestors, subject to rightsand obligations of the latter, and, she can not bedeprived of her rights thereto except by the methodsprovided for by law (Arts. 657, 659, and 661, CivilCode). 15 Concepcion Teves could, as she did, sell thelots in question as part of her share of the proposedpartition of the properties, especially when, as in thepresent case, the sale has been expressly recognizedby herself and her co-heirs ..."

4. The burden of oppositors' contention is that thetestamentary dispositions in their favor are in the natureof devises of real property, citing the testatrix' repeated

use of the words "I bequeath" in her assignment ordistribution of her real properties to the respective heirs.From this erroneous premise, they proceed to theequally erroneous conclusion that "the legitime of thecompulsory heirs passes to them by operation of lawand that the testator can only dispose of the freeportion, that is, the remainder of the estate afterdeducting the legitime of the compulsory heirs ... and alltestamentary dispositions, either in the nature ofinstitution of heirs or of devises or legacies, have to betaken from the remainder of the testator's estateconstituting the free portion." 16

Oppositors err in their premises, for the adjudicationsand assignments in the testatrix' will of specificproperties to specific heirs cannot be considered alldevises, for it clearly appear from the whole context ofthe will and the disposition by the testatrix of her wholeestate (save for some small properties of little valuealready noted at the beginning of this opinion) that herclear intention was to partition her whole estate throughher will. The repeated use of the words "I bequeath" inher testamentary dispositions acquire no legalsignificance, such as to convert the same into devises tobe taken solely from the free one-half disposable portionof the estate. Furthermore, the testatrix' intent that her

testamentary dispositions were by way of adjudicationsto the beneficiaries as heirs and not as mere devisees,and that said dispositions were therefore on account ofthe respective legitimes of the compulsory heirs isexpressly borne out in the fourth paragraph of her will,immediately following her testamentary adjudications inthe third paragraph in this wise: "FOURTH: I likewisecommand that in case any of those I named as my heirsin this testament any of them shall die before I do, hisforced heirs under the law enforced at the time of mydeath shall inherit the properties I bequeath to saiddeceased." 17

Oppositors' conclusions necessarily are in error. Thetestamentary dispositions of the testatrix, beingdispositions in favor of compulsory heirs, do not have tobe taken only from the free portion of the estate, ascontended, for the second paragraph of Article 842 ofthe Civil Code precisely provides that "(O)ne who hascompulsory heirs may dispose of his estate provided hedoes not contravene the provisions of this Code withregard to the legitime of said heirs." And even going byoppositors' own theory of bequests, the secondparagraph of Article 912 Civil Code covers precisely thecase of the executrix-appellee, who admittedly was



favored by the testatrix with the large bulk of her estatein providing that "(T)he devisee who is entitled to alegitime may retain the entire property, provided itsvalue does not exceed that of the disposable portionand of the share pertaining to him as legitime." For"diversity of apportionment is the usual reason formaking a testament; otherwise, the decedent might aswell die intestate." 18 Fundamentally, of course, thedispositions by the testatrix constituted a partition by

will, which by mandate of Article 1080 of the Civil Codeand of the other cited codal provisions upholding theprimacy of the testator's last will and testament, have tobe respected insofar as they do not prejudice thelegitime of the other compulsory heirs.

Oppositors' invoking of Article 1063 of the Civil Codethat "(P)roperty left by will is not deemed subject tocollation, if the testator has not otherwise provided, butthe legitime shall in any case remain unimpaired" andinvoking of the construction thereof given by someauthorities that "'not deemed subject to collation' in thisarticle really means not imputable to or chargeable

against the legitime", while it may have some plausibility19 in an appropriate case, has no application in thepresent case. Here, we have a case of a distribution andpartition of the entire estate by the testatrix, without herhaving made any previous donations during her lifetimewhich would require collation to determine the legitimeof each heir nor having left merely some properties bywill which would call for the application of Articles 1061to 1063 of the Civil Code on collation. The amount of thelegitime of the heirs is here determined and undisputed.

5. With this resolution of the decisive issue raised byoppositors-appellants, the secondary issues are likewise

necessarily resolved. Their right was merely to demandcompletion of their legitime under Article 906 of the CivilCode and this has been complied with in the approvedproject of partition, and they can no longer demand afurther share from the remaining portion of the estate,as bequeathed and partitioned by the testatrixprincipally to the executrix-appellee.

Neither may the appellants legally insist on their legitimebeing completed with real properties of the estateinstead of being paid in cash, per the approved projectof partition. The properties are not available for thepurpose, as the testatrix had specifically partitioned and

distributed them to her heirs, and the heirs are calledupon, as far as feasible to comply with and give effect tothe intention of the testatrix as solemnized in her will, byimplementing her manifest wish of transmitting the realproperties intact to her named beneficiaries, principallythe executrix-appellee. The appraisal report of theproperties of the estate as filed by the commissionerappointed by the lower court was approved in toto upon joint petition of the parties, and hence, there cannot besaid to be any question - and none is presented - as tofairness of the valuation thereof or that the legitime ofthe heirs in terms of cash has been understated. Theplaint of oppositors that the purchasing value of the

Philippine peso has greatly declined since the testatrix'death in January, 1961 provides no legal basis or justification for overturning the wishes and intent of thetestatrix. The transmission of rights to the successionare transmitted from the moment of death of thedecedent (Article 777, Civil Code) and accordingly, thevalue thereof must be reckoned as of then, asotherwise, estates would never be settled if there wereto be a revaluation with every subsequent fluctuation inthe values of the currency and properties of the estate.There is evidence in the record that prior to November25, 1964, one of the oppositors, Bernardita, accepted

the sum of P50,000.00 on account of her inheritance,which, per the parties' manifestation, 20 "does not inany way affect the adjudication made to her in theprojects of partition of either party as the same is a mereadvance of the cash that she should receive in bothprojects of partition." The payment in cash by way ofmaking the proper adjustments in order to meet therequirements of the law on non-impairment of legitimesas well as to give effect to the last will of the testatrix

has invariably been availed of and sanctioned. 21 Thather co-oppositors would receive their cash differentialsonly now when the value of the currency has declinedfurther, whereas they could have received them earlier,like Bernardita, at the time of approval of the project ofpartition and when the peso's purchasing value washigher, is due to their own decision of pursuing thepresent appeal.

ACCORDINGLY, the orders appealed from are herebyaffirmed. Without cost.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal,Zaldivar, Castro, Fernando, Barredo and Villamor, JJ.,concur.

# Footnotes

1 Appeal was directed to this Court, as the value of theestate exceeded P200,000.00, in accordance with thethen subsisting provisions of Sec. 17, third paragraph,subsec. 5, now eliminated by Rep. Act 5440 enacted onSept. 9, 1968.

2 Sp. Proc. No. 1582 of the Court of First Instance of

Pampanga.

3 These figures are those of oppositors-appellantswhich are adopted for purposes of this decision. Perappellee's brief, p. 3, executrix-appellee sums up thevalue of the estate P1,809,569.55, and therefore thelegitime of each of the seven (7) forced heirs atP129,254.96. While there is thus a slight difference inthe valuation of the estate and legitime of the forcedheirs (a difference of P2,126.05 for the whole estate andof P107.15 in each legitime), the same is of noimportance... because the issue involved in this appealis not the value of the estate but the manner it should be

distributed among the heirs." (Notes in parenthesessupplied)

4 Art. 888, Civil Code.

5 Santos vs. Madarang, 27 Phil. 209.

6 L-15737, Feb. 28, 1962; 4 SCRA 550.

7 "SEC. 59. Instrument construed so as to give effect toall provisions. - In the construction of an instrumentwhere there are several provisions or particulars, such aconstruction is, if possible, to be adopted as will give

effect to all." (now Rule 130, sec. 9)

8 Citing in In re Estate of Calderon, 26 Phil. 333.

9 Tribunal Supremo of Spain, sentencia of 20 Marzo1918.

10 ART. 1079. Partition, in general, is the separation,division and assignment of a thing held in commonamong those to whom it may belong. The thing itselfmay be divided, or its value. (n)

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11 Romero vs. Villamor, 102 Phil. 641 (1957).

12 Legasto vs. Versoza, 54 Phil. 766 (1930); Fajardo vs.Fajardo, 54 Phil. 842 (1930).

13 Reyes and Puno, Vol. III, p. 216; Tolentino, Vol. III,pp. 538-540.

14 L-15598 and L-16726, March 31, 1964; 10 SCRA471.

15 See Arts. 776 and 777 Phil. Civil Code. The latterarticle provides that "(T)he rights to the succession aretransmitted from the moment of the death of thedecedent."

16 Appellants' brief, pp. 15-16.

17 Rec. on Appeal, p. 20; emphasis supplied.

18 Icasiano vs. Icasiano, L-18979, June 30, 1964; 11SCRA 422.

19 III Tolentino's Civil Code, 1961 ed., p. 518.

20 Record on Appeal, p. 107.

21 See Arts. 955, 1080 and 1104, Civil Code.

G.R. No. L-23678 June 6, 1967

TESTATE ESTATE OF AMOS G. BELLIS, deceased.PEOPLE'S BANK and TRUST COMPANY, executor.

MARIA CRISTINA BELLIS and MIRIAM PALMABELLIS, oppositors-appellants,vs.EDWARD A. BELLIS, ET AL., heirs-appellees.

Vicente R. Macasaet and Jose D. Villena for oppositorsappellants.Paredes, Poblador, Cruz and Nazareno for heirs-appellees E. A. Bellis, et al.Quijano and Arroyo for heirs-appellees W. S. Bellis, etal.J. R. Balonkita for appellee People's Bank & TrustCompany.

Ozaeta, Gibbs and Ozaeta for appellee A. B. Allsman.

BENGZON, J.P., J.:

This is a direct appeal to Us, upon a question purely oflaw, from an order of the Court of First Instance ofManila dated April 30, 1964, approving the project ofpartition filed by the executor in Civil Case No. 37089therein.1äwphï1.ñët

The facts of the case are as follows:

Amos G. Bellis, born in Texas, was "a citizen of theState of Texas and of the United States." By his firstwife, Mary E. Mallen, whom he divorced, he had fivelegitimate children: Edward A. Bellis, George Bellis (whopre-deceased him in infancy), Henry A. Bellis, Alexander Bellis and Anna Bellis Allsman; by his secondwife, Violet Kennedy, who survived him, he had threelegitimate children: Edwin G. Bellis, Walter S. Bellis andDorothy Bellis; and finally, he had three illegitimatechildren: Amos Bellis, Jr., Maria Cristina Bellis andMiriam Palma Bellis.

On August 5, 1952, Amos G. Bellis executed a will inthe Philippines, in which he directed that after all taxes,obligations, and expenses of administration are paid for,his distributable estate should be divided, in trust, in thefollowing order and manner: (a) $240,000.00 to his firstwife, Mary E. Mallen; (b) P120,000.00 to his threeillegitimate children, Amos Bellis, Jr., Maria CristinaBellis, Miriam Palma Bellis, or P40,000.00 each and (c)after the foregoing two items have been satisfied, the

remainder shall go to his seven surviving children by hisfirst and second wives, namely: Edward A. Bellis, Henry A. Bellis, Alexander Bellis and Anna Bellis Allsman,Edwin G. Bellis, Walter S. Bellis, and Dorothy E. Bellis,in equal shares.1äwphï1.ñët

Subsequently, or on July 8, 1958, Amos G. Bellis died aresident of San Antonio, Texas, U.S.A. His will wasadmitted to probate in the Court of First Instance ofManila on September 15, 1958.

The People's Bank and Trust Company, as executor ofthe will, paid all the bequests therein including theamount of $240,000.00 in the form of shares of stock toMary E. Mallen and to the three (3) illegitimate children, Amos Bellis, Jr., Maria Cristina Bellis and Miriam PalmaBellis, various amounts totalling P40,000.00 each insatisfaction of their respective legacies, or a total ofP120,000.00, which it released from time to timeaccording as the lower court approved and allowed thevarious motions or petitions filed by the latter threerequesting partial advances on account of theirrespective legacies.

On January 8, 1964, preparatory to closing itsadministration, the executor submitted and filed its

"Executor's Final Account, Report of Administration andProject of Partition" wherein it reported, inter alia, thesatisfaction of the legacy of Mary E. Mallen by thedelivery to her of shares of stock amounting to$240,000.00, and the legacies of Amos Bellis, Jr., MariaCristina Bellis and Miriam Palma Bellis in the amount ofP40,000.00 each or a total of P120,000.00. In theproject of partition, the executor — pursuant to the"Twelfth" clause of the testator's Last Will andTestament — divided the residuary estate into sevenequal portions for the benefit of the testator's sevenlegitimate children by his first and second marriages.

On January 17, 1964, Maria Cristina Bellis and MiriamPalma Bellis filed their respective oppositions to theproject of partition on the ground that they weredeprived of their legitimes as illegitimate children and,therefore, compulsory heirs of the deceased.

Amos Bellis, Jr. interposed no opposition despite noticeto him, proof of service of which is evidenced by theregistry receipt submitted on April 27, 1964 by theexecutor.1

After the parties filed their respective memoranda andother pertinent pleadings, the lower court, on April 30,1964, issued an order overruling the oppositions andapproving the executor's final account, report andadministration and project of partition. Relying upon Art.16 of the Civil Code, it applied the national law of thedecedent, which in this case is Texas law, which did notprovide for legitimes.

Their respective motions for reconsideration havingbeen denied by the lower court on June 11, 1964,oppositors-appellants appealed to this Court to raise the

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issue of which law must apply — Texas law orPhilippine law.

In this regard, the parties do not submit the case on, noreven discuss, the doctrine of renvoi, applied by thisCourt in Aznar v. Christensen Garcia, L-16749, January31, 1963. Said doctrine is usually pertinent where thedecedent is a national of one country, and a domicile ofanother. In the present case, it is not disputed that thedecedent was both a national of Texas and a domicilethereof at the time of his death.2 So that even assumingTexas has a conflict of law rule providing that thedomiciliary system (law of the domicile) should govern,the same would not result in a reference back (renvoi) toPhilippine law, but would still refer to Texas law.Nonetheless, if Texas has a conflicts rule adopting thesitus theory (lex rei sitae) calling for the application ofthe law of the place where the properties are situated,renvoi would arise, since the properties here involvedare found in the Philippines. In the absence, however, ofproof as to the conflict of law rule of Texas, it should notbe presumed different from ours.3 Appellants' position is

therefore not rested on the doctrine of renvoi. As stated,they never invoked nor even mentioned it in theirarguments. Rather, they argue that their case fallsunder the circumstances mentioned in the thirdparagraph of Article 17 in relation to Article 16 of theCivil Code.

Article 16, par. 2, and Art. 1039 of the Civil Code, renderapplicable the national law of the decedent, in intestateor testamentary successions, with regard to four items:(a) the order of succession; (b) the amount ofsuccessional rights; (e) the intrinsic validity of theprovisions of the will; and (d) the capacity to succeed.

They provide that —

ART. 16. Real property as well as personal property issubject to the law of the country where it is situated.

However, intestate and testamentary successions, bothwith respect to the order of succession and to theamount of successional rights and to the intrinsic validityof testamentary provisions, shall be regulated by thenational law of the person whose succession is underconsideration, whatever may he the nature of theproperty and regardless of the country wherein saidproperty may be found.

ART. 1039. Capacity to succeed is governed by the lawof the nation of the decedent.

Appellants would however counter that Art. 17,paragraph three, of the Civil Code, stating that —

Prohibitive laws concerning persons, their acts orproperty, and those which have for their object publicorder, public policy and good customs shall not berendered ineffective by laws or judgments promulgated,or by determinations or conventions agreed upon in a

foreign country.

prevails as the exception to Art. 16, par. 2 of the CivilCode afore-quoted. This is not correct. Precisely,Congress deleted the phrase, "notwithstanding theprovisions of this and the next preceding article" whenthey incorporated Art. 11 of the old Civil Code as Art. 17of the new Civil Code, while reproducing withoutsubstantial change the second paragraph of Art. 10 ofthe old Civil Code as Art. 16 in the new. It must havebeen their purpose to make the second paragraph of Art. 16 a specific provision in itself which must be

applied in testate and intestate succession. As furtherindication of this legislative intent, Congress added anew provision, under Art. 1039, which decrees thatcapacity to succeed is to be governed by the nationallaw of the decedent.

It is therefore evident that whatever public policy orgood customs may be involved in our System oflegitimes, Congress has not intended to extend thesame to the succession of foreign nationals. For it hasspecifically chosen to leave, inter alia, the amount ofsuccessional rights, to the decedent's national law.Specific provisions must prevail over general ones.

Appellants would also point out that the decedentexecuted two wills — one to govern his Texas estateand the other his Philippine estate — arguing from thisthat he intended Philippine law to govern his Philippineestate. Assuming that such was the decedent's intentionin executing a separate Philippine will, it would not alterthe law, for as this Court ruled in Miciano v. Brimo, 50Phil. 867, 870, a provision in a foreigner's will to theeffect that his properties shall be distributed inaccordance with Philippine law and not with his nationallaw, is illegal and void, for his national law cannot beignored in regard to those matters that Article 10 — now Article 16 — of the Civil Code states said national lawshould govern.

The parties admit that the decedent, Amos G. Bellis,was a citizen of the State of Texas, U.S.A., and thatunder the laws of Texas, there are no forced heirs orlegitimes. Accordingly, since the intrinsic validity of theprovision of the will and the amount of successionalrights are to be determined under Texas law, the

Philippine law on legitimes cannot be applied to thetestacy of Amos G. Bellis.

Wherefore, the order of the probate court is herebyaffirmed in toto, with costs against appellants. Soordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Regala,Makalintal, Zaldivar, Sanchez and Castro, JJ., concur.

Footnotes

1He later filed a motion praying that as a legal heir he beincluded in this case as one of the oppositors-appellants; to file or adopt the opposition of his sisters tothe project of partition; to submit his brief after payinghis proportionate share in the expenses incurred in theprinting of the record on appeal; or to allow him to adoptthe briefs filed by his sisters — but this Court resolved todeny the motion.

2San Antonio, Texas was his legal residence.

3Lim vs. Collector, 36 Phil. 472; In re Testate Estate ofSuntay, 95 Phil. 500.

G.R. No. L-25966 November 1, 1926

In the matter of the estate of Tomas Rodriguez,deceased. MANUEL TORRES, special administrator,and LUZ LOPEZ DE BUENO, heir, appellee,vs.MARGARITA LOPEZ, opponent-appellant.



Marcaida, Capili and Ocampo and Camus, Delgado andRecto for appellant. Araneta and Zaragoza for appellee.

STREET, J .:

This appeal involves a controversy over one-half of theestate of Tomas Rodriguez, decedent. The appellant,Margarita Lopez, claims said half by the intestatesuccession as next of kin and nearest heir; while theappellee, Luz Lopez de Bueno, claims the same byaccredition and in the character of universal heir the willof the decedent. The trial court decided the point ofcontroversy in favor of Luz Lopez de Bueno, andMargariat Lopez appealed.

The facts necessary to an understanding of the case arethese: On January 3, 1924, Tomas Rodriguez executedhis last will and testament, in the second clause of

which he declared:

I institute as the only and universal heirs to all myproperty, my cousin Vicente F. Lopez and his daughterLuz Lopez de Bueno.

Prior to the time of the execution of this will the testator,Tomas Rodriguez, had been judicially declaredincapable of taking care of himself and had been placedunder the care of his cousin Vicente F. Lopez, asguardian. On January 7, 1924, or only four days afterthe will above-mentioned was made, Vicente F. Lopezdied; and the testator, Tomas Rodriguez, died on

February 25, 1924, thereafter. At the time the will wasmade Vicente F. Lopez had not presented his finalaccounts as guardian, and no such accounts had beenpresented by him at the time of his death. MargariatLopez was a cousin and nearest relative of thedecedent. The will referred to, and after having beencontested, has been admitted to probate by judicialdetermination (Torres and Lopez de Bueno vs. Lopez,48 Phil., 772).

Our discussion of the legal problem presented shouldbegin with article 753 of the Civil Code which in effectdeclares that, with certain exceptions in favor of near

relatives, no testamentary provision shall be valid whenmade by a ward in favor of his guardian before the finalaccounts of the latter have been approved. Thisprovision is of undoubted application to the situationbefore us; and the provision made in the will of TomasRodriguez in favor of Vicente F. Lopez was not anygeneral incapacity on his part, but a special incapacitydue to the accidental relation of guardian and wardexisting between the parties.

We now pass to article 982 of the Civil Code, definingthe right of accretion. It is there declared, in effect, thataccretion take place in a testamentary succession, first

when the two or more persons are called to the sameinheritance or the same portion thereof without specialdesignation of shares; and secondly, when one of thepersons so called dies before the testator or renouncesthe inheritance or is disqualifying to receive it. In thecase before us we have a will calling Vicente F. Lopezand his daughter, Luz Lopez de Bueno, to the sameinheritance without special designation of shares. Inaddition to this, one of the persons named as heir haspredeceased the testator, this person being alsodisqualified to receive the estate even if he had beenalive at the time of the testator's death. This article (982)

is therefore also of exact application to the case in hand;and its effect is to give to the survivor, Luz Lopez deBueno, not only the undivided half which she wouldhave received in conjunction with her father if he hadbeen alive and qualified to take, but also the half whichpertained to him. There was no error whatever,therefore, in the order of the trial court declaring LuzLopez de Bueno entitled to the whole estate.

The argument in favor of the appellant supposes thatthere has supervened a partial intestacy with respect tothe half of the estate which was intended for Vicente F.Lopez and that this half has descended to the appellant,Margarita Lopez, as next of kin and sole heir at law ofthe decedent. In this connection attention is directed toarticle 764 of the Civil Code wherein it is declared,among other things, that a will may be valid even thoughthe person instituted as heir is disqualified to inherit. Ourattention is next invited to article 912 wherein it isdeclared, among other things, that legal successiontakes place if the heir dies before the testator and alsowhen the heir instituted is disqualified to succeed. Upon

these provisions an argument is planted conducting tothe conclusion that the will of Tomas Rodriguez wasvalid, notwithstanding the fact that one of the individualsnamed as heirs in the will was disqualified to take, andthat as a consequence Margarita Lopez s entitled toinherit the share of said disqualified heir.

