Liggayu, Mc Anthony

G.R. No. 189121, July 31, 2013

AMELIA GARCIA-QUIAZON, JENNETH QUIAZON AND MARIA JENNIFER

QUIAZON, Petitioners,

v.

 MA. LOURDES BELEN, FOR AND IN BEHALF OF MARIA LOURDES ELISE

QUIAZON, Respondent.

PEREZ, J.:

Case Doctrine/s:

Section 1, Rule 73 of the Rules of Court:

Where estate of deceased persons settled. – If the decedent is an inhabitant of the

Philippines at the time of his death, whether a citizen or an alien, his will shall be proved,

or letters of administration granted, and his estate settled, in the Court of First

Instance [now Regional Trial Court] in the province in which he resides at the time of his

death, and if he is an inhabitant of a foreign country, the Court of First Instance [now

Regional Trial Court] of any province in which he had estate.  The court first taking

cognizance of the settlement of the estate of a decedent, shall exercise jurisdiction to the

exclusion of all other courts.  The jurisdiction assumed by a court, so far as it depends on

the place of residence of the decedent, or of the location of his estate, shall not be

contested in a suit or proceeding, except in an appeal from that court, in the original case,

or when the want of jurisdiction appears on the record.

The term “resides” connotes ex vi termini “actual residence” as distinguished from “legal

residence or domicile.”  This term “resides,” like the terms “residing” and “residence,” is

elastic and should be interpreted in the light of the object or purpose of the statute or

rule in which it is employed.  In the application of venue statutes and rules – Section 1,

Rule 73 of the Revised Rules of Court is of such nature – residence rather than domicile

is the significant factor. Even where the statute uses the word “domicile” still it is

construed as meaning residence and not domicile in the technical sense.

Facts:

Eliseo Quiazon (Eliseo) died intestate on 12 December 1992.

On 12 September 1994, Maria Lourdes Elise Quiazon (Elise), represented by her mother, Ma.

Lourdes Belen (Lourdes) Eliseo’s common-law wife filed a Petition for Letters of

Administration before the Regional Trial Court (RTC) of Las Piñas City claiming that she is the

natural child of Eliseo having been conceived and born at the time when her parents were both

capacitated to marry each other. Claiming that the venue of the petition was improperly laid,

Amelia Garcia-Quaizon (Amelia) to whom Eliseo was married, together with her children,

Jenneth and Jennifer, opposed the issuance of the letters of administration by filing an

Opposition/Motion to Dismiss asserting that as shown by his Death Certificate, Eliseo was a

resident of Capas, Tarlac and not of Las Piñas City, at the time of his death.  Pursuant to Section

1, Rule 73 of the Revised Rules of Court, the petition for settlement of decedent’s estate should

have been filed in Capas, Tarlac and not in Las Piñas City.  In addition to their claim of improper

venue, the petitioners averred that there are no factual and legal bases for Elise to be

appointed administratix of Eliseo’s estate.

In a Decision dated 11 March 2005, the RTC directed the issuance of Letters of Administration

to Elise upon posting the necessary bond.  The lower court ruled that the venue of the petition

was properly laid in Las Piñas City, thereby discrediting the position taken by the petitioners that

Eliseo’s last residence was in Capas, Tarlac, as hearsay.  On appeal, the decision of the trial court

was affirmed in toto in the 28 November 2008 Decision rendered by the Court of Appeals in CA-

G.R. CV No. 88589. 

Issue:

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THAT

ELISEO QUIAZON WAS A RESIDENT OF LAS PIÑAS AND THEREFORE, THE

PETITION FOR LETTERS OF ADMINISTRATION WAS PROPERLY FILED WITH THE

[RTC] OF LAS PIÑAS.

Ruling:

The court declred the petition bereft of merit. Under Section 1, Rule 73 of the Rules of Court, the

petition for letters of administration of the estate of a decedent should be filed in the RTC of the

province where the decedent resides at the time of his death: Sec. 1. Where estate of deceased

persons settled. – If the decedent is an inhabitant of the Philippines at the time of his death,

whether a citizen or an alien, his will shall be proved, or letters of administration granted, and his

estate settled, in the Court of First Instance [now Regional Trial Court] in the province in which

he resides at the time of his death, and if he is an inhabitant of a foreign country, the Court of

First Instance [now Regional Trial Court] of any province in which he had estate.  The court first

taking cognizance of the settlement of the estate of a decedent, shall exercise jurisdiction to the

exclusion of all other courts.  The jurisdiction assumed by a court, so far as it depends on the

place of residence of the decedent, or of the location of his estate, shall not be contested in a suit

or proceeding, except in an appeal from that court, in the original case, or when the want of

jurisdiction appears on the record.  (Emphasis supplied).

The term “resides” connotes ex vi termini “actual residence” as distinguished from “legal

residence or domicile.”  This term “resides,” like the terms “residing” and “residence,” is elastic

and should be interpreted in the light of the object or purpose of the statute or rule in which it is

employed.  In the application of venue statutes and rules – Section 1, Rule 73 of the Revised

Rules of Court is of such nature – residence rather than domicile is the significant factor. Even

where the statute uses the word “domicile” still it is construed as meaning residence and not

domicile in the technical sense. Some cases make a distinction between the terms “residence”

and “domicile” but as generally used in statutes fixing venue, the terms are synonymous, and

convey the same meaning as the term “inhabitant.”15  In other words, “resides” should be

viewed or understood in its popular sense, meaning, the personal, actual or physical habitation of

a person, actual residence or place of abode.16  It signifies physical presence in a place and

actual stay thereat.Venue for ordinary civil actions and that for special proceedings have one and

the same meaning. As thus defined, “residence,” in the context of venue provisions, means

nothing more than a person’s actual residence or place of abode, provided he resides therein with

continuity and consistency. Viewed in light of the foregoing principles, the Court of Appeals

cannot be faulted for affirming the ruling of the RTC that the venue for the settlement of the

estate of Eliseo was properly laid in Las Piñas City.  It is evident from the records that during his

lifetime, Eliseo resided at No. 26 Everlasting Road, Phase 5, Pilar Village, Las Piñas City.  For

this reason, the venue for the settlement of his estate may be laid in the said city.

In opposing the issuance of letters of administration, the petitioners harp on the entry in Eliseo’s

Death Certificate that he is a resident of Capas, Tarlac where they insist his estate should be

settled.  While the recitals in death certificates can be considered proofs of a decedent’s

residence at the time of his death, the contents thereof, however, is not binding on the courts. 

Both the RTC and the Court of Appeals found that Eliseo had been living with Lourdes,

deporting themselves as husband and wife, from 1972 up to the time of his death in 1995.  This

finding is consistent with the fact that in 1985, Eliseo filed an action for judicial partition of

properties against Amelia before the RTC of Quezon City, Branch 106, on the ground that their

marriage is void for being bigamous.  That Eliseo went to the extent of taking his marital feud

with Amelia before the courts of law renders untenable petitioners’ position that Eliseo spent the

final days of his life in Tarlac with Amelia and her children.  It disproves rather than supports

petitioners’ submission that the lower courts’ findings arose from an erroneous appreciation of

the evidence on record.  Factual findings of the trial court, when affirmed by the appellate court,

must be held to be conclusive and binding upon this Court.

CASE FULL TEXT:

G.R. No. 189121, July 31, 2013

AMELIA GARCIA-QUIAZON, JENNETH QUIAZON AND MARIA JENNIFER QUIAZON, Petitioners,v. MA. LOURDES BELEN, FOR AND IN BEHALF OF MARIA LOURDES ELISE QUIAZON,Respondent.

D E C I S I O N

PEREZ, J.:

This is a Petition for Review on Certiorari filed pursuant to Rule 45 of the Revised Rules of Court, primarily assailing the 28 November 2008 Decision rendered by the Ninth Division of the Court of Appeals in CA-G.R. CV No. 88589,1 the decretal portion of which states:cralawlibrary

WHEREFORE, premises considered, the appeal is hereby DENIED.  The assailed Decision dated March 11, 2005, and the Order dated March 24, 2006 of the Regional Trial Court, Branch 275, Las Piñas City are AFFIRMED in toto.2

The Facts

This case started as a Petition for Letters of Administration of the Estate of Eliseo Quiazon (Eliseo), filed by herein respondents who are Eliseo’s common-law wife and daughter.  The petition was opposed by herein petitioners Amelia Garcia-Quaizon (Amelia) to whom Eliseo was married.  Amelia was joined by her children, Jenneth Quiazon (Jenneth) and Maria Jennifer Quiazon (Jennifer).

Eliseo died intestate on 12 December 1992.

On 12 September 1994, Maria Lourdes Elise Quiazon (Elise), represented by her mother, Ma.

Lourdes Belen (Lourdes), filed a Petition for Letters of Administration before the Regional Trial Court (RTC) of Las Piñas City.3  In her Petition docketed as SP Proc. No. M-3957, Elise claims that she is the natural child of Eliseo having been conceived and born at the time when her parents were both capacitated to marry each other.  Insisting on the legal capacity of Eliseo and Lourdes to marry, Elise impugned the validity of Eliseo’s marriage to Amelia by claiming that it was bigamous for having been contracted during the subsistence of the latter’s marriage with one Filipito Sandico (Filipito).  To prove her filiation to the decedent, Elise, among others, attached to the Petition for Letters of Administration her Certificate of Live Birth4 signed by Eliseo as her father.  In the same petition, it was alleged that Eliseo left real properties worth P2,040,000.00 and personal properties worth P2,100,000.00.  In order to preserve the estate of Eliseo and to prevent the dissipation of its value, Elise sought her appointment as administratrix of her late father’s estate.

Claiming that the venue of the petition was improperly laid, Amelia, together with her children, Jenneth and Jennifer, opposed the issuance of the letters of administration by filing an Opposition/Motion to Dismiss.5  The petitioners asserted that as shown by his Death Certificate,6Eliseo was a resident of Capas, Tarlac and not of Las Piñas City, at the time of his death.  Pursuant to Section 1, Rule 73 of the Revised Rules of Court,7 the petition for settlement of decedent’s estate should have been filed in Capas, Tarlac and not in Las Piñas City.  In addition to their claim of improper venue, the petitioners averred that there are no factual and legal bases for Elise to be appointed administratix of Eliseo’s estate.

In a Decision8 dated 11 March 2005, the RTC directed the issuance of Letters of Administration to Elise upon posting the necessary bond.  The lower court ruled that the venue of the petition was properly laid in Las Piñas City, thereby discrediting the position taken by the petitioners that Eliseo’s last residence was in Capas, Tarlac, as hearsay.  The dispositive of the RTC decision reads:cralawlibrary

Having attained legal age at this time and there being no showing of any disqualification or incompetence to serve as administrator, let letters of administration over the estate of the decedent Eliseo Quiazon, therefore, be issued to petitioner, Ma. Lourdes Elise Quiazon, after the approval by this Court of a bond in the amount of P100,000.00 to be posted by her.9cralaw virtualaw library

On appeal, the decision of the trial court was affirmed in toto in the 28 November 2008 Decision10rendered by the Court of Appeals in CA-G.R. CV No. 88589.  In validating the findings of the RTC, the Court of Appeals held that Elise was able to prove that Eliseo and Lourdes lived together as husband and wife by establishing a common residence at No. 26 Everlasting Road, Phase 5, Pilar Village, Las Piñas City, from 1975 up to the time of Eliseo’s death in 1992.  For purposes of fixing the venue of the settlement of Eliseo’s estate, the Court of Appeals upheld the conclusion reached by the RTC that the decedent was a resident of Las Piñas City.  The petitioners’ Motion for Reconsideration was denied by the Court of Appeals in its Resolution11 dated 7 August 2009.

The Issues

The petitioners now urge Us to reverse the assailed Court of Appeals Decision and Resolution on the following grounds:cralawlibrary

I. THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THAT ELISEO QUIAZON WAS A RESIDENT OF LAS PIÑAS AND THEREFORE[,] THE PETITION FOR LETTERS OF ADMINISTRATION WAS PROPERLY FILED WITH THE [RTC] OF LAS PIÑAS[;]

II. THE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT AMELIA GARCIA-QUIAZON WAS NOT LEGALLY MARRIED TO ELISEO QUIAZON DUE TO PRE-EXISTING MARRIAGE[;] [AND]

III. THE COURT OF APPEALS OVERLOOKED THE FACT THAT ELISE QUIAZON HAS NOT SHOWN ANY INTEREST IN THE PETITION FOR LETTERS OF ADMINISTRATION[.]12

The Court’s Ruling

We find the petition bereft of merit.

Under Section 1, Rule 73 of the Rules of Court, the petition for letters of administration of the estate of a decedent should be filed in the RTC of the province where the decedent resides at the time of his death:cralawlibrary

Sec. 1.  Where estate of deceased persons settled. – If the decedent is an inhabitant of the Philippines at the time of his death, whether a citizen or an alien, his will shall be proved, or letters of administration granted, and his estate settled, in the Court of First Instance [now Regional Trial Court] in the province in which he resides at the time of his death, and if he is an inhabitant of a foreign country, the Court of First Instance [now Regional Trial Court] of any province in which he had estate.  The court first taking cognizance of the settlement of the estate of a decedent, shall exercise jurisdiction to the exclusion of all other courts.  The jurisdiction assumed by a court, so far as it depends on the place of residence of the decedent, or of the location of his estate, shall not be contested in a suit or proceeding, except in an appeal from that court, in the original case, or when the want of jurisdiction appears on the record.  (Emphasis supplied).

The term “resides” connotes ex vi termini “actual residence” as distinguished from “legal residence or domicile.”  This term “resides,” like the terms “residing” and “residence,” is elastic and should be interpreted in the light of the object or purpose of the statute or rule in which it is employed.  In the application of venue statutes and rules – Section 1, Rule 73 of the Revised Rules of Court is of such nature – residence rather than domicile is the significant factor.13  Even where the statute uses the word “domicile” still it is construed as meaning residence and not domicile in the technical sense.14 Some cases make a distinction between the terms “residence” and “domicile” but as generally used in statutes fixing venue, the terms are synonymous, and convey the same meaning as the term “inhabitant.”15  In other words,

“resides” should be viewed or understood in its popular sense, meaning, the personal, actual or physical habitation of a person, actual residence or place of abode.16  It signifies physical presence in a place and actual stay thereat.17  Venue for ordinary civil actions and that for special proceedings have one and the same meaning.18  As thus defined, “residence,” in the context of venue provisions, means nothing more than a person’s actual residence or place of abode, provided he resides therein with continuity and consistency.19cralaw virtualaw library

Viewed in light of the foregoing principles, the Court of Appeals cannot be faulted for affirming the ruling of the RTC that the venue for the settlement of the estate of Eliseo was properly laid in Las Piñas City.  It is evident from the records that during his lifetime, Eliseo resided at No. 26 Everlasting Road, Phase 5, Pilar Village, Las Piñas City.  For this reason, the venue for the settlement of his estate may be laid in the said city.

In opposing the issuance of letters of administration, the petitioners harp on the entry in Eliseo’s Death Certificate that he is a resident of Capas, Tarlac where they insist his estate should be settled.  While the recitals in death certificates can be considered proofs of a decedent’s residence at the time of his death, the contents thereof, however, is not binding on the courts.  Both the RTC and the Court of Appeals found that Eliseo had been living with Lourdes, deporting themselves as husband and wife, from 1972 up to the time of his death in 1995.  This finding is consistent with the fact that in 1985, Eliseo filed an action for judicial partition of properties against Amelia before the RTC of Quezon City, Branch 106, on the ground that their marriage is void for being bigamous.20  That Eliseo went to the extent of taking his marital feud with Amelia before the courts of law renders untenable petitioners’ position that Eliseo spent the final days of his life in Tarlac with Amelia and her children.  It disproves rather than supports petitioners’ submission that the lower courts’ findings arose from an erroneous appreciation of the evidence on record.  Factual findings of the trial court, when affirmed by the appellate court, must be held to be conclusive and binding upon this Court.21cralaw virtualaw library

Likewise unmeritorious is petitioners’ contention that the Court of Appeals erred in declaring Amelia’s marriage to Eliseo as void ab initio.  In a void marriage, it was though no marriage has taken place, thus, it cannot be the source of rights.  Any interested party may attack the marriage directly or collaterally.  A void marriage can be questioned even beyond the lifetime of the parties to the marriage.22  It must be pointed out that at the time of the celebration of the marriage of Eliseo and Amelia, the law in effect was the Civil Code, and not the Family Code, making the ruling in Niñal v. Bayadog23 applicable four-square to the case at hand.  In Niñal, the Court, in no uncertain terms, allowed therein petitioners to file a petition for the declaration of nullity of their father’s marriage to therein respondent after the death of their father, by contradistinguishing void from voidable marriages, to wit:cralawlibrary

[C]onsequently, void marriages can be questioned even after the death of either party but voidable marriages can be assailed only during the lifetime of the parties and not after death of either, in which case the parties and their offspring will be left as if the marriage had been perfectly valid. That is why the action or defense for nullity is imprescriptible, unlike voidable marriages where the action prescribes. Only the parties to a voidable marriage can assail it but any proper interested party may attack a void marriage.24

It was emphasized in Niñal that in a void marriage, no marriage has taken place and it cannot be the source of rights, such that any interested party may attack the marriage directly or collaterally without prescription, which may be filed even beyond the lifetime of the parties to the marriage.25cralaw virtualaw library

Relevant to the foregoing, there is no doubt that Elise, whose successional rights would be prejudiced by her father’s marriage to Amelia, may impugn the existence of such marriage even after the death of her father.  The said marriage may be questioned directly by filing an action attacking the validity thereof, or collaterally by raising it as an issue in a proceeding for the settlement of the estate of the deceased spouse, such as in the case at bar.  Ineluctably, Elise, as a compulsory heir,26 has a cause of action for the declaration of the absolute nullity of the void marriage of Eliseo and Amelia, and the death of either party to the said marriage does not extinguish such cause of action.