We are the opinion that this contention is untenable andthat the appellee clearly has the better right. In playingthe provisions of the Code it is the duty of the court toharmonize its provisions as far as possible, giving dueeffect to all; and in case of conflict between twoprovisions the more general is to be considered as

being limited by the more specific. As between articles912 and 983, it is obvious that the former is the moregeneral of the two, dealing, as it does, with the generaltopic of intestate succession while the latter is morespecific, defining the particular conditions under whichaccretion takes place. In case of conflict, therefore, theprovisions of the former article must be consideredlimited by the latter. Indeed, in subsection 3 of article912 the provision with respect to intestate succession isexpressly subordinated to article 983 by the expression"and (if) there is no right of accretion." It is true that thesame express qualification is not found in subsection 4of article 912, yet it must be so understood, in view of

the rule of interpretation above referred to, by which themore specific is held to control the general. Besides, thisinterpretation supplies the only possible means ofharmonizing the two provisions. In addition to this,article 986 of the Civil Code affords independent proofthat intestate succession to a vacant portion can onlyoccur when accretion is impossible.

The attorneys for the appellant direct attention to thefact that, under paragraph 4 of article 912, intestatesuccession occurs when the heir instituted isdisqualified to succeed (incapaz de suceder ), while,under the last provision in paragraph 2 of article 982,

accretion occurs when one of the persons called toinherit under the will is disqualified to receive theinheritance (incapaz de recibirla). A distinction is thendrawn between incapacity to succeed and incapacity totake, and it is contended that the disability of Vicente F.Lopez was such as to bring the case under article 912rather than 982. We are of the opinion that the casecannot be made to turn upon so refined an interpretationof the language of the Code, and at any rate thedisability to which Vicente F. Lopez was subject was nota general disability to succeed but an accidentalincapacity to receive the legacy, a consideration which



makes a case for accretion rather than for intestatesuccession.

The opinions of the commentators, so far as they haveexpressed themselves on the subject, tend to theconclusion that the right of accretion with regard toportions of an inheritance left vacant by the death ordisqualification of one of the heirs or his renunciation ofthe inheritance is governed by article 912, without beinglimited, to the extent supposed in appellant's brief, byprovisions of the Code relative to intestate succession(Manresa, Comentarios al Codigo Civil Español , 4th ed.,vol. VII, pp. 310, 311; id., 34; 13 Mucius Scaevola, pp.372, 373, 285-287; 16 Mucius Scaevola, 186). SaysEscriche: "It is to be understood that one of the coheirsor colegatees fails if nonexistent at the time of themaking of the will, or he renounces the inheritance orlegacy, if he dies before the testator, if the condition benot fulfilled, or if he becomes otherwise incapacitated. . .. (Diccionario de Legislacion y Jurisprudencia, vol. I, p.225.)lawphil.net

In conclusion it may be worth observing that there hasalways existed both in the civil and in the common law acertain legal intendment, amounting to a mildpresumption, against partial intestacy. In Roman law, asis well known, partial testacy systems a presumptionagainst it, — a presumption which has its basis in thesupposed intention of the testator.

The judgment appealed from will be affirmed, and it isso ordered, with costs against the appellant.

Avanceña, C, J., Villamor, Ostrand, Johns, Romualdezand Villa-Real, JJ., concur.

G.R. No. 162784 June 22, 2007

NATIONAL HOUSING AUTHORITY, petitioner,vs.SEGUNDA ALMEIDA, COURT OF APPEALS, andRTC of SAN PEDRO, LAGUNA, BR. 31, respondents.

D E C I S I O N

PUNO, C.J.:

This is a Petition for Review on Certiorari under Rule 45filed by the National Housing Authority (NHA) againstthe Court of Appeals, the Regional Trial Court of SanPedro Laguna, Branch 31, and private respondentSegunda Almeida.

On June 28, 1959, the Land Tenure Administration(LTA) awarded to Margarita Herrera several portions ofland which are part of the Tunasan Estate in San Pedro,Laguna. The award is evidenced by an Agreement toSell No. 3787.1 By virtue of Republic Act No. 3488, theLTA was succeeded by the Department of AgrarianReform (DAR). On July 31, 1975, the DAR was

succeeded by the NHA by virtue of Presidential DecreeNo. 757.2 NHA as the successor agency of LTA is thepetitioner in this case.

The records show that Margarita Herrera had twochildren: Beatriz Herrera-Mercado (the mother of privaterespondent) and Francisca Herrera. Beatriz Herrera-Mercado predeceased her mother and left heirs.

Margarita Herrera passed away on October 27, 1971.3

On August 22, 1974, Francisca Herrera, the remainingchild of the late Margarita Herrera executed a Deed ofSelf-Adjudication claiming that she is the only remainingrelative, being the sole surviving daughter of thedeceased. She also claimed to be the exclusive legalheir of the late Margarita Herrera.

The Deed of Self-Adjudication was based on aSinumpaang Salaysay dated October 7, 1960, allegedlyexecuted by Margarita Herrera. The pertinent portions ofwhich are as follows:

SINUMPAANG SALAYSAY

SA SINO MAN KINAUUKULAN;

Akong si MARGARITA HERRERA, Filipina, may 83taong gulang, balo, kasalukuyang naninirahan attumatanggap ng sulat sa Nayon ng San Vicente, SanPedro Laguna, sa ilalim ng panunumpa ay malaya atkusang loob kong isinasaysay at pinagtitibay itong mga

sumusunod:

1. Na ako ay may tinatangkilik na isang lagay na lupangtirikan (SOLAR), tumatayo sa Nayon ng San Vicente,San Pedro, Laguna, mayroong PITONG DAAN ATPITUMPU'T ISANG (771) METRONG PARISUKAT anglaki, humigit kumulang, at makikilala sa tawag na Lote17, Bloke 55, at pag-aari ng Land Tenure Administration;

2. Na ang nasabing lote ay aking binibile, sapamamagitan ng paghuhulog sa Land Tenure Administration, at noong ika 30 ng Julio, 1959, ang

Kasunduang sa Pagbibile (AGREEMENT TO SELL No.3787) ay ginawa at pinagtibay sa Lungsod ng Maynila,sa harap ng Notario Publico na si G. Jose C. Tolosa, atlumalabas sa kaniyang Libro Notarial bilang DocumentoNo. 13, Pagina No. 4; Libro No. IV, Serie ng 1959;

3. Na dahilan sa ako'y matanda na at walang ano manghanap buhay, ako ay nakatira at pinagsisilbihan nangaking anak na si Francisca Herrera, at ang tinitirikan osolar na nasasabi sa unahan ay binabayaran ngkaniyang sariling cuarta sa Land Tenure Administration;

4. Na alang-alang sa nasasaysay sa unahan nito,

sakaling ako'y bawian na ng Dios ng aking buhay, anglupang nasasabi sa unahan ay aking ipinagkakaloob sanasabi kong anak na FRANCISCA HERRERA, Filipina,nasa katamtamang gulang, kasal kay Macario Berroya,kasalukuyang naninirahan at tumatanggap ng sulat saNayong ng San Vicente, San Pedro Laguna, o sakaniyang mga tagapagmana at;

5. Na HINIHILING KO sa sino man kinauukulan, nasakaling ako nga ay bawian na ng Dios ng aking buhayay KILALANIN, IGALANG at PAGTIBAYIN angnilalaman sa pangalan ng aking anak na si FranciscaHerrera ang loteng nasasabi sa unahan.

SA KATUNAYAN NG LAHAT, ako ay nag-didiit nghinlalaki ng kanan kong kamay sa ibaba nito at sakaliwang gilid ng unang dahon, dito sa Lungsod ngMaynila, ngayong ika 7 ng Octubre, 1960.4

The said document was signed by two witnesses andnotarized. The witnesses signed at the left-hand side ofboth pages of the document with the said documenthaving 2 pages in total. Margarita Herrera placed her

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thumbmark5 above her name in the second page and atthe left-hand margin of the first page of the document.

The surviving heirs of Beatriz Herrera-Mercado filed acase for annulment of the Deed of Self-Adjudicationbefore the then Court of First Instance of Laguna,Branch 1 in Binan, Laguna (now, Regional Trial CourtBranch 25). The case for annulment was docketed asCivil Case No. B-1263.

6

On December 29, 1980, a Decision in Civil Case No. B-1263 (questioning the Deed of Self-Adjudication) wasrendered and the deed was declared null and void.7

During trial on the merits of the case assailing the Deedof Self-Adjudication, Francisca Herrera filed anapplication with the NHA to purchase the same lotssubmitting therewith a copy of the "SinumpaangSalaysay" executed by her mother. Private respondent Almeida, as heir of Beatriz Herrera-Mercado, protestedthe application.

In a Resolution8 dated February 5, 1986, the NHAgranted the application made by Francisca Herrera,holding that:

From the evidence of the parties and the records of thelots in question, we gathered the following facts: the lotsin question are portions of the lot awarded and sold tothe late Margarita Herrera on July 28, 1959 by thedefunct Land Tenure Administration; protestant is thedaughter of the late Beatriz Herrera Mercado who wasthe sister of the protestee; protestee and Beatriz arechildren of the late Margarita Herrera; Beatriz was the

transferee from Margarita of Lot Nos. 45, 46, 47, 48 and49, Block 50; one of the lots transferred to Beatriz, e.g.Lot 47, with an area of 148 square meters is in thename of the protestant; protestant occupied the lots inquestion with the permission of the protestee; protesteeis a resident of the Tunasan Homesite since birth;protestee was born on the lots in question; protestee leftthe place only after marriage but resided in a lot situatedin the same Tunasan Homesite; her (protestee) sonRoberto Herrera has been occupying the lots inquestion; he has been there even before the death ofthe late Margarita Herrera; on Oc tob er 7, 1960,

Margari ta Herrera executed a "Sinump aang

Salaysay" whereby sh e waived or transferred al l her

r ights and interest over the lo ts in qu est ion in favor

of the protestee ; and protestee had paid the lots inquestion in full on March 8, 1966 with the defunct LandTenure Administration.

This Office finds that protestee has a better preferentialright to purchase the lots in question.9

Private respondent Almeida appealed to the Office ofthe President.10 The NHA Resolution was affirmed bythe Office of the President in a Decision dated January23, 1987.11

On February 1, 1987, Francisca Herrera died. Her heirsexecuted an extrajudicial settlement of her estate whichthey submitted to the NHA. Said transfer of rights wasapproved by the NHA.12 The NHA executed severaldeeds of sale in favor of the heirs of Francisca Herreraand titles were issued in their favor .13 Thereafter, theheirs of Francisca Herrera directed Segunda Mercado- Almeida to leave the premises that she was occupying.

Feeling aggrieved by the decision of the Office of thePresident and the resolution of the NHA, private

respondent Segunda Mercado-Almeida sought thecancellation of the titles issued in favor of the heirs ofFrancisca. She filed a Complaint on February 8, 1988,for "Nullification of Government Lot's Award," withthe Regional Trial Court of San Pedro, Laguna, Branch31.

In her complaint, private respondent Almeida invokedher forty-year occupation of the disputed properties, andre-raised the fact that Francisca Herrera's declaration ofself-adjudication has been adjudged as a nullitybecause the other heirs were disregarded. Thedefendant heirs of Francisca Herrera alleged that thecomplaint was barred by laches and that the decision ofthe Office of the President was already final andexecutory.14 They also contended that the transfer ofpurchase of the subject lots is perfectly valid as thesame was supported by a consideration and thatFrancisca Herrera paid for the property with the use ofher own money.15 Further, they argued that plaintiff'soccupation of the property was by mere tolerance andthat they had been paying taxes thereon.16

The Regional Trial Court issued an Order dated June14, 1988 dismissing the case for lack of jurisdiction.17 The Court of Appeals in a Decision dated June 26, 1989reversed and held that the Regional Trial Court had jurisdiction to hear and decide the case involving "titleand possession to real property within its jurisdiction."18 The case was then remanded for further proceedings onthe merits.

A pre-trial was set after which trial ensued.

On March 9, 1998, the Regional Trial Court rendered aDecision setting aside the resolution of the NHA and thedecision of the Office of the President awarding thesubject lots in favor of Francisca Herrera. It declared thedeeds of sale executed by NHA in favor of Herrera'sheirs null and void. The Register of Deeds of Laguna,Calamba Branch was ordered to cancel the TransferCertificate of Title issued. Attorney's fees were alsoawarded to private respondent.

The Regional Trial Court ruled that the "SinumpaangSalaysay" was not an assignment of rights but adisposition of property which shall take effect upondeath. It then held that the said document must first besubmitted to probate before it can transfer property.

Both the NHA and the heirs of Francisca Herrera filedtheir respective motions for reconsideration which wereboth denied on July 21, 1998 for lack of merit. They bothappealed to the Court of Appeals. The brief for the heirsof Francisca Herrera was denied admission by theappellate court in a Resolution dated June 14, 2002 forbeing a "carbon copy" of the brief submitted by the NHAand for being filed seventy-nine (79) days late.

On August 28, 2003, the Court of Appeals affirmed the

decision of the Regional Trial Court, viz:

There is no dispute that the right to repurchase thesubject lots was awarded to Margarita Herrera in 1959.There is also no dispute that Margarita executed a"Sinumpaang Salaysay" on October 7, 1960. DefendantNHA claims that the "Sinumpaang Salaysay" is, ineffect, a waiver or transfer of rights and interest over thesubject lots in favor of Francisca Herrera. This Court isdisposed to believe otherwise. After a perusal of the"Sinumpaang Salaysay" of Margarita Herrera, it can beascertained from its wordings taken in their ordinary and


























































grammatical sense that the document is a simpledisposition of her estate to take effect after her death.Clearly the Court finds that the "Sinumpaang Salaysay"is a will of Margarita Herrera. Evidently, if the intentionof Margarita Herrera was to merely assign her right overthe lots to her daughter Francisca Herrera, she shouldhave given her "Sinumpaang Salaysay" to thedefendant NHA or to Francisca Herrera for submissionto the defendant NHA after the full payment of the

purchase price of the lots or even prior thereto but shedid not. Hence it is apparent that she intended the"Sinumpaang Salaysay" to be her last will and not anassignment of rights as what the NHA in its resolutionwould want to make it appear. The intention of MargaritaHerrera was shared no less by Francisca Herrera whoafter the former's demise executed on August 22, 1974a Deed of Self-Adjudication claiming that she is her soleand legal heir. It was only when said deed wasquestioned in court by the surviving heirs of MargaritaHerrera's other daughter, Beatriz Mercado, thatFrancisca Herrera filed an application to purchase thesubject lots and presented the "Sinumpaang Salaysay"

stating that it is a deed of assignment of rights .19

The Court of Appeals ruled that the NHA actedarbitrarily in awarding the lots to the heirs of FranciscaHerrera. It upheld the trial court ruling that the"Sinumpaang Salaysay" was not an assignment ofrights but one that involved disposition of property whichshall take effect upon death. The issue of whether it wasa valid will must first be determined by probate.

Petitioner NHA elevated the case to this Court.

Petitioner NHA raised the following issues:

A. WHETHER OR NOT THE RESOLUTION OF THENHA AND THE DECISION OF THE OFFICE OF THEPRESIDENT HAVE ATTAINED FINALITY, AND IF SO,WHETHER OR NOT THE PRINCIPLE OF ADMINISTRATIVE RES JUDICATA BARS THECOURT FROM FURTHER DETERMINING WHOBETWEEN THE PARTIES HAS PREFERENTIALRIGHTS FOR AWARD OVER THE SUBJECT LOTS;

B. WHETHER OR NOT THE COURT HASJURISDICTION TO MAKE THE AWARD ON THESUBJECT LOTS; AND

C. WHETHER OR NOT THE AWARD OF THESUBJECT LOTS BY THE NHA IS ARBITRARY.

We rule for the respondents.

Res judicata is a concept applied in review of lowercourt decisions in accordance with the hierarchy ofcourts. But jurisprudence has also recognized the rule ofadministrative res judicata: "the rule which forbids thereopening of a matter once judicially determined bycompetent authority applies as well to the judicial and

quasi-judicial facts of public, executive or administrativeofficers and boards acting within their jurisdiction as tothe judgments of courts having general judicial powers .. . It has been declared that whenever final adjudicationof persons invested with power to decide on theproperty and rights of the citizen is examinable by theSupreme Court, upon a writ of error or a certiorari, suchfinal adjudication may be pleaded as res judicata."20 Tobe sure, early jurisprudence were already mindful thatthe doctrine of res judicata cannot be said to applyexclusively to decisions rendered by what are usuallyunderstood as courts without unreasonably

circumscribing the scope thereof and that the moreequitable attitude is to allow extension of the defense todecisions of bodies upon whom judicial powers havebeen conferred.

In Ipekdjian Merchandising Co., Inc. v. Court of TaxAppeals,21 the Court held that the rule prescribing that"administrative orders cannot be enforced in the courtsin the absence of an express statutory provision for thatpurpose" was relaxed in favor of quasi-judicial agencies.

In fine, it should be remembered that quasi-judicialpowers will always be subject to true judicial power —that which is held by the courts. Quasi-judicial power isdefined as that power of adjudication of anadministrative agency for the "formulation of a finalorder."22 This function applies to the actions, discretionand similar acts of public administrative officers orbodies who are required to investigate facts, orascertain the existence of facts, hold hearings, and drawconclusions from them, as a basis for their official actionand to exercise discretion of a judicial nature.23 However, administrative agencies are not consideredcourts, in their strict sense. The doctrine of separation ofpowers reposes the three great powers into its three (3)branches—the legislative, the executive, and the judiciary. Each department is co-equal and coordinate,and supreme in its own sphere. Accordingly, theexecutive department may not, by its own fiat, imposethe judgment of one of its agencies, upon the judiciary.Indeed, under the expanded jurisdiction of the SupremeCourt, it is empowered to "determine whether or notthere has been grave abuse of discretion amounting tolack or excess of jurisdiction on the part of any branchor instrumentality of the Government."24 Courts have an

expanded role under the 1987 Constitution in theresolution of societal conflicts under the grave abuseclause of Article VIII which includes that duty to checkwhether the other branches of government committedan act that falls under the category of grave abuse ofdiscretion amounting to lack or excess of jurisdiction.25

Next, petitioner cites Batas Pambansa Blg. 129 or theJudiciary Reorganization Act of 198026 where it istherein provided that the Intermediate Appellate Court(now, Court of Appeals) shall exercise the "exclusiveappellate jurisdiction over all final judgments, decisions,resolutions, orders or awards, of the Regional Trial

Courts and Quasi-Judicial agencies, instrumentalities,boards or commissions, except those falling within the jurisdiction of the Supreme Court in accordance with theConstitution…"

27 and contends that the Regional Trial

Court has no jurisdiction to rule over awards made bythe NHA.

Well-within its jurisdiction, the Court of Appeals, in itsdecision of August 28, 2003, already ruled that the issueof the trial court's authority to hear and decide theinstant case has already been settled in the decision ofthe Court of Appeals dated June 26, 1989 (which hasbecome final and executory on August 20, 1989 as per

entry of judgment dated October 10, 1989).28

We find noreason to disturb this ruling. Courts are duty-bound toput an end to controversies. The system of judicialreview should not be misused and abused to evade theoperation of a final and executory judgment.29 Theappellate court's decision becomes the law of the casewhich must be adhered to by the parties by reason ofpolicy.30

Next, petitioner NHA contends that its resolution wasgrounded on meritorious grounds when it consideredthe application for the purchase of lots. Petitioner



















































argues that it was the daughter Francisca Herrera whofiled her application on the subject lot; that it consideredthe respective application and inquired whether she hadall the qualifications and none of the disqualifications ofa possible awardee. It is the position of the petitionerthat private respondent possessed all the qualificationsand none of the disqualifications for lot award andhence the award was not done arbitrarily.

The petitioner further argues that assuming that the"Sinumpaang Salaysay" was a will, it could not bind theNHA.31 That, "insofar as [the] NHA is concerned, it is anevidence that the subject lots were indeed transferredby Margarita Herrera, the original awardee, to FranciscaHerrera was then applying to purchase the same beforeit."32

We are not impressed. When the petitioner received the"Sinumpaang Salaysay," it should have noted that theeffectivity of the said document commences at the timeof death of the author of the instrument; in her words"sakaling ako'y bawian na ng Dios ng aking buhay …"

Hence, in such period, all the interests of the personshould cease to be hers and shall be in the possessionof her estate until they are transferred to her heirs byvirtue of Article 774 of the Civil Code which providesthat:

Art. 774. Succession is a mode of acquisition by virtueof which the property, rights and obligations to theextent of the value of the inheritance, of a person aretransmitted through his death to another or otherseither by his will or by operation of law .33

By considering the document, petitioner NHA shouldhave noted that the original applicant has alreadypassed away. Margarita Herrera passed away onOctober 27, 1971.34 The NHA issued its resolution35 onFebruary 5, 1986. The NHA gave due course to theapplication made by Francisca Herrera withoutconsidering that the initial applicant's death wouldtransfer all her property, rights and obligations to theestate including whatever interest she has or may havehad over the disputed properties. To the extent of theinterest that the original owner had over the property,the same should go to her estate. Margarita Herrera hadan interest in the property and that interest should go toher estate upon her demise so as to be able to properly

distribute them later to her heirs—in accordance with awill or by operation of law.

The death of Margarita Herrera does not extinguish herinterest over the property. Margarita Herrera had anexisting Contract to Sell36 with NHA as the seller. UponMargarita Herrera's demise, this Contract to Sell wasneither nullified nor revoked. This Contract to Sell wasan obligation on both parties—Margarita Herrera andNHA. Obligations are transmissible.37 MargaritaHerrera's obligation to pay became transmissible at thetime of her death either by will or by operation of law.

If we sustain the position of the NHA that this documentis not a will, then the interests of the decedent shouldtransfer by virtue of an operation of law and not by virtueof a resolution by the NHA. For as it stands, NHAcannot make another contract to sell to other parties ofa property already initially paid for by the decedent.Such would be an act contrary to the law on successionand the law on sales and obligations.38

When the original buyer died, the NHA should haveconsidered the estate of the decedent as the next

"person"39 likely to stand in to fulfill the obligation to paythe rest of the purchase price. The opposition of otherheirs to the repurchase by Francisca Herrera shouldhave put the NHA on guard as to the award of the lots.Further, the Decision in the said Civil Case No. B-1263(questioning the Deed of Self-Adjudication) whichrendered the deed therein null and void40 should havealerted the NHA that there are other heirs to theinterests and properties of the decedent who may claim

the property after a testate or intestate proceeding isconcluded. The NHA therefore acted arbitrarily in theaward of the lots.