Having established the right of Elise to impugn Eliseo’s marriage to Amelia, we now proceed to determine whether or not the decedent’s marriage to Amelia is void for being bigamous.

Contrary to the position taken by the petitioners, the existence of a previous marriage between Amelia and Filipito was sufficiently established by no less than the Certificate of Marriage issued by the Diocese of Tarlac and signed by the officiating priest of the Parish of San Nicolas de Tolentino in Capas, Tarlac.  The said marriage certificate is a competent evidence of marriage and the certification from the National Archive that no information relative to the said marriage exists does not diminish the probative value of the entries therein.  We take judicial notice of the fact that the first marriage was celebrated more than 50 years ago, thus, the possibility that a record of marriage can no longer be found in the National Archive, given the interval of time, is not completely remote.  Consequently, in the absence of any showing that such marriage had been dissolved at the time Amelia and Eliseo’s marriage was solemnized, the inescapable conclusion is that the latter marriage is bigamous and, therefore, void ab initio.27cralaw virtualaw library

Neither are we inclined to lend credence to the petitioners’ contention that Elise has not shown any interest in the Petition for Letters of Administration.

Section 6, Rule 78 of the Revised Rules of Court lays down the preferred persons who are entitled to the issuance of letters of administration, thus:cralawlibrary

Sec. 6.  When and to whom letters of administration granted. — If no executor is named in the will, or the executor or executors are incompetent, refuse the trust, or fail to give bond, or a person dies intestate, administration shall be granted:cralawlibrary

(a)  To the surviving husband or wife, as the case may be, or next of kin, or both, in the discretion of the court, or to such person as such surviving husband or wife, or next of kin, requests to have appointed, if competent and willing to serve;chanr0blesvirtualawlibrary

(b)  If such surviving husband or wife, as the case may be, or next of kin, or the person selected by them, be incompetent or unwilling, or if the husband or widow, or next of kin,

neglects for thirty (30) days after the death of the person to apply for administration or to request that administration be granted to some other person, it may be granted to one or more of the principal creditors, if competent and willing to serve;chanr0blesvirtualawlibrary

(c)  If there is no such creditor competent and willing to serve, it may be granted to such other person as the court may select.

Upon the other hand, Section 2 of Rule 79 provides that a petition for Letters of Administration must be filed by an interested person, thus:cralawlibrary

Sec. 2. Contents of petition for letters of administration. — A petition for letters of administration must be filed by an interested person and must show, so far as known to the petitioner:cralawlibrary

(a)    The jurisdictional facts;chanr0blesvirtualawlibrary

(b)    The names, ages, and residences of the heirs, and the names and residences of the creditors, of the decedent;chanr0blesvirtualawlibrary

(c)    The probable value and character of the property of the estate;chanr0blesvirtualawlibrary

(d)    The name of the person for whom letters of administration are prayed.

But no defect in the petition shall render void the issuance of letters of administration.

An “interested party,” in estate proceedings, is one who would be benefited in the estate, such as an heir, or one who has a claim against the estate, such as a creditor.  Also, in estate proceedings, the phrase “next of kin” refers to those whose relationship with the decedent is such that they are entitled to share in the estate as distributees.28cralaw virtualaw library

In the instant case, Elise, as a compulsory heir who stands to be benefited by the distribution of Eliseo’s estate, is deemed to be an interested party.  With the overwhelming evidence on record produced by Elise to prove her filiation to Eliseo, the petitioners’ pounding on her lack of interest in the administration of the decedent’s estate, is just a desperate attempt to sway this Court to reverse the findings of the Court of Appeals.  Certainly, the right of Elise to be appointed administratix of the estate of Eliseo is on good grounds.  It is founded on her right as a compulsory heir, who, under the law, is entitled to her legitime after the debts of the estate are satisfied.29  Having a vested right in the distribution of Eliseo’s estate as one of his natural children, Elise can rightfully be considered as an interested party within the purview of the law.

WHEREFORE, premises considered, the petition is DENIED for lack of merit.  Accordingly, the Court of Appeals assailed 28 November 2008 Decision and 7 August 2009 Resolution, areAFFIRMED in toto.

SO ORDERED.

Carpio, (Chairperson), Brion, Del Castillo, and Perlas-Bernabe, JJ., concur.

Endnotes:

1 Penned by Associate Justice Ramon R. Garcia with Associate Justices Josefina Guevara–Salonga and Magdangal M. De Leon, concurring.  CA rollo, pp. 94-106.

2 Id. at 105.

3 Special Proceeding No. M-3957.  Records, Vol. I, pp. 1-9.

4 Id. at 10.

5 Id. at 40-44.

6 Id. at 11.

7 Sec. 1.  Where estate of deceased persons settled. – If the decedent is an inhabitant of the Philippines at the time of his death, whether a citizen or an alien, his will shall be proved, or letters of administration granted, and his estate settled, in the Court of First Instance [now Regional Trial Court] in the province in which he resides at the time of his death, and if he is an inhabitant of a foreign country, the Court of First Instance [now Regional Trial Court] of any province in which he had estate.  The court first taking cognizance of the settlement of the estate of a decedent, shall exercise jurisdiction to the exclusion of all other courts.  The jurisdiction assumed by a court, so far as it depends on the place of residence of the decedent, or of the location of his estate, shall not be contested in a suit or proceeding, except in an appeal from that court, in the original case, or when the want of jurisdiction appears on the record.

8 Penned by Judge Bonifacio Sanz Maceda.  CA rollo, pp. 33-38.nadcralawlibrary

9 Id. at 38.redcralaw

10 Id. at 94-106.

11 Id. at 118-119.

12Rollo, pp. 32-33.

13 Garcia Fule v. Court of Appeals, G.R. Nos. L-40502 and L-42670, 29 November 1976, 74 SCRA 189, 199.

14 Id.

15 Id.

16 Id.

17 Id.

18Jao v. Court of Appeals, 432 Phil. 160, 170 (2002).

19 Id.

20Quiazon v. Garcia, Civil Case No. Q-43712.  Records, Vol. II, pp. 234-240.

21Golden (Iloilo) Delta Sales Corporation v. Pre-Stress International Corporation, G.R. No. 176768, 12 January 2009, 576 SCRA 23, 35; Seaoil Petroleum Corporation v. Autocorp Group, G.R. No. 164326, 17 October 2008, 569 SCRA 387, 394; Ejercito v. M.R. Vargas Construction, G.R. No. 172595, 10 April 2008, 551 SCRA 97, 106.

22Juliano-Llave v. Republic, G.R. No. 169766, 30 March 2011, 646 SCRA 637, 656-657 citing Niñal v. Bayadog, 384 Phil. 661, 673 (2000).

23 Id.

24 Id. at 673.red cralawlibrary

25 Id.

26  New Civil Code. Art. 961. In default of the testamentary heirs, the law vests the inheritance, in accordance with the rules hereinafter set forth, in the legitimate and illegitimate relatives of the deceased, in the surviving spouse, and in the State.

New Civil Code. Art. 988. In the absence of legitimate descendants or ascendants, the illegitimate children shall succeed to the entire estate of the deceased.

27 Old Civil Code. Art. 83. Any marriage subsequently contracted by any person during the lifetime of the first spouse of such person with any person other than such first spouse shall be illegal and void from its performance, unless:cralawlibrary

(1) The first marriage was annulled or dissolved; or

(2) The first spouse had been absent for seven consecutive years at the time of the second marriage without the spouse present having news of the absentee being alive, or if the absentee, though he has been absent for less than seven years, is generally considered as dead and believed to be so by the spouse present at the time of contracting such subsequent marriage, or if the absentee is presumed dead according to Articles 390 and 391. The marriage so contracted shall be valid in any of the three cases until declared null and void by a competent court.

28Solinap v. Locsin, Jr., 423 Phil. 192, 199 (2001).

29 New Civil Code. Art. 961. In default of the testamentary heirs, the law vests the inheritance, in accordance with the rules hereinafter set forth, in the legitimate and illegitimate relatives of the deceased, in the surviving spouse, and in the State.

New Civil Code. Art. 988. In the absence of legitimate descendants or ascendants, the illegitimate children shall succeed to the entire estate of the deceased.

G.R. No. 204029, June 04, 2014

AVELINA ABARIENTOS REBUSQUILLO [SUBSTITUTED BY HER HEIRS, EXCEPT

EMELINDA R. GUALVEZ] AND SALVADOR A. OROSCO, Petitioners, 

v. 

SPS. DOMINGO AND EMELINDA REBUSQUILLO GUALVEZ, Respondent.

Case Doctrine/s:

Section 1, Rule 74 of the Rules of Court :

Section 1. Extrajudicial settlement by agreement between heirs.––x x x If there is

only one heir, he may adjudicate to himself the entire estate by means of an affidavit

filed in the office of the register of deeds. x x x

Facts:

On October 26, 2004, petitioners Avelina Abarientos Rebusquillo (Avelina) and Salvador

Orosco (Salvador) filed a Complaint for annulment and revocation of an Affidavit of Self-

Adjudication dated December 4, 2001 and a Deed of Absolute Sale dated February 6, 2002

before the court a quo. In it, petitioners alleged that Avelina was one of the children of Eulalio

Abarientos (Eulalio) and Victoria Villareal (Victoria). Eulalio died intestate on July 3, 1964,

survived by his wife Victoria, six legitimate children, and one illegitimate child, namely: (1)

Avelina Abarientos-Rebusquillo, petitioner in this case;  (2) Fortunata Abarientos-Orosco, the

mother of petitioner Salvador; (3) Rosalino Abarientos; (4) Juan Abarientos; (5) Feliciano

Abarientos; (6) Abraham Abarientos; and (7) Carlos Abarientos. His wife Victoria eventually

died intestate on June 30, 1983.On his death, Eulalio left behind an untitled parcel of land in

Legazpi City consisting of two thousand eight hundred sixty-nine (2,869) square meters, more or

less, which was covered by Tax Declaration ARP No. (TD) 0141.In 2001, Avelina was

supposedly made to sign two (2) documents by her daughter Emelinda Rebusquillo-Gualvez

(Emelinda) and her son-in-law Domingo Gualvez (Domingo), respondents in this case, on the

pretext that the documents were needed to facilitate the titling of the lot. It was only in 2003, so

petitioners claim that Avelina realized that what she signed was an Affidavit of Self-

Adjudication and a Deed of Absolute Sale in favor of respondents.

As confirmed by the RTC in its Decision, respondents have stipulated and have thereby admitted

in court that they knew for a fact that petitioner Avelina was not the sole heir of Eulalio and that

petitioner Salvador was one of the other living heirs with rights over the subject land.

Issue:

WHETHER THE AFFIDAVIT OF SELF-ADJUDICATION OF THE ESTATE OF THE

DECEASED IS PROPER.

Ruling:

The Court declared that the Affidavit of Self-Adjudication of Estate of the Deceased is not

proper. In light of the admission of respondents spouses Gualvez, it is with more reason that a

resort to special proceeding will be but an unnecessary superfluity. Accordingly, the court a

quo had properly rendered judgment on the validity of the Affidavit of Self-Adjudication

executed by Avelina. As pointed out by the trial court, an Affidavit of Self-Adjudication is only

proper when the affiant is the sole heir of the decedent. The second sentence of Section 1, Rule

74 of the Rules of Court is patently clear that self-adjudication is only warranted when there is

only one heir:

Section 1. Extrajudicial settlement by agreement between heirs.––x x x If there is only one

heir, he may adjudicate to himself the entire estate by means of an affidavit filed in the

office of the register of deeds. x x x (emphasis supplied)

As admitted by respondents, Avelina was not the sole heir of Eulalio. In fact, as admitted by

respondents, petitioner Salvador is one of the co-heirs by right of representation of his mother.

Without a doubt, Avelina had perjured herself when she declared in the affidavit that she is “the

only daughter and sole heir of spouses EULALIO ABARIENTOS AND VICTORIA

VILLAREAL.” The falsity of this claim renders her act of adjudicating to herself the inheritance

left by her father invalid. The RTC did not, therefore, err in granting Avelina’s prayer to declare

the affidavit null and void and so correct the wrong she has committed.

In like manner, the Deed of Absolute Sale executed by Avelina in favor of respondents was

correctly nullified and voided by the RTC Avelina was not in the right position to sell and

transfer the absolute ownership of the subject property to respondents. As she was not the sole

heir of Eulalio and her Affidavit of Self-Adjudication is void, the subject property is still subject

to partition. Avelina, in fine, did not have the absolute ownership of the subject property but only

an aliquot portion. What she could have transferred to respondents was only the ownership of

such aliquot portion. It is apparent from the admissions of respondents and the records of this

case that Avelina had no intention to transfer the ownership, of whatever extent, over the

property to respondents. Hence, the Deed of Absolute Sale is nothing more than a simulated

contract.

CASE FULL TEXT:

G.R. No. 204029, June 04, 2014

AVELINA ABARIENTOS REBUSQUILLO [SUBSTITUTED BY HER HEIRS, EXCEPT EMELINDA R. GUALVEZ] AND SALVADOR A. OROSCO, Petitioners, v. SPS. DOMINGO AND EMELINDA REBUSQUILLO GUALVEZ, Respondent.

D E C I S I O N

Before Us is a Petition for Review on Certiorari under Rule 45 assailing the Decision1 and Resolution2dated March 30, 2012 and September 25, 2012, respectively, of the Court of Appeals (CA) in CA-G.R. CV No. 93035, which reversed and set aside the Decision dated January 20, 2009 of the Regional Trial Court (RTC), Branch 4 in Legazpi City, in Civil Case No. 10407.

The antecedent facts may be summarized as follows:chanroblesvirtuallawlibrary

On October 26, 2004, petitioners Avelina Abarientos Rebusquillo (Avelina) and Salvador Orosco (Salvador) filed a Complaint for annulment and revocation of an Affidavit of Self-Adjudication dated December 4, 2001 and a Deed of Absolute Sale dated February 6, 2002 before the court a quo. In it, petitioners alleged that Avelina was one of the children of Eulalio Abarientos (Eulalio) and Victoria Villareal (Victoria). Eulalio died intestate on July 3, 1964, survived by his wife Victoria, six legitimate children,and one illegitimate child, namely: (1) Avelina Abarientos-Rebusquillo, petitioner in this case;  (2) Fortunata Abarientos-Orosco, the mother of petitioner Salvador; (3) Rosalino Abarientos; (4) Juan Abarientos; (5) Feliciano Abarientos; (6) Abraham Abarientos; and (7) Carlos Abarientos. His wife Victoria eventually died intestate on June 30, 1983.

On his death, Eulalio left behind an untitled parcel of land in Legazpi City consisting of two

thousand eight hundred sixty-nine (2,869) square meters, more or less, which was covered by Tax Declaration ARP No. (TD) 0141.

In 2001, Avelina was supposedly made to sign two (2) documents by her daughter Emelinda Rebusquillo-Gualvez (Emelinda) and her son-in-law Domingo Gualvez (Domingo), respondents in this case, on the pretext that the documents were needed to facilitate the titling of the lot. It was only in 2003, so petitioners claim, that Avelina realized that what she signed was an Affidavit of Self-Adjudication and a Deed of Absolute Sale in favor of respondents.

As respondents purportedly ignored her when she tried to talk to them, Avelina sought the intervention of the RTC to declare null and void the two (2) documents in order to reinstate TD 0141 and so correct the injustice done to the other heirs of Eulalio.

In their answer, respondents admitted that the execution of the Affidavit of Self-Adjudication and the Deed of Sale was intended to facilitate the titling of the subject property. Paragraph 9 of their Answer reads:chanroblesvirtuallawlibrary

Sometime in the year 2001, [petitioner] Avelina together with the other heirs of Eulalio Abarientos brought out the idea to [respondent] Emelinda Rebusquillo-Gualvez to have the property described in paragraph 8 of the complaint registered under the Torrens System of Registration. To facilitate the titling of the property, so that the same could be attractive to prospective buyers, it was agreed that the property’s tax declaration could be transferred to [respondents] Spouses [Emelinda] R. Gualvez and Domingo Gualvez who will spend all the cost of titling subject to reimbursement by all other heirs in case the property is sold; That it was agreed that all the heirs will be given their corresponding shares on the property; That pursuant to said purpose Avelina Abarientos-Rebusquillo with the knowledge and consent of the other heirs signed and executed an Affidavit of Self-Adjudication and a Deed of Absolute Sale in favor of [respondents] Gualvez. In fact, [petitioner] Avelina Rebusquillo was given an advance sum of FIFTY THOUSAND PESOS (P50,000.00) by [respondent] spouses and all the delinquent taxes paid by [respondents].3cralawlawlibrary

After trial, the RTC rendered its Decision dated January 20, 2009 annulling the Affidavit of Self-Adjudication and the Deed of Absolute Sale executed by Avelina on the grounds that (1) with regard to the Affidavit of Self-Adjudication, she was not the sole heir of her parents and was not therefore solely entitled to their estate; and (2) in the case of the Deed of Absolute Sale, Avelina did not really intend to sell her share in the property as it was only executed to facilitate the titling of such property. The dispositive portion of the RTC Decision reads:chanroblesvirtuallawlibrary

WHEREFORE, premises considered, judgment is hereby rendered, as follows:chanRoblesvirtualLawlibrary

1. The subject Affidavit of Self-Adjudication of the Estate of the Deceased Spouses Eulalio Abarientos and Victoria Villareal, dated December 4, 2001 as well as the subject Deed of Absolute Sale, notarized on February 6, 2002, covering the property described in par. 8 of the Amended Complaint are hereby ordered ANNULLED;

2. That defendant City Assessor’s Officer of Legazpi City is hereby ordered to CANCEL the Tax Declaration in the name of private [respondents] spouses Gualvez under ARP No. 4143 and to REINSTATE the Tax Declaration under ARP No. 0141 in the name of Eulalio Abarientos;

3. By way of restitution, [petitioner] Avelina Abarientos Rebusquillo is hereby ordered to return or refund to [respondents] spouses Domingo Gualvez and Emelinda Gualvez, the P50,000.00 given by the latter spouses to the former.4

chanrobleslaw

Assailing the trial court’s decision, respondents interposed an appeal with the CA arguing that the Deed of Sale cannot be annulled being a public document that has for its object the creation and transmission of real rights over the immovable subject property. The fact that Avelina’s testimony was not offered in evidence, so respondents argued, the signature on the adverted deed remains as concrete proof of her agreement to its terms. Lastly, respondents contended that the Complaint filed by petitioners Avelina and Salvador before the RTC is not the proper remedy provided by law for those compulsory heirs unlawfully deprived of their inheritance.

Pending the resolution of respondents’ appeal, Avelina died intestate on September 1, 2009 leaving behind several living heirs5 including respondent Emelinda.

In its Decision dated March 30, 2012, the appellate court granted the appeal and reversed and set aside the Decision of the RTC. The CA held that the RTC erred in annulling the Affidavit of Self-Adjudication simply on petitioners’ allegation of the existence of the heirs of Eulalio, considering that issues on heirship must be made in administration or intestate proceedings, not in an ordinary civil action. Further, the appellate court observed that the Deed of Absolute Sale cannot be nullified as it is a notarized document that has in its favor the presumption of regularity and is entitled to full faith and credit upon its face.

Aggrieved by the CA’s Decision, petitioner Avelina, as substituted by her heirs except respondent Emelinda, and petitioner Salvador are now before this Court ascribing reversible error on the part of the appellate court.

We find merit in the instant petition.

It has indeed been ruled that the declaration of heirship must be made in a special proceeding, not in an independent civil action. However, this Court had likewise held that recourse to administration proceedings to determine who heirs are is sanctioned only if there is a good and compelling reason for such recourse.6Hence, the Court had allowed exceptions to the rule requiring administration proceedings as when the parties in the civil case already presented their evidence regarding the issue of heirship, and the RTC had consequently rendered judgment upon the issues it defined during the pre-trial.7In Portugal v. Portugal-Beltran,8 this Court held:chanroblesvirtuallawlibrary

In the case at bar, respondent, believing rightly or wrongly that she was the sole heir to Portugal’s estate, executed on February 15, 1988 the questioned Affidavit of Adjudication under

the second sentence of Rule 74, Section 1 of the Revised Rules of Court. Said rule is an exception to the general rule that when a person dies leaving a property, it should be judicially administered and the competent court should appoint a qualified administrator, in the order established in Sec. 6, Rule 78 in case the deceased left no will, or in case he did, he failed to name an executor therein.

Petitioners claim, however, to be the exclusive heirs of Portugal. A probate or intestate court, no doubt, has jurisdiction to declare who are the heirs of a deceased.

It appearing, however, that in the present case the only property of the intestate estate of Portugal is the Caloocan parcel of land to still subject it, under the circumstances of the case, to a special proceeding which could be long, hence, not expeditious, just to establish the status of petitioners as heirs is not only impractical; it is burdensome to the estate with the costs and expenses of an administration proceeding. And it is superfluous in light of the fact that the parties to the civil case - subject of the present case, could and had already in fact presented evidence before the trial court which assumed jurisdiction over the case upon the issues it defined during pre-trial.

In fine, under the circumstances of the present case, there being no compelling reason to still subject Portugal’s estate to administration proceedings since a determination of petitioners’ status as heirs could be achieved in the civil case filed by petitioners, the trial court should proceed to evaluate the evidence presented by the parties during the trial and render a decision thereon upon the issues it defined during pre-trial x xx. (emphasis supplied)ChanRoblesVirtualawlibrary

Similar to Portugal, in the present case, there appears to be only one parcel of land being claimed by the contending parties as the inheritance from Eulalio. It would be more practical, as Portugalteaches, to dispense with a separate special proceeding for the determination of the status of petitioner Avelina as sole heir of Eulalio, especially in light of the fact that respondents spouses Gualvez admitted in court that they knew for a fact that petitioner Avelina was not the sole heir of Eulalio and that petitioner Salvador was one of the other living heirs with rights over the subject land. As confirmed by the RTC in its Decision,respondents have stipulated and have thereby admitted the veracity of the following facts during the pre-trial:chanroblesvirtuallawlibrary

IV – UNCONTROVERTED FACTS: (Based on the stipulation of facts in the Pre-Trial Order)

A. x x x

B. [Petitioners] and private [respondents] spouses Gualvez admitted the following facts:chanroblesvirtuallawlibrary

1. Identity of the parties;

2. Capacity of the [petitioners] and private [respondents] to sue and be sued;

3. [Petitioner] Avelina Abarientos-Rebusquilllo is not the only surviving heir of deceased spouses Eulalio and Victoria Abarientos;

4. Petitioner Salvador Orosco is a co-owner/possessor of a portion of the subject property;

5. Fortunata Abarientos-Orosco is the sister of Avelina Abarientos;

6. [Respondent] Emelinda Rebusquillo-Gualves is a daughter of [petitioner] Avelina A. Rebusquillo;

7. [Petitioner] Avelina Rebusquillo was born on Nov. 10, 1923;

8. The existence of Affidavit of Self-Adjudication of Estate of the Deceased and Deed of Absolute Sale executed by [petitioner] Avelina A. Rebusquillo on the subject property.9(emphasis supplied)

In light of the admission of respondents spouses Gualvez, it is with more reason that a resort to special proceeding will be but an unnecessary superfluity. Accordingly, the court a quo had properly rendered judgment on the validity of the Affidavit of Self-Adjudication executed by Avelina. As pointed out by the trial court, an Affidavit of Self-Adjudication is only proper when the affiant is the sole heir of the decedent. The second sentence of Section 1, Rule 74 of the Rules of Court is patently clear that self-adjudication is only warranted when there is only one heir:chanroblesvirtuallawlibrary

Section 1. Extrajudicial settlement by agreement between heirs.––x x x If there is only one heir, he may adjudicate to himself the entire estate by means of an affidavit filed in the office of the register of deeds. x x x (emphasis supplied)ChanRoblesVirtualawlibrary

As admitted by respondents, Avelina was not the sole heir of Eulalio. In fact, as admitted by respondents, petitioner Salvador is one of the co-heirs by right of representation of his mother. Without a doubt, Avelina had perjured herself when she declared in the affidavit that she is “the only daughter and sole heir of spouses EULALIO ABARIENTOS AND VICTORIA VILLAREAL.”10 The falsity of this claim renders her act of adjudicating to herself the inheritance left by her father invalid. The RTC did not, therefore, err in granting Avelina’s prayer to declare the affidavit null and void and so correct the wrong she has committed.

In like manner, the Deed of Absolute Sale executed by Avelina in favor of respondents was correctly nullified and voided by the RTC Avelina was not in the right position to sell and transfer the absolute ownership of the subject property to respondents. As she was not the sole heir of Eulalio and her Affidavit of Self-Adjudication is void, the subject property is still subject to partition. Avelina, in fine, did not have the absolute ownership of the subject property but only an aliquot portion. What she could have transferred to respondents was only the ownership of such aliquot portion. It is apparent from the admissions of respondents and the records of this case that Avelina had no intention to transfer the ownership, of whatever extent, over the property to respondents. Hence, the Deed of Absolute Sale is nothing more than a simulated contract.

The Civil Code provides:chanroblesvirtuallawlibrary

Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true agreement. (emphasis supplied)

Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement.

In Heirs of Policronio Ureta Sr. v. Heirs of Liberato Ureta,11this Court explained the concept of the simulation of contracts:chanroblesvirtuallawlibrary

In absolute simulation, there is a colorable contract but it has no substance as the parties have no intention to be bound by it.  The main characteristic of an absolute simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of the parties. As a result, an absolutely simulated or fictitious contract is void, and the parties may recover from each other what they may have given under the contract. However, if the parties state a false cause in the contract to conceal their real agreement, the contract is relatively simulated and the parties are still bound by their real agreement. Hence, where the essential requisites of a contract are present and the simulation refers only to the content or terms of the contract, the agreement is absolutely binding and enforceable between the parties and their successors in interest. (emphasis supplied)ChanRoblesVirtualawlibrary

In the present case, the true intention of the parties in the execution of the Deed of Absolute Sale is immediately apparent from respondents’ very own Answer to petitioners’ Complaint. As respondents themselves acknowledge, the purpose of the Deed of Absolute Sale was simply to “facilitate the titling of the [subject] property,” not to transfer the ownership of the lot to them. Furthermore, respondents concede that petitioner Salvador remains in possession of the property and that there is no indication that respondents ever took possession of the subject property after its supposed purchase. Such failure to take exclusive possession of the subject property or, in the alternative, to collect rentals from its possessor, is contrary to the principle of ownership and is a clear badge of simulation that renders the whole transaction void.12

Contrary to the appellate court’s opinion, the fact that the questioned Deed of Absolute Sale was reduced to writing and notarized does not accord it the quality of incontrovertibility otherwise provided by the parole evidence rule. The form of a contract does not make an otherwise simulated and invalid act valid. The rule on parole evidence is not, as it were, ironclad. Sec. 9, Rule 130 of the Rules of Court provides the exceptions:chanroblesvirtuallawlibrary

Section 9. Evidence of written agreements.– x x x

However, a party may present evidence to modify, explain or add to the terms of written agreement if he puts in issue in his pleading:chanroblesvirtuallawlibrary

(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;

(b) The failure of the written agreement to express the true intent and agreement of the

parties thereto;

(c) The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement.

The term “agreement” includes wills.(emphasis supplied)ChanRoblesVirtualawlibrary

The failure of the Deed of Absolute Sale to express the true intent and agreement of the contracting parties was clearly put in issue in the present case. Again, respondents themselves admit in their Answer that the Affidavit of Self-Adjudication and the Deed of Absolute Sale were only executed to facilitate the titling of the property. The RTC is, therefore, justified to apply the exceptions provided in the second paragraph of Sec. 9, Rule 130 to ascertain the true intent of the parties, which shall prevail over the letter of the document. That said, considering that the Deed of Absolute Sale has been shown to be void for being absolutely simulated, petitioners are not precluded from presenting evidence to modify, explain or add to the terms of the written agreement.13

WHEREFORE, the instant petition is GRANTED.  The Decision dated March 30, 2012 and the Resolution dated September 25, 2012 of the Court of Appeals in CA-G.R. CV No. 93035 are herebyREVERSED and SET ASIDE. The Decision dated January 20, 2009 in Civil Case No. 10407 of the Regional Trial Court (RTC), Branch 4 in Legazpi City is REINSTATED.

SO ORDERED.

Peralta, Villarama, Jr.,* Mendoza, and Leonen, JJ., concur.cralawred

Endnotes:

* Acting member per Special Order No. 1691 dated May 22, 2014.

1Rollo, pp. 24-39.Penned by Associate Justice Franchito N. Diamante and concurred in by Associate Justices Mariflor P. Punzalan Castillo and Myra V. Garcia-Fernandez.

2 Id. at 67-68.

3 Records, Folder 1, pp. 24-25.

4 CA rollo, pp. 77-78.

5Rollo, pp. 65-66. The following, including herein respondent Emelinda Rebusquillo Gualvez, are the only living heirs of petitioner Avelina Abarientos Gualvez Rebusquillo:chanroblesvirtuallawlibrary

Children:chanRoblesvirtualLawlibrary1. Consuelo R. Espedido – Tagdon, Barcelona, Sorsogon;2. Teresita A. Rebusquillo – Oas, Albay;

3. Shirley R. Reduta – Salitran 3, Blk 23, Cardinal Village, Dasmariñas, Cavite;

4. Susan A. Rebusquillo, Oas, Albay;

5. Alicia A. Rebusquillo, 350 Dr. Fernandez St., Mauway, Mandalauyong City;

6. Josefina R. Raro who died intestate on July 24, 2005, is represented by: Maria Joyce R. Birrey, Romero Raro, Jr., Johncarlo R. Raro, Celso R. Raro III, Jayrome R. Raro;

7. Abdon A. Rebusquillo, who died intestate on May 30, 2004, is represented by Shiela R. Rebancos, Ryan B. Rebusquillo, Arjay B. Rebusquillo, Cyrene B. Rebusquillo, Donna B. Rebusquillo, and Cyril B. Rebusquillo.

6Pereira v. Court of Appeals, G.R. No. 81147, June 20, 1989, 174 SCRA 154; Intestate Estate of Mercado v. Magtibay, 96 Phil. 383 (1953).

7Heirs of MagdalenoYpon v. Gaudioso Ponteras Ricaforte, G.R. No. 198680, July 8, 2013, 700 SCRA 778; Republic v. Mangotara, G. R. No. 170375, July 7, 2010, 624 SCRA 360; Heirs of Teofilo Gabatan v. Court of Appeals, G.R. No. 150206, March 13, 2009, 581 SCRA 70, 80-81; Fidel v. Court of Appeals, G.R. No. 168263, July 21, 2008, 559 SCRA 186, 194.

8 G.R. No. 155555, August 16, 2005, 467 SCRA 184, 199.

9 CA rollo, pp. 71-72.

10 Paragraph 1, Affidavit of Self-Adjudication, Annex “3” of the Complaint, records, p. 17.

11 G.R. Nos. 165748&165930, September 14, 2011, 657 SCRA 555, 575; citing Valerio v. Refresca, G.R. No. 163687, March 28, 2006, 485 SCRA 494, 500-501.

12 Id.

13 See Heirs of Policronio Ureta Sr. v. Heirs of Liberato Ureta, id.

G.R. No. 173548, October 15, 2014

ONOFRE ANDRES, SUBSTITUTED BY HIS HEIRS, NAMELY: FERDINAND, ROSALINA, ERIBERTO, FROILAN, MA. CLEOFE, NELSON, GERMAN, GLORIA, ALEXANDER, MAY, ABRAHAM, AND AFRICA, ALL SURNAMED ANDRES, Petitioners,

 v. 

PHILIPPINE NATIONAL BANK, Respondents.

LEONEN, J.:

Case Doctrine/s:

Rule 74, Section 4 of the Rules of Court provides:

SEC 4. Liability of distributees and estate. – If it shall appear at any time within two (2)

years after the settlement and distribution of an estate in accordance with the provisions

of either of the first two sections of this rule, that an heir or other person has been unduly

deprived of his lawful participation in the estate, such heir or such other person may

compel the settlement of the estate in the courts in the manner hereinafter provided for

the purpose of satisfying such lawful participation.  And if within the same time of two

(2) years, it shall appear that there are debts outstanding against the estate which have not

been paid, or that an heir or other person has been unduly deprived of his lawful

participation payable in money, the court having jurisdiction of the estate may, by order

for that purpose, after hearing, settle the amount of such debts or lawful participation and

order how much and in what manner each distributee shall contribute in the payment

thereof, and may issue execution, if circumstances require, against the bond provided in

the preceding section or against the real estate belonging to the deceased, or both. Such

bond and such real estate shall remain charged with a liability to creditors, heirs, or other

persons for the full period of two (2) years after such distribution, notwithstanding any

transfers of real estate that may have been made. (Emphasis supplied)

In any event, Rule 74, Section 4 does not apply to Onofre Andres who never alleged

being an excluded heir or unpaid creditor of his brother Roman Andres and Roman’s

wife.

Facts:

A 4,634-square-meter parcel of land in Nueva Ecija mortgaged to respondent Philippine National

Bank (PNB) was later foreclosed the property and consolidated title in its name.  Petitioner

Onofre Andres, the uncle of mortgagors Reynaldo Andres and his wife, Janette de Leon, filed a

complaint for cancellation of title and reconveyance of the property alleging that title in

mortgagor's name was based on a falsified document denominated as “Self-Adjudication of Sole

Heir.” The Spouses Victor and Filomena Andres acquired during their marriage a 4,634-square-

meter parcel of land in Sto. Domingo, Nueva Ecija, covered by TCT No. NT-7267.They had nine

children and mong them were Onofre Andres and Roman Andres who is the father of Reynaldo

Andres.  After Victor’s death, or on July 1, 1965, his widow, Filomena, and six of their children

— Onofre, Roman, Juana, Guillermo, Felisa, and Maxima — agreed in an extrajudicial partition

with sale to adjudicate one half of the land covered by TCT No. NT-7267 to each of them pro

indiviso. This document also provides that for P1,000.00, they all sold, transferred, and conveyed

to Roman Andres their respective rights and participation to the one-half portion of the property.

A new title was issued on August 20, 1965 in the name of Roman Andres and his wife, Lydia

Echaus-Andres, under TCT No. NT-57731. Upon the death Spouses Roman and Lydia Andres,

ownership was transferred to their only living heir, Reynaldo Andres.

On September 4, 1995, the Spouses Reynaldo Andres and Janette de Leon used this title and

mortgaged the property to PNB for a P1.2 million loan.  This was without the consent of Onofre

Andres.

Onofre Andres, claiming ownership over the property, filed on November 13, 1996 a complaint

for cancellation of title, reconveyance of property and damages, with prayer for the issuance of a

preliminary injunction against his nephew Reynaldo Andres and Reynaldo’s wife, Janette de

Leon, PNB, Lydia Echaus-Andres, and the Register of Deeds of Nueva Ecija.