We need not delve into the validity of the will. The issueis for the probate court to determine. We affirm theCourt of Appeals and the Regional Trial Court whichnoted that it has an element of testamentary dispositionwhere (1) it devolved and transferred property; (2) theeffect of which shall transpire upon the death of theinstrument maker .41

IN VIEW WHEREOF, the petition of the National

Housing Authority is DENIED. The decision of the Courtof Appeals in CA-G.R. No. 68370 dated August 28,2003, affirming the decision of the Regional Trial Courtof San Pedro, Laguna in Civil Case No. B-2780 datedMarch 9, 1998, is hereby AFFIRMED.

No cost.

SO ORDERED.

Sandoval-Gutierrez, Corona, Azcuna, Garcia, JJ., concur.

G.R. No. 82027 March 29, 1990

ROMARICO G. VITUG, petitioner,vs.THE HONORABLE COURT OF APPEALS andROWENA FAUSTINO-CORONA, respondents.

Rufino B. Javier Law Office for petitioner.

Quisumbing, Torres & Evangelista for privaterespondent.

SARMIENTO, J.:

This case is a chapter in an earlier suit decided by thisCourt

1 involving the probate of the two wills of the late

Dolores Luchangco Vitug, who died in New York, U.S.A., on November 10, 1980, naming privaterespondent Rowena Faustino-Corona executrix. In oursaid decision, we upheld the appointment of Nenita Alonte as co-special administrator of Mrs. Vitug's estatewith her (Mrs. Vitug's) widower, petitioner Romarico G.

Vitug, pending probate.

On January 13, 1985, Romarico G. Vitug filed a motionasking for authority from the probate court to sell certainshares of stock and real properties belonging to theestate to cover allegedly his advances to the estate inthe sum of P667,731.66, plus interests, which heclaimed were personal funds. As found by the Court of Appeals, 2 the alleged advances consisted ofP58,147.40 spent for the payment of estate tax,P518,834.27 as deficiency estate tax, and P90,749.99as "increment thereto." 3

According to Mr. Vitug, he















































withdrew the sums of P518,834.27 and P90,749.99 fromsavings account No. 35342-038 of the Bank of America,Makati, Metro Manila.

On April 12, 1985, Rowena Corona opposed the motionto sell on the ground that the same funds withdrawnfrom savings account No. 35342-038 were conjugalpartnership properties and part of the estate, and hence,there was allegedly no ground for reimbursement. Shealso sought his ouster for failure to include the sums inquestion for inventory and for "concealment of fundsbelonging to the estate." 4

Vitug insists that the said funds are his exclusiveproperty having acquired the same through asurvivorship agreement executed with his late wife andthe bank on June 19, 1970. The agreement provides:

We hereby agree with each other and with the BANKOF AMERICAN NATIONAL TRUST AND SAVINGS ASSOCIATION (hereinafter referred to as the BANK),

that all money now or hereafter deposited by us or anyor either of us with the BANK in our joint savings currentaccount shall be the property of all or both of us andshall be payable to and collectible or withdrawable byeither or any of us during our lifetime, and after thedeath of either or any of us shall belong to and be thesole property of the survivor or survivors, and shall bepayable to and collectible or withdrawable by suchsurvivor or survivors.

We further agree with each other and the BANK that thereceipt or check of either, any or all of us during ourlifetime, or the receipt or check of the survivor orsurvivors, for any payment or withdrawal made for ourabove-mentioned account shall be valid and sufficientrelease and discharge of the BANK for such payment orwithdrawal. 5

The trial courts6 upheld the validity of this agreement

and granted "the motion to sell some of the estate ofDolores L. Vitug, the proceeds of which shall be used topay the personal funds of Romarico Vitug in the totalsum of P667,731.66 ... ." 7

On the other hand, the Court of Appeals, in the petitionfor certiorari filed by the herein private respondent, held

that the above-quoted survivorship agreementconstitutes a conveyance mortis causa which "did notcomply with the formalities of a valid will as prescribedby Article 805 of the Civil Code,"

8 and secondly,

assuming that it is a mere donation inter vivos, it is aprohibited donation under the provisions of Article 133of the Civil Code. 9

The dispositive portion of the decision of the Court of Appeals states:

WHEREFORE, the order of respondent Judge datedNovember 26, 1985 (Annex II, petition) is hereby set

aside insofar as it granted private respondent's motionto sell certain properties of the estate of Dolores L. Vitugfor reimbursement of his alleged advances to the estate,but the same order is sustained in all other respects. Inaddition, respondent Judge is directed to includeprovisionally the deposits in Savings Account No.35342-038 with the Bank of America, Makati, in theinventory of actual properties possessed by the spousesat the time of the decedent's death. With costs againstprivate respondent. 10

In his petition, Vitug, the surviving spouse, assails theappellate court's ruling on the strength of our decisionsin Rivera v. People's Bank and Trust Co. 11 and Macamv. Gatmaitan

12 in which we sustained the validity of

"survivorship agreements" and considering them asaleatory contracts. 13

The petition is meritorious.

The conveyance in question is not, first of all, one ofmortis causa, which should be embodied in a will. A willhas been defined as "a personal, solemn, revocable andfree act by which a capacitated person disposes of hisproperty and rights and declares or complies with dutiesto take effect after his death."

14 In other words, the

bequest or device must pertain to the testator.15

In thiscase, the monies subject of savings account No. 35342-038 were in the nature of conjugal funds In the caserelied on, Rivera v. People's Bank and Trust Co.,

16 we

rejected claims that a survivorship agreement purportsto deliver one party's separate properties in favor of theother, but simply, their joint holdings:

xxx xxx xxx

... Such conclusion is evidently predicated on theassumption that Stephenson was the exclusive owner ofthe funds-deposited in the bank, which assumption wasin turn based on the facts (1) that the account wasoriginally opened in the name of Stephenson alone and(2) that Ana Rivera "served only as housemaid of thedeceased." But it not infrequently happens that a persondeposits money in the bank in the name of another; andin the instant case it also appears that Ana Riveraserved her master for about nineteen years withoutactually receiving her salary from him. The fact thatsubsequently Stephenson transferred the account to thename of himself and/or Ana Rivera and executed withthe latter the survivorship agreement in questionalthough there was no relation of kinship between thembut only that of master and servant, nullifies theassumption that Stephenson was the exclusive owner ofthe bank account. In the absence, then, of clear proof tothe contrary, we must give full faith and credit to thecertificate of deposit which recites in effect that thefunds in question belonged to Edgar Stephenson and Ana Rivera; that they were joint (and several) ownersthereof; and that either of them could withdraw any part

or the whole of said account during the lifetime of both,and the balance, if any, upon the death of either,belonged to the survivor. 17

xxx xxx xxx

In Macam v. Gatmaitan, 18 it was held:

xxx xxx xxx

This Court is of the opinion that Exhibit C is an aleatorycontract whereby, according to article 1790 of the Civil

Code, one of the parties or both reciprocally bindthemselves to give or do something as an equivalent forthat which the other party is to give or do in case of theoccurrence of an event which is uncertain or will happenat an indeterminate time. As already stated, Leonardawas the owner of the house and Juana of the Buickautomobile and most of the furniture. By virtue of ExhibitC, Juana would become the owner of the house in caseLeonarda died first, and Leonarda would become theowner of the automobile and the furniture if Juana wereto die first. In this manner Leonarda and Juanareciprocally assigned their respective property to one



another conditioned upon who might die first, the time ofdeath determining the event upon which the acquisitionof such right by the one or the other depended. Thiscontract, as any other contract, is binding upon theparties thereto. Inasmuch as Leonarda had died beforeJuana, the latter thereupon acquired the ownership ofthe house, in the same manner as Leonarda would haveacquired the ownership of the automobile and of thefurniture if Juana had died first.

19

xxx xxx xxx

There is no showing that the funds exclusively belongedto one party, and hence it must be presumed to beconjugal, having been acquired during the existence ofthe marita. relations.

20

Neither is the survivorship agreement a donation intervivos, for obvious reasons, because it was to take effectafter the death of one party. Secondly, it is not adonation between the spouses because it involved no

conveyance of a spouse's own properties to the other.

It is also our opinion that the agreement involves nomodification petition of the conjugal partnership, as heldby the Court of Appeals, 21 by "mere stipulation" 22 andthat it is no "cloak" 23 to circumvent the law on conjugalproperty relations. Certainly, the spouses are notprohibited by law to invest conjugal property, say, byway of a joint and several bank account, morecommonly denominated in banking parlance as an"and/or" account. In the case at bar, when the spousesVitug opened savings account No. 35342-038, theymerely put what rightfully belonged to them in a money-making venture. They did not dispose of it in favor of theother, which would have arguably been sanctionable asa prohibited donation. And since the funds wereconjugal, it can not be said that one spouse could havepressured the other in placing his or her deposits in themoney pool.

The validity of the contract seems debatable by reasonof its "survivor-take-all" feature, but in reality, thatcontract imposed a mere obligation with a term, the termbeing death. Such agreements are permitted by the CivilCode. 24

Under Article 2010 of the Code:

ART. 2010. By an aleatory contract, one of the partiesor both reciprocally bind themselves to give or to dosomething in consideration of what the other shall giveor do upon the happening of an event which isuncertain, or which is to occur at an indeterminate time.

Under the aforequoted provision, the fulfillment of analeatory contract depends on either the happening of anevent which is (1) "uncertain," (2) "which is to occur atan indeterminate time." A survivorship agreement, thesale of a sweepstake ticket, a transaction stipulating on

the value of currency, and insurance have been held tofall under the first category, while a contract for lifeannuity or pension under Article 2021, et sequentia, hasbeen categorized under the second.

25 In either case,

the element of risk is present. In the case at bar, the riskwas the death of one party and survivorship of the other.

However, as we have warned:

xxx xxx xxx

But although the survivorship agreement is per se notcontrary to law its operation or effect may be violative ofthe law. For instance, if it be shown in a given case thatsuch agreement is a mere cloak to hide an inofficiousdonation, to transfer property in fraud of creditors, or todefeat the legitime of a forced heir, it may be assailedand annulled upon such grounds. No such vice hasbeen imputed and established against the agreementinvolved in this case.

26

xxx xxx xxx

There is no demonstration here that the survivorshipagreement had been executed for such unlawfulpurposes, or, as held by the respondent court, in orderto frustrate our laws on wills, donations, and conjugalpartnership.

The conclusion is accordingly unavoidable that Mrs.Vitug having predeceased her husband, the latter hasacquired upon her death a vested right over the

amounts under savings account No. 35342-038 of theBank of America. Insofar as the respondent courtordered their inclusion in the inventory of assets left byMrs. Vitug, we hold that the court was in error. Being theseparate property of petitioner, it forms no more part ofthe estate of the deceased.

WHEREFORE, the decision of the respondent appellatecourt, dated June 29, 1987, and its resolution, datedFebruary 9, 1988, are SET ASIDE.

No costs.

SO ORDERED.

Melencio-Herrera (Chairperson), Paras, Padilla andRegalado JJ., concur.

SECOND DIVISION

[G.R. No. 131641. February 23, 2000]

NATIVIDAD P. NAZARENO, peti t ioner , vs . COURTOF APPEALS, HON. NAPOLEON V. DILAG,Presiding Judge, RTC-Cavite, Branch XV, ROMEO P.NAZARENO and ELIZA NAZARENO, respondents .

D E C I S I O N

BELLOSILLO, J .:

A writ of execution must conform to the judgment to beexecuted; it may not vary the terms of the judgment itseeks to enforce. Nor may it go beyond the terms of the judgment sought to be executed. Where the execution isnot in harmony with the judgment which gives it life, andin fact exceeds it, it has pro tanto no validity. Tomaintain otherwise would be to ignore the constitutional

provision against depriving a person of his propertywithout due process of law.1[1]

Adjudication of ownership necessarily includes deliveryof possession. Indeed, it would be defeating the ends of justice should we require that for the parties to obtain



possession of the property duly adjudged to be theirsfrom those who have no right to remain therein, theymust submit to court litigations anew.2[2] An exceptionhowever exists where the actual possessor has shown avalid right over the property enforceable even againstthe owner thereof.3[3]

On 15 March 1985 Natividad Nazareno filed aComplaint for Annulment of Sale and Damages againstspouses Romeo and Eliza Nazareno. Natividad avers inher complaint that she is the sole and absolute owner ofa parcel of land located in Naic, Cavite, covered by TCTNo. 51798 of the Registry of Deeds of Cavite. Sometimein April 1981 Natividad‘s brother, Romeo, and his wifeEliza convinced Natividad to lend them TCT No. 51798to be used as collateral to a loan the proceeds of whichwould be used in the completion of the construction ofthe Naic Cinema on the subject property. Natividadagreed on the condition that title to her property wouldbe returned within one (1) year from the completion ofthe construction of the cinema. Accordingly, Natividadexecuted a Deed of Absolute Sale in favor of spouses

Romeo and Eliza over the lot covered by TCT No.51798. The sale, however, was simulated becauseNatividad did not receive any consideration therefor.

The cinema was completed in November 1981 butdespite several demands by Natividad, spouses Romeoand Eliza failed and refused to return Natividad‘s title tothe property; instead, they had the property transferredin their name. Consequently, TCT No. T-118276 wasissued in their name in lieu of TCT No. 51798.

Spouses Romeo and Eliza denied that the propertybelonged to Natividad. On the contrary, they averred

that it originally formed part of the estate of the lateMaximino Nazareno, Jr., father of Romeo and Natividad. According to Romeo, the property was his share in theirinheritance. As regards the deed of sale, he explainedthat it was only resorted to for the purpose of carryingout and implementing the transfer of the propertyforming part of the estate of Maximino Nazareno Jr., thedistribution of which was entrusted to Natividad.

The trial court found for the spouses Romeo and Elizaand ruled that although the Deed of Absolute Sale wassimulated, the same could be treated as an adjudicationand a conveyance to Romeo of his share in the estate

of his father.

But the Court of Appeals ruled otherwise. It found thatduring pre-trial, the parties stipulated that the Deed of Absolute Sale between Natividad and spouses Romeoand Eliza was simulated as there was in fact no moneyconsideration. Consequently, the burden of proof wasshifted to Romeo to prove that the transfer was in realitya conveyance of his share in the estate of his father. Butduring trial, Romeo failed to prove this so-calledconveyance of his share. On the other hand, Natividadsatisfactorily showed that the property was previouslysold to her by their late father. Romeo failed to disprove

this fact. Neither did he successfully cause the deed ofsale executed by Maximino Nazareno Jr. in favor of

Natividad to be declared null and void. Resultingly, itsauthenticity and validity remained unrebutted.

In short, the Court of Appeals did not sustain the trialcourt and set aside its Decision. The Deed of AbsoluteSale executed by Natividad in favor of the spousesRomeo and Eliza as well as TCT No. 118276 wasdeclared null and void. Hence, the Register of Deedswas ordered to restore TCT No. 51798 under the nameof Natividad. The case was brought to us on a Petitionfor Review on Certiorari but we denied the petition afterhaving ascertained that the appellate court committedno reversible error. Thus, the Court of Appeals‘ decisionbecame final and executory on 13 June 1996.

On 7 November 1996 Natividad filed a Manifestation and Motion with the Regional Trial Court of Naic prayingfor the issuance of a writ of execution as well as a writ ofpossession. The spouses Romeo and Eliza filed anOpposition contending that in her Complaint Natividadnever prayed that she be placed in possession of thesubject premises. Neither did the Court of Appeals orderthat petitioner be placed in possession of the property.

On 21 February 1997 the trial court granted the writ ofexecution prayed for but denied the issuance of a writ ofpossession as it was not included in the decision of theCourt of Appeals. Natividad‘s Motion forReconsideration was denied. Hence, recourse wasmade to the Court of Appeals.

On 9 September 1997 the Court of Appeals denied thepetition thus -

Execution not in harmony with the judgment has novalidity. It must conform more particularly to thatordained or decreed in the dispositive portion of thedecision, as the only portion of the decision thatbecomes the subject of execution.

Therefore, to issue a writ of possession in favor ofpetitioner in this case where possession was neverdecreed in favor of petitioner, would be void x x x

Moreover, it is a settled rule that a writ of possession isimproper to eject another from possession unlesssought in connection with (1) a land registration

proceeding; (2) an extrajudicial foreclosure of realproperty; (3) in a judicial foreclosure of propertyprovided that the mortgagor has possession and nothird party has intervened; and (4) in execution sales.

It is an undisputed fact that this case is for theannulment of a private sale made by petitioner to privaterespondent. This action is not a land registration casenor a foreclosure of mortgage whether judicially orextrajudicially nor was the subject property sold inexecution. Petitioner sought for the issuance of a writ ofpossession in connection with a decision in a civil actionfor annulment of a private sale and damages.4[4]

A Motion for Reconsideration was filed but the samewas denied; hence, the instant petition.



entitled to possession of all the improvements therein.Otherwise, the actual possessor would be deprived ofhis property without due process of law.

Finally, petitioner cannot validly claim possession overthe Naic Cinema since in her complaint and subsequentpleadings, she has admitted not being the ownerthereof. On the contrary, she claims that the NaicCinema belongs to the estate of her father. On the otherhand, respondent spouses have asserted dominion overthe Naic Cinema. Plainly, petitioner cannot wrestpossession of the moviehouse from respondentspouses through a mere writ of possession as sheherself even disclaims being the owner thereof.Ownership over the Naic Cinema must be threshed outin a proper proceeding. A mere prayer for the issuanceof a writ of possession will not suffice.

WHEREFORE, the petition is DENIED. The Decision ofthe Court of Appeals denying the issuance of a writ ofpossession is AFFIRMED. Costs against petitioner.

SO ORDERED.

Mendoza, Quisumbing, and De Leon, Jr., JJ., concur.

Buena, J., on leave.

Heirs of Spouses REMEDIOS R. SANDEJAS andELIODORO P. SANDEJAS SR. -- ROBERTO R.SANDEJAS, ANTONIO R. SANDEJAS, CRISTINASANDEJAS MORELAND, BENJAMIN R. SANDEJAS,REMEDIOS R. SANDEJAS; and heirs of SIXTO S.SANDEJAS II, RAMON R. SANDEJAS, TERESITA R.

SANDEJAS, and ELIODORO R. SANDEJAS JR., allrepresented by ROBERTO R. SANDEJAS, petitioners,vs. ALEX A. LINA, respondent.

D E C I S I O N

PANGANIBAN, J .:

A contract of sale is not invalidated by the fact that it issubject to probate court approval. The transactionremains binding on the seller-heir, but not on the otherheirs who have not given their consent to it. In settlingthe estate of the deceased, a probate court has

jurisdiction over matters incidental and collateral to theexercise of its recognized powers. Such matters includeselling, mortgaging or otherwise encumbering realtybelonging to the estate. Rule 89, Section 8 of the Rulesof Court, deals with the conveyance of real propertycontracted by the decedent while still alive. In contrastwith Sections 2 and 4 of the same Rule, the saidprovision does not limit to the executor or administratorthe right to file the application for authority to sell,mortgage or otherwise encumber realty underadministration. The standing to pursue such course ofaction before the probate court inures to any personwho stands to be benefited or injured by the judgment or

to be entitled to the avails of the suit.

The Case

Before us is a Petition for Review under Rule 45 of theRules of Court, seeking to reverse and set aside theDecisionxxv[1] dated April 16, 1999 and theResolutionxxvi[2] dated January 12, 2000, bothpromulgated by the Court of Appeals in CA-GR CV No.49491. The dispositive portion of the assailed Decisionreads as follows:xxvii[3]

―WHEREFORE, for all the foregoing, [w]e herebyMODIFY the [O]rder of the lower court dated January13, 1995, approving the Receipt of Earnest Money WithPromise to Buy and Sell dated June 7, 1982, only to thethree-fifth (3/5) portion of the disputed lots covering theshare of [A]dministrator Eliodoro Sandejas, Sr. [in] theproperty. The intervenor is hereby directed to payappellant the balance of the purchase price of the three-fifth (3/5) portion of the property within thirty (30) days

from receipt of this [O]rder and x x x the administrator [isdirected] to execute the necessary and proper deeds ofconveyance in favor of appellee within thirty (30) daysthereafter.‖

The assailed Resolution denied reconsideration of theforegoing disposition.

The Facts

The facts of the case, as narrated by the Court of Appeals (CA), are as follows:xxviii[4]

―On February 17, 1981, Eliodoro Sandejas, Sr. filed apetition (Record, SP. Proc. No. R-83-15601, pp. 8-10) inthe lower court praying that letters of administration beissued in his favor for the settlement of the estate of hiswife, REMEDIOS R. SANDEJAS, who died on April 17,1955. On July 1, 1981, Letters of Administration [wereissued by the lower court appointing Eliodoro Sandejas,Sr. as administrator of the estate of the late RemediosSandejas (Record, SP. Proc. No. R-83-15601, p. 16).Likewise on the same date, Eliodoro Sandejas, Sr. tookhis oath as administrator (Record, SP. Proc. No. R-83-15601, p. 17). x x x.

―On November 19, 1981, the 4th floor of Manila City Hallwas burned and among the records burned were therecords of Branch XI of the Court of First Instance ofManila. As a result, [A]dministrator Eliodoro Sandejas,Sr. filed a [M]otion for [R]econstitution of the records ofthe case on February 9, 1983 (Record, SP. Proc. No. R-83-15601, pp. 1-5). On February 16, 1983, the lowercourt in its [O]rder granted the said motion (Record, SP.Proc. No. R-83-15601, pp. 28-29).