The complaint alleged that on November 8, 1994, Onofre Andres’ nephew Reynaldo Andres was

in collusion with his mother, Lydia Echaus-Andres, in executing a falsified document

denominated as “Self-Adjudication of Sole Heir.”  This stated that Reynaldo Andres was the sole

heir of his father, Roman Andres, who died on October 12, 1968, and his mother who died on

December 15, 1969.However, his mother was then still alive and his father, Roman Andres, died

only on May 29, 1990.

For their part, the Spouses Reynaldo Andres and Janette de Leon claimed that from the time title

was issued in the name of Reynaldo Andres’ parents, until title transferred to them on December

27, 1994, his father, Roman Andres, had exercised acts of ownership over the property until they

succeeded in its possession.  Onofre Andres’ possession was merely “tolerated [because] of their

close relationship.”  The Spouses Reynaldo Andres and Janette de Leon also raised prescription

and estoppel.

Issue:

WHETHER OR NOT ONOFRE ANDRES HAS A VALID CLAIM UNDER RULE 74,

SECTION 4 OF THE RULES OF COURT.

Ruling:

The two-year period under Rule 74, Section 4 of the Rules of Court had lapsed and petitioner

heirs did not allege if any heir or creditor of Roman Andres and his wife had invoked their right

under this provision. Rule 74, Section 4 of the Rules of Court provides:

SEC 4. Liability of distributees and estate. – If it shall appear at any time within two (2)

years after the settlement and distribution of an estate in accordance with the provisions of

either of the first two sections of this rule, that an heir or other person has been unduly

deprived of his lawful participation in the estate, such heir or such other person may

compel the settlement of the estate in the courts in the manner hereinafter provided for the

purpose of satisfying such lawful participation.  And if within the same time of two (2)

years, it shall appear that there are debts outstanding against the estate which have not

been paid, or that an heir or other person has been unduly deprived of his lawful

participation payable in money, the court having jurisdiction of the estate may, by order

for that purpose, after hearing, settle the amount of such debts or lawful participation and

order how much and in what manner each distributee shall contribute in the payment

thereof, and may issue execution, if circumstances require, against the bond provided in the

preceding section or against the real estate belonging to the deceased, or both. Such bond

and such real estate shall remain charged with a liability to creditors, heirs, or other

persons for the full period of two (2) years after such distribution, notwithstanding any

transfers of real estate that may have been made. (Emphasis supplied)

In any event, Rule 74, Section 4 does not apply to Onofre Andres who never alleged being an

excluded heir or unpaid creditor of his brother Roman Andres and Roman’s wife.

CASE FULL TEXT:

G.R. No. 173548, October 15, 2014

ONOFRE ANDRES, SUBSTITUTED BY HIS HEIRS, NAMELY: FERDINAND, ROSALINA, ERIBERTO, FROILAN, MA. CLEOFE, NELSON, GERMAN, GLORIA, ALEXANDER, MAY, ABRAHAM, AND AFRICA, ALL SURNAMED ANDRES, Petitioners, v. PHILIPPINE NATIONAL BANK,Respondents.

D E C I S I O N

LEONEN, J.:

A bank that accepts a mortgage based upon a title which appears valid on its face and after exercising the requisite care, prudence, and diligence appropriate to the public interest character of its business can be deemed a mortgagee in good faith.  The subsequent consolidation of title in its name after a valid foreclosure shall be respected notwithstanding later proof showing that the title was based upon a void transaction.

This case involves a 4,634-square-meter parcel of land in Nueva Ecija mortgaged to respondent Philippine National Bank (PNB).  PNB later foreclosed the property and consolidated title in its name.1  Petitioner Onofre Andres, the uncle of mortgagors Reynaldo Andres and his wife, Janette de Leon, filed a complaint for cancellation of title and reconveyance of the property alleging that title in mortgagor's name was based on a falsified document denominated as “Self-Adjudication

of Sole Heir.”

The trial court ruled in favor of Onofre Andres by voiding all derivative titles from TCT No. NT-7267.  The Court of Appeals modified this decision by declaring as valid and existing TCT No. N-24660 in PNB’s name.  Onofre Andres filed the instant petition2 assailing the Court of Appeals’ decision and resolution.

The Spouses Victor and Filomena Andres acquired during their marriage a 4,634-square-meter parcel of land in Sto. Domingo, Nueva Ecija, covered by TCT No. NT-7267.3chanRoblesvirtualLawlibrary

They had nine children.4  Among them were Onofre Andres and Roman Andres who is the father of Reynaldo Andres.5  Victor passed away on June 15, 1955, while his wife, Filomena, died on April 23, 1973.6chanRoblesvirtualLawlibrary

After Victor’s death, or on July 1, 1965,7 his widow, Filomena, and six of their children — Onofre, Roman, Juana, Guillermo, Felisa,8 and Maxima — agreed in an extrajudicial partition with sale to adjudicate one half of the land covered by TCT No. NT-7267 to each of them pro indiviso.9  This document also provides that for P1,000.00, they all sold, transferred, and conveyed to Roman Andres their respective rights and participation to the one-half portion of the property.10  This was annotated on the title.11chanRoblesvirtualLawlibrary

Consequently, TCT No. NT-7267 was cancelled, and a new title was issued on August 20, 1965 in the name of Roman Andres and his wife, Lydia Echaus-Andres, under TCT No. NT-57731.12chanRoblesvirtualLawlibrary

PNB alleged that on October 22, 1968, the Spouses Roman and Lydia Andres mortgaged the property to PNB for P3,000.00.13  According to PNB, no objection was made, even after the mortgage had been cancelled on July 20, 1972.14chanRoblesvirtualLawlibrary

PNB also alleged that on October 14, 1992, the Nueva Ecija Regional Trial Court15 cancelled the guardianship issued in favor of the Security Bank and Trust Company and transferred ownership of the properties of the deceased, Spouses Roman and Lydia Andres, to their only living heir, Reynaldo Andres.16chanRoblesvirtualLawlibrary

TCT No. NT-57731 was consequently cancelled, and title was transferred to the Spouses Reynaldo Andres and Janette de Leon, under TCT No. (NT-239548) NT-7725 on December 27, 1994.17chanRoblesvirtualLawlibrary

On September 4, 1995, the Spouses Reynaldo Andres and Janette de Leon used this title and mortgaged the property to PNB for a P1.2 million loan.18  This was without the consent of Onofre Andres.19chanRoblesvirtualLawlibrary

Onofre Andres, claiming ownership over the property, filed on November 13, 1996 a complaint for cancellation of title, reconveyance of property and damages, with prayer for the issuance of a preliminary injunction against his nephew Reynaldo Andres and Reynaldo’s wife, Janette de

Leon, PNB, Lydia Echaus-Andres, and the Register of Deeds of Nueva Ecija.20chanRoblesvirtualLawlibrary

The complaint alleged that on November 8, 1994, Onofre Andres’ nephew Reynaldo Andres was in collusion with his mother, Lydia Echaus-Andres, in executing a falsified document denominated as “Self-Adjudication of Sole Heir.”  This stated that Reynaldo Andres was the sole heir of his father, Roman Andres, who died on October 12, 1968, and his mother who died on December 15, 1969.21  However, his mother was then still alive and his father, Roman Andres, died only on May 29, 1990.22chanRoblesvirtualLawlibrary

PNB denied the material allegations in the complaint.  It argued that it conducted an investigation on the property.23  The title presented to PNB by Reynaldo Andres and his wife was clear and free from adverse claims.24chanRoblesvirtualLawlibrary

For their part, the Spouses Reynaldo Andres and Janette de Leon claimed that from the time title was issued in the name of Reynaldo Andres’ parents, until title transferred to them on December 27, 1994, his father, Roman Andres, had exercised acts of ownership over the property until they succeeded in its possession.25  Onofre Andres’ possession was merely “tolerated [because] of their close relationship.”26  The Spouses Reynaldo Andres and Janette de Leon also raised prescription and estoppel.27chanRoblesvirtualLawlibrary

In his reply, Onofre Andres countered that the extrajudicial partition with sale executed on July 1, 1965 was fictitious, thus, void.28chanRoblesvirtualLawlibrary

Onofre Andres argued that (1) this was not published in a newspaper of general circulation; (2) it was executed only to accommodate the request of Roman Andres and his wife who wanted to mortgage the property; (3) three of the legitimate heirs of the late Victor and Filomena Andres, who were then still living, namely, Sixto, Ofelia, and Araceli, did not participate in its execution; and (4) there was no consideration for the alleged sale.29chanRoblesvirtualLawlibrary

Even assuming that the document was valid, only a one-half undivided portion of the land was sold since the other half was the conjugal share of Filomena Andres who was then still living.30  The residential building did not exist yet at the time of the questioned partition so this could not have been sold to Roman Andres.31chanRoblesvirtualLawlibrary

Onofre Andres also denied that his continuous possession of the property was by mere tolerance.32chanRoblesvirtualLawlibrary

This case was filed as early as November 13, 1996, but the entire Nueva Ecija Regional Trial Court was razed by fire.33  The records of this case were among those destroyed that needed reconstitution. 34chanRoblesvirtualLawlibrary

The parties submitted documents and pleadings forming part of the reconstituted records, and the case was set for the retaking of testimonies and presentation of evidence.35  Unfortunately, Onofre Andres’ testimony could not be retaken since he was already bedridden at that time.36chanRoblesvirtualLawlibrary

It appears that PNB was considered to have waived further presentation of evidence when its counsel failed to appear at the hearing despite notice.37  The trial court denied PNB’s motion for reconsideration to be allowed to present evidence.38chanRoblesvirtualLawlibrary

Onofre Andres died on March 20, 2001 when the case was in the presentation of evidence stage.  He was substituted by his surviving heirs.39chanRoblesvirtualLawlibrary

The Regional Trial Court40 rendered its decision41 on November 7, 2003 in favor of Onofre Andres:chanroblesvirtuallawlibrary

WHEREFORE, premises considered, judgment is hereby rendered as follows:ChanRoblesVirtualawlibrary

1. Declaring null and void all derivative titles from TCT No. NT-7267 specifically TCT No. NT-57731, TCT No. NT-239548 and TCT No. NT-24660, and ordering the concerned Register of Deeds to reinstate said TCT NT-7267 in the names of its original owners, Victor Andres and Filomena Ramos.

2. Ordering defendant spouses Reynaldo Andres and Janette de Leon, jointly and severally, to pay plaintiff or his substitutes the sum of P100,000.00 by way of moral damages.

3. Ordering defendant spouses Reynaldo Andres and Janette de Leon, jointly and severally, to pay plaintiff or his substitutes the sum of P50,000.00 by way of exemplary damages;

4. Ordering defendant spouses Reynaldo Andres and Janette de Leon, jointly and severally, to pay plaintiff or his substitutes attorney's fees in the sum of P30,000.00, and to pay the costs of suit.

SO ORDERED.42

The Court of Appeals43 rendered its decision44 on December 13, 2005, modifying the trial court’s decision in that TCT No. N-24660 in the name of PNB was declared valid and existing.  The rest of the decision stands.45  It also denied reconsideration46 on July 5, 2006, prompting Onofre Andres to file the instant petition.47chanRoblesvirtualLawlibrary

Petitioner heirs of Onofre Andres argue that (1) there is no legal basis to uphold the validity of PNB's title as it was derived from a void title;48 (2) Cabuhat v. Court of Appeals49 on innocent mortgagees for value is not applicable;50 (3) PNB is “not a mortgagee in good faith”;51 (4) there was no valid mortgage, thus, no valid foreclosure and auction sale;52 and (5) “trial courts are in [a] better position to determine questions involving [the] credibility of witnesses.”53chanRoblesvirtualLawlibrary

Petitioner heirs pray that the assailed Court of Appeals’ decision and resolution be set aside, and the trial court’s November 7, 2003 decision be reinstated.54chanRoblesvirtualLawlibrary

In its comment, PNB countered that “a defective title may be a source of a completely legal and

valid title in the hands of an innocent purchaser for value.”55  Cruz v. Bancom Finance Corporation56 cited by petitioner heirs is off-tangent and inapplicable.57  On the other hand, Cabuhat v. Court of Appealson innocent mortgagees in good faith involved similar facts and the same legal issue.58chanRoblesvirtualLawlibrary

PNB adds that the issue of whether it is a mortgagee in good faith involves a factual issue not within this court’s power of review.59  The issue on the validity of the foreclosure proceedings and sale was not raised in the complaint, thus, cannot be raised for the first time on appeal.60chanRoblesvirtualLawlibrary

Lastly, PNB contends that the factual findings of the Court of Appeals are deemed final and conclusive by this court.61chanRoblesvirtualLawlibrary

Petitioner heirs filed a reply reiterating their arguments and submitting certified true copies of the property’s tax declarations to support their contentions.62chanRoblesvirtualLawlibrary

Thus, the issues before this court for resolution are:chanroblesvirtuallawlibrary

I. Whether a valid title can be derived from a void title; and

II. Whether PNB is an innocent mortgagee for value and in good faith, thus, its right on the property is protected even if the mortgagor obtained title through fraud.

A petition for review on certiorari shall raise only questions of law.63  The core of the issues presented requires a determination of whether PNB was in good faith and exercised due diligence in accepting the property mortgaged by Spouses Reynaldo Andres and Janette de Leon.  These are questions of fact64 that fall outside the ambit of this court’s power of review.

This court is not a trier of facts that routinely re-examines evidence presented.  Factual findings by the Court of Appeals are, thus, generally considered binding and conclusive upon this court.65chanRoblesvirtualLawlibrary

The rule against entertaining factual questions admits of exceptions,66 but none are present in this case.  This court finds no reason to overturn the findings of the Court of Appeals.

Petitioner heirs submit that the trial court “did not rule categorically on the issue of good faith interposed by the respondent bank[; however], it ruled that since the mortgage was without object and cause, it was parenthetically void such that the defense of and protestation of good faith is thus rendered of no consequence.”67  In support of their contention that PNB’s title was derived from a void title, petitioner heirs cited at length the trial court decision:chanroblesvirtuallawlibrary

A close examination of the said deed of partition will show that not all the children of the spouses Victor Andres and Filomena Ramos were parties nor signatories thereto.  Specifically, only six of the nine children of said spouses executed the supposed extra-judicial partition which, in effect, preterited three others, namely: Sixto, Ofelia and Araceli.

The extra-judicial partition is thus vitiated by what appeared to have been a deliberate omission therein of the said three children.  The obvious explanation to that is what is claimed by the plaintiff: that the deed was simulated to afford financial accommodation to their brother Roman.

More significantly, the deed very clearly provided that only one half of the subject property was covered by partition since the other half was recognized as the conjugal share of Victor Andres’ spouses [sic], Filomena Ramos.

Even assuming the validity of the partition as executed, only one-half of the subject property should have been transferred, by virtue thereof, to Roman Andres.

Insofar, therefore, as the Extra-Judicial Partition with Sale was made the basis for the transfer of TCT No. NT-7267 to TCT No. NT-57731, the same may not be characterized other than as absolutely simulated or fictitious contract or document.  As such, the transfer effected through it was void ab initio and, in legal contemplation, never existed.

By the same token, any subsequent transfer from the void TCT No. NT-57731, could not have had any valid and binding effect so as to constitute the transferee thereof as the legal owner of the property embraced and described therein.

Interestingly, even the manner defendant Andres effected the transfer of TCT No. NT-57731 to himself was legally flawed.

To be sure, the issuance of TCT No. NT-239548 in the name of defendant Reynaldo Andres was by way of a document styled as Self Adjudication of Sole Heir (Exh. “D”) executed by defendant Reynaldo Andres himself.  In this document, he declared that Roman Andres died on October 12, 1968, and his mother died Lydia Echaus, on December 15, 1969; that they died with the subject property as their only property, that he is the only child and heir of the decedents and for that reason he declared the estate to be his inheritance and adjudicated the same unto himself extra-judicially pursuant to Section 1, Rule 74 of the Rules of Court.

It appears, however, that at the time the Self-Adjudication of Sole Heir was executed by defendant Reynaldo Andres, it is not true that his mother, Lydia Echaus, was already dead.  In fact, up to the present she [is] still alive.  Not only that, defendant Reynaldo Andres is not really the sole child of spouses Roman Andres and Lydia Echaus because they have other children, namely: Cynthia and Vienna who are both in the United States of America.68 (Emphasis supplied)

On the other hand, the Court of Appeals ascertained good faith on the part of PNB.

Preliminarily, the Court of Appeals mentioned that it is “in quandary as to whether or not the appellant PNB indeed was able to present evidence for and on its own behalf [but a] close scrutiny of the records of this case would disclose that Gerardo Pestaño was presented as a witness for the defendant-PNB and his testimony was adopted by the defendants-spouses.”69chanRoblesvirtualLawlibrary

It then found that PNB followed the standard practice of banks before approving a loan by sending representatives to inspect the property offered as collateral.70  PNB even investigated on “where and from whom the title . . . originated.”71chanRoblesvirtualLawlibrary

According to the Court of Appeals, evidence disclosed that Spouses Reynaldo Andres and Janette de Leon submitted TCT No. (NT-239548) N-7725 as proof of their ownership.  PNB’s property appraiser, Gerardo Pestaño, conducted an investigation and verified the status of the property with the Register of Deeds and Assessor's Office.72chanRoblesvirtualLawlibrary

On August 8, 1995, Gerardo Pestaño went to the property and personally met with the borrowers, Spouses Reynaldo Andres and Janette de Leon, who told him they were living in the property.  He appraised the residential building then being constructed.  Upon Gerardo Pestaño’s request, Reynaldo Andres submitted the property’s tax declaration.73chanRoblesvirtualLawlibrary

Gerardo Pestaño also went to the Municipal Trial Court to check on any pending cases, particularly on estafa, filed against Spouses Reynaldo Andres and Janette de Leon.  Upon verification from the Register of Deeds, he learned that all previous annotations on the titles have been cancelled.74chanRoblesvirtualLawlibrary

The Court of Appeals found that there was nothing on the face of the titles that would excite any suspicion of an irregular issuance.75  Reynaldo Andres’ parents had even previously mortgaged the property to a bank in 1965, and the property was accepted.76chanRoblesvirtualLawlibrary

We affirm the decision of the Court of Appeals.