―On April 19, 1983, an Omnibus Pleading for motion tointervene and petition-in-intervention was filed by

[M]ovant Alex A. Lina alleging among others that onJune 7, 1982, movant and [A]dministrator Eliodoro P.Sandejas, in his capacity as seller, bound and obligatedhimself, his heirs, administrators, and assigns, to sellforever and absolutely and in their entirety the followingparcels of land which formed part of the estate of thelate Remedios R. Sandejas, to wit:

1. ‗A parcel of land (Lot No. 22 Block No. 45 of thesubdivision plan Psd-21121, being a portion of Block 45described on plan Psd-19508, G.L.R.O. Rec. No. 2029),situated in the Municipality of Makati, province of Rizal,containing an area of TWO HUNDRED SEVENTY (270)

SQUARE METERS, more or less, with TCT No. 13465;

2. ‗A parcel of land (Lot No. 21 Block No. 45 of thesubdivision plan Psd-21141, being a portion of Block 45described on plan Psd-19508 G.L.R.O. Rec. No. 2029),situated in the Municipality of Makati, Province of Rizal,containing an area of TWO HUNDRED SEVENTY (270)SQUARE METERS, more or less, with TCT No. 13464;‘

3. ‗A parcel of land (Lot No. 5 Block No. 45 of thesubdivision plan Psd-21141, being a portion of Block 45described on plan Psd-19508 G.L.R.O. Rec. No. 2029),



situated in the Municipality of Makati, Province of Rizal,containing an area of TWO HUNDRED EIGHT (208)SQUARE METERS, more or less, with TCT No. 13468;‘

4. ‗A parcel of land (Lot No. 6, Block No. 45 of thesubdivision plan Psd-21141, being a portion of Block 45described on plan Psd-19508 G.L.R.O. Rec. No. 2029),situated in the Municipality of Makati, Province of Rizal,containing an area of TWO HUNDRED EIGHT (208)SQUARE METERS, more or less, with TCT No. 13468;‘

―The [R]eceipt of the [E]arnest [M]oney with [P]romise to[S]ell and to [B]uy is hereunder quoted, to wit:

‗Received today from MR. ALEX A. LINA the sum ofONE HUNDRED THOUSAND (P100,000.00) PESOS,Philippine Currency, per Metropolitan Bank & TrustCompany Chec[k] No. 319913 dated today forP100,000.00, x x x as additional earnest money for thefollowing:

x x x x x x x x x

all registered with the Registry of Deeds of the[P]rovince of Rizal (Makati Branch Office) in the name ofSELLER ‗ELIODORO SANDEJAS, Filipino Citizen, oflegal age, married to Remedios Reyes de Sandejas;‘and which undersigned, as SELLER, binds andobligates himself, his heirs, administrators and assigns,to sell forever and absolutely in their entirety (all of thefour (4) parcels of land above described, which arecontiguous to each other as to form one big lot) to saidMr. Alex A. Lina, who has agreed to buy all of them,also binding on his heirs, administrators and assigns, for

the consideration of ONE MILLION (P1,000,000.00)PESOS, Philippine Currency, upon such reasonableterms of payment as may be agreed upon by them. Theparties have, however, agreed on the following termsand conditions:

‗1. The P100,000.00 herein received is in additionto the P70,000.00 earnest money already received bySELLER from BUYER, all of which shall form part of,and shall be deducted from, the purchase price ofP1,000,000.00, once the deed of absolute [sale] shall beexecuted;

‗2. As a consideration separate and distinct fromthe price, undersigned SELLER also acknowledgesreceipt from Mr. Alex A. Lina of the sum of ONETHOUSAND (P1,000.00) PESOS, Philippine Currency,per Metropolitan Bank & Trust Company Check No.319912 dated today and payable to SELLER forP1,000.00;

‗3. Considering that Mrs. Remedios Reyes deSandejas is already deceased and as there is a pendingintestate proceedings for the settlement of her estate(Spec. Proc. No. 138393, Manila CFI, Branch XI),wherein SELLER was appointed as administrator of said

Estate, and as SELLER, in his capacity as administratorof said Estate, has informed BUYER that he (SELLER)already filed a [M]otion with the Court for authority to sellthe above parcels of land to herein BUYER, but whichhas been delayed due to the burning of the records ofsaid Spec. Pro. No. 138398, which records arepresently under reconstitution, the parties shall have atleast ninety (90) days from receipt of the Orderauthorizing SELLER, in his capacity as administrator, tosell all THE ABOVE DESCRIBED PARCELS OF LANDTO HEREIN BUYER (but extendible for another periodof ninety (90) days upon the request of either of the

parties upon the other), within which to execute thedeed of absolute sale covering all above parcels of land;

‗4. In the event the deed of absolute sale shall notproceed or not be executed for causes either due toSELLER‘S fault, or for causes of which the BUYER isinnocent, SELLER binds himself to personally return toMr. Alex A. Lina the entire ONE HUNDRED SEVENTYTHOUSAND ([P]170,000.00) PESOS in earnest moneyreceived from said Mr. Lina by SELLER, plus fourteen(14%) percentum interest per annum, all of which shallbe considered as liens of said parcels of land, or at leaston the share therein of herein SELLER;

‗5. Whether indicated or not, all of above terms andconditions shall be binding on the heirs, administrators,and assigns of both the SELLER (undersigned MR.ELIODORO P. SANDEJAS, SR.) and BUYER (MR. ALEX A. LINA).‘ (Record, SP. Proc. No. R-83-15601,pp. 52-54)

―On July 17, 1984, the lower court issued an [O]rdergranting the intervention of Alex A. Lina (Record, SP.Proc. No. R-83-15601, p. 167).

―On January 7, 1985, the counsel for [A]dministratorEliodoro P. Sandejas filed a [M]anifestation allegingamong others that the administrator, Mr. Eliodoro P.Sandejas, died sometime in November 1984 in Canadaand said counsel is still waiting for official word on thefact of the death of the administrator. He also alleged,among others that the matter of the claim of Intervenor Alex A. Lina becomes a money claim to be filed in theestate of the late Mr. Eliodoro P. Sandejas (Record, SP.Proc. No. R-83-15601, p. 220). On February 15, 1985,the lower court issued an [O]rder directing, amongothers, that the counsel for the four (4) heirs and otherheirs of Teresita R. Sandejas to move for theappointment of [a] new administrator within fifteen (15)days from receipt of this [O]rder (Record, SP. Proc. No.R-83-15601, p. 227). In the same manner, onNovember 4, 1985, the lower court again issued anorder, the content of which reads:

‗On October 2, 1985, all the heirs, Sixto, Roberto, Antonio, Benjamin all surnamed Sandejas were orderedto move for the appointment of [a] new administrator.On October 16, 1985, the same heirs were given aperiod of fifteen (15) days from said date within which tomove for the appointment of the new administrator.Compliance was set for October 30, 1985, noappearance for the aforenamed heirs. The aforenamedheirs are hereby ordered to show cause within fifteen(15) days from receipt of this Order why this Petition forSettlement of Estate should not be dismissed for lack ofinterest and failure to comply with a lawful order of thisCourt.

‗SO ORDERED.‘ (Record, SP. Proc. No. R-83-15601,p. 273)

―On November 22, 1985, Alex A. Lina as petitioner filedwith the Regional Trial Court of Manila an OmnibusPleading for (1) petition for letters of administration [and](2) to consolidate instant case with SP. Proc. No. R-83-15601 RTC-Branch XI-Manila, docketed therein as SP.Proc. No. 85-33707 entitled ‗IN RE: INTESTATEESTATE OF ELIODORO P. SANDEJAS, SR., ALEX A.LINA PETITIONER‖, [for letters of administration](Record, SP. Proc. No. 85-33707, pp. 1-7). OnNovember 29, 1985, Branch XXXVI of the Regional TrialCourt of Manila issued an [O]rder consolidating SP.



Proc. No. 85-33707, with SP. Proc. No. R-83-15601(Record, SP. Proc. No.85-33707, p. 13). Likewise, onDecember 13, 1985, the Regional Trial Court of Manila,Branch XI, issued an [O]rder stating that ‗this Court hasno objection to the consolidation of Special ProceedingsNo. 85-331707, now pending before Branch XXXVI ofthis Court, with the present proceedings now pendingbefore this Branch‘ (Record, SP. Proc. No. R-83-15601,p. 279).

―On January 15, 1986, Intervenor A lex A. Lina filed [a]Motion for his appointment as a new administrator of theIntestate Estate of Remedios R. Sandejas on thefollowing reasons:

‗5.01. FIRST, as of this date, [i]ntervenor has notreceived any motion on the part of the heirs Sixto, Antonio, Roberto and Benjamin, all surnamed Sandejas,for the appointment of a new [a]dministrator in place oftheir father, Mr. Eliodoro P. Sandejas, Sr.;

‗5.02. SECOND, since Sp. Proc. 85-33707, wherein the[p]etitioner is herein Intervenor Alex A. Lina and theinstant Sp. PROC. R-83-15601, in effect are alreadyconsolidated, then the appointment of Mr. Alex Lina as[a]dministrator of the Intestate Estate of Remedios R.Sandejas in instant Sp. Proc. R-83-15601, would bebeneficial to the heirs and also to the Intervenor;

‗5.03. THIRD, of course, Mr. Alex A. Lina would bewilling to give way at anytime to any [a]dministrator whomay be proposed by the heirs of the deceasedRemedios R. Sandejas, so long as such [a]dministratoris qualified.‘ (Record, SP. Proc. No. R-83-15601, pp.281-283)

―On May 15, 1986, the lower court issued an ordergranting the [M]otion of Alex A. Lina as the new[a]dministrator of the Intestate Estate of Remedios R.Sandejas in this proceedings. (Record, SP. Proc. No.R-83-15601, pp. 288-290)

―On August 28, 1986, heirs Sixto, Roberto, Antonio andBenjamin, all surnamed Sandejas, and heirs [sic] filed a[M]otion for [R]econsideration and the appointment ofanother administrator Mr. Sixto Sandejas, in lieu of[I]ntervenor Alex A. Lina stating among others that it

[was] only lately that Mr. Sixto Sandejas, a son and heir,expressed his willingness to act as a new administratorof the intestate estate of his mother, Remedios R.Sandejas (Record, SP. Proc. No. 85-33707, pp. 29-31).On October 2, 1986, Intervenor Alex A. Lina filed his[M]anifestation and [C]ounter [M]otion alleging that heha[d] no objection to the appointment of Sixto Sandejasas [a]dministrator of the [i]ntestate [e]state of his motherRemedios R. Sandejas (Sp. Proc. No. 85-15601),provided that Sixto Sandejas be also appointed asadministrator of the [i]ntestate [e]state of his father,Eliodoro P. Sandejas, Sr. (Spec. Proc. No. 85-33707),which two (2) cases have been consolidated (Record,SP. Proc. No. 85-33707, pp. 34-36). On March 30,1987, the lower court granted the said [M]otion andsubstituted Alex Lina with Sixto Sandejas as petitionerin the said [P]etitions (Record, SP. Proc. No. 85-33707,p.52). After the payment of the administrator‘s bond(Record, SP. Proc. No. 83-15601, pp. 348-349) andapproval thereof by the court (Record, SP. Proc. No. 83-15601, p. 361), Administrator Sixto Sandejas onJanuary 16, 1989 took his oath as administrator of theestate of the deceased Remedios R. Sandejas andEliodoro P. Sandejas (Record, SP. Proc. No. 83-15601,p. 367) and was likewise issued Letters of

Administration on the same day (Record, SP. Proc. No.83-15601, p. 366).

―On November 29, 1993, Intervenor filed [an] OmnibusMotion (a) to approve the deed of conditional saleexecuted between Plaintiff-in-Intervention Alex A. Linaand Elidioro [sic] Sandejas, Sr. on June 7, 1982; (b) tocompel the heirs of Remedios Sandejas and EliodoroSandejas, Sr. thru their administrator, to execute a deedof absolute sale in favor of [I]ntervenor Alex A. Linapursuant to said conditional deed of sale (Record, SP.Proc. No. 83-15601, pp. 554-561) to which theadministrator filed a [M]otion to [D]ismiss and/or[O]pposition to said omnibus motion on December 13,1993 (Record, SP. Proc. No. 83-15601, pp. 591-603).

―On January 13, 1995, the lower court rendered thequestioned order granting intervenor‘s [M]otion for the[A]pproval of the Receipt of Earnest Money with promiseto buy between Plaintiff-in-Intervention Alex A. Lina andEliodoro Sandejas, Sr. dated June 7, 1982 (Record, SP.Proc. No. 83-15601, pp. 652-654). x x x.‖

The Order of the intestate courtxxix[5] disposed asfollows:

―WHEREFORE, [i]ntervenor‘s motion for the approval ofthe Receipt Of Earnest Money With Promise To Sell And To Buy dated June 7, 1982, is granted. The[i]ntervenor is directed to pay the balance of thepurchase price amounting to P729,000.00 within thirty(30) days from receipt of this Order and the Administrator is directed to execute within thirty (30)days thereafter the necessary and proper deeds ofconveyancing.‖xxx[6]

Ruling of the Court of Appeals

Overturning the RTC ruling, the CA held that thecontract between Eliodoro Sandejas Sr. and respondentwas merely a contract to sell, not a perfected contract ofsale. It ruled that the ownership of the four lots was toremain in the intestate estate of Remedios Sandejasuntil the approval of the sale was obtained from thesettlement court. That approval was a positivesuspensive condition, the nonfulfillment of which wasnot tantamount to a breach. It was simply an event that

prevented the obligation from maturing or becomingeffective. If the condition did not happen, the obligationwould not arise or come into existence.

The CA held that Section 1, Rule 89xxxi[7] of the Rulesof Court was inapplicable, because the lack of writtennotice to the other heirs showed the lack of consent ofthose heirs other than Eliodoro Sandejas Sr. For thisreason, bad faith was imputed to him, for no one isallowed to enjoy a claim arising from one‘s ownwrongdoing. Thus, Eliodoro Sr. was bound, as a matterof justice and good faith, to comply with his contractualcommitments as an owner and heir. When he entered

into the agreement with respondent, he bound hisconjugal and successional shares in the property.

Hence, this Petition.xxxii[8]

Issues

In their Memorandum, petitioners submit the followingissues for our resolution:



―a) Whether or not Eliodoro P. Sandejas Sr. islegally obligated to convey title to the property referredto in the subject document which was found to be in thenature of a contract to sell – where the suspensivecondition set forth therein [i.e.] court approval, was notcomplied with;

―b) Whether or not Eliodoro P. Sandejas Sr. wasguilty of bad faith despite the conclusion of the Court of Appeals that the respondent [bore] the burden ofproving that a motion for authority to sell ha[d] been filedin court;

―c) Whether or not the undivided shares of EliodoroP. Sandejas Sr. in the subject property is three-fifth (3/5)and the administrator of the latter should execute deedsof conveyance therefor within thirty days from receipt ofthe balance of the purchase price from the respondent;and

―d) Whether or not the respondent‘s petition-in-

intervention was converted to a money claim andwhether the [trial court] acting as a probate court couldapprove the sale and compel the petitioners to execute[a] deed of conveyance even for the share alone ofEliodoro P. Sandejas Sr.‖xxxiii[9]

In brief, the Petition poses the main issue of whether theCA erred in modifying the trial court‘s Decision and inobligating petitioners to sell 3/5 of the disputedproperties to respondent, even if the suspensivecondition had not been fulfilled. It also raises thefollowing collateral issues: (1) the settlement court‘s jurisdiction; (2) respondent- intervenor‘s standing to filean application for the approval of the sale of realty in thesettlement case, (3) the decedent‘s bad faith, and (4)the computation of the decedent‘s share in the realtyunder administration.

This Court‘s Ruling

The Petition is partially meritorious.

Main Issue: Obligation With a Suspensive Condition

Petitioners argue that the CA erred in ordering the

conveyance of the disputed 3/5 of the parcels of land,despite the nonfulfillment of the suspensive condition --court approval of the sale -- as contained in the ―Receiptof Earnest Money with Promise to Sell and to Buy ” (alsoreferred to as the ―Receipt” ). Instead, they assert thatbecause this condition had not been satisfied, theirobligation to deliver the disputed parcels of land wasconverted into a money claim.

We disagree. Petitioners admit that the agreementbetween the deceased Eliodoro Sandejas Sr. andrespondent was a contract to sell. Not exactly. In acontract to sell, the payment of the purchase price is a

positive suspensive condition. The vendor‘s obligationto convey the title does not become effective in case offailure to pay.xxxiv[10]

On the other hand, the agreement between Eliodoro Sr.and respondent is subject to a suspensive condition --the procurement of a court approval, not full payment.There was no reservation of ownership in theagreement. In accordance with paragraph 1 of theReceipt, petitioners were supposed to deed the disputedlots over to respondent. This they could do upon thecourt‘s approval, even before full payment. Hence, their

contract was a conditional sale, rather than a contract tosell as determined by the CA.

When a contract is subject to a suspensive condition, itsbirth or effectivity can take place only if and when thecondition happens or is fulfilled.xxxv[11] Thus, theintestate court‘s grant of the Motion for Approval of thesale filed by respondent resulted in petitioners‘obligation to execute the Deed of Sale of the disputedlots in his favor. The condition having been satisfied,the contract was perfected. Henceforth, the partieswere bound to fulfill what they had expressly agreedupon.

Court approval is required in any disposition of thedecedent‘s estate per Rule 89 of the Rules of Court.Reference to judicial approval, however, cannotadversely affect the substantive rights of heirs todispose of their own pro indiviso shares in the co-heirship or co-ownership.xxxvi[12] In other words, theycan sell their rights, interests or participation in theproperty under administration. A stipulation requiringcourt approval does not affect the validity and theeffectivity of the sale as regards the selling heirs. Itmerely implies that the property may be taken out ofcustodia legis, but only with the court‘spermission.xxxvii[13] It would seem that the suspensivecondition in the present conditional sale was imposedonly for this reason.

Thus, we are not persuaded by petitioners ‘ argumentthat the obligation was converted into a mere monetaryclaim. Paragraph 4 of the Receipt, which petitionersrely on, refers to a situation wherein the sale has notmaterialized. In such a case, the seller is bound to

return to the buyer the earnest money paid plus interestat fourteen percent per annum. But the sale wasapproved by the intestate court; hence, the proviso doesnot apply.

Because petitioners did not consent to the sale of theirideal shares in the disputed lots, the CA correctly limitedthe scope of the Receipt to the pro-indiviso share ofEliodoro Sr. Thus, it correctly modified the intestatecourt‘s ruling by excluding their shares from the ambit ofthe transaction.

First Collateral Issue: Jurisdiction of Settlement Court

Petitioners also fault the CA Decision by arguing, interalia, (a) jurisdiction over ordinary civil action seeking notmerely to enforce a sale but to compel performance of acontract falls upon a civil court, not upon an intestatecourt; and (b) that Section 8 of Rule 89 allows theexecutor or administrator, and no one else, to file anapplication for approval of a sale of the property underadministration.

Citing Gil v. Cancioxxxviii[14] and Acebedo v. Abesamis,xxxix[15] petitioners contend that the CAerred in clothing the settlement court with the jurisdictionto approve the sale and to compel petitioners to executethe Deed of Sale. They allege factual differencesbetween these cases and the instant case, as follows: inGil, the sale of the realty in administration was a clearand an unequivocal agreement for the support of thewidow and the adopted child of the decedent; and in Acebedo, a clear sale had been made, and all the heirsconsented to the disposition of their shares in the realtyin administration.



We are not persuaded. We hold that Section 8 of Rule89 allows this action to proceed. The factual differencesalleged by petitioners have no bearing on the intestatecourt‘s jurisdiction over the approval of the subjectconditional sale. Probate jurisdiction covers all mattersrelating to the settlement of estates (Rules 74 & 86-91)and the probate of wills (Rules 75-77) of deceasedpersons, including the appointment and the removal ofadministrators and executors (Rules 78-85). It also

extends to matters incidental and collateral to theexercise of a probate court‘s recognized powers such asselling, mortgaging or otherwise encumbering realtybelonging to the estate. Indeed, the rules on this pointare intended to settle the estate in a speedy manner, sothat the benefits that may flow from such settlementmay be immediately enjoyed by the heirs and thebeneficiaries.xl[16]

In the present case, the Motion for Approval was meantto settle the decedent‘s obligation to respondent; hence,that obligation clearly falls under the jurisdiction of thesettlement court. To require respondent to file a

separate action -- on whether petitioners should conveythe title to Eliodoro Sr.‘s share of the disputed realty --will unnecessarily prolong the settlement of the intestateestates of the deceased spouses.

The suspensive condition did not reduce the conditionalsale between Eliodoro Sr. and respondent to one thatwas ―not a definite, clear and absolute document ofsale,‖ as contended by petitioners. Upon theoccurrence of the condition, the conditional sale becamea reciprocally demandable obligation that is bindingupon the parties.xli[17] That Acebedo also involved aconditional sale of real propertyxlii[18] proves that the

existence of the suspensive condition did not removethat property from the jurisdiction of the intestate court.

Second Collateral Issue: Intervenor’s Standing

Petitioners contend that under said Rule 89, only theexecutor or administrator is authorized to apply for theapproval of a sale of realty under administration.Hence, the settlement court allegedly erred inentertaining and granting respondent‘s Motion for Approval.

We read no such limitation. Section 8, Rule 89 of theRules of Court, provides:

―SEC. 8. When court may authorize conveyance ofrealty which deceased contracted to convey. Notice.Effect of deed.—Where the deceased was in his lifetimeunder contract, binding in law, to deed real property, oran interest therein, the court having jurisdiction of theestate may, on application for that purpose, authorizethe executor or administrator to convey such propertyaccording to such contract, or with such modificationsas are agreed upon by the parties and approved by thecourt; and if the contract is to convey real property to theexecutor or administrator, the clerk of the court shallexecute the deed. x x x.‖

This provision should be differentiated from Sections 2and 4 of the same Rule, specifically requiring only theexecutor or administrator to file the application forauthority to sell, mortgage or otherwise encumber realestate for the purpose of paying debts, expenses andlegacies (Section 2);xliii[19] or for authority to sell real orpersonal estate beneficial to the heirs, devisees orlegatees and other interested persons, although suchauthority is not necessary to pay debts, legacies or

expenses of administration (Section 4).xliv[20] Section 8mentions only an application to authorize theconveyance of realty under a contract that the deceasedentered into while still alive. While this Rule does notspecify who should file the application, it stands toreason that the proper party must be one who is to bebenefited or injured by the judgment, or one who is to beentitled to the avails of the suit.xlv[21]

Third Collateral Issue: Bad Faith

Petitioners assert that Eliodoro Sr. was not in bad faith,because (a) he informed respondent of the need tosecure court approval prior to the sale of the lots, and(2) he did not promise that he could obtain the approval.