The Court of Appeals quoted Cabuhat v. Court of Appeals in holding that “when a mortgagee relies upon what appears on the face of a Torrens title and loans money in all good faith on the basis of the title in the name of the mortgagor, only thereafter to learn that the latter’s title was defective, being thus an innocent mortgagee for value, his or her right or lien upon the land mortgaged must be respected and protected, even if the mortgagor obtained her title thereto through fraud.”77chanRoblesvirtualLawlibrary

Petitioner heirs argued the inapplicability of Cabuhat to the instant case.  They explained howCabuhat involved a private individual mortgagee while respondent was a universal bank.  They added that unlike in Cabuhat, good faith was not duly proven by PNB.78chanRoblesvirtualLawlibrary

Petitioner heirs then cited Cruz v. Bancom Finance Corporation for its holding that “[the bank] should not have simply relied on the face of the Certificate of Title to the property, as its ancillary function of investing funds required a greater degree of diligence. . . .”79chanRoblesvirtualLawlibrary

The Civil Code is clear that only the absolute owner of a property can mortgage such property.80  The law also provides that absolutely simulated or fictitious contracts are void and inexistent.81  Consequently, these fictitious contracts convey no rights.

The trial court has declared as void all titles that originated from the contracts it found to be void, such as the extrajudicial partition with sale in favor of Roman Andres, and the “Self-Adjudication of Sole Heir” in favor of Reynaldo Andres.  This was affirmed by the Court of Appeals.

The issue now is whether a valid title in favor of PNB can be derived from these void titles.

This court reiterated the good faith doctrine that applies to innocent mortgagees for value in the 2012 case of Philippine Banking Corporation v. Dy:82chanRoblesvirtualLawlibrary

While it is settled that a simulated deed of sale is null and void and therefore, does not convey any right that could ripen into a valid title, it has been equally ruled that, for reasons of public policy, the subsequent nullification of title to a property is not a ground to annul the contractual right which may have been derived by a purchaser, mortgagee or other transferee who acted in good faith.83 (Emphasis supplied, citations omitted)

The doctrine protecting mortgagees and innocent purchasers in good faith emanates from the social interest embedded in the legal concept granting indefeasibility of titles.  The burden of discovery of invalid transactions relating to the property covered by a title appearing regular on its face is shifted from the third party relying on the title to the co-owners or the predecessors of the title holder.  Between the third party and the co-owners, it will be the latter that will be more intimately knowledgeable about the status of the property and its history.  The costs of discovery of the basis of invalidity, thus, are better borne by them because it would naturally be lower.  A reverse presumption will only increase costs for the economy, delay transactions, and, thus, achieve a less optimal welfare level for the entire society.84chanRoblesvirtualLawlibrary

The general rule allows every person dealing with registered land to rely on the face of the title when determining its absolute owner.85  Thus, cases like Cabuhat have held that “a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor of the property given as security and in the absence of any sign that might arouse suspicion, has no obligation to undertake further investigation.”86  The protection of innocent mortgagees for value finds support in the Land Registration Act:chanroblesvirtuallawlibrary

Then in Penullar v. PNB, this Court resolved a similar issue ruling that Section 38 of the Land Registration Act places an innocent mortgagee for value under the mantle of protection accorded to innocent purchasers for value.

Furthermore, Section 39 of Act No. 496 provides that every person receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser (or mortgagee) of registered land who takes a certificate of title for value in good faith, shall hold the same free of all encumbrance except those noted on said certificate. . . 87 (Citations omitted)

Section 38 of Act No. 496 in what is now Section 32 of Presidential Decree No. 1529 reads:chanroblesvirtuallawlibrary

SEC. 32. Review of decree of registration; Innocent purchaser for value. — The decree of registration shall not be reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor by any proceeding in any court for reversing judgments, subject, however, to the right of any person, including the government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and review of the decree of registration not later than one year from and after the date of the entry of such decree of registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has acquired the land or an interest therein, whose rights may be prejudiced. Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value.

Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or any other persons responsible for the fraud.

However, the banking industry belongs to a different category than private individuals. Banks are considered businesses impressed with public interest, requiring “high standards of integrity and performance.”88  Consequently, banks must exercise greater care, prudence, and due diligence in their property dealings.  The standard operating practice for banks when acting on a loan application is “to conduct an ocular inspection of the property offered for mortgage and to verify the genuineness of the title to determine the real owner(s) thereof.”89chanRoblesvirtualLawlibrary

Unlike in Cruz v. Bancom Finance Corporation cited by petitioners,90 PNB complied with this standard operating practice.

The petition even attached certified true copies of the transcript of bank appraiser Gerardo Pestaño’s testimony, offered “to prove that defendant spouses Reynaldo and Jannette [sic] Andres mortgaged the property subject matter of the litigation covered by Transfer Certificate of Title No. NT-239548 to secure their loan to PNB approved in 1995 and at that time the defendant Andres [spouses] were the owner[s] of the mortgaged property; that there was no claim filed by the plaintiff Onofre Andres. . . .”91chanRoblesvirtualLawlibrary

Petitioner heirs disagree with the Court of Appeals’ findings of due diligence by PNB.  They submit that Gerardo Pestaño failed to conduct a thorough investigation; otherwise, he would have discovered that Reynaldo Andres did not own the residential building then being constructed on the property.92  Petitioner heirs add that the approval of a collateral in 1965 does not mean the same property is good collateral 30 years later.93  Lastly, PNB was negligent when it failed to take into account the two-year period under Rule 74, Section 4 of the Rules of Court.94chanRoblesvirtualLawlibrary

These arguments fail to convince.

First, it is undisputed that PNB sent its appraiser and credit investigator Gerardo Pestaño to conduct an ocular inspection of the property.95  He also went to the relevant government offices to verify the ownership status of the property.96  There was an on-going construction of a residential building during his inspection, so he appraised this building as well, in case the land proved insufficient to cover the applied loan.97  These acts complied with the standard operating practice expected of banks when dealing with real property.

Second, the two-year period under Rule 74, Section 4 of the Rules of Court had lapsed and petitioner heirs did not allege if any heir or creditor of Roman Andres and his wife had invoked their right under this provision. Rule 74, Section 4 of the Rules of Court provides:chanroblesvirtuallawlibrary

SEC 4. Liability of distributees and estate. – If it shall appear at any time within two (2) years after the settlement and distribution of an estate in accordance with the provisions of either of the first two sections of this rule, that an heir or other person has been unduly deprived of his lawful participation in the estate, such heir or such other person may compel the settlement of the estate in the courts in the manner hereinafter provided for the purpose of satisfying such lawful participation.  And if within the same time of two (2) years, it shall appear that there are debts outstanding against the estate which have not been paid, or that an heir or other person has been unduly deprived of his lawful participation payable in money, the court having jurisdiction of the estate may, by order for that purpose, after hearing, settle the amount of such debts or lawful participation and order how much and in what manner each distributee shall contribute in the payment thereof, and may issue execution, if circumstances require, against the bond provided in the preceding section or against the real estate belonging to the deceased, or both. Such bond and such real estate shall remain charged with a liability to creditors, heirs, or other persons for the full period of two (2) years after such distribution, notwithstanding any transfers of real estate that may have been made. (Emphasis supplied)

This provision was no longer annotated on the title at the time the title was submitted to PNB as collateral for the loan:chanroblesvirtuallawlibrary

Q: You mentioned that you did went [sic] to the Register of Deeds and in the Register of Deeds you found the document concerning an order in Civil Case involving the property, do you remember having said that?

A: Yes, sir.Q: What was that Civil Case all about?A: I go to the Register of Deeds to verify the previous title because there is a Sec. 4 Rule 74 of

the title and I found out at the back of the title that there is an order in favor of Reynaldo Andres commissioned by virtue of an order of RTC 3rd Judicial Region, Branch 37, Sto. Domingo, Nueva Ecija issued by Hon. Senen Saguyod issued by Security Bank and Trust Company and the transfer of ownership of the properties of the deceased spouses Roman Andres and Lydia Echauz to Reynaldo Andres and the date is October 14, 1992, sir.

Atty. Lasam:Q: Having read that at the Register of Deeds of Nueva Ecija you proceeded to Branch 37, Baloc,

Sto. Domingo, Nueva Ecija to verify whether there are still pending cases regarding the lot?A: A[t] the time they submit the title there is no annotation at the back of the title and the title is

clean, sir.Q: You mean to say that when they applied for a loan that annotation which you read earlier was

not present?A: There is no more annotation, sir.98 (Emphasis supplied)

In any event, Rule 74, Section 4 does not apply to Onofre Andres who never alleged being an excluded heir or unpaid creditor of his brother Roman Andres and Roman’s wife.

Petitioner heirs also insist that Gerardo Pestaño did not interview or inquire from residents in the surrounding area regarding the ownership of the residential building then being constructed on the land.99  They submit that this amounts to lack of due diligence by PNB considering Reynaldo Andres’ admission that Onofre Andres possessed the property, but by mere tolerance.100chanRoblesvirtualLawlibrary

On the contrary, Gerardo Pestaño testified that he interviewed the laborers working on the residential building in the property, and he asked the Spouses Reynaldo Andres and Janette de Leon to obtain the tax declaration from the Assessor’s Office:chanroblesvirtuallawlibrary

ATTY LASAM:

Mr. witness, the time you conducted the credit investigation who was in possession of the property?

A. I was asked by Reynaldo Andres to see the property and we went to the place and there is on going construction of a building and it was 50% finish. I told them to go to the Municipal Assessor’s Office for Tax Declaration.

Q. So it is cle[unreadable] that Reynaldo and Jannette was in possession of the subject property?

A. Yes, sir.Q. And at the time you conducted the credit investigation was there any claim of that

property. . regarding this claim of Onofre Andres?A. I went to the Municipal Hall of Sto. Domingo and I don’t have any knowledge of

that.. . . .Q. When you investigated you solely relied to the title being offered?A. No, sir. I went to the Assessor’s Office of Sto. Domingo, to see the tax payments

and to the Register of Deeds.Q. You did talk to the laborers working in the building?A. Yes, sir.Q. Mr. witness, you mentioned that you required Reynaldo Andres to submit the tax

declaration of the building?A. Yes, sir.Q. Did he submit to you the tax declaration?A. Yes.101 (Emphasis supplied)

Gerardo Pestaño did not have a copy of the tax declaration of the residential building at the time of his testimony, but he testified that the Spouses Reynaldo Andres and Janette de Leon presented Tax Declaration No. 449459, and he inspected this document.102  He does not appear to

have been questioned on the contents of Tax Declaration No. 449459.

Nevertheless, even Onofre Andres’ possession appears doubtful since Gerardo Pestaño testified that the residential building was still under construction during his inspection on August 8, 1995:103chanRoblesvirtualLawlibrary

Q: Did you actually inspect the 4,634 square meters of the property?A: Yes, sir.Q: At the time of your inspection of the property, who was actually living in the

property?A: At the time of my inspection on August 8, 1995 the house is under construction?

sir.Q: There were no occupants?A: The spouses borrower Reynaldo Andres and his wife, sir.Atty. Lasam:Q: You mean to say that while the building is under construction they were at the

same time living there?A: They were not living there but they were in possession of the property, sir.Q: You only presumed that they are the once [sic] in possession of the property?A: Because they accompanied me there, sir.104 (Emphasis supplied)

In their reply, petitioner heirs attached tax declarations over the land and the residential building, asking this court to allow the submission of such documentary evidence in the interest of substantial justice.105  Again, this court is not a trier of facts.  A petition for review on certiorari “shall raise only questions of law.”106  This court cannot accept and consider documentary evidence only raised and submitted now on review.

In any event, the tax declarations attached to the reply fail to convince.  Reynaldo Andres attached two tax declarations to show that he owned the residential building standing on the property, thus, Gerardo Pestaño did not conduct an exhaustive investigation.107chanRoblesvirtualLawlibrary

The first tax declaration in Reynaldo Andres’ name was for year 1994.  The spaces allotted for the boundaries of the land where the house stands read “erected on the lot of Roman Andres,” but the name Roman Andres was written on top of a white out erasure, and such correction was not countersigned.108  Reynaldo Andres did not explain such erasure in his reply.  A person presenting an altered document must account for the alteration; otherwise, this affects its admissibility.109chanRoblesvirtualLawlibrary

The second tax declaration was for year 2006, long after Gerardo Pestaño inspected the property in 1995.110chanRoblesvirtualLawlibrary

In sum, this court reiterates the rule that banks, as businesses impressed with public interest, must exercise greater care, prudence, and due diligence in all their property dealings.  This court upholds the Court of Appeals’ findings that PNB complied with the standard operating practice

of banks, which met the requisite level of diligence, when it sent Gerardo Pestaño to conduct an ocular inspection of the property and verify the status of its ownership and title.  Consequently, PNB is a mortgagee in good faith. The title resulting from the foreclosure sale, therefore, is to be protected. The bank is an innocent purchaser for value.chanrobleslaw

WHEREFORE, the petition is DENIED.  The assailed Court of Appeals decision and resolution areAFFIRMED.

SO ORDERED.cralawlawlibrary

Carpio, (Chairperson), Peralta,* Del Castillo, and Reyes,** JJ., concur.

Endnotes:

* Designated additional member per raffle dated October 13, 2014.

** Designated acting member per Special Order No. 1844 dated October 14, 2014.

1Rollo, p. 59. “As buyer in the auction sale of the subject property, defendant bank consolidated title over it and was issued the same (TCT No. N-24660) on May 27, 2002.”

2 The petition was filed pursuant to Rule 45 of the Rules of Court.

3Rollo, pp. 34–35 and 58.

4 The nine children were Onofre, Guillermo, Sixto, Roman, Juana, Melissa, Maxima, Ofelia, and Araceli, all surnamed Andres.

5Rollo, p. 36.

6 Id. at 34 and 58.

7 Id. at 36.

8 The decision of the trial court used the name, “Felisa,” instead of “Melissa.”

9 Id. at 58.

10 Id. at 37–38, 55–56, and 59.

11 Id. at 55.

12 Id. at 36, 38, 56, and 59.

13 Id. at 36 and 55. The Court of Appeals reported this date as October 22, 1965.

14 Id. The Court of Appeals reported this date as July 20, 1973.

15 Branch 37 of Regional Trial Court of Baloc, Sto. Domingo, Nueva Ecija.

16Rollo, pp. 36–37 and 55.

17 Id. at 35, 37, 55, and 59.

18 Id. at 59.

19 Id. at 36 and 55.

20 Id. at 35 and 54.

21 Id at 59.

22 Id.

23 Id.

24 Id. at 37 and 55.

25 Id. at 38 and 56.

26 Id.

27 Id.

28 Id.

29 Id. at 38–39 and 56.

30 Id. at 39 and 56.

31 Id.

32 Id.

33 Id. at 39–40.

34 Id. at 40.

35 Id.

36 Id. at 41.

37 Id. at 40.

38 Id. at 65.

39 Id. at 40–41.

40 The decision was penned by Judge Lauro G. Sandoval of Branch 37 of the Regional Trial Court of Nueva Ecija.

41Rollo, pp. 54–62.

42 Id. at 61–62.

43 The decision was penned by Associate Justice Jose L. Sabio, Jr., and concurred in by Associate Justices Jose C. Mendoza and Arturo G. Tayag, Court of Appeals, Sixteenth Division.

44Rollo, pp. 33–47.

45 Id. at 47.

46 Id. at 49–53.

47 Id. at 8–28.

48 Id. at 16.

49 418 Phil. 451 (2001) [Per J. Ynares-Santiago, First Division].

50Rollo, pp. 20 and 156.

51 Id. at 20.

52 Id. at 26.

53 Id.

54 Id. at 27.

55 Id. at 132.

56 429 Phil. 225 (2002) [Per J. Panganiban, Third Division].

57Rollo, pp. 134–135.

58 Id. at 137.

59 Id.

60 Id. at 138.

61 Id. at 139.

62 Id. at 159.

63 RULES OF CIVIL PROCEDURE, Rule 45, sec.1.

SEC. 1. Filing of petition with Supreme Court. — A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth. (Emphasis supplied)

64 Philippine Banking Corporation v. Dy, G.R. No. 183774, November 14, 2012, 685 SCRA 567, 574 [Per J. Perlas-Bernabe, Second Division].

65Republic of the Philippines v. Heirs of Ramos, G.R. No. 169481, February 22, 2010, 613 SCRA 315, 324 [Per J. Del Castillo, Second Division].

66 The exceptions are: “(1) when the inference made is manifestly mistaken, absurd or impossible; (2) when there is grave abuse of discretion; (3) when the finding is grounded entirely on speculations, surmises, or conjectures; (4) when the judgment of the CA is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the CA, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both parties; (7) when the findings of the CA are contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the CA manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and (10) when the findings of fact of the CA are premised on the absence of evidence and are contradicted by the evidence on record.” Republic of the Philippines v. Heirs of Ramos, G.R. No. 169481, February 22, 2010, 613 SCRA 315, 324–325 [Per J. Del Castillo, Second Division].

67 Rollo, pp. 26–27.

68 Id. at 16–17 and 59–60.

69 Id. at 43.

70 Id. at 44.

71 Id.

72 Id.

73 Id. at 44–45.

74 Id. at 45.

75 Id.

76 Id. at 45–46.

77Cabuhat v. Court of Appeals, 418 Phil. 451, 458–459 (2001) [Per J. Ynares-Santiago, First Division].

78Rollo, pp. 20–21.

79Cruz v. Bancom Finance Corporation, 429 Phil. 225, 241 (2002) [Per J. Panganiban, Third Division], citing Government Service Insurance System v. Court of Appeals, 350 Phil. 654, 662 (1998) [Per J. Romero, Third Division].

80 Civil Code, art. 2085(2).

81 Civil Code, art. 1409(2).

82 G.R. No. 183774, November 14, 2012, 685 SCRA 567 [Per J. Perlas-Bernabe, Second Division].

83 Id. at 574.

84See O. E. Williamson, Transaction-Cost Economics: The Governance of Contractual Relations, 22 JOURNAL OF LAW AND ECONOMICS 233, 239–242 (1979). See also R. H. Coase, The Problem of Social Cost, 3 JOURNAL OF LAW AND ECONOMICS 1–44 (1960).

85 See Cruz v. Bancom Finance Corporation, 429 Phil. 225, 237 (2002) [Per J. Panganiban, Third Division].

86Cabuhat v. Court of Appeals, 418 Phil. 451, 460 (2001) [Per J. Ynares-Santiago, First Division].

87 Id. at 458.

88 Rep. Act No. 8791 (2000), sec. 2, otherwise known as The General Banking Law of 2000.

89Philippine Banking Corporation v. Dy, G.R. No. 183774, November 14, 2012, 685 SCRA 567, 575 [Per J. Perlas-Bernabe, Second Division], citing Alano v. Planter’s Development Bank, G.R. No. 171628, June 13, 2011, 651 SCRA 766, 774–775 [Per J. Del Castillo, First Division]. See also Dela Peña v. Avila, G.R. No. 187490, February 8, 2012, 665 SCRA 553, 570 [Per J. Perez,

Second Division].

90 In Bancom, the bank, among other things, failed to conduct an ocular inspection of the property at the time it was mortgaged to the bank.  See Cruz v. Bancom Finance Corporation, 429 Phil. 225, 240 (2002) [Per J. Panganiban, Third Division].

91Rollo, p. 91.

92 Id. at 23 and 157–158.

93 Id. at 25.

94 Id. at 25–26.

95 Id. at 157.

96 Id.

97 Id. at 45.

98  Id. at 108–109.

99  Id. at 23–24.

100 Id. at 24.

101 Id. at 97–99.

102 Id. at 99 and 114–115.

103 Id. at 106.

104 Id. at 105–106.

105 Id. at 159.

106 RULES OF COURT, Rule 45, sec. 1.

107 Id. at 160.

108 Id. at 169.

109 RULES OF COURT, Rule 132, sec. 31. See Cabotaje v. Spouses Pudunan, 480 Phil. 65, 77 (2004) [Per J. Callejo, Sr., Second Division].

110Rollo, p. 170.

Maria Susana R. Ape

Spec. Pro Summer Class 2015

Dean Gemylito Festin

List of Cases

1. G.R. No. 171206               September 23, 2013

HEIRS OF THE LATE SPOUSES FLA VIANO MAGLASANG and SALUD ADAZA-

MAGLASANG vs. MANILA BANKING CORPORATION, now substituted by FIRST

SOVEREIGN ASSET MANAGEMENT SPV-AMC, INC. FSAMI, 

2. G.R. No. 170498               January 9, 2013

METROPOLITAN BANK & TRUST COMPANY vs. ABSOLUTE MANAGEMENT

CORPORATION

I. I. finding that the extra-judicial foreclosure subject of this case was properly conducted in

accordance with the formalities of Act No. 3135,the Court upholds the same as a valid exercise

of respondent's third option under Section 7, Rule 86. To reiterate, respondent cannot, however,

file any suit to recover any deficiency amount since it effectively waived its right thereto when it

chose to avail of extra-judicial foreclosure as jurisprudence instructs.

I.II G.R. No. 171206               September 23, 2013

HEIRS OF THE LATE SPOUSES FLA VIANO MAGLASANG and SALUD ADAZA-

MAGLASANG vs. MANILA BANKING CORPORATION

PERLAS-BERNABE, J.:

The Facts

Spouses Flaviano and Salud Maglasang (Sps.Maglasang) obtained a credit line from respondent

in the amount of P350,000.00 which was secured by a real estate mortgage6 executed over seven

of their properties7 located in Province of Leyte. After Flaviano Maglasang (Flaviano) died

intestate, his widow Salud Maglasang (Salud) and their surviving children, appointed their

brother petitioner Edgar Maglasang (Edgar) as their attorney-in-fact and administrator. The

probate court terminated the proceedings with the surviving heirs executing an extra-judicial

partition of the properties of Flaviano’s estate. Respondent extra-judicially foreclose the

mortgage covering the Sps. Maglasang’s properties, still remained a deficiency on Sps.

Maglasang’s obligation to respondent., filed a suit to recover the deficiency against the estate of

Flaviano, his widow Salud and petitioners.

ISSUE: whether or not the exercise of the third option of extra-judicial foreclosure under Section

7, Rule 86 of respondent precluded them from filing a suit to recover any deficiency?

HELD: YES

The Court’s Ruling

The petition is partly meritorious.

Claims against deceased persons should be filed during the settlement proceedings of their

estate.41 Such proceedings are primarily governed by special rules found under Rules 73 to 90 of

the Rules, although rules governing ordinary actions may, as far as practicable, apply

suppletorily.42 Among these special rules, Section 7, Rule 86 of the Rules (Section 7, Rule86)

provides the rule in dealing with secured claims against the estate:

SEC. 7. Mortgage debt due from estate. – A creditor holding a claim against the deceased

secured by a mortgage or other collateral security, may abandon the security and prosecute his

claim in the manner provided in this rule, and share in the general distribution of the assets of the

estate; or he may foreclose his mortgage or realize upon his security, by action in court, making

the executor or administrator a party defendant, and if there is a judgment for a deficiency, after

the sale of the mortgaged premises, or the property pledged, in the foreclosure or other

proceeding to realize upon the security, he may claim his deficiency judgment in the manner

provided in the preceding section; or he may rely upon his mortgage or other security alone, and

foreclose the same at any time within the period of the statute of limitations, and in that event he

shall not be admitted as a creditor, and shall receive no share in the distribution of the other

assets of the estate; but nothing herein contained shall prohibit the executor or administrator from

redeeming the property mortgaged or pledged, by paying the debt for which it is held as security,

under the direction of the court, if the court shall adjudged it to be for the best interest of the

estate that such redemption shall be made. (Emphasis and underscoring supplied)

As the foregoing generally speaks of "a creditor holding a claim against the deceased secured by

a mortgage or other collateral security" as above-highlighted, it may be reasonably concluded

that the aforementioned section covers all secured claims, whether by mortgage or any other

form of collateral, which a creditor may enforce against the estate of the deceased debtor. On the

contrary, nowhere from its language can it be fairly deducible that the said section would – as the

CA interpreted – narrowly apply only to mortgages made by the administrator over any property

belonging to the estate of the decedent. To note, mortgages of estate property executed by the

administrator, are also governed by Rule 89 of the Rules, captioned as "Sales, Mortgages, and

Other Encumbrances of Property of Decedent."

In this accord, it bears to stress that the CA’s reliance on Philippine National Bank v.

CA43 (PNB) was misplaced as the said case did not, in any manner, limit the scope of Section 7,

Rule 86. It only stated that the aforesaid section equally applies to cases where the administrator

mortgages the property of the estate to secure the loan he obtained.44 Clearly, the pronouncement

was a ruling of inclusion and not one which created a distinction. It cannot, therefore, be doubted

that it is Section 7, Rule 86which remains applicable in dealing with a creditor’s claim against

the mortgaged property of the deceased debtor, as in this case, as well as mortgages made by the

administrator, as that in the PNB case.

Jurisprudence breaks down the rule under Section 7, Rule 86 and explains that the secured

creditor has three remedies/options that he may alternatively adopt for the satisfaction of his

indebtedness. In particular, he may choose to: (a) waive the mortgage and claim the entire debt

from the estate of the mortgagor as an ordinary claim; (b) foreclose the mortgage judicially and

prove the deficiency as an ordinary claim; and (c) rely on the mortgage exclusively, or other

security and foreclose the same before it is barred by prescription, without the right to file a

claim for any deficiency.45 It must, however, be emphasized that these remedies are distinct,

independent and mutually exclusive from each other; thus, the election of one effectively bars

the exercise of the others. With respect to real properties, the Court in Bank of America v.

American Realty Corporation46 pronounced:

In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and

not cumulative. Notably, an election of one remedy operates as a waiver of the other. For this

purpose, a remedy is deemed chosen upon the filing of the suit for collection or upon the filing of

the complaint in an action for foreclosure of mortgage, pursuant to the provision of Rule 68 of

the 1997 Rules of Civil Procedure. As to extrajudicial foreclosure, such remedy is deemed

elected by the mortgage creditor upon filing of the petition not with any court of justice but with

the Office of the Sheriff of the province where the sale is to be made, in accordance with the

provisions of Act No. 3135, as amended by Act No.4118.47 (Emphasis supplied)

Anent the third remedy, it must be mentioned that the same includes the option of extra-

judicially foreclosing the mortgage under Act No. 3135,as availed of by respondent in this case.

However, the plain result of adopting the last mode of foreclosure is that the creditor waives his

right to recover any deficiency from the estate.48 These precepts were discussed in the PNB case,

citing Perez v. Philippine National Bank49 which overturned the earlier Pasno v. Ravina ruling:50

Case law now holds that this rule grants to the mortgagee three distinct, independent and

mutually exclusive remedies that can be alternatively pursued by the mortgage creditor for the

satisfaction of his credit in case the mortgagor dies, among them:

(1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an

ordinary claim;

(2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim;

and

(3) to rely on the mortgage exclusively, foreclosing the same at anytime before it is

barred by prescription without right to file a claim for any deficiency

In Perez v. Philippine National Bank, reversing Pasno vs. Ravina, we held:

The ruling in Pasno v. Ravina not having been reiterated in any other case, we have carefully

reexamined the same, and after mature deliberation have reached the conclusion that the

dissenting opinion is more in conformity with reason and law. Of the three alternative courses

that section 7, Rule 87 (now Rule 86), offers the mortgage creditor, to wit, (1) to waive the

mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (2)

foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and (3) to rely

on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription,

without right to file a claim for any deficiency, the majority opinion in Pasno v. Ravina, in

requiring a judicial foreclosure, virtually wipes out the third alternative conceded by the Rules to

the mortgage creditor, and which would precisely include extra-judicial foreclosures by contrast

with the second alternative.

The plain result of adopting the last mode of foreclosure is that the creditor waives his right to

recover any deficiency from the estate. Following the Perez ruling that the third mode includes

extrajudicial foreclosure sales, the result of extrajudicial foreclosure is that the creditor waives

any further deficiency claim. x x x.51 (Emphases and underscoring supplied; italics in the

original)

To obviate any confusion, the Court observes that the operation of Act No. 3135 does not

entirely discount the application of Section 7, Rule 86, or vice-versa. Rather, the two

complement each other within their respective spheres of operation. On the one hand, Section 7,

Rule 86 lays down the options for the secured creditor to claim against the estate and, according

to jurisprudence, the availment of the third option bars him from claiming any deficiency

amount. On the other hand, after the third option is chosen, the procedure governing the manner

in which the extra-judicial foreclosure should proceed would still be governed by the provisions

of Act No. 3135.Simply put, Section 7, Rule 86 governs the parameters and the extent to which a

claim may be advanced against the estate, whereas Act No. 3135sets out the specific procedure

to be followed when the creditor subsequently chooses the third option – specifically, that of

extra-judicially foreclosing real property belonging to the estate. The application of the

procedure under Act No. 3135 must be concordant with Section 7, Rule 86 as the latter is a

special rule applicable to claims against the estate, and at the same time, since Section 7, Rule 86

does not detail the procedure for extra-judicial foreclosures, the formalities governing the

manner of availing of the third option – such as the place where the application for extra-judicial

foreclosure is filed, the requirements of publication and posting and the place of sale – must be

governed by Act No. 3135.

In this case, respondent sought to extra-judicially foreclose the mortgage of the properties

previously belonging to Sps. Maglasang (and now, their estates) and, therefore, availed of the

third option. Lest it be misunderstood, it did not exercise the first option of directly filing a claim

against the estate, as petitioners assert, since it merely notified52 the probate court of the

outstanding amount of its claim against the estate of Flaviano and that it was currently

restructuring the account.53 Thus, having unequivocally opted to exercise the third option of

extra-judicial foreclosure under Section 7, Rule 86, respondent is now precluded from filing a

suit to recover any deficiency amount as earlier discussed.

As a final point, petitioners maintain that the extra-judicial foreclosure of the subject properties

was null and void since the same was conducted in violation of the stipulation in the real estate

mortgage contract stating that the auction sale should be held in the capital of the province where

the properties are located, i.e., the Province of Leyte.

The Court disagrees.

As may be gleaned from the records, the stipulation under the real estate mortgage54 executed by

Sps. Maglasang which fixed the place of the foreclosure sale at Tacloban City lacks words of

exclusivity which would bar any other acceptable for a wherein the said sale may be conducted,

to wit:

It is hereby agreed that in case of foreclosure of this mortgage under Act 3135, the auction sale

shall be held at the capital of the province if the property is within the territorial jurisdiction of

the province concerned, or shall be held in the city if the property is within the territorial

jurisdiction of the city concerned; x x x.55

Case law states that absent such qualifying or restrictive words to indicate the exclusivity of the

agreed forum, the stipulated place should only be as an additional, not a limiting venue.56 As a

consequence, the stipulated venue and that provided under Act No. 3135 can be applied

alternatively.

In particular, Section 2 of Act No. 3135 allows the foreclosure sale to be done within the

province where the property to be sold is situated, viz.:

SEC. 2. Said sale cannot be made legally outside of the province which the property sold is

situated; and in case the place within said province in which the sale is to be made is subject to

stipulation, such sale shall be made in said place or in the municipal building of the municipality

in which the property or part thereof is situated. (Italics supplied) ..

In this regard, since the auction sale was conducted in Ormoc City, which is within the territorial

jurisdiction of the Province of Leyte, then the Court finds sufficient compliance with the above-

cited requirement.

All told, finding that the extra-judicial foreclosure subject of this case was properly conducted in

accordance with the formalities of Act No. 3135,the Court upholds the same as a valid exercise

of respondent's third option under Section 7, Rule 86. To reiterate, respondent cannot, however,

file any suit to recover any deficiency amount since it effectively waived its right thereto when it

chose to avail of extra-judicial foreclosure as jurisprudence instructs.

WHEREFORE, the petition is PARTLY GRANTED. The complaint for the recovery of the

deficiency amount after extra-judicial foreclosure filed by respondent Manila Banking

Corporation is hereby DISMISSED. The extra-judicial foreclosure of the mortgaged properties,

however, stands.

SO ORDERED.

I.III G.R. No. 171206               September 23, 2013

HEIRS OF THE LATE SPOUSES FLA VIANO MAGLASANG and SALUD ADAZA-

MAGLASANG, namely, OSCAR A. MAGLASANG, EDGAR A. MAGLASANG,

CONCEPCION CHONA A. MAGLASANG, GLENDA A. MAGLASANG-ARNAIZ,

LERMA A. MAGLASANG, FELMA A. · MAGLASANG, FE DORIS A. MAGLASANG,

LEOLINO A. MAGLASANG, MARGIE LEILA A. MAGLASANG,MA. MILALIE A.

MAGLASANG, SALUD A. MAGLASANG, and MA. FLASALIE A. MAGLASANG,

REPRESENTING THE ESTATES OF THEIR AFORE-NAMEDDECEASED

PARENTS, Petitioners, 

vs.

MANILA BANKING CORPORATION, now substituted by FIRST SOVEREIGN ASSET

MANAGEMENT SPV-AMC, INC. FSAMI, Respondent.

D E C I S I O N

PERLAS-BERNABE, J.:

The Facts

On June 16, 1975, spouses Flaviano and Salud Maglasang (Sps.Maglasang) obtained a credit line

from respondent5 in the amount of P350,000.00 which was secured by a real estate

mortgage6 executed over seven of their properties7 located in Ormoc City and the Municipality of

Kananga, Province of Leyte.8 They availed of their credit line by securing loans in the amounts

of P209,790.50 and P139,805.83 on October 24, 1975and March 15, 1976, respectively,9 both of

which becoming due and demandable within a period of one year. Further, the parties agreed that

the said loans would earn interest at 12% per annum (p.a.) and an additional 4% penalty would

be charged upon default.10

After Flaviano Maglasang (Flaviano) died intestate on February 14,1977, his widow Salud

Maglasang (Salud) and their surviving children, herein petitioners Oscar (Oscar), Concepcion

Chona, Lerma, Felma, FeDoris, Leolino, Margie Leila, Ma. Milalie, Salud and Ma. Flasalie, all

surnamed Maglasang, and Glenda Maglasang-Arnaiz, appointed11 their brother petitioner Edgar

Maglasang (Edgar) as their attorney-in-fact.12 Thus, on March 30, 1977, Edgar filed a verified

petition for letters of administration of the intestate estate of Flaviano before the then Court of

First Instance of Leyte, Ormoc City, Branch 5 (probate court), docketed as Sp. Proc. No. 1604-

0.13 On August 9, 1977, the probate court issued an Order14 granting the petition, thereby

appointing Edgar as the administrator15 of Flaviano’s estate.

In view of the issuance of letters of administration, the probate court, on August 30, 1977, issued

a Notice to Creditors16 for the filing of money claims against Flaviano’s estate. Accordingly, as

one of the creditors of Flaviano, respondent notified17 the probate court of its claim in the amount

of P382,753.19 as of October 11, 1978, exclusive of interests and charges.