We agree. Eliodoro Sr. did not misrepresent these lotsto respondent as his own properties to which he alonehad a title in fee simple. The fact that he failed to obtainthe approval of the conditional sale did not automaticallyimply bad faith on his part. The CA held him in bad faith

only for the purpose of binding him to the conditionalsale. This was unnecessary because his being boundto it is, as already shown, beyond cavil.

Fourth Collateral Issue: Computation of Eliodoro’s Share

Petitioners aver that the CA‘s computation of EliodoroSr.‘s share in the disputed parcels of land waserroneous because, as the conjugal partner ofRemedios, he owned one half of these lots plus afurther one tenth of the remaining half, in his capacity asa one of her legal heirs. Hence, Eliodoro‘s share shouldbe 11/20 of the entire property. Respondent poses no

objection to this computation.xlvi[22]

On the other hand, the CA held that, at the very least,the conditional sale should cover the one half (1/2) proindiviso conjugal share of Eliodoro plus his one tenth(1/10) hereditary share as one of the ten legal heirs ofthe decedent, or a total of three fifths (3/5) of the lots inadministration.xlvii[23]

Petitioners‘ computation is correct. The CA computedEliodoro‘s share as an heir based on one tenth of theentire disputed property. It should be based only on theremaining half, after deducting the conjugal

share.xlviii[24]

The proper determination of the seller-heir‘s sharesrequires further explanation. Succession laws and jurisprudence require that when a marriage is dissolvedby the death of the husband or the wife, the decedent‘sentire estate – under the concept of conjugal propertiesof gains -- must be divided equally, with one half goingto the surviving spouse and the other half to the heirs ofthe deceased.xlix[25] After the settlement of the debtsand obligations, the remaining half of the estate is thendistributed to the legal heirs, legatees and devices. Weassume, however, that this preliminary determination of

the decedent‘s estate has already been taken intoaccount by the parties, since the only issue raised in thiscase is whether Eliodoro‘s share is 11/20 or 3/5 of thedisputed lots.

WHEREFORE, the Petition is hereby PARTIALLYGRANTED. The appealed Decision and Resolution are AFFIRMED with the MODIFICATION that respondent isentitled to only a pro-indiviso share equivalent to 11/20of the disputed lots.

SO ORDERED.



Melo, (Chairman), Vitug, Gonzaga-Reyes, andSandoval-Gutierrez, JJ., concur.

EN BANC

[G.R. No. L-24434. January 17, 1968.]

HEIRS OF PEDRO REGANON, JOVENCIAREGANON, MENCIAS REGANON, JOSEFA

REGANON, VIOLETA REGANON and FLORAREGANON, Plainti f fs-Appel lees , v. RUFINO

IMPERIAL, Defendant-Appel lant .

Torcuato L. Galon for Plainti f fs-Appel lees .

V. Lacaya, for Defendant-Appel lant .

SYLLABUS

1. ATTACHMENT; PROPERTY IN CUSTODIA LEGIS;

NEW RULES OF COURT, EFFECT. — Under the oldRules it was held that property under custodial legiscannot be attached. The New Rules, however,specifically provides for the procedure to be followed incase the property to be attached is in custodia legis.The clear import of this new provisions is that propertyunder custodia legis is now attachable, subject to themode set forth in said rule. (Rule 57, Section 7)

2. ID.; ID.; EFFECT OF DEATH UPONGUARDIANSHIP OF DECEASED WARD. — The deathof the ward necessarily terminates the guardianship andthereupon all powers and duties of the guardian cease,

except the duty which remains to make a properaccounting and settlement in the probate court. Uponthe death of the ward, Eulogio Imperial on September13, 1962, the rights to his succession from the momentof his death were transmitted to his heirs.

3. SUCCESSION; AUTOMATIC TRANSMISSION OFRIGHTS TO HEIRS, UPON MOMENT OF DEATH. — The rights to the succession of a person are transmittedfrom the moment of death and, where, as in this case,the heir is of legal age and the estate is not burdenedwith any debts, said heir immediately succeeds, by forceof law to the dominion, ownership and possession of the

properties of his predecessor, and consequently standslegally in shoes of the latter.

4. JUDGMENT; EXECUTION OF JUDGMENT;INTERESTS OF AN HEIR, IN ESTATE OF DECEASEDPERSON, SUBJECT TO ATTACHMENT FORPURPOSES OF EXECUTION. — The interest of anheir, in the estate of a deceased person may beattached for purpose of execution even if the estate is inthe process of settlement before the courts. This is asettled matter in this jurisdiction.

5. SUCCESSION; EXTRAJUDICIAL PARTITION;EFFECT. — The Deed of Extrajudicial Partitionexecuted by the heirs on May 25, 1964, provided all therequisites of its validity were fulfilled — settled the entireestate of the decedent and the heirs were at full libertyto withdraw the residuary estate from the PhilippineNational Bank — Dipolog Branch, and divide it amongthemselves.

6. ID.; EXEMPTION FROM EXECUTION OFMONTHLY USVA ALLOWANCES, A RIGHTPERSONALISSIMA, NOT TRANSMISSIBLE TO HEIRSOF THE DECEASED VETERAN. — Any pension,annuity or gratuity granted by the Government in

recognition of past services rendered is primordiallyaimed at tiding its beneficiaries during their old ageand/or disability. This right is personalissima, purelypersonal, because founded on necessity. Where therecipient dies, however, the motivating necessityunderlying the grant ceases to exist. With more reasonin this case where the law (Rep. Act 360) providing forexemption from execution is intended to benefit USveterans residing here and is merely a manifestation of

comity.

7. CIVIL LAW; PARTITION, EXTRAJUDICIAL; EFFECTTHEREOF. — Where the heirs have divided the estateamong themselves through a Deed of Extra-JudicialPartition, as in this case, the end result is that theproperty is no longer that of the estate but of theindividual heirs. Thus, one of the heirs cannot thereaftersecure the appointment of an administrator to takecharge of and administer the estate or a part thereof,which no longer pertains to the estate but to theindividual heirs, whether it remains undivided or not.

D E C I S I O N

BENGZON, J.P., J .:

This is an appeal from the orders dated June 9, 1964,July 14, 1964 and August 11, 1964, respectively, of theCourt of First Instance of Zamboanga del Norte(Dipolog, Branch II).

The facts of the case are admitted by both parties.

On February 22, 1963, the heirs of Pedro Reganon fileda complaint for recovery of ownership and possession ofabout one- hectare portion of a parcel of land (Lot No. 1or Lot No. 4952, situated at Miasi, Polanco, Zamboangadel Norte, covered by O.T.C. No. 1447, with an area of7,9954 hectares), with damages, against RufinoImperial.

Defendant not having filed an answer within thereglementary period, the plaintiffs on April 8, 1963 fileda motion to declare the former in default. The trial courtgranted the motion in its order dated April 10, 1963.

On April 23, 1963, the plaintiffs presented their evidenceex parte before the Clerk of Court acting asCommissioner.

The court a quo on May 6, 1963, rendered a decisiondeclaring the plaintiffs lawful owners of the land inquestion and entitled to its peaceful possession andenjoyment; ordering defendant immediately to vacatethe portion occupied by him and to restore the peacefulpossession thereof to plaintiffs; and sentencingdefendant to pay plaintiffs to amount of P1,929.20 andthe costs.

On November 29, 1963, the plaintiffs filed a motion forissuance of a writ of execution. This was granted by thetrial court in its order of December 9, 1963.

The Deputy Provincial Sheriff submitted on February 8,1964 a sheriff‘s return of proceedings reporting thegarnishment and sale of a carabao and goat belongingto defendant for P153.00, and the attachment and saleof defendant‘s parcel of land covered by TaxDeclaration No. 4694, situated in Sicet, Polanco,Zamboanga del Norte, for P500.00 — both sales havingbeen made to the only bidder, plaintiffs‘ counsel Atty.



Vic T. Lacaya.

On March 13, 1964, the Philippine National Bankdeposited in the Philippine National Bank-DipologBranch the residuary estate of its former ward, EulogioImperial, in the sum of P10,303.80, pursuant to an orderof Branch I of the Court of First Instance of Zamboangadel Norte in Sp. Proc. No. R-145.

On May 25, 1964, the heirs of said Eulogio Imperial, oneof whom is defendant, executed a Deed of ExtrajudicialPartition of the residuary estate, wherein wasapportioned — P1,471.97 as defendant RufinoImperial‘s share.

Informed of this development, the plaintiffs filed on June5, 1964 an ex parte motion for issuance of an alias writof execution and of an order directing the manager, orthe representative, of the Philippine National Bank — Dipolog Branch, to hold the share of defendant anddeliver the same to the provincial sheriff of the provinceto be applied to the satisfaction of the balance of the

money judgment. This was granted by the trial court(Branch II) in its order dated June 9, 1964.

On June 17, 1964, the Deputy Provincial Sheriff issueda sheriff‘s notification for levy addressed to defendant,giving notice of the garnishment of the rights, interests,shares and participation that defendant may have overthe residuary estate of the late Eulogio Imperial,consisting of the money deposited in the PhilippineNational Bank — Dipolog Branch.

Defendant, through counsel, appearing for the first timebefore the trial court, on June 24, 1964 filed a motion for

reconsideration of the order dated June 9, 1964, and toquash the alias writ of execution issued pursuant to it, towhich plaintiffs filed their opposition on July 6, 1964. OnJuly 14, 1964, the trial court denied defendant‘saforesaid motion.

Defendant‘s second motion for reconsideration likewisehaving been denied by the trial court in its order of August 11, 1964, defendant appealed to Us, raising thefollowing issues:chanrob1es virtual 1aw library

(1) Upon the death of a ward, is the money accumulatedin his guardianship proceedings and deposited in abank, still considered in custodia legis and therefore notsubject to attachment?

(2) Is the residuary estate of a U.S. veteran, whichconsists in the aggregate accumulated sum from themonthly allowances given him by the United StatesVeterans Administration (USVA) during his lifetime,exempt from execution?

Defendant-appellant argues that the property of anincompetent under guardianship is in custodia legis andtherefore can not be attached.

It is true that in a former case 1 it was held that property

under custodia legis can not be attached. But this wasunder the old Rules of Court. The new Rules of Court 2now specifically provides for the procedure to befollowed in case what is attached is in custodia legis. 3The clear import of this new provision is that propertyunder custodia legis is now attachable, subject to themode set forth in said rule.

Besides, the ward having died, the guardianshipproceedings no longer subsist:jgc:chanrobles.com.ph

"The death of the ward necessarily terminates the

guardianship, and thereupon all powers and duties ofthe guardian cease, except the duty, which remains, tomake a proper accounting and settlement in the probatecourt." 4

As a matter of fact, the guardianship proceedings wasordered conditionally closed by Branch I of the Court ofFirst Instance of Zamboanga del Norte in which it waspending, in its order of February 8, 1964, where it stated

—

"In the meantime, the guardian Philippine National Bankis hereby directed to deposit the residuary estate of saidward with its bank agency in Dipolog, this province, inthe name of the estate of the deceased ward EulogioImperial, preparatory to the eventual distribution of thesame to the heirs when the latter shall be known, andupon proof of deposit of said residuary estate, theguardian Philippine National Bank shall forthwith berelieved from any responsibility as such, and thisproceedings shall be considered closed andterminated." 5

And the condition has long been fulfilled, because onMarch 13, 1964 the Philippine National Bank — Maniladeposited the residuary estate of the ward with thePhilippine National Bank-Dipolog Branch, evidenced bya receipt attached to the records in Sp. Proc. No. R-145. 6

When Eulogio Imperial died on September 13, 1962, therights to his succession — from the moment of his death— were transmitted to his heirs, one of whom is his sonand heir, Defendant-Appellant herein. 7 This automatictransmission can not but proceed with greater ease and

certainty than in this case where the parties agree thatthe residuary estate is not burdened with any debt. For,

"The rights to the succession of a person aretransmitted from the moment of death, and where, as inthis case, the heir is of legal age and the estate is notburdened with any debts, said heir immediatelysucceeds, by force of law, to the dominion, ownership,and possession of the properties of his predecessor,and consequently stands legally in the shoes of thelatter." 8

That the interest of an heir in the estate of a deceasedperson may be attached for purposes of execution, evenif the estate is in the process of settlement before thecourts, is already a settled matter in this jurisdiction. 9 Itis admitted that the heirs of Eulogio Imperial, includingherein defendant-appellant, have on May 25, 1964executed a Deed of Extrajudicial Partition. Thisinstrument suffices to settle the entire estate of thedecedent — provided all the requisites for its validity arefulfilled 10 even without the approval of the court.Therefore, the estate for all practical purposes has beensettled. The heirs are at full liberty to withdraw theresiduary estate from the Philippine National Bank-Dipolog Branch and divide it among themselves. Theonly reason they have not done so is because of the

alleged illegal withdrawal from said estate of the amountof P1,080.00 by one Gloria Gomez by authority ofBranch I of the Court of first Instance of Zamboanga delNorte, which incident is now on appeal before the Courtof Appeals. This appeal, however, does not detract anyfrom the fact that the guardianship proceedings isclosed and terminated and the residuary estate nolonger under custodia legis.

Finally, it is defendant-appellant‘s position that theresiduary estate of Eulogio Imperial, a former U.S.veteran, having been set aside from the monthly



allowances given him by the United States Veterans Administration (USVA) during his lifetime, is exemptfrom execution.

Any pension, annuity. or gratuity granted by aGovernment to its officers or employees in recognitionof past services rendered, is primordially aimed at tidingthem over during their old age and/or disability. This istherefore a right personalissima, purely personal

because founded on necessity. It requires no argumentto show that where the recipient dies, the necessitymotivating or underlying its grant necessarily ceases tobe. Even more so in this case where the law 11providing for the exemption is calculated to benefit U.S.veterans residing here, and is therefore merely amanifestation of comity.

Besides, as earlier stated, the heirs of Eulogio Imperial,one of whom is appellant, have already executed aDeed of Extrajudicial Partition — the end result of whichis that the property is no longer the property of theestate but of the individual heirs. And it is settled

that:jgc:chanrobles.com.ph

"When the heirs by mutual agreement have divided theestate among themselves, one of the heirs can notthereafter secure the appointment of an administrator totake charge of and administer the estate or a partthereof. The property is no longer the property of theestate, but of the individual heirs, whether it remainsundivided or not." 12

WHEREFORE, the orders appealed from are herebyaffirmed, with costs against defendant-appellant. Soordered.

Concepcion, C.J., J.B.L., Reyes, Dizon, Makalintal,Zaldivar, Sanchez, Ruiz Castro, Angeles and Fernando,JJ., concur.

PhilippineLaw.info » Jurisprudence » 1967 » June »PhilippineLaw.info » Jurisprudence » SCRA » Vol. 20 »

G.R. No. L-25952, Salvador v. Enriquez, 20 SCRA603

Republic of the Philippines

SUPREME COURT Manila

EN BANC

June 30, 1967

G.R. No. L-25952MARGARITA SALVADOR, in her own behalf and asAttorney-in-fact of CANDIDA SALVADOR, ET AL., petitioners,vs.THE HON. JUDGE ANDRES STA. MARIA,

DOMINADOR CARDENAS, REMEDIOS CABRERA,ALBERTO M. K. JAMIR and SIMEON ENRIQUEZ, respondents.

Arturo Joaquin for petitioners.Pelaez, Jalandoni and Jamir and S. V. Enriquez, forrespondent Simeon Enriquez.C. E. Medina and J. M. Locsin for respondent PhilippineNational Bank.Bala and Enriquez for the other respondents.

BENGZON, J.P., J.:

Seven parcels of titled land and two parcels of untitledland, situated in Bigaa, Bulacan, were owned byCelestino Salvador. In 1941, he executed a deed of saleover them in favor of the spouses Alfonso Salvador and Anatolia Halili. Alleging that the sale was void for lack ofconsideration, he filed on May 12,1955, against saidvendees, a suit for reconveyance of said parcels of land(CFI of Bulacan, Br. I, Civil Case No. 1082).

On April 27, 1956, Celestino Salvador died, testate. Ashis alleged heirs, twenty-one persons[[1]] were on May18, 1956 substituted as plaintiffs in the action forreconveyance. And meanwhile, special proceedings forthe probate of his will and for letters testamentary wasinstituted (CFI of Bulacan, Br. II, Sp. Proceedings No.940). In said proceedings, Dominador Cardenas wasappointed on June 11, 1956 special administrator ofCelestino Salvador's testate estate.

On September 4, 1956 the administrator filed in Sp.Proceedings No. 940 an inventory of properties of theestate, covering the same parcels of land subject matterof the reconveyance action. On September 7, 1956,Celestino Salvador's will was admitted to probate andDominador Cardenas was appointed executor of saidwill. Actual issuance of letters testamentary to him wasmade on October 27, 1956.

Twenty-three (23) persons were instituted heirs in thewill. Of these, nine (9) were not among the twenty-one(21) alleged relatives substituted in the reconveyancecase; and of the twenty-one (21) substituted allegedheirs seven (7) were not instituted in the will. 2

In the suit for reconveyance, on November 26, 1956, theCourt (CFI of Bulacan, Br. I) rendered judgment,ordering the defendants therein (the spouses Alfonsoand Anatolia), to reconvey the parcels of land to theestate of Celestino Salvador . Appeal therefrom to theCourt of Appeals was interposed by said defendants.

On August 12, 1961, the Court of Appeals affirmed thereconveyance judgment, with the correction thatreconveyance be in favor of the twenty-one (21) heirssubstituted as plaintiffs therein.

About three years later, pursuant to an order of the CFIof Bulacan, Br. II, in the testacy proceedings, dated April21, 1964, one of the parcels of land involved, Lot 6, wassold so that with its proceeds debtors who filed claimsmay be paid. The Philippine National Bank bought it atP41,184.00. Said amount was then deposited in thesame bank by the administrator, subject to Court order.

On December 18, 1964, defendants in the suit forreconveyance executed a deed of reconveyance overthe subject parcels of land, in favor of CelestinoSalvador's estate. Revoking the same as lot in

accordance with the final judgment therein, the CFI ofBulacan, Br. I, on September 24, 1965, ordered a newdeed of reconveyance to be executed, in favor of thetwenty-one persons substituted as plaintiffs in thataction. Accordingly, on September 30, 1965, a newdeed of reconveyance was made, in favor of saidtwenty-one (21) persons as heirs of Celestino.

Following this, on November 22, 1965, said Br. I,ordered the corresponding title certificate (TCT No.54639) in the administrator's name, cancelled; new titlecertificate to be issued in the names of the same twenty-









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one (21) persons. Said order was carried out, and TCTNo. 63734 was issued in the names of the twenty-onepersons. 3

On December 7, 1965, Br. I (reconveyance court)ordered the Philippine National Bank to release theP41,184.00 proceeds of the sale of Lot 6, to the twenty-one (21) plaintiffs in the reconveyance case. Apparently,although the passbook was given by the administrator tosaid twenty-one persons, no release was made, as thePhilippine National Bank awaited Br. II's order.

Br. II, on March 1, 1966, approved the following claimsagainst the estate:

Taxes — Nat'l. gov't P5,328.23

Atty's fees — Atty. Enriquez 8,000.00

Atty's fees — Atty. Jamir 12,000.00

Loan — R. Cabrera 13,544.35

T O T A L . . . . . . . . 38,872.58=========

On March 30, 1966, said Br. II (probate court), orderedreturn of the passbook to the administrator; and releaseto the administrator by the PNB of the P41,184.00, or somuch thereof is needed to pay the afore-stated debts ofthe estate.

After failing to get reconsideration of said order, the

twenty-one (21) substituted heirs, on April 25, 1966,filed with Us the present special civil action for certiorariwith preliminary injunction to assail the order to pay thedebts of the estate with the P41,184.00 proceeds of thesale of Lot 6; and to question Br. II's (probate court)power to dispose of the parcels of land involved in thereconveyance suit in Br. I.

Raised are these issues: (1) Are the parcels of land andthe proceeds of the sale of one of them, properties ofthe estate or not? (2) Does final judgment in thereconveyance suit in favor of the twenty-one so-calledheirs who substituted Celestino Salvador, bar the

disposition of the reconveyed properties by thesettlement court?

It is a settled point of law that the right of heirs tospecific, distributive shares of inheritance does notbecome finally determinable until all the debts of theestate are paid. Until then, in the face of said claims,their rights cannot be enforced, are inchoate, andsubject to the existence of a residue after payment ofthe debts (Castellvi de Raquiza v. Castellvi, L-17630,October 31, 1963; Jimoga-on v. Belmonte, 84 Phil. 545; Sec. 1, Rule 90, Rules of Court).

Petitioners do not question the existence of the debtsabovementioned. They only contend that the propertiesinvolved having been ordered by final judgmentreconveyed to them, not to the estate the same are notproperties of the estate but their own, and thus, notliable for debts of the estate.

Said contention is self-refuting. Petitioners rely for theirrights on their alleged character as heirs of Celestino; assuch, they were substituted in the reconveyance case;the reconveyance to them was reconveyance to themas heirs of Celestino Salvador . It follows that the

properties they claim are, even by their own reasoning,part of Celestino's estate. The right thereto as allegedlyhis heirs would arise only if said parcels of land are partof the estate of Celestino, not otherwise. Their havingreceived the same, therefore, in the reconveyanceaction, was perforce in trust for the estate, subject to itsobligations. They cannot distribute said propertiesamong themselves as substituted heirs without thedebts of the estate being first satisfied.

At any rate, the proceeds of Lot 6 alone (P41,184.00)appears more than sufficient to pay the debt(P38,872.58); and there will remain the other parcels ofland not sold. As to the question of who will receive howmuch as heirs, the same is properly determinable by thesettlement court, after payment of the debts (Pimentel v.Palanca, 5 Phil. 436; Maningat v. Castillo, 75 Phil. 532; Jimoga-on v. Belmonte, supra).

Wherefore, the petition for certiorari is denied, withoutcosts. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal,Zaldivar Sanchez and Castro JJ., concur.