During the pendency of the intestate proceedings, Edgar and Oscar were able to obtain several

loans from respondent, secured by promissory notes18 which they signed.

In an Order19 dated December 14, 1978 (December 14, 1978 Order),the probate court terminated

the proceedings with the surviving heirs executing an extra-judicial partition of the properties of

Flaviano’s estate. The loan obligations owed by the estate to respondent, however, remained

unsatisfied due to respondent’s certification that Flaviano’s account was undergoing a

restructuring. Nonetheless, the probate court expressly recognized the rights of respondent under

the mortgage and promissory notes executed by the Sps. Maglasang, specifically, its "right to

foreclose the same within the statutory period."20

In this light, respondent proceeded to extra-judicially foreclose the mortgage covering the Sps.

Maglasang’s properties and emerged as the highest bidder at the public auction for the amount

of P350,000.00.21 There, however, remained a deficiency on Sps. Maglasang’s obligation to

respondent. Thus, on June 24, 1981, respondent filed a suit to recover the deficiency amount

of P250,601.05 as of May 31, 1981 against the estate of Flaviano, his widow Salud and

petitioners, docketed as Civil Case No. 1998-0.22

The RTC Ruling and Subsequent Proceedings

After trial on the merits, the RTC (formerly, the probate court)23 rendered a Decision24 on April

6, 1987 directing the petitioners to pay respondent, jointly and severally, the amount

of P434,742.36 with interest at the rate of 12% p.a., plus a 4% penalty charge, reckoned from

September 5,1984 until fully paid.25 The RTC found that it was shown, by a preponderance of

evidence, that petitioners, after the extra-judicial foreclosure of all the properties mortgaged, still

have an outstanding obligation in the amount and as of the date as above-stated. The RTC also

found in order the payment of interests and penalty charges as above-mentioned as well as

attorney’s fees equivalent to 10% of the outstanding obligation.26

Dissatisfied, petitioners elevated the case to the CA on appeal, contending,27 inter alia, that the

remedies available to respondent under Section 7, Rule 86 of the Rules of Court (Rules) are

alternative and exclusive, such that the election of one operates as a waiver or abandonment of

the others. Thus, when respondent filed its claim against the estate of Flaviano in the proceedings

before the probate court, it effectively abandoned its right to foreclose on the mortgage.

Moreover, even on the assumption that it has not so waived its right to foreclose, it is nonetheless

barred from filing any claim for any deficiency amount.

During the pendency of the appeal, Flaviano’s widow, Salud, passed away on July 25, 1997.28

The CA Ruling

In a Decision29 dated July 20, 2005, the CA denied the petitioners’ appeal and affirmed the

RTC’s Decision. At the outset, it pointed out that the probate court erred when it, through the

December 14, 1978 Order, closed and terminated the proceedings in Sp. Proc. No. 1604-0

without first satisfying the claims of the creditors of the estate – in particular, respondent – in

violation of Section 1, Rule 90 of the Rules.30 As a consequence, respondent was not able to

collect from the petitioners and thereby was left with the option of foreclosing the real estate

mortgage.31 Further, the CA held that Section 7, Rule 86 of the Rules does not apply to the

present case since the same does not involve a mortgage made by the administrator over any

property belonging to the estate of the decedent.32 According to the CA, what should apply is Act

No. 313533 which entitles respondent to claim the deficiency amount after the extra-judicial

foreclosure of the real estate mortgage of Sps. Maglasang’s properties.34

Petitioners’ motion for reconsideration was subsequently denied in a Resolution35 dated January

4, 2006. Hence, the present recourse.

The Issue Before the Court

The essential issue in this case is whether or not the CA erred in affirming the RTC’s award of

the deficiency amount in favor of respondent.

Petitioners assert36 that it is not Act No. 3135 but Section 7, Rule 86of the Rules which applies in

this case. The latter provision provides alternative and exclusive remedies for the satisfaction of

respondent’s claim against the estate of Flaviano.37 Corollarily, having filed its claim against the

estate during the intestate proceedings, petitioners argue that respondent had effectively waived

the remedy of foreclosure and, even assuming that it still had the right to do so, it was precluded

from filing a suit for the recovery of the deficiency obligation.38

Likewise, petitioners maintain that the extra-judicial foreclosure of the subject properties was

null and void, not having been conducted in the capital of the Province of Leyte in violation of

the stipulations in the real estate mortgage contract.39 They likewise deny any personal liability

for the loans taken by their deceased parents.40

The Court’s Ruling

The petition is partly meritorious.

Claims against deceased persons should be filed during the settlement proceedings of their

estate.41 Such proceedings are primarily governed by special rules found under Rules 73 to 90 of

the Rules, although rules governing ordinary actions may, as far as practicable, apply

suppletorily.42 Among these special rules, Section 7, Rule 86 of the Rules (Section 7, Rule86)

provides the rule in dealing with secured claims against the estate:

SEC. 7. Mortgage debt due from estate. – A creditor holding a claim against the deceased

secured by a mortgage or other collateral security, may abandon the security and prosecute his

claim in the manner provided in this rule, and share in the general distribution of the assets of the

estate; or he may foreclose his mortgage or realize upon his security, by action in court, making

the executor or administrator a party defendant, and if there is a judgment for a deficiency, after

the sale of the mortgaged premises, or the property pledged, in the foreclosure or other

proceeding to realize upon the security, he may claim his deficiency judgment in the manner

provided in the preceding section; or he may rely upon his mortgage or other security alone, and

foreclose the same at any time within the period of the statute of limitations, and in that event he

shall not be admitted as a creditor, and shall receive no share in the distribution of the other

assets of the estate; but nothing herein contained shall prohibit the executor or administrator from

redeeming the property mortgaged or pledged, by paying the debt for which it is held as security,

under the direction of the court, if the court shall adjudged it to be for the best interest of the

estate that such redemption shall be made. (Emphasis and underscoring supplied)

As the foregoing generally speaks of "a creditor holding a claim against the deceased secured by

a mortgage or other collateral security" as above-highlighted, it may be reasonably concluded

that the aforementioned section covers all secured claims, whether by mortgage or any other

form of collateral, which a creditor may enforce against the estate of the deceased debtor. On the

contrary, nowhere from its language can it be fairly deducible that the said section would – as the

CA interpreted – narrowly apply only to mortgages made by the administrator over any property

belonging to the estate of the decedent. To note, mortgages of estate property executed by the

administrator, are also governed by Rule 89 of the Rules, captioned as "Sales, Mortgages, and

Other Encumbrances of Property of Decedent."

In this accord, it bears to stress that the CA’s reliance on Philippine National Bank v.

CA43 (PNB) was misplaced as the said case did not, in any manner, limit the scope of Section 7,

Rule 86. It only stated that the aforesaid section equally applies to cases where the administrator

mortgages the property of the estate to secure the loan he obtained.44 Clearly, the pronouncement

was a ruling of inclusion and not one which created a distinction. It cannot, therefore, be doubted

that it is Section 7, Rule 86which remains applicable in dealing with a creditor’s claim against

the mortgaged property of the deceased debtor, as in this case, as well as mortgages made by the

administrator, as that in the PNB case.

Jurisprudence breaks down the rule under Section 7, Rule 86 and explains that the secured

creditor has three remedies/options that he may alternatively adopt for the satisfaction of his

indebtedness. In particular, he may choose to: (a) waive the mortgage and claim the entire debt

from the estate of the mortgagor as an ordinary claim; (b) foreclose the mortgage judicially and

prove the deficiency as an ordinary claim; and (c) rely on the mortgage exclusively, or other

security and foreclose the same before it is barred by prescription, without the right to file a

claim for any deficiency.45 It must, however, be emphasized that these remedies are distinct,

independent and mutually exclusive from each other; thus, the election of one effectively bars

the exercise of the others. With respect to real properties, the Court in Bank of America v.

American Realty Corporation46 pronounced:

In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and

not cumulative. Notably, an election of one remedy operates as a waiver of the other. For this

purpose, a remedy is deemed chosen upon the filing of the suit for collection or upon the filing of

the complaint in an action for foreclosure of mortgage, pursuant to the provision of Rule 68 of

the 1997 Rules of Civil Procedure. As to extrajudicial foreclosure, such remedy is deemed

elected by the mortgage creditor upon filing of the petition not with any court of justice but with

the Office of the Sheriff of the province where the sale is to be made, in accordance with the

provisions of Act No. 3135, as amended by Act No.4118.47 (Emphasis supplied)

Anent the third remedy, it must be mentioned that the same includes the option of extra-

judicially foreclosing the mortgage under Act No. 3135,as availed of by respondent in this case.

However, the plain result of adopting the last mode of foreclosure is that the creditor waives his

right to recover any deficiency from the estate.48 These precepts were discussed in the PNB case,

citing Perez v. Philippine National Bank49 which overturned the earlier Pasno v. Ravina ruling:50

Case law now holds that this rule grants to the mortgagee three distinct, independent and

mutually exclusive remedies that can be alternatively pursued by the mortgage creditor for the

satisfaction of his credit in case the mortgagor dies, among them:

(1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an

ordinary claim;

(2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim;

and

(3) to rely on the mortgage exclusively, foreclosing the same at anytime before it is

barred by prescription without right to file a claim for any deficiency

In Perez v. Philippine National Bank, reversing Pasno vs. Ravina, we held:

The ruling in Pasno v. Ravina not having been reiterated in any other case, we have carefully

reexamined the same, and after mature deliberation have reached the conclusion that the

dissenting opinion is more in conformity with reason and law. Of the three alternative courses

that section 7, Rule 87 (now Rule 86), offers the mortgage creditor, to wit, (1) to waive the

mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (2)

foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and (3) to rely

on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription,

without right to file a claim for any deficiency, the majority opinion in Pasno v. Ravina, in

requiring a judicial foreclosure, virtually wipes out the third alternative conceded by the Rules to

the mortgage creditor, and which would precisely include extra-judicial foreclosures by contrast

with the second alternative.

The plain result of adopting the last mode of foreclosure is that the creditor waives his right to

recover any deficiency from the estate. Following the Perez ruling that the third mode includes

extrajudicial foreclosure sales, the result of extrajudicial foreclosure is that the creditor waives

any further deficiency claim. x x x.51 (Emphases and underscoring supplied; italics in the

original)

To obviate any confusion, the Court observes that the operation of Act No. 3135 does not

entirely discount the application of Section 7, Rule 86, or vice-versa. Rather, the two

complement each other within their respective spheres of operation. On the one hand, Section 7,

Rule 86 lays down the options for the secured creditor to claim against the estate and, according

to jurisprudence, the availment of the third option bars him from claiming any deficiency

amount. On the other hand, after the third option is chosen, the procedure governing the manner

in which the extra-judicial foreclosure should proceed would still be governed by the provisions

of Act No. 3135.Simply put, Section 7, Rule 86 governs the parameters and the extent to which a

claim may be advanced against the estate, whereas Act No. 3135sets out the specific procedure

to be followed when the creditor subsequently chooses the third option – specifically, that of

extra-judicially foreclosing real property belonging to the estate. The application of the

procedure under Act No. 3135 must be concordant with Section 7, Rule 86 as the latter is a

special rule applicable to claims against the estate, and at the same time, since Section 7, Rule 86

does not detail the procedure for extra-judicial foreclosures, the formalities governing the

manner of availing of the third option – such as the place where the application for extra-judicial

foreclosure is filed, the requirements of publication and posting and the place of sale – must be

governed by Act No. 3135.

In this case, respondent sought to extra-judicially foreclose the mortgage of the properties

previously belonging to Sps. Maglasang (and now, their estates) and, therefore, availed of the

third option. Lest it be misunderstood, it did not exercise the first option of directly filing a claim

against the estate, as petitioners assert, since it merely notified52 the probate court of the

outstanding amount of its claim against the estate of Flaviano and that it was currently

restructuring the account.53 Thus, having unequivocally opted to exercise the third option of

extra-judicial foreclosure under Section 7, Rule 86, respondent is now precluded from filing a

suit to recover any deficiency amount as earlier discussed.

As a final point, petitioners maintain that the extra-judicial foreclosure of the subject properties

was null and void since the same was conducted in violation of the stipulation in the real estate

mortgage contract stating that the auction sale should be held in the capital of the province where

the properties are located, i.e., the Province of Leyte.

The Court disagrees.

As may be gleaned from the records, the stipulation under the real estate mortgage54 executed by

Sps. Maglasang which fixed the place of the foreclosure sale at Tacloban City lacks words of

exclusivity which would bar any other acceptable for a wherein the said sale may be conducted,

to wit:

It is hereby agreed that in case of foreclosure of this mortgage under Act 3135, the auction sale

shall be held at the capital of the province if the property is within the territorial jurisdiction of

the province concerned, or shall be held in the city if the property is within the territorial

jurisdiction of the city concerned; x x x.55

Case law states that absent such qualifying or restrictive words to indicate the exclusivity of the

agreed forum, the stipulated place should only be as an additional, not a limiting venue.56 As a

consequence, the stipulated venue and that provided under Act No. 3135 can be applied

alternatively.

In particular, Section 2 of Act No. 3135 allows the foreclosure sale to be done within the

province where the property to be sold is situated, viz.:

SEC. 2. Said sale cannot be made legally outside of the province which the property sold is

situated; and in case the place within said province in which the sale is to be made is subject to

stipulation, such sale shall be made in said place or in the municipal building of the municipality

in which the property or part thereof is situated. (Italics supplied) ..

In this regard, since the auction sale was conducted in Ormoc City, which is within the territorial

jurisdiction of the Province of Leyte, then the Court finds sufficient compliance with the above-

cited requirement.

All told, finding that the extra-judicial foreclosure subject of this case was properly conducted in

accordance with the formalities of Act No. 3135,the Court upholds the same as a valid exercise

of respondent's third option under Section 7, Rule 86. To reiterate, respondent cannot, however,

file any suit to recover any deficiency amount since it effectively waived its right thereto when it

chose to avail of extra-judicial foreclosure as jurisprudence instructs.

WHEREFORE, the petition is PARTLY GRANTED. The complaint for the recovery of the

deficiency amount after extra-judicial foreclosure filed by respondent Manila Banking

Corporation is hereby DISMISSED. The extra-judicial foreclosure of the mortgaged properties,

however, stands.

SO ORDERED.

II.I Quasi-contracts are included in claims that should be filed under Rule

86, Section 5 of the Rules of Court. Liabilities of the deceased arising from quasi-contracts

should be filed as claims in the settlement of his estate, as provided in Section 5, Rule 86 of the

Rules of Court.

II.II G.R. No. 170498               January 9, 2013

METROPOLITAN BANK & TRUST COMPANY, Petitioner, 

vs. ABSOLUTE MANAGEMENT CORPORATION, Respondent.

BRION, J.:

Facts:

Sherwood Holdings Corporation, Inc. (SHCI) filed a complaint for sum of money against

Absolute Management Corporation (AMC). SHCI complaint that it made advance payments to

AMC for the purchase of 27,000 pieces of plywood and 16,500 plyboards in the sum

of P12,277,500.00, covered by Metrobank Checks. These checks were all crossed, and were all

made payable to Chua, AMC’s General Manager, in 1998. Chua died in 1999, and a special

proceeding for the settlement of his estate was commenced before the RTC of Pasay City. SHCI

made demands on AMC, after Chua’s death, for allegedly undelivered items

worth P8,331,700.00. Upon investigation, AMC discovered that in 1998, Chua received from

SHCI 18 Metrobank checks worth P31,807,500.00. These were all payable to AMC and were

crossed or "for payee’s account only.” Subsequently, Metrobank filed fourth-party complaint

against Chua’s estate. It alleged that Chua’s estate should reimburse Metrobank in case it would

be held liable in the third-party complaint filed against it by AMC.

ISSUES:

1. whether or not quasi-contracts are included in claims that should be filed pursuant to Rule 86,

Section 5 of the Rules of Court?

2. Whether or not Metrobank’s claim against the Estate of Jose Chua based on a quasi-contract?

3. Whether Metrobank’s fourth-party complaint against Chua’s estate should be allowed?

HELD:

1. yes

2. yes

3. yes

The Court’s Ruling

The Present Petition Complies With Section 4, Rule 45 of the Rules of Court

AMC posits that Metrobank’s failure to append relevant AMC pleadings submitted to the RTC

and to the CA violated Section 4, Rule 45 of the Rules of Court, and is a sufficient ground to

dismiss the petition under Section 5, Rule 45 of the Rules of Court.

We disagree with AMC’s position.

In F.A.T. Kee Computer Systems, Inc. v. Online Networks International, Inc., Online Networks

International, Inc. similarly assailed F.A.T. Kee Computer Systems, Inc.’s failure to attach the

transcript of stenographic notes (TSN) of the RTC proceedings, and claimed this omission to be

a violation of Section 4, Rule 45 of the Rules of Court that warranted the petition’s dismissal.

The Court held that the defect was not fatal, as the TSN of the proceedings before the RTC forms

part of the records of the case. Thus, there was no incurable omission that warranted the outright

dismissal of the petition.

The Court significantly pointed out in F.A.T. Kee that the requirement in Section 4, Rule 45 of

the Rules of Court is not meant to be an absolute rule whose violation would automatically lead

to the petition’s dismissal. The Rules of Court has not been intended to be totally rigid. In fact,

the Rules of Court provides that the Supreme Court "may require or allow the filing of such

pleadings, briefs, memoranda or documents as it may deem necessary within such periods and

under such conditions as it may consider appropriate"; and "[i]f the petition is given due course,

the Supreme Court may require the elevation of the complete record of the case or specified parts

thereof within fifteen (15) days from notice." These provisions are in keeping with the overriding

standard that procedural rules should be liberally construed to promote their objective and to

assist the parties in obtaining a just, speedy and inexpensive determination of every action or

proceeding.