G.R. No. L-25049, Ramirez, Ramirez and Eguaras v.Baltazar et al., 24 SCRA 918


Manila

EN BANC

August 30, 1968

G.R. No. L-25049FILEMON RAMIREZ, MONICA RAMIREZ, and JOSEEGUARAS, plaintiffs-appellants,vs.ARTEMIO BALTAZAR, ET AL., defendants-appellees.

Eduardo M. Peralta for plaintiffs-appellants.Tomas P. Anonuevo for defendants-appellees ArtemioBaltazar and Susana Flores.Tirso Caballero for defendant-appellee Artemio Diawan.

ANGELES, J.:

On appeal from an order dismissing the complaint, onmotion to dismiss, in Civil Case No. SC-319 of the Courtof First Instance of Laguna.

It appears that on 6 January 1959, Victoriana Eguarassingle, made and executed a real estate mortgage overa parcel of land, owned by her in fee simple, as securityfor a loan of P2,170.00 in favor of the spouses ArtemioBaltazar and Susana Flores.

Upon the demise of the mortgagor, the mortgagees, ascreditors of the deceased, on 16 September 1960 filed apetition for the intestate proceedings of her estate, in theCourt of First Instance of Laguna, docketed as CivilCase No. SC-99 wherein said mortgages, as petitioners,alleged that Filemon Ramirez and Monica Ramirez arethe heirs of the deceased. Filemon Ramirez wasappointed administrator of the estate; however, havingfailed to qualify, on 16 January 1961, the courtappointed Artemio Diawan, then a deputy clerk of court,administrator of the estate who, in due time, qualified forthe office.

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administrator fails or refuses to act in which event theheirs may act in his place."

A similar situation obtains in the case at bar. Theadministrator is being charged to have been in collusionand connivance with the mortgagees of a property of thedeceased, allowing its foreclosure without notifying theheirs, to the prejudice of the latter. Since the ground forthe present action to annul the aforesaid foreclosureproceedings is the fraud resulting from such insidiousmachinations and collusion in which the administratorhas allegedly participated, it would be farfetched toexpect the said administrator himself to file the action inbehalf of the estate. And who else but the heirs, whohave an interest to assert and to protect, would bring theaction? Inevitably, this case should fall under theexception, rather than the general rule that pendingproceedings for the settlement of the estate, the heirshave no right to commence an action arising out of therights belonging to the deceased.

On the second point raised, We fully agree with theplaintiffs-appellants that the lower court had gone too farin practically adjudicating the case on the merits when itmade the observation that "there could not have beenany connivance and/or collusion between plaintiffs inthis case and Artemio Diawan as administrator." Athorough scrutiny of the allegations in the motions todismiss filed by defendants-appellees does not indicatethat that question was ever put at issue therein. On theother hand, the controversy — on the existence orinexistence of collusion between the parties as a resultof which judgment was rendered against the estate — isthe very core of the complaint that was dismissed.Undoubtedly, the cause of action is based on Section

30, Rule 132 of the Rules of Court.

We are not, however, in accord with the third assignederror — the denial of the motion for the issuance ofpreliminary injunction — for it puts at issue the factualfinding made by the lower court that the defendants hadalready been placed in possession of the property. Atthis stage of the proceeding, and considering the natureof the case before Us, such a question is, at this time,beyond the competence of the Court.

PREMISES CONSIDERED, the order appealed from ishereby set aside insofar as it dismissed the complaint in

Civil Case No. SC-319, and the records be remanded tothe lower court for further proceedings. Costs againstdefendants-appellees. The Clerk of Court is directed tofurnish a copy of this decision to the Department ofJustice for its information.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal,Zaldivar, Sanchez, Castro and Fernando, JJ., concur.

THIRD DIVISION

JOSELITO MUSNI PUNO

(as heir of the late Carlos Puno),

Petitioner,

G.R. No. 177066

Present:

- versus -

PUNO ENTERPRISES, INC., represented by

JESUSA PUNO,

Respondent.

YNA

CHI

VEL

NA

PER

Pro

Se

x------------------------------------------------------------------------------

------x

DECISION

NACHURA, J .:

Upon the death of a stockholder, the heirs do not

automatically become stockholders of the corporation;

neither are they mandatorily entitled to the rights and

privileges of a stockholder. This, we declare in this

petition for review on certiorari of the Court of Appeals

(CA) Decision10[1] dated October 11, 2006 and

Resolution dated March 6, 2007 in CA-G.R. CV No.

86137.

The facts of the case follow:



Carlos L. Puno, who died on June 25, 1963, was an

incorporator of respondent Puno Enterprises, Inc. On

March 14, 2003, petitioner Joselito Musni Puno,

claiming to be an heir of Carlos L. Puno, initiated a

complaint for specific performance against respondent.Petitioner averred that he is the son of the deceased

with the latter‘s common-law wife, Amelia Puno. As

surviving heir, he claimed entitlement to the rights and

privileges of his late father as stockholder of

respondent. The complaint thus prayed that respondent

allow petitioner to inspect its corporate book, render an

accounting of all the transactions it entered into from

1962, and give petitioner all the profits, earnings,

dividends, or income pertaining to the shares of Carlos

L. Puno.11[2]

Respondent filed a motion to dismiss on the ground that

petitioner did not have the legal personality to sue

because his birth certificate names him as ―Joselito

Musni Muno.‖ Apropos, there was yet a need for a

judicial declaration that ―Joselito Musni Puno‖ and―Joselito Musni Muno‖ were one and the same.

The court ordered that the proceedings be held in

abeyance, ratiocinating that petitioner‘s certificate of live

birth was no proof of his paternity and relation to Carlos

L. Puno.

Petitioner submitted the corrected birth certificate with

the name ―Joselito M. Puno,‖ certified by the Civil

Registrar of the City of Manila, and the Certificate of

Finality thereof. To hasten the disposition of the case,

the court conditionally admitted the corrected birth

certificate as genuine and authentic and ordered

respondent to file its answer within fifteen days from the

order and set the case for pretrial.12[3]

On October 11, 2005, the court rendered a Decision, the

dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered

ordering Jesusa Puno and/or Felicidad Fermin

to allow the plaintiff to inspect the corporate

books and records of the company from 1962

up to the present including the financial

statements of the corporation.

The costs of copying shall be shouldered by the

plaintiff. Any expenses to be incurred by the

defendant to be able to comply with this ordershall be the subject of a bill of costs.

SO ORDERED.13[4]

On appeal, the CA ordered the dismissal of the

complaint in its Decision dated October 11, 2006.

According to the CA, petitioner was not able to establishthe paternity of and his filiation to Carlos L. Puno since

his birth certificate was prepared without the intervention

of and the participatory acknowledgment of paternity by

Carlos L. Puno. Accordingly, the CA said that petitioner

had no right to demand that he be allowed to examine

respondent‘s books. Moreover, petitioner was not a

stockholder of the corporation but was merely claiming

rights as an heir of Carlos L. Puno, an incorporator of

the corporation. His action for specific performancetherefore appeared to be premature; the proper action

to be taken was to prove the paternity of and his filiation

to Carlos L. Puno in a petition for the settlement of the

estate of the latter.14[5]



Petitioner‘s motion for reconsideration was

denied by the CA in its Resolution15[6] dated March 6,

2007.

In this petition, petitioner raises the followingissues:

I. THE HONORABLE COURT OF

APPEALS ERRED IN NOT RULING THAT THE

JOSELITO PUNO IS ENTITLED TO THE

RELIEFS DEMANDED HE BEING THE HEIR

OF THE LATE CARLOS PUNO, ONE OF THE

INCORPORATORS [OF] RESPONDENT

CORPORATION.

II. HONORABLE COURT OF

APPEALS ERRED IN RULING THAT

FILIATION OF JOSELITO PUNO, THE

PETITIONER[,] IS NOT DULY PROVEN OR

ESTABLISHED.

III. THE HONORABLE COURT ERREDIN NOT RULING THAT JOSELITO MUNO AND

JOSELITO PUNO REFERS TO THE ONE AND

THE SAME PERSON.

IV. THE HONORABLE COURT OF

APPEALS ERRED IN NOT RULING THAT

WHAT RESPONDENT MERELY DISPUTES IS

THE SURNAME OF THE PETITIONER WHICH

WAS MISSPELLED AND THE FACTUAL

ALLEGATION E.G. RIGHTS OF PETITIONER AS HEIR OF CARLOS PUNO ARE DEEMED

ADMITTED HYPOTHETICALLY IN THE

RESPONDENT[‘S] MOTION TO DISMISS.

V. THE HONORABLE COURT OF

APPEALS THEREFORE ERRED I[N]

DECREEING THAT PETITIONER IS NOT

ENTITLED TO INSPECT THE CORPORATE

BOOKS OF DEFENDANTCORPORATION.16[7]

The petition is without merit. Petitioner failed to establish

the right to inspect respondent corporation‘s books and

receive dividends on the stocks owned by Carlos L.

Puno.

Petitioner anchors his claim on his being an heir of the

deceased stockholder. However, we agree with the

appellate court that petitioner was not able to prove

satisfactorily his filiation to the deceased stockholder;

thus, the former cannot claim to be an heir of the latter.

Incessantly, we have declared that factual findings of

the CA supported by substantial evidence, are

conclusive and binding.17[8] In an appeal via certiorari ,

the Court may not review the factual findings of the CA.

It is not the Court‘s function under Rule 45 of the Rules

of Court to review, examine, and evaluate or weigh the

probative value of the evidence presented.18[9]

A certificate of live birth purportedly identifying the

putative father is not competent evidence of paternity

when there is no showing that the putative father had a

hand in the preparation of the certificate. The local civil

registrar has no authority to record the paternity of an

illegitimate child on the information of a thirdperson.19[10] As correctly observed by the CA, only

petitioner‘s mother supplied the data in the birth

certificate and signed the same. There was no evidence

that Carlos L. Puno acknowledged petitioner as his son.



As for the baptismal certificate, we have already

decreed that it can only serve as evidence of the

administration of the sacrament on the date specified

but not of the veracity of the entries with respect to the

child‘s paternity.20[11]

In any case, Sections 74 and 75 of the Corporation

Code enumerate the persons who are entitled to the

inspection of corporate books, thus —

Sec. 74. Books to be kept; stock transfer agent.

— x x x.

The records of all business transactions of the

corporation and the minutes of any meeting

shall be open to the inspection of any director,

trustee, stockholder or member of the

corporation at reasonable hours on business

days and he may demand, in writing, for a copy

of excerpts from said records or minutes, at his

expense.

x x x x

Sec. 75. Right to financial statements. — Within

ten (10) days from receipt of a written request of

any stockholder or member, the corporation

shall furnish to him its most recent financial

statement, which shall include a balance sheet

as of the end of the last taxable year and a

profit or loss of statement for said taxable year,

showing in reasonable detail its assets andliabilities and the result of its operations.21[12]

The stockholder‘s right of inspection of the corporation‘s

books and records is based upon his ownership of

shares in the corporation and the necessity for self-

protection. After all, a shareholder has the right to be

intelligently informed about corporate affairs.22[13]

Such right rests upon the stockholder‘s underlying

ownership of the corporation‘s assets and

property.23[14]

Similarly, only stockholders of record are entitled to

receive dividends declared by the corporation, a right

inherent in the ownership of the shares.24[15]

Upon the death of a shareholder, the heirs do not

automatically become stockholders of the corporation

and acquire the rights and privileges of the deceased as

shareholder of the corporation. The stocks must be

distributed first to the heirs in estate proceedings, and

the transfer of the stocks must be recorded in the books

of the corporation. Section 63 of the Corporation Code

provides that no transfer shall be valid, except as

between the parties, until the transfer is recorded in the

books of the corporation.25[16] During such interim

period, the heirs stand as the equitable owners of the

stocks, the executor or administrator duly appointed by

the court being vested with the legal title to the

stock.26[17] Until a settlement and division of the

estate is effected, the stocks of the decedent are held

by the administrator or executor.27[18] Consequently,

during such time, it is the administrator or executor who

is entitled to exercise the rights of the deceased as

stockholder.



Thus, even if petitioner presents sufficient evidence in

this case to establish that he is the son of Carlos L.

Puno, he would still not be allowed to inspect

respondent‘s books and be entitled to receive dividends

from respondent, absent any showing in its transferbook that some of the shares owned by Carlos L. Puno

were transferred to him. This would only be possible if

petitioner has been recognized as an heir and has

participated in the settlement of the estate of the

deceased.

Corollary to this is the doctrine that a determination ofwhether a person, claiming proprietary rights over the

estate of a deceased person, is an heir of the deceased

must be ventilated in a special proceeding instituted

precisely for the purpose of settling the estate of the

latter. The status of an illegitimate child who claims to

be an heir to a decedent‘s estate cannot be adjudicated

in an ordinary civil action, as in a case for the recovery

of property.28[19] The doctrine applies to the instant

case, which is one for specific performance — to directrespondent corporation to allow petitioner to exercise

rights that pertain only to the deceased and his

representatives.

WHEREFORE, premises considered, the petition is

DENIED. The Court of Appeals Decision dated October

11, 2006 and Resolution dated March 6, 2007 are

AFFIRMED.

SO ORDERED.


Manila

SECOND DIVISION

G.R. No. 165744 August 11, 2008

OSCAR C. REYES, petitioner,vs.

HON. REGIONAL TRIAL COURT OF MAKATI, Branch142, ZENITH INSURANCE CORPORATION, andRODRIGO C. REYES, respondents.

D E C I S I O N

BRION, J .:

This Petition for Review on Certiorari under Rule 45 ofthe Rules of Court seeks to set aside the Decision of theCourt of Appeals (CA)

1 promulgated on May 26, 2004 in

CA-G.R. SP No. 74970. The CA Decision affirmed theOrder of the Regional Trial Court (RTC ), Branch 142,Makati City dated November 29, 20022 in Civil Case No.00-1553 (entitled "Accounting of All Corporate Fundsand Assets, and Damages") which denied petitionerOscar C. Reyes‘ (Oscar) Motion to Declare Complaintas Nuisance or Harassment Suit.

BACKGROUND FACTS

Oscar and private respondent Rodrigo C. Reyes(Rodrigo) are two of the four children of the spousesPedro and Anastacia Reyes. Pedro, Anastacia, Oscar,and Rodrigo each owned shares of stock of ZenithInsurance Corporation (Zenith), a domestic corporationestablished by their family. Pedro died in 1964, while Anastacia died in 1993. Although Pedro‘s estate was judicially partitioned among his heirs sometime in the1970s, no similar settlement and partition appear tohave been made with Anastacia‘s estate, whichincluded her shareholdings in Zenith. As of June 30,1990, Anastacia owned 136,598 shares of Zenith; Oscarand Rodrigo owned 8,715,637 and 4,250 shares,

respectively.

3

On May 9, 2000, Zenith and Rodrigo filed a complain t4 with the Securities and Exchange Commission (SEC)against Oscar, docketed as SEC Case No. 05-00-6615.The complaint stated that it is "a derivative suit initiatedand filed by the complainant Rodrigo C. Reyes to

obta in an account ing of the funds and assets of

ZENITH INSURANCE CORPORA TION which are nowor formerly in the control, custody, and/or possession ofrespondent [herein petitioner Oscar] and to d etermine

the shares of stoc k of d eceased spouses Pedro and

Anastacia Reyes that were arbitrarily and fraudulently

appropriated [by Oscar] for himself [and] which were notcollated and taken into account in the partition,distribution, and/or settlement of the estate of thedeceased spouses, for which he should be ordered toaccount for all the income from the time he took theseshares of stock, and should now deliver to his brothersand sisters their just and respective shares ."5 [Emphasissupplied.]

In his Answer with Counterclaim,6 Oscar denied the

charge that he illegally acquired the shares of AnastaciaReyes. He asserted, as a defense, that he purchasedthe subject shares with his own funds from the unissuedstocks of Zenith, and that the suit is not a bona fide derivative suit because the requisites therefor have notbeen complied with. He thus questioned the SEC‘s jurisdiction to entertain the complaint because it pertainsto the settlement of the estate of Anastacia Reyes.

When Republic Act (R.A.) No. 87997 took effect, the

SEC‘s exclusive and original jurisdiction over casesenumerated in Section 5 of Presidential Decree (P.D.)No. 902-A was transferred to the RTC designated as aspecial commercial court.8 The records of Rodrigo‘s

http://www.lawphil.net/judjuris/juri2008/aug2008/gr_165744_2008.html#fnt1

































SEC case were thus turned over to the RTC, Branch142, Makati, and docketed as Civil Case No. 00-1553.

On October 22, 2002, Oscar filed a Motion to DeclareComplaint as Nuisance or Harassment Suit.9 Heclaimed that the complaint is a mere nuisance orharassment suit and should, according to the InterimRules of Procedure for Intra-Corporate Controversies,be dismissed; and that it is not a bona fide derivativesuit as it partakes of the nature of a petition for thesettlement of estate of the deceased Anastacia that isoutside the jurisdiction of a special commercial court.The RTC, in its Order dated November 29, 2002 (RTCOrder ), denied the motion in part and declared:

A close reading of the Complaint disclosed the presenceof two (2) causes of action, namely: a) a derivative suitfor accounting of the funds and assets of the corporationwhich are in the control, custody, and/or possession ofthe respondent [herein petitioner Oscar] with prayer toappoint a management committee; and b) an action fordetermination of the shares of stock of deceasedspouses Pedro and Anastacia Reyes allegedly taken byrespondent, its accounting and the correspondingdelivery of these shares to the parties‘ brothers andsisters. The latter is not a derivative suit and shouldproperly be threshed out in a petition for settlement ofestate.

Accordingly, the motion is denied. However, only thederivative suit consisting of the first cause of action willbe taken cognizance of by this Court.10

Oscar thereupon went to the CA on a petition forcertiorari , prohibition, and mandamus

11 and prayed thatthe RTC Order be annulled and set aside and that thetrial court be prohibited from continuing with theproceedings. The appellate court affirmed the RTCOrder and denied the petition in its Decision dated May26, 2004. It likewise denied Oscar‘s motion forreconsideration in a Resolution dated October 21, 2004.

Petitioner now comes before us on appeal through apetition for review on certiorari under Rule 45 of theRules of Court.

ASSIGNMENT OF ERRORS

Petitioner Oscar presents the following points asconclusions the CA should have made:

1. that the complaint is a mere nuisance or harassmentsuit that should be dismissed under the Interim Rules ofProcedure of Intra-Corporate Controversies; and

2. that the complaint is not a bona fide derivative suit butis in fact in the nature of a petition for settlement ofestate; hence, it is outside the jurisdiction of the RTCacting as a special commercial court.

Accordingly, he prays for the setting aside andannulment of the CA decision and resolution, and thedismissal of Rodrigo‘s complaint before the RTC.

THE COURT’S RULING

We find the petition meritorious.

The core question for our determination is whether thetrial court, sitting as a special commercial court, has jurisdiction over the subject matter of Rodrigo‘s

complaint. To resolve it, we rely on the judicial principlethat "jurisdiction over the subject matter of a case isconferred by law and is determined by the allegations ofthe complaint, irrespective of whether the plaintiff isentitled to all or some of the claims asserted therein."12

JURISDICTION OF SPECIAL COMMERCIALCOURTS

P.D. No. 902-A enumerates the cases over which theSEC (now the RTC acting as a special commercialcourt) exercises exclusive jurisdiction:

SECTION 5. In addition to the regulatory andadjudicative functions of the Securities and ExchangeCommission over corporations, partnership, and otherforms of associations registered with it as expresslygranted under existing laws and decrees, it shall haveoriginal and exclusive jurisdiction to hear and decidecases involving:

a) Devices or schemes employed by or any acts of theboard of directors, business associates, its officers orpartners, amounting to fraud and misrepresentationwhich may be detrimental to the interest of the publicand/or of the stockholders, partners, members ofassociations or organizations registered with theCommission.

b) Controversies arising out of intra-corporate orpartnership relations, between and among stockholders,members, or associates; between any or all of them andthe corporation, partnership or association of which theyare stockholders, members, or associates, respectively;

and between such corporation, partnership orassociation and the State insofar as it concerns theirindividual franchise or right to exist as such entity; and

c) Controversies in the election or appointment ofdirectors, trustees, officers, or managers of suchcorporations, partnerships, or associations.

The allegations set forth in Rodrigo‘s complaintprincipally invoke Section 5, paragraphs (a) and (b)above as basis for the exercise of the RTC‘s specialcourt jurisdiction. Our focus in examining the allegationsof the complaint shall therefore be on these two

provisions.

Fraudulent Devices and Schemes

The rule is that a complaint must contain a plain,concise, and direct statement of the ultimate factsconstituting the plaintiff‘s cause of action and mustspecify the relief sought.13 Section 5, Rule 8 of theRevised Rules of Court provides that in all avermentsof fraud or mistake, the circumstances constitutingfraud or mistake must be stated with particularity.14 These rules find specific application to Section 5(a) ofP.D. No. 902-A which speaks of corporate devices or

schemes that amount to fraud or misrepresentationdetrimental to the public and/or to the stockholders.

In an attempt to hold Oscar responsible for corporatefraud, Rodrigo alleged in the complaint the following:

3. This is a complaint…to determine the shares ofstock of the deceased spouses Pedro and AnastaciaReyes that were arbitrarily and fraudulentlyappropriated for himself [herein petitioner Oscar] which were not collated and taken into account in the


























majority stockholder of Zenith Insurance Corporation[and] thereby deprived his brothers and sisters of theirrespective equal shares thereof including complainanthereto. [Emphasis supplied.]

In ordinary cases, the failure to specifically allege thefraudulent acts does not constitute a ground fordismissal since such defect can be cured by a bill ofparticulars. In cases governed by the Interim Rules ofProcedure on Intra-Corporate Controversies, however, abill of particulars is a prohibited pleading.17 It isessential, therefore, for the complaint to show on itsface what are claimed to be the fraudulent corporateacts if the complainant wishes to invoke the court‘sspecial commercial jurisdiction.

We note that twice in the course of this case, Rodrigohad been given the opportunity to study the propriety ofamending or withdrawing the complaint, but heconsistently refused. The court‘s function in resolvingissues of jurisdiction is limited to the review of theallegations of the complaint and, on the basis of theseallegations, to the determination of whether they are ofsuch nature and subject that they fall within the terms ofthe law defining the court‘s jurisdiction. Regretfully, wecannot read into the complaint any specifically allegedcorporate fraud that will call for the exercise of thecourt‘s special commercial jurisdiction. Thus, we cannotaffirm the RTC‘s assumption of jurisdiction overRodrigo‘s complaint on the basis of Section 5(a) of P.D.No. 902-A.

18

Intra-Corporate Controvers y

A review of relevant jurisprudence shows adevelopment in the Court‘s approach in classifying whatconstitutes an intra-corporate controversy. Initially, themain consideration in determining whether a disputeconstitutes an intra-corporate controversy was limited toa consideration of the intra-corporate relationshipexisting between or among the parties.19 The types ofrelationships embraced under Section 5(b), as declaredin the case of Union Glass & Container Corp. v. SEC ,

20 were as follows:

a) between the corporation, partnership, or associationand the public;

b) between the corporation, partnership, or associationand its stockholders, partners, members, or officers;

c) between the corporation, partnership, or associationand the State as far as its franchise, permit or license tooperate is concerned; and

d) among the stockholders, partners, or associatesthemselves. [Emphasis supplied.]

The existence of any of the above intra-corporaterelations was sufficient to confer jurisdiction to the SEC,

regardless of the subject matter of the dispute. Thiscame to be known as the relationship test.

However, in the 1984 case of DMRC Enterprises v. Estadel Sol Mountain Reserve, Inc .,

21 the Court introducedthe nature of the controversy test. We declared in thiscase that it is not the mere existence of an intra-corporate relationship that gives rise to an intra-corporate controversy; to rely on the relationship testalone will divest the regular courts of their jurisdiction forthe sole reason that the dispute involves a corporation,its directors, officers, or stockholders. We saw that there

is no legal sense in disregarding or minimizing the valueof the nature of the transactions which gives rise to thedispute.

Under the nature of the controversy test, the incidents ofthat relationship must also be considered for thepurpose of ascertaining whether the controversy itself isintra-corporate.

22 The controversy must not only be

rooted in the existence of an intra-corporaterelationship, but must as well pertain to the enforcementof the parties‘ correlative rights and obligations underthe Corporation Code and the internal and intra-corporate regulatory rules of the corporation. If therelationship and its incidents are merely incidental to thecontroversy or if there will still be conflict even if therelationship does not exist, then no intra-corporatecontroversy exists.

The Court then combined the two tests and declaredthat jurisdiction should be determined by considering notonly the status or relationship of the parties, but also thenature of the question under controversy.23 This two-tiertest was adopted in the recent case of SpeedDistribution, Inc. v. Court of Appeals:24

To determine whether a case involves an intra-corporate controversy, and is to be heard and decidedby the branches of the RTC specifically designated bythe Court to try and decide such cases, two elementsmust concur: (a) the status or relationship of the parties;and (2) the nature of the question that is the subject oftheir controversy.

The first element requires that the controversy mustarise out of intra-corporate or partnership relationsbetween any or all of the parties and the corporation,partnership, or association of which they arestockholders, members or associates; between any orall of them and the corporation, partnership, orassociation of which they are stockholders, members, orassociates, respectively; and between such corporation,partnership, or association and the State insofar as itconcerns their individual franchises. The secondelement requires that the dispute among the parties beintrinsically connected with the regulation of thecorporation. If the nature of the controversy involvesmatters that are purely civil in character, necessarily, thecase does not involve an intra-corporate controversy.

Given these standards, we now tackle the questionposed for our determination under the specificcircumstances of this case:

Application of the Relationship Test

Is there an intra-corporate relationship between theparties that would characterize the case as an intra-corporate dispute?

We point out at the outset that while Rodrigo holds

shares of stock in Zenith, he holds them in twocapacities: in his own right with respect to the 4,250shares registered in his name, and as one of the heirs of Anastacia Reyes with respect to the 136,598 sharesregistered in her name. What is material in resolving theissues of this case under the allegations of thecomplaint is Rodrigo‘s interest as an heir since thesubject matter of the present controversy centers on theshares of stocks belonging to Anastacia, not onRodrigo‘s personally-owned shares nor on hispersonality as shareholder owning these shares. In thislight, all reference to shares of stocks in this case shall



































pertain to the shareholdings of the deceased Anastaciaand the parties‘ interest therein as her heirs.

Article 777 of the Civil Code declares that thesuccessional rights are transmitted from the moment ofdeath of the decedent. Accordingly, upon Anastacia‘sdeath, her children acquired legal title to her estate(which title includes her shareholdings in Zenith), andthey are, prior to the estate‘s partition, deemed co-owners thereof .25 This status as co-owners, however,does not immediately and necessarily make themstockholders of the corporation. Unless and until there iscompliance with Section 63 of the Corporation Code onthe manner of transferring shares, the heirs do notbecome registered stockholders of the corporation.Section 63 provides:

Section 63. Certificate of stock and transfer of shares. – The capital stock of stock corporations shall be dividedinto shares for which certificates signed by the presidentor vice-president, countersigned by the secretary orassistant secretary, and sealed with the seal of thecorporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal propertyand may be transferred by delivery of the certificate orcertificates indorsed by the owner or his attorney-in-factor other person legally authorized to make the transfer.No transfer, however, shall be valid, except asbetween the parties, until the transfer is recorded inthe books of the corporation so as to show thenames of the parties to the transaction, the date ofthe transfer, the number of the certificate orcertificates, and the number of shares transferred.[Emphasis supplied.]

No shares of stock against which the corporation holdsany unpaid claim shall be transferable in the books ofthe corporation.

Simply stated, the transfer of title by means ofsuccession, though effective and valid between theparties involved (i.e., between the decedent‘s estate andher heirs), does not bind the corporation and thirdparties. The transfer must be registered in the books ofthe corporation to make the transferee-heir astockholder entitled to recognition as such both by thecorporation and by third parties.26

We note, in relation with the above statement, that in Abejo v. Dela Cruz

27 and TCL Sales Corporation v.Court of Appeal s

28 we did not require the registration ofthe transfer before considering the transferee astockholder of the corporation (in effect upholding theexistence of an intra-corporate relation between theparties and bringing the case within the jurisdiction ofthe SEC as an intra-corporate controversy). A markeddifference, however, exists between these cases andthe present one.

In Abejo and TCL Sales, the transferees held definiteand uncontested titles to a specific number of

shares of the corporation; after the transferee hadestablished prima facie ownership over the shares ofstocks in question, registration became a mere formalityin confirming their status as stockholders. In the presentcase, each of Anastacia‘s heirs holds only an undividedinterest in the shares. This interest, at this point, is stillinchoate and subject to the outcome of a settlementproceeding; the right of the heirs to specific, distributiveshares of inheritance will not be determined until all thedebts of the estate of the decedent are paid. In short,the heirs are only entitled to what remains after paymentof the decedent‘s debts;

29 whether there will be residue

remains to be seen. Justice Jurado aptly puts it asfollows:

No succession shall be declared unless and until aliquidation of the assets and debts left by the decedentshall have been made and all his creditors are fully paid.Until a final liquidation is made and all the debts arepaid, the right of the heirs to inherit remains inchoate.This is so because under our rules of procedure,liquidation is necessary in order to determinewhether or not the decedent has left any liquidassets which may be transmitted to his heirs.30 [Emphasis supplied.]

Rodrigo must, therefore, hurdle two obstacles before hecan be considered a stockholder of Zenith with respectto the shareholdings originally belonging to Anastacia.First , he must prove that there are shareholdings thatwill be left to him and his co-heirs, and this can bedetermined only in a settlement of the decedent‘sestate. No such proceeding has been commenced todate. Second , he must register the transfer of the

shares allotted to him to make it binding against thecorporation. He cannot demand that this be done unlessand until he has established his specific allotment (and prima facie ownership) of the shares. Without thesettlement of Anastacia‘s estate, there can be nodefinite partition and distribution of the estate to theheirs. Without the partition and distribution, there can beno registration of the transfer. And without theregistration, we cannot consider the transferee-heir astockholder who may invoke the existence of an intra-corporate relationship as premise for an intra-corporatecontroversy within the jurisdiction of a specialcommercial court.

In sum, we find that – insofar as the subject shares ofstock (i.e., Anastacia‘s shares) are concerned – Rodrigocannot be considered a stockholder of Zenith.Consequently, we cannot declare that an intra-corporaterelationship exists that would serve as basis to bring thiscase within the special commercial court‘s jurisdictionunder Section 5(b) of PD 902- A, as amended. Rodrigo‘scomplaint, therefore, fails the relationship test.

Application of the Nature of Controversy Test

The body rather than the title of the complaintdetermines the nature of an action.31 Our examination ofthe complaint yields the conclusion that, more thananything else, the complaint is about the protection andenforcement of successional rights. The controversy itpresents is purely civil rather than corporate, although itis denominated as a "complaint for accounting of allcorporate funds and assets."

Contrary to the findings of both the trial and appellatecourts, we read only one cause of action alleged in thecomplaint. The "derivative suit for accounting of thefunds and assets of the corporation which are in thecontrol, custody, and/or possession of the respondent[herein petitioner Oscar]" does not constitute a separatecause of action but is, as correctly claimed by Oscar,only an incident to the "action for determination of theshares of stock of deceased spouses Pedro and Anastacia Reyes allegedly taken by respondent, itsaccounting and the corresponding delivery of theseshares to the parties‘ brothers and sisters." There canbe no mistake of the relationship between the"accounting" mentioned in the complaint and theobjective of partition and distribution when Rodrigoclaimed in paragraph 10.1 of the complaint that:































10.1 By refusal of the respondent to account of [sic] hisshareholdings in the company, he illegally andfraudulently transferred solely in his name wherein [sic]the shares of stock of the deceased Anastacia C. Reyes[which] must be properly collated and/or distributedequally amongst the children including the complainantRodrigo C. Reyes herein to their damage and prejudice.

We particularly note that the complaint contained nosufficient allegation that justified the need for anaccounting other than to determine the extent of Anastacia‘s shareholdings f or purposes of distribution.

Another significant indicator that points us to the realnature of the complaint are Rodrigo‘s repeated claims ofillegal and fraudulent transfers of Anastacia‘s shares byOscar to the prejudice of the other heirs of thedecedent; he cited these allegedly fraudulent acts asbasis for his demand for the collation and distribution of Anastacia‘s shares to the heirs. These claims tell usunequivocally that the present controversy arose fromthe parties‘ relationship as heirs of Anastacia and not as

shareholders of Zenith. Rodrigo, in filing the complaint,is enforcing his rights as a co-heir and not as astockholder of Zenith. The injury he seeks to remedy isone suffered by an heir (for the impairment of hissuccessional rights) and not by the corporation nor byRodrigo as a shareholder on record.

More than the matters of injury and redress, whatRodrigo clearly aims to accomplish through hisallegations of illegal acquisition by Oscar is thedistribution of Anastacia‘s shareholdings without a priorsettlement of her estate – an objective that, by law andestablished jurisprudence, cannot be done. The RTC of

Makati, acting as a special commercial court, has no jurisdiction to settle, partit ion, and distribute the estate ofa deceased. A relevant provision – Section 2 of Rule 90of the Revised Rules of Court – that contemplatesproperties of the decedent held by one of the heirsdeclares:

Questions as to advancement made or alleged tohave been made by the deceased to any heir may beheard and determined by the court having

ju risd ic t io n o f the es tat e proceed in gs ; and the finalorder of the court thereon shall be binding on the personraising the questions and on the heir. [Emphasis

supplied.]

Worth noting are this Court‘s statements in the case ofNatcher v. Court of Appeals:

32

Matters which involve settlement and distribution ofthe estate of the decedent fall within the exclusiveprovince of the probate court in the exercise of itslimited jurisdiction.

x x x x

It is clear that trial courts trying an ordinary actioncannot resolve to perform acts pertaining to aspecial proceeding because it is subject to specificprescribed rules. [Emphasis supplied.]

That an accounting of the funds and assets of Zenith todetermine the extent and value of Anastacia‘sshareholdings will be undertaken by a probate court andnot by a special commercial court is completelyconsistent with the probate court‘s limited jurisdiction. Ithas the power to enforce an accounting as a necessarymeans to its authority to determine the properties

included in the inventory of the estate to beadministered, divided up, and distributed. Beyond this,the determination of title or ownership over the subjectshares (whether belonging to Anastacia or Oscar) maybe conclusively settled by the probate court as aquestion of collation or advancement. We had occasionto recognize the court‘s authority to act on questions oftitle or ownership in a collation or advancement situationin Coca v. Pangilinan

33 where we ruled:

It should be clarified that whether a particular mattershould be resolved by the Court of First Instance in theexercise of its general jurisdiction or of its limitedprobate jurisdiction is in reality not a jurisdictionalquestion. In essence, it is a procedural questioninvolving a mode of practice "which may be waived."

As a general rule, the question as to title to propertyshould not be passed upon in the testate or intestateproceeding. That question should be ventilated in aseparate action. That general rule has qualifications orexceptions justified by expediency and convenience.

Thus, the probate court may provisionally pass upon inan intestate or testate proceeding the question ofinclusion in, or exclusion from, the inventory of a pieceof property without prejudice to its final determination ina separate action.

Although generally, a probate court may not decidea question of title or ownership, yet if the interestedparties are all heirs, or the question is one of collationor advancement, or the parties consent to theassumption of jurisdiction by the probate court and therights of third parties are not impaired, the probatecourt is competent to decide the question ofownership. [Citations omitted. Emphasis supplied.]

In sum, we hold that the nature of the presentcontroversy is not one which may be classified as anintra-corporate dispute and is beyond the jurisdiction ofthe special commercial court to resolve. In short,Rodrigo‘s complaint also fails the nature of thecontroversy test.

DERIVATIVE SUIT

Rodrigo‘s bare claim that the complaint is a derivativesuit will not suffice to confer jurisdiction on the RTC (asa special commercial court) if he cannot comply with therequisites for the existence of a derivative suit. Theserequisites are:

a. the party bringing suit should be a shareholder duringthe time of the act or transaction complained of, thenumber of shares not being material;

b. the party has tried to exhaust intra-corporateremedies, i.e., has made a demand on the board ofdirectors for the appropriate relief, but the latter has

failed or refused to heed his plea; and

c. the cause of action actually devolves on thecorporation; the wrongdoing or harm having been orbeing caused to the corporation and not to the particularstockholder bringing the suit.34

Based on these standards, we hold that the allegationsof the present complaint do not amount to a derivativesuit.















First , as already discussed above, Rodrigo is not ashareholder with respect to the shareholdings originallybelonging to Anastacia; he only stands as a transferee-heir whose rights to the share are inchoate andunrecorded. With respect to his own individually-heldshareholdings, Rodrigo has not alleged any individualcause or basis as a shareholder on record to proceedagainst Oscar.

Second , in order that a stockholder may show a right tosue on behalf of the corporation, he must allege withsome particularity in his complaint that he hasexhausted his remedies within the corporation bymaking a sufficient demand upon the directors or otherofficers for appropriate relief with the expressed intent tosue if relief is denied.35 Paragraph 8 of the complainthardly satisfies this requirement since what the rulecontemplates is the exhaustion of remedies within thecorporate setting:

8. As members of the same family, complainant RodrigoC. Reyes has resorted [to] and exhausted all legalmeans of resolving the dispute with the end view ofamicably settling the case, but the dispute betweenthem ensued.

Lastly , we find no injury, actual or threatened, alleged tohave been done to the corporation due to Oscar‘s acts.If indeed he illegally and fraudulently transferred Anastacia‘s shares in his own name, then the damage isnot to the corporation but to his co-heirs; the wrongfultransfer did not affect the capital stock or the assets ofZenith. As already mentioned, neither has Rodrigoalleged any particular cause or wrongdoing against thecorporation that he can champion in his capacity as a

shareholder on record.36

In summary, whether as an individual or as a derivativesuit, the RTC – sitting as special commercial court – hasno jurisdiction to hear Rodrigo‘s complaint since what isinvolved is the determination and distribution ofsuccessional rights to the shareholdings of AnastaciaReyes. Rodrigo‘s proper remedy, under thecircumstances, is to institute a special proceeding forthe settlement of the estate of the deceased AnastaciaReyes, a move that is not foreclosed by the dismissal ofhis present complaint.

WHEREFORE, we hereby GRANT the petition andREVERSE the decision of the Court of Appeals datedMay 26, 2004 in CA-G.R. SP No. 74970. The complaintbefore the Regional Trial Court, Branch 142, Makati,docketed as Civil Case No. 00-1553, is orderedDISMISSED for lack of jurisdiction.

SO ORDERED.


Manila

THIRD DIVISION

G.R. No. 169129 March 28, 2007

SPS. VIRGILIO F. SANTOS & ESPERANZA LATISANTOS, SPS.VICTORINO F. SANTOS, &LAGRIMAS SANTOS, ERNESTO F. SANTOS, andTADEO F. SANTOS, Petitioners,vs.SPS. JOSE LUMBAO and PROSERFINA LUMBAO, Respondents.

D E C I S I O N

CHICO-NAZARIO, J .:

Before this Court is a Petition for Review on Certiorariunder Rule 45 of the 1997 Revised Rules of CivilProcedure seeking to annul and set aside the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. CV

No. 60450 entitled, Spouses Jose Lumbao andProserfina Lumbao v. Spouses Virgilio F. Santos andEsperanza Lati, Spouses Victorino F. Santos andLagrimas F. Santos, Ernesto F. Santos and Tadeo F.Santos, dated 8 June 2005 and 29 July 2005,respectively, which granted the appeal filed by hereinrespondents Spouses Jose Lumbao and ProserfinaLumbao (Spouses Lumbao) and ordered hereinpetitioners Spouses Virgilio F. Santos and EsperanzaLati, Spouses Victorino F. Santos and Lagrimas F.Santos, Ernesto F. Santos and Tadeo F. Santos toreconvey to respondents Spouses Lumbao the subjectproperty and to pay the latter attorney‘s fees andlitigation expenses, thus, reversing the Decision3 of theRegional Trial Court (RTC) of Pasig City, dated 17 June1998 which dismissed the Complaint for Reconveyancewith Damages filed by respondents Spouses Lumbaofor lack of merit.

Herein petitioners Virgilio, Victorino, Ernesto and Tadeo,all surnamed Santos, are the legitimate and survivingheirs of the late Rita Catoc Santos (Rita), who died on20 October 1985. The other petitioners Esperanza Latiand Lagrimas Santos are the daughters-in-law of Rita.

Herein respondents Spouses Jose Lumbao andProserfina Lumbao are the alleged owners of the 107-square meter lot (subject property), which theypurportedly bought from Rita during her lifetime.

The facts of the present case are as follows:

On two separate occasions during her lifetime, Rita soldto respondents Spouses Lumbao the subject propertywhich is a part of her share in the estate of herdeceased mother, Maria Catoc (Maria), who diedintestate on 19 September 1978. On the first occasion,Rita sold 100 square meters of her inchoate share in hermother‘s estate through a document denominated as

"Bilihan ng Lupa," dated 17 August 1979.

4

RespondentsSpouses Lumbao claimed the execution of the aforesaiddocument was witnessed by petitioners Virgilio andTadeo, as shown by their signatures affixed therein. Onthe second occasion, an additional seven square meterswas added to the land as evidenced by a document alsodenominated as "Bilihan ng Lupa," dated 9 January1981.5

After acquiring the subject property, respondentsSpouses Lumbao took actual possession thereof anderected thereon a house which they have beenoccupying as exclusive owners up to the present. As the

exclusive owners of the subject property, respondentsSpouses Lumbao made several verbal demands uponRita, during her lifetime, and thereafter upon hereinpetitioners, for them to execute the necessarydocuments to effect the issuance of a separate title infavor of respondents Spouses Lumbao insofar as thesubject property is concerned. Respondents SpousesLumbao alleged that prior to her death, Rita informedrespondent Proserfina Lumbao she could not deliver thetitle to the subject property because the entire propertyinherited by her and her co-heirs from Maria had not yetbeen partitioned.







http://www.lawphil.net/judjuris/juri2007/mar2007/gr_169129_2007.html#fnt1























On 2 May 1986, the Spouses Lumbao claimed thatpetitioners, acting fraudulently and in conspiracy withone another, executed a Deed of ExtrajudicialSettlement,6 adjudicating and partitioning amongthemselves and the other heirs, the estate left by Maria,which included the subject property already sold torespondents Spouses Lumbao and now covered byTCT No. 817297 of the Registry of Deeds of Pasig City.

On 15 June 1992, respondents Spouses Lumbao,through counsel, sent a formal demand letter 8 topetitioners but despite receipt of such demand letter,petitioners still failed and refused to reconvey thesubject property to the respondents Spouses Lumbao.Consequently, the latter filed a Complaint forReconveyance with Damages9 before the RTC of PasigCity.

Petitioners filed their Answer denying the allegationsthat the subject property had been sold to therespondents Spouses Lumbao. They likewise deniedthat the Deed of Extrajudicial Settlement had beenfraudulently executed because the same was dulypublished as required by law. On the contrary, theyprayed for the dismissal of the Complaint for lack ofcause of action because respondents Spouses Lumbaofailed to comply with the Revised KatarungangPambarangay Law under Republic Act No. 7160,otherwise known as the Local Government Code of1991, which repealed Presidential Decree No. 1508

10

requiring first resort to barangay conciliation.

Respondents Spouses Lumbao, with leave of court,amended their Complaint because they discovered thaton 16 February 1990, without their knowledge,

petitioners executed a Deed of Real Estate Mortgage infavor of Julieta S. Esplana for the sum of P30,000.00.The said Deed of Real Estate Mortgage was annotatedat the back of TCT No. PT-81729 on 26 April 1991. Also, in answer to the allegation of the petitioners thatthey failed to comply with the mandate of the RevisedKatarungang Pambarangay Law, respondents SpousesLumbao said that the Complaint was filed directly incourt in order that prescription or the Statute ofLimitations may not set in.

During the trial, respondents Spouses Lumbaopresented Proserfina Lumbao and Carolina Morales as

their witnesses, while the petitioners presented only thetestimony of petitioner Virgilio.

The trial court rendered a Decision on 17 June 1998,the dispositive portion of which reads as follows:

Premises considered, the instant complaint is herebydenied for lack of merit.