Under this guiding principle, we do not see Metrobank’s omission to be a fatal one that should

warrant the petition’s outright dismissal. To be sure, the omission to submit the adverse party’s

pleadings in a petition before the Court is not a commendable practice as it may lead to an

unduly biased narration of facts and arguments that masks the real issues before the Court. Such

skewed presentation could lead to the waste of the Court’s time in sifting through the maze of the

parties’ narrations of facts and arguments and is a danger the Rules of Court seeks to avoid.

Our examination of Metrobank’s petition shows that it contains AMC’s opposition to its motion

to admit fourth-party complaint among its annexes. The rest of the pleadings have been

subsequently submitted as attachments in Metrobank’s Reply. A reading of these pleadings

shows that their arguments are the same as those stated in the orders of the trial court and the

Court of Appeals. Thus, even if Metrobank’s petition did not contain some of AMC’s pleadings,

the Court still had the benefit of a clear narration of facts and arguments according to both

parties’ perspectives. In this broader view, the mischief that the Rules of Court seeks to avoid has

not really been present. If at all, the omission is not a grievous one that the spirit of liberality

cannot address.

The Merits of the Main Issue

The main issue poses to us two essential points that must be addressed. First, are quasi-contracts

included in claims that should be filed pursuant to Rule 86, Section 5 of the Rules of Court?

Second, if so, is Metrobank’s claim against the Estate of Jose Chua based on a quasi-contract?

Quasi-contracts are included in

claims that should be filed under Rule

86, Section 5 of the Rules of Court

In Maclan v. Garcia, Gabriel Maclan filed a civil case to recover from Ruben Garcia the

necessary expenses he spent as possessor of a piece of land. Garcia acquired the land as an heir

of its previous owner. He set up the defense that this claim should have been filed in the special

proceedings to settle the estate of his predecessor. Maclan, on the other hand, contended that his

claim arises from law and not from contract, express or implied. Thus, it need not be filed in the

settlement of the estate of Garcia’s predecessor, as mandated by Section 5, Rule 87 of the Rules

of Court (now Section 5, Rule 86).

The Court held under these facts that a claim for necessary expenses spent as previous possessor

of the land is a kind of quasi-contract. Citing Leung Ben v. O’Brien, it explained that the term

"implied contracts," as used in our remedial law, originated from the common law where

obligations derived from quasi-contracts and from law are both considered as implied contracts.

Thus, the term quasi-contract is included in the concept "implied contracts" as used in the Rules

of Court. Accordingly, liabilities of the deceased arising from quasi-contracts should be filed as

claims in the settlement of his estate, as provided in Section 5, Rule 86 of the Rules of Court.

Metrobank’s fourth-party complaint is

based on quasi-contract

Both the RTC and the CA described Metrobank’s claim against Chua’s estate as one based on

quasi-contract. A quasi-contract involves a juridical relation that the law creates on the basis of

certain voluntary, unilateral and lawful acts of a person, to avoid unjust enrichment. The Civil

Code provides an enumeration of quasi-contracts, but the list is not exhaustive and merely

provides examples.

According to the CA, Metrobank’s fourth-party complaint falls under the quasi-contracts

enunciated in Article 2154 of the Civil Code. Article 2154 embodies the concept "solutio

indebiti" which arises when something is delivered through mistake to a person who has no right

to demand it. It obligates the latter to return what has been received through mistake.

Solutio indebiti, as defined in Article 2154 of the Civil Code, has two indispensable requisites:

first, that something has been unduly delivered through mistake; and second, that something was

received when there was no right to demand it.

In its fourth-party complaint, Metrobank claims that Chua’s estate should reimburse it if it

becomes liable on the checks that it deposited to Ayala Lumber and Hardware’s account upon

Chua’s instructions.

This fulfills the requisites of solutio indebiti. First, Metrobank acted in a manner akin to a

mistake when it deposited the AMC checks to Ayala Lumber and Hardware’s account; because

of Chua’s control over AMC’s operations, Metrobank assumed that the checks payable to AMC

could be deposited to Ayala Lumber and Hardware’s account. Second, Ayala Lumber and

Hardware had no right to demand and receive the checks that were deposited to its account;

despite Chua’s control over AMC and Ayala Lumber and Hardware, the two entities are distinct,

and checks exclusively and expressly payable to one cannot be deposited in the account of the

other. This disjunct created an obligation on the part of Ayala Lumber and Hardware, through its

sole proprietor, Chua, to return the amount of these checks to Metrobank.

The Court notes, however, that its description of Metrobank’s fourth-party complaint as a

claimclosely analogous to solutio indebiti is only to determine the validity of the lower courts’

orders denying it. It is not an adjudication determining the liability of Chua’s estate against

Metrobank. The appropriate trial court should still determine whether Metrobank has a lawful

claim against Chua’s estate based on quasi-contract

Metrobank’s fourth-party complaint,

as a contingent claim, falls within the

claims that should be filed under

Section 5, Rule 86 of the Rules of

Court

A distinctive character of Metrobank’s fourth-party complaint is its contingent nature – the claim

depends on the possibility that Metrobank would be adjudged liable to AMC, a future event that

may or may not happen. This characteristic unmistakably marks the complaint as a contingent

one that must be included in the claims falling under the terms of Section 5, Rule 86 of the Rules

of Court:

Sec. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. – All claims

for money against the decedent, arising from contract, express or implied, whether the same be

due, not due, or contingent, all claims for funeral expenses and expenses for the last sickness of

the decedent, and judgment for money against the decedent, must be filed within the time limited

in the notice. [italics ours]

Specific provisions of Section 5, Rule

86 of the Rules of Court prevail over

general provisions of Section 11, Rule

6 of the Rules of Court

Metrobank argues that Section 11, Rule 6 of the Rules of Court should apply because it

impleaded Chua’s estate for reimbursement in the same transaction upon which it has been sued

by AMC. On this point, the Court supports the conclusion of the CA, to wit:

Notably, a comparison of the respective provisions of Section 11, Rule 6 and Section 5, Rule 86

of the Rules of Court readily shows that Section 11, Rule 6 applies to ordinary civil actions while

Section 5, Rule 86 specifically applies to money claims against the estate. The specific

provisions of Section 5, Rule 86 x x x must therefore prevail over the general provisions of

Section 11, Rule 6.

We read with approval the CA’s use of the statutory construction principle of lex specialis

derogat generali, leading to the conclusion that the specific provisions of Section 5, Rule 86 of

the Rules of Court should prevail over the general provisions of Section 11, Rule 6 of the Rules

of Court; the settlement of the estate of deceased persons (where claims against the deceased

should be filed) is primarily governed by the rules on special proceedings, while the rules

provided for ordinary claims, including Section 11, Rule 6 ofthe Rules of Court, merely apply

suppletorily.

In sum, on all counts in the considerations material to the issues posed, the resolution points to

the affirmation of the assailed CA decision and resolution. Metrobank's claim in its fourth-party

complaint against Chua's estate is based on quasi-contract. It is also a contingent claim that

depends on another event. Both belong to the category of claims against a deceased person that

should be filed under Section 5, Rule 86 of the Rules of Comi and, as such, should have been so

filed in Special Proceedings No. 99-0023.

WHEREFORE, premises considered, we hereby DENY the petition for lack of merit. The

decision of the Court of Appeals dated August 25, 2005, holding that the Regional Trial Court of

Quezon City, Branch 80, did not commit grave abuse of discretion in denying Metropolitan Bank

& Trust Company's motion for leave to admit fourth-party complaint Is

AFFIRMED. Costs against Metropolitan Bank & Trust Company.

II.III G.R. No. 170498               January 9, 2013

METROPOLITAN BANK & TRUST COMPANY, Petitioner, 

vs. ABSOLUTE MANAGEMENT CORPORATION, Respondent.

D E C I S I O N

BRION, J.:

We resolve petitioner Metropolitan Bank & Trust Company's (Metro bank's) petition for review

on certiorari1seeking the reversal of the decision2 dated August 25, 2005 and the

resolution3 dated November 17, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 86336.

The assailed decision affirmed the order4 dated May 7, 2004 of the Regional Trial Court (RTC)

of Quezon City, Branch 80. The RTC had denied the admission of Metrobank's Fourth-Party

Complaint5 against the Estate of Jose L. Chua for being a money claim that falls under Section 5,

Rule 86 of the Rules of Court; the claim should have been filed in the pending judicial settlement

of Chua’s estate before the RTC of Pasay City. The CA affirmed the RTC’s order based on the

same ground.

Factual Antecedents

On October 5, 2000, Sherwood Holdings Corporation, Inc. (SHCI) filed a complaint for sum of

money against Absolute Management Corporation (AMC). The complaint was docketed as Civil

Case No. Q-00-42105 and was assigned to the RTC of Quezon City, Branch 80.6

SHCI alleged in its complaint that it made advance payments to AMC for the purchase of 27,000

pieces of plywood and 16,500 plyboards in the sum of P12,277,500.00, covered by Metrobank

Check Nos. 1407668502, 140768507, 140768530, 140768531, 140768532, 140768533 and

140768534. These checks were all crossed, and were all made payable to AMC. They were given

to Chua, AMC’s General Manager, in 1998.7

Chua died in 1999, 8 and a special proceeding for the settlement of his estate was commenced

before the RTC of Pasay City. This proceeding was pending at the time AMC filed its answer

with counterclaims and third-party complaint.9

SHCI made demands on AMC, after Chua’s death, for allegedly undelivered items

worth P8,331,700.00. According to AMC, these transactions could not be found in its records.

Upon investigation, AMC discovered that in 1998, Chua received from SHCI 18 Metrobank

checks worth P31,807,500.00. These were all payable to AMC and were crossed or "for payee’s

account only."10

In its answer with counterclaims and third-party complaint,11 AMC averred that it had no

knowledge of Chua’s transactions with SHCI and it did not receive any money from the latter.

AMC also asked the RTC to hold Metrobank liable for the subject checks in case it is adjudged

liable to SHCI.

Metrobank filed a motion for bill of particulars,12 seeking to clarify certain ambiguous statements

in AMC’s answer. The RTC granted the motion but AMC failed to submit the required bill of

particulars. Hence, Metrobank filed a motion to strike out the third-party complaint.13

In the meantime, Metrobank filed a motion to dismiss14 against AMC on the ground that the

latter engaged in prohibited forum shopping. According to Metrobank, AMC’s claim against it is

the same claim that it raised against Chua’s estate in Special Proceedings No. 99-0023 before the

RTC of Pasay City, Branch 112. The RTC subsequently denied this motion.15

The RTC of Quezon City opted to defer consideration16 of Metrobank’s motion to strike out

third-party complaint17and it instead granted AMC’s motion for leave to serve written

interrogatories on the third-party defendant.18While Metrobank filed its answer to the written

interrogatories, AMC was again directed by the RTC, in an order19dated August 13, 2003, to

submit its bill of particulars. Instead, AMC filed a motion for reconsideration20 which was denied

in an order21 dated October 28, 2003. AMC still did not file its bill of particulars. The RTC, on

the other hand, did not act on Metrobank’s motion to strike out AMC’s third-party complaint.22

In its answer23 dated December 1, 2003, Metrobank admitted that it deposited the checks in

question to the account of Ayala Lumber and Hardware, a sole proprietorship Chua owned and

managed. The deposit was allegedly done with the knowledge and consent of AMC. According

to

Metrobank, Chua then gave the assurance that the arrangement for the handling of the checks

carried AMC’s consent. Chua also submitted documents showing his position and interest in

AMC. These documents, as well as AMC’s admission in its answer that it allowed Chua to

manage AMC with a relative free hand, show that it knew of Chua’s arrangement with

Metrobank. Further, Chua’s records show that the proceeds of the checks were remitted to AMC

which cannot therefore now claim that it did not receive these proceeds.

Metrobank also raised the defense of estoppel. According to Metrobank, AMC had knowledge of

its arrangements with Chua for several years. Despite this arrangement, AMC did not object to

nor did it call the attention of Metrobank about Chua’s alleged lack of authority to deposit the

checks in Ayala Lumber and Hardware’s account. At this point, AMC is already estopped from

questioning Chua’s authority to deposit these checks in Ayala Lumber and Hardware’s account.

Lastly, Metrobank asserted that AMC gave Chua unbridled control in managing AMC’s affairs.

This measure of control amounted to gross negligence that was the proximate cause of the loss

that AMC must now bear.

Subsequently, Metrobank filed a motion for leave to admit fourth-party complaint24 against

Chua’s estate. It alleged that Chua’s estate should reimburse Metrobank in case it would be held

liable in the third-party complaint filed against it by AMC.

The RTC’s Ruling

In an order25 dated May 7, 2004, the RTC denied Metrobank’s motion. It likewise denied

Metrobank’s motion for reconsideration in an order26 dated July 7, 2004.

The RTC categorized Metrobank’s allegation in the fourth-party complaint as a "cobro de lo

indebido"27 – a kind of quasi-contract that mandates recovery of what has been improperly paid.

Quasi-contracts fall within the concept of implied contracts that must be included in the claims

required to be filed with the judicial settlement of the deceased’s estate under Section 5, Rule 86

of the Rules of Court. As such claim, it should have been filed in Special Proceedings No. 99-

0023, not before the RTC as a fourth-party complaint. The RTC, acting in the exercise of its

general jurisdiction, does not have the authority to adjudicate the fourth-party complaint. As a

trial court hearing an ordinary action, it cannot resolve matters pertaining to special proceedings

because the latter is subject to specific rules.

Metrobank responded to the RTC ruling by filing a petition for certiorari28 under Rule 65 before

the CA.

The CA’s Ruling

The CA affirmed the RTC’s ruling that Metrobank’s fourth-party complaint should have been

filed in Special Proceedings No. 99-0023.29 According to the CA, the relief that Metrobank

prayed for was based on a quasi-contract and was a money claim categorized as an implied

contract that should be filed under Section 5, Rule 86 of the Rules of Court.

Based on the statutory construction principle of lex specialis derogat generali, the CA held that

Section 5, Rule 86 of the Rules of Court is a special provision that should prevail over the

general provisions of Section 11, Rule 6 of the Rules of Court. The latter applies to money

claims in ordinary actions while a money claim against a person already deceased falls under the

settlement of his estate that is governed by the rules on special proceedings. If at all, rules for

ordinary actions only apply suppletorily to special proceedings.

The Present Petition

In its present petition for review on certiorari,30 Metrobank asserts that it should be allowed to

file a fourth-party complaint against Chua’s estate in the proceedings before the RTC; its fourth-

party complaint was filed merely to enforce its right to be reimbursed by Chua’s estate in case

Metrobank is held liable to AMC. Hence, Section 11, Rule 6 of the Rules of Court should apply.

AMC, in its comment,31 maintains the line that the CA and the RTC rulings should be followed,

i.e., that Metrobank’s claim is a quasi-contract that should be filed as a claim under Section 5,

Rule 86 of the Rules of Court.

AMC also challenges the form of Metrobank’s petition for failure to comply with Section 4, Rule

45 of the Rules of Court. This provision requires petitions filed before the Supreme Court to be

accompanied by "such material portions of the record as would support the petition."

According to AMC, the petition’s annexes are mostly Metrobank’s pleadings and court

issuances. It did not append all relevant AMC pleadings before the RTC and the CA. For this

reason, the petition should have been dismissed outright.

Issues

The parties’ arguments, properly joined, present to us the following issues:

1) Whether the petition for review on certiorari filed by Metrobank before the Supreme

Court complies with Section 4, Rule 45 of the Rules of Court; and

2) Whether Metrobank’s fourth-party complaint against Chua’s estate should be allowed.

The Court’s Ruling

The Present Petition Complies With Section 4, Rule 45 of the Rules of Court

AMC posits that Metrobank’s failure to append relevant AMC pleadings submitted to the RTC

and to the CA violated Section 4, Rule 45 of the Rules of Court,32 and is a sufficient ground to

dismiss the petition under Section 5, Rule 45 of the Rules of Court.33

We disagree with AMC’s position.

In F.A.T. Kee Computer Systems, Inc. v. Online Networks International, Inc.,34 Online Networks

International, Inc. similarly assailed F.A.T. Kee Computer Systems, Inc.’s failure to attach the

transcript of stenographic notes (TSN) of the RTC proceedings, and claimed this omission to be

a violation of Section 4, Rule 45 of the Rules of Court that warranted the petition’s dismissal.

The Court held that the defect was not fatal, as the TSN of the proceedings before the RTC forms

part of the records of the case. Thus, there was no incurable omission that warranted the outright

dismissal of the petition.

The Court significantly pointed out in F.A.T. Kee that the requirement in Section 4, Rule 45 of

the Rules of Court is not meant to be an absolute rule whose violation would automatically lead

to the petition’s dismissal.35 The Rules of Court has not been intended to be totally rigid. In fact,

the Rules of Court provides that the Supreme Court "may require or allow the filing of such

pleadings, briefs, memoranda or documents as it may deem necessary within such periods and

under such conditions as it may consider appropriate";36 and "[i]f the petition is given due course,

the Supreme Court may require the elevation of the complete record of the case or specified parts

thereof within fifteen (15) days from notice."37 These provisions are in keeping with the

overriding standard that procedural rules should be liberally construed to promote their objective

and to assist the parties in obtaining a just, speedy and inexpensive determination of every action

or proceeding.38

Under this guiding principle, we do not see Metrobank’s omission to be a fatal one that should

warrant the petition’s outright dismissal. To be sure, the omission to submit the adverse party’s

pleadings in a petition before the Court is not a commendable practice as it may lead to an

unduly biased narration of facts and arguments that masks the real issues before the Court. Such