Considering that [petitioners] have incurred expenses inorder to protect their interest, [respondents spousesLumbao] are hereby directed to pay [petitioners], to wit:

1) the amount of P30,000.00 as attor ney‘s fees andlitigation expenses, and 2) costs of the suit.11

Aggrieved, respondents Spouses Lumbao appealed tothe Court of Appeals. On 8 June 2005, the appellatecourt rendered a Decision, thus:

WHEREFORE, premises considered, the presentappeal is hereby GRANTED. The appealed Decisiondated June 17, 1998 of the Regional Trial Court of PasigCity, Branch 69 in Civil Case No. 62175 is herebyREVERSED and SET ASIDE. A new judgment is

hereby entered ordering [petitioners] to reconvey 107square meters of the subject [property] covered by TCTNo. PT-81729 of the Registry of Deeds of Pasig City,Metro Manila, and to pay to [respondents spousesLumbao] the sum of P30,000.00 for attorney‘s fees andlitigation expenses.

No pronouncement as to costs.12

Dissatisfied, petitioners filed a Motion forReconsideration of the aforesaid Decision but it wasdenied in the Resolution of the appellate court dated 29July 2005 for lack of merit.

Hence, this Petition.

The grounds relied upon by the petitioners are thefollowing:

I. THE APPELLATE COURT COMMITTED AREVERSIBLE ERROR IN REVERSING THE

DECISION OF THE TRIAL COURT, THEREBYCREATING A VARIANCE ON THE FINDINGS OFFACTS OF TWO COURTS.

II. THE APPELLATE COURT COMMITTED AREVERSIBLE ERROR IN ORDERING THEPETITIONERS TO RECONVEY THE SUBJECT[PROPERTY] TO THE RESPONDENTS [SPOUSESLUMBAO] AND IN NOT RULING THAT THEY AREGUILTY OF LACHES, HENCE THEY CANNOTRECOVER THE LOT ALLEGEDLY SOLD TO THEM.

III. THE APPELLATE COURT COMMITTED A

REVERSIBLE ERROR IN NOT FINDING HEREINPETITIONER[S] TO BE IN GOOD FAITH INEXECUTING THE "DEED OF EXTRAJUDICIALSETTLEMENT" DATED [2 MAY 1986].

IV. THE APPELLATE COURT COMMITTED AREVERSIBLE ERROR IN NOT FINDING THATPETITIONERS ARE NOT LEGALLY BOUND TOCOMPLY WITH THE SUPPOSED BILIHAN NG LUPADATED [17 AUGUST 1979] AND [9 JANUARY 1981]THAT WERE SUPPOSEDLY EXECUTED BY THELATE RITA CATOC.

V. THE APPELLATE COURT COMMITTED AREVERSIBLE ERROR IN NOT FINDING THATRESPONDENTS [SPOUSES LUMBAO‘S] ACTIONFOR RECONVEYANCE WITH DAMAGES CANNOTBE SUPPORTED WITH AN UNENFORCEABLEDOCUMENTS, SUCH AS THE BILIHAN NG LUPADATED [17 AUGUST 1979] AND [9 JANUARY 1981].

VI. THE APPELLATE COURT COMMITTED AREVERSIBLE ERROR IN NOT FINDING THATRESPONDENTS [SPOUSES LUMBAO‘S] COMPLAINTFOR RECONVEYANCE IS DISMISSABLE (SIC) FORNON COMPLIANCE OF THE MANDATE OF [P.D. NO.]

1508, AS AMENDED BY Republic Act No. 7160.

VII. THE APPELLATE COURT COMMITTED AREVERSIBLE ERROR IN NOT FINDING THATRESPONDENTS [SPOUSES LUMBAO] SHOULD BEHELD LIABLE FOR PETITIONERS‘ CLAIM FORDAMAGES AND ATTORNEY[‗]S FEES.

Petitioners ask this Court to scrutinize the evidencepresented in this case, because they claim that thefactual findings of the trial court and the appellate court




























are conflicting. They allege that the findings of fact bythe trial court revealed that petitioners Virgilio andTadeo did not witness the execution of the documentsknown as "Bilihan ng Lupa"; hence, this finding runscounter to the conclusion made by the appellate court. And even assuming that they were witnesses to theaforesaid documents, still, respondents SpousesLumbao were not entitled to the reconveyance of thesubject property because they were guilty of laches for

their failure to assert their rights for an unreasonablelength of time. Since respondents Spouses Lumbao hadslept on their rights for a period of more than 12 yearsreckoned from the date of execution of the second"Bilihan ng Lupa," it would be unjust and unfair to thepetitioners if the respondents will be allowed to recoverthe subject property.

Petitioners allege they are in good faith in executing theDeed of Extrajudicial Settlement because evenrespondents Spouses Lumbao‘s witness, CarolinaMorales, testified that neither petitioner Virgilio norpetitioner Tadeo was present during the execution of the

"Bilihan ng Lupa," dated 17 August 1979 and 9 January1981. Petitioners affirm that the Deed of ExtrajudicialSettlement was published in a newspaper of generalcirculation to give notice to all creditors of the estatesubject of partition to contest the same within the periodprescribed by law. Since no claimant appeared tointerpose a claim within the period allowed by law, a titleto the subject property was then issued in favor of thepetitioners; hence, they are considered as holders ingood faith and therefore cannot be barred from enteringinto any subsequent transactions involving the subjectproperty.

Petitioners also contend that they are not bound by thedocuments denominated as "Bilihan ng Lupa" becausethe same were null and void for the following reasons:1) for being falsified documents because one of thosedocuments made it appear that petitioners Virgilio andTadeo were witnesses to its execution and that theyappeared personally before the notary public, when intruth and in fact they did not; 2) the identities of theproperties in the "Bilihan ng Lupa," dated 17 August1979 and 9 January 1981 in relation to the subjectproperty in litigation were not established by theevidence presented by the respondents SpousesLumbao; 3) the right of the respondents Spouses

Lumbao to lay their claim over the subject property hadalready been barred through estoppel by laches; and 4)the respondents Spouses Lumbao‘s claim over thesubject property had already prescribed.

Finally, petitioners claim that the Complaint forReconveyance with Damages filed by respondentsSpouses Lumbao was dismissible because they failedto comply with the mandate of Presidential Decree No.1508, as amended by Republic Act No. 7160,particularly Section 412 of Republic Act No. 7160.

Given the foregoing, the issues presented by the

petitioners may be restated as follows:

I. Whether or not the Complaint for Reconveyance withDamages filed by respondents spouses Lumbao isdismissible for their failure to comply with the mandateof the Revised Katarungang Pambarangay Law underR.A. No. 7160.

II. Whether or not the documents known as "Bilihan ngLupa" are valid and enforceable, thus, they can be thebases of the respondents spouses Lumbao‘s action forreconveyance with damages.

III. Whether or not herein petitioners are legally bound tocomply with the "Bilihan ng Lupa" dated 17 August 1979and 9 January 1981 and consequently, reconvey thesubject property to herein respondents spousesLumbao.

It is well-settled that in the exercise of the SupremeCourt‘s power of review, the court is not a trier of factsand does not normally undertake the re-examination ofthe evidence presented by the contending parties duringthe trial of the case considering that the findings of factof the Court of Appeals are conclusive and binding onthe Court.13 But, the rule is not without exceptions.There are several recognized exceptions14 in whichfactual issues may be resolved by this Court. One ofthese exceptions is when the findings of the appellatecourt are contrary to those of the trial court. Thisexception is present in the case at bar.

Going to the first issue presented in this case, it is theargument of the petitioners that the Complaint forReconveyance with Damages filed by respondentsSpouses Lumbao should be dismissed for failure tocomply with the barangay conciliation proceedings asmandated by the Revised Katarungang PambarangayLaw under Republic Act No. 7160. This argumentcannot be sustained.

Section 408 of the aforesaid law and AdministrativeCircular No. 14-9315 provide that all disputes betweenparties actually residing in the same city or municipalityare subject to barangay conciliation. A prior recoursethereto is a pre-condition before filing a complaint incourt or any government offices. Non-compliance withthe said condition precedent could affect the sufficiency

of the plaintiff‘s cause of action and make his complaintvulnerable to dismissal on ground of lack of cause ofaction or prematurity; but the same would not prevent acourt of competent jurisdiction from exercising its powerof adjudication over the case before it, where thedefendants failed to object to such exercise of jurisdiction.16

While it is true that the present case should first bereferred to the Barangay Lupon for conciliation becausethe parties involved herein actually reside in the samecity (Pasig City) and the dispute between them involvesa real property, hence, the said dispute should have

been brought in the city in which the real property,subject matter of the controversy, is located, whichhappens to be the same city where the contendingparties reside. In the event that respondents SpousesLumbao failed to comply with the said conditionprecedent, their Complaint for Reconveyance withDamages can be dismissed. In this case, however,respondents Spouses Lumbao‘s non-compliance withthe aforesaid condition precedent cannot be consideredfatal. Although petitioners alleged in their answer thatthe Complaint for Reconveyance with Damages filed byrespondents spouses Lumbao should be dismissed fortheir failure to comply with the condition precedent,

which in effect, made the complaint prematurelyinstituted and the trial court acquired no jurisdiction tohear the case, yet, they did not file a Motion to Dismissthe said complaint.

Emphasis must be given to the fact that the petitionerscould have prevented the trial court from exercising jurisdiction over the case had they filed a Motion toDismiss. However, instead of doing so, they invoked thevery same jurisdiction by filing an answer seeking anaffirmative relief from it. Worse, petitioners activelyparticipated in the trial of the case by presenting their


















own witness and by cross-examining the witnessespresented by the respondents Spouses Lumbao. It iselementary that the active participation of a party in acase pending against him before a court is tantamountto recognition of that court‘s jurisdiction and awillingness to abide by the resolution of the case whichwill bar said party from later on impugning the court‘s jurisdiction.17 It is also well-settled that the non-referralof a case for barangay conciliation when so required

under the law is not jurisdictional in nature and maytherefore be deemed waived if not raised seasonably ina motion to dismiss.18 Hence, herein petitioners can nolonger raise the defense of non-compliance with thebarangay conciliation proceedings to seek the dismissalof the complaint filed by the respondents SpousesLumbao, because they already waived the said defensewhen they failed to file a Motion to Dismiss.

As regards the second issue, petitioners maintain thatthe "Bilihan ng Lupa," dated 17 August 1979 and 9January 1981 are null and void for being falsifieddocuments as it is made to appear that petitioners

Virgilio and Tadeo were present in the execution of thesaid documents and that the identities of the propertiesin those documents in relation to the subject propertyhas not been established by the evidence of therespondents Spouses Lumbao. Petitioners also claimthat the enforceability of those documents is barred byprescription of action and laches.

It is the petitioners‘ incessant barking that the "Bilihanng Lupa" documents dated 17 August 1979 and 9January 1981 were falsified because it was made toappear that petitioners Virgilio and Tadeo were presentin the executions thereof, and their allegation that even

respondents Spouses Lumbao‘s witness CarolinaMorales proved that said petitioners were not presentduring the execution of the aforementioned documents.This is specious.

Upon examination of the aforesaid documents, thisCourt finds that in the "Bilihan ng Lupa," dated 17 August 1979, the signatures of petitioners Virgilio andTadeo appeared thereon. Moreover, in petitioners‘ Answer and Amended Answer to the Complaint forReconveyance with Damages, both petitioners Virgilioand Tadeo made an admission that indeed they actedas witnesses in the execution of the "Bilihan ng Lupa,"

dated 17 August 1979.19

However, in order to avoid theirobligations in the said "Bilihan ng Lupa," petitionerVirgilio, in his cross-examination, denied havingknowledge of the sale transaction and claimed that hecould not remember the same as well as hisappearance before the notary public due to the length oftime that had passed. Noticeably, petitioner Virgilio didnot categorically deny having signed the "Bilihan ngLupa," dated 17 August 1979 and in support thereof, histestimony in the cross-examination propounded by thecounsel of the respondents Spouses Lumbao is quotedhereunder:

ATTY. CHIU:

Q. Now, you said, Mr. Witness…Virgilio Santos, that youdon‘t know about this document which was marked asExhibit "A" for the [respondents spouses Lumbao]?

ATTY. BUGARING:

The question is misleading, your Honor. Counselpremised the question that he does not have anyknowledge but not that he does not know.

ATTY. CHIU:

Q. Being… you are one of the witnesses of thisdocument? [I]s it not?

WITNESS:

A. No, sir.

Q. I am showing to you this document, there is asignature at the left hand margin of this documentVirgilio Santos, will you please go over the same and tellthe court whose signature is this?

A. I don‘t remember, sir, because of the length of timethat had passed.

Q. But that is your signature?

A. I don‘t have eyeglasses… My signature is different.

Q. You never appeared before this notary public Apolinario Mangahas?

A. I don‘t remember .20

As a general rule, facts alleged in a party‘s pleading aredeemed admissions of that party and are binding uponhim, but this is not an absolute and inflexible rule. Ananswer is a mere statement of fact which the party filingit expects to prove, but it is not evidence.21 And in spiteof the presence of judicial admissions in a party‘spleading, the trial court is still given leeway to consider

other evidence presented.22

However, in the case atbar, as the Court of Appeals mentioned in its Decision,"[herein petitioners] had not adduced any otherevidence to override the admission made in their[A]nswer that [petitioners Virgilio and Tadeo] actuallysigned the [Bilihan ng Lupa dated 17 August 1979]except that they were just misled as to the purpose ofthe document, x x x."

23 Virgilio‘s answers were unsure

and quibbled. Hence, the general rule that theadmissions made by a party in a pleading are bindingand conclusive upon him applies in this case.

On the testimony of respondents Spouses Lumbao‘s

witness Carolina Morales, this Court adopts the findingsmade by the appellate court. Thus -

[T]he trial court gave singular focus on her reply to aquestion during cross-examination if the [petitionersVirgilio and Tadeo] were not with her and the vendor[Rita] during the transaction. It must be pointed out thatearlier in the direct examination of said witness, sheconfirmed that [respondents spouses Lumbao] actuallybought the lot from [Rita] ("nagkabilihan"). Said witnesspositively identified and confirmed the two (2)documents evidencing the sale in favor of [respondentsspouse Lumbao]. Thus, her subsequent statement that

the [petitioners Virgilio and Tadeo] were not with themduring the transaction does not automatically imply that[petitioners Virgilio and Tadeo] did not at any time signas witnesses as to the deed of sale attesting to theirmother‘s voluntary act of selling a portion of her share inher deceased mother‘s property. The rule is thattestimony of a witness must be considered andcalibrated in its entirety and not by truncated portionsthereof or isolated passages therein.24

Furthermore, both "Bilihan ng Lupa" documents dated17 August 1979 and 9 January 1981 were duly



































notarized before a notary public. It is well-settled that adocument acknowledged before a notary public is apublic document25 that enjoys the presumption ofregularity. It is a prima facie evidence of the truth of thefacts stated therein and a conclusive presumption of itsexistence and due execution.26 To overcome thispresumption, there must be presented evidence that isclear and convincing. Absent such evidence, thepresumption must be upheld.27 In addition, one who

denies the due execution of a deed where one‘ssignature appears has the burden of proving thatcontrary to the recital in the jurat, one never appearedbefore the notary public and acknowledged the deed tobe a voluntary act. Nonetheless, in the present casepetitioners‘ denials without clear and convincingevidence to support their claim of fraud and falsity werenot sufficient to overthrow the above-mentionedpresumption; hence, the authenticity, due execution andthe truth of the facts stated in the aforesaid "Bilihan ngLupa" are upheld.

The defense of petitioners that the identities of the

properties described in the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981 in relation to thesubject property were not established by respondentsSpouses Lumbao‘s evidence is likewise not acceptable.

It is noteworthy that at the time of the execution of thedocuments denominated as "Bilihan ng Lupa," the entireproperty owned by Maria, the mother of Rita, was notyet divided among her and her co-heirs and so thedescription of the entire estate is the only descriptionthat can be placed in the "Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981" because the exactmetes and bounds of the subject property sold to

respondents Spouses Lumbao could not be possiblydetermined at that time. Nevertheless, that does notmake the contract of sale between Rita andrespondents Spouses Lumbao invalid because both thelaw and jurisprudence have categorically held that evenwhile an estate remains undivided, co-owners haveeach full ownership of their respective aliquots orundivided shares and may therefore alienate, assign ormortgage them.

28 The co-owner, however, has no right

to sell or alienate a specific or determinate part of thething owned in common, because such right over thething is represented by an aliquot or ideal portionwithout any physical division. In any case, the mere fact

that the deed purports to transfer a concrete portiondoes not per se render the sale void. The sale is valid,but only with respect to the aliquot share of the sellingco-owner. Furthermore, the sale is subject to the resultsof the partition upon the termination of the co-ownership.29

In the case at bar, when the estate left by Maria hadbeen partitioned on 2 May 1986 by virtue of a Deed ofExtrajudicial Settlement, the 107- square meter lot soldby the mother of the petitioners to respondents SpousesLumbao should be deducted from the total lot, inheritedby them in representation of their deceased mother,

which in this case measures 467 square meters. The107-square meter lot already sold to respondentsSpouses Lumbao can no longer be inherited by thepetitioners because the same was no longer part of theirinheritance as it was already sold during the lifetime oftheir mother.

Likewise, the fact that the property mentioned in the two"Bilihan ng Lupa" documents was described as "aportion of a parcel of land covered in Tax DeclarationsNo. A-018-01674," while the subject matter of the Deedof Extrajudicial Settlement was the property described in

Transfer Certificate of Title (TCT) No. 3216 of theRegistry of Deeds of the Province of Rizal in the nameof Maria is of no moment because in the "Bilihan ngLupa," dated 17 August 1979 and 9 January 1981, it isclear that there was only one estate left by Maria uponher death. And this fact was not refuted by thepetitioners. Besides, the property described in TaxDeclaration No. A-018-01674 and the propertymentioned in TCT No. 3216 are both located in Barrio

Rosario, Municipality of Pasig, Province of Rizal, andalmost have the same boundaries. It is, thus, safe tostate that the property mentioned in Tax Declaration No. A-018-01674 and in TCT No. 3216 are one and thesame.

The defense of prescription of action and laches islikewise unjustifiable. In an action for reconveyance, thedecree of registration is respected as incontrovertible.What is sought instead is the transfer of the property orits title which has been wrongfully or erroneouslyregistered in another person‘s name to its rightful orlegal owner, or to the one with a better right. It is,

indeed, true that the right to seek reconveyance ofregistered property is not absolute because it is subjectto extinctive prescription. However, when the plaintiff isin possession of the land to be reconveyed, prescriptioncannot set in. Such an exception is based on the theorythat registration proceedings could not be used as ashield for fraud or for enriching a person at the expenseof another .30

In the case at bar, the right of the respondents SpousesLumbao to seek reconveyance does not prescribebecause the latter have been and are still in actualpossession and occupation as owners of the property

sought to be reconveyed, which fact has not beenrefuted nor denied by the petitioners. Furthermore,respondents Spouses Lumbao cannot be held guilty oflaches because from the very start that they bought the107-square meter lot from the mother of the petitioners,they have constantly asked for the transfer of thecertificate of title into their names but Rita, during herlifetime, and the petitioners, after the death of Rita,failed to do so on the flimsy excuse that the lot had notbeen partitioned yet. Inexplicably, after the partition ofthe entire estate of Maria, petitioners still included the107-square meter lot in their inheritance which theydivided among themselves despite their knowledge of

the contracts of sale between their mother and therespondents Spouses Lumbao.

Under the above premises, this Court holds that the"Bilihan ng Lupa" documents dated 17 August 1979 and9 January 1981 are valid and enforceable and can bemade the basis of the respondents Spouses Lumbao‘saction for reconveyance. The failure of respondentsSpouses Lumbao to have the said documentsregistered does not affect its validity and enforceability.It must be remembered that registration is not arequirement for validity of the contract as between theparties, for the effect of registration serves chiefly to

bind third persons. The principal purpose of registrationis merely to notify other persons not parties to a contractthat a transaction involving the property had beenentered into. Where the party has knowledge of a priorexisting interest which is unregistered at the time heacquired a right to the same land, his knowledge of thatprior unregistered interest has the effect of registrationas to him.31 Hence, the "Bilihan ng Lupa" documentsdated 17 August 1979 and 9 January 1981, being validand enforceable, herein petitioners are bound to complywith their provisions. In short, such documents areabsolutely valid between and among the parties thereto.































Finally, the general rule that heirs are bound bycontracts entered into by their predecessors-in-interestapplies in the present case. Article 131132 of the NCC isthe basis of this rule. It is clear from the said provisionthat whatever rights and obligations the decedent haveover the property were transmitted to the heirs by way ofsuccession, a mode of acquiring the property, rights andobligations of the decedent to the extent of the value ofthe inheritance of the heirs.33 Thus, the heirs cannot

escape the legal consequence of a transaction enteredinto by their predecessor-in-interest because they haveinherited the property subject to the liability affectingtheir common ancestor. Being heirs, there is privity ofinterest between them and their deceased mother. Theyonly succeed to what rights their mother had and what isvalid and binding against her is also valid and binding asagainst them. The death of a party does not excusenonperformance of a contract which involves a propertyright and the rights and obligations thereunder pass tothe personal representatives of the deceased. Similarly,nonperformance is not excused by the death of theparty when the other party has a property interest in the

subject matter of the contract.34

In the end, despite the death of the petitioners‘ mother,they are still bound to comply with the provisions of the"Bilihan ng Lupa," dated 17 August 1979 and 9 January1981. Consequently, they must reconvey to hereinrespondents Spouses Lumbao the 107-square meter lotwhich they bought from Rita, petitioners‘ mother. And ascorrectly ruled by the appellate court, petitioners mustpay respondents Spouses Lumbao attorney‘s fees andlitigation expenses for having been compelled to litigateand incur expenses to protect their interest.35 On thismatter, we do not find reasons to reverse the said

findings.

WHEREFORE, premises considered, the instantPetition is hereby DENIED. The Decision andResolution of the Court of Appeals dated 8 June 2005and 29 July 2005, respectively, are hereby AFFIRMED.Herein petitioners are ordered to reconvey torespondents Spouses Lumbao the subject property andto pay the latter attorney‘s fees and litigation expenses.Costs against petitioners.

SO ORDERED.
















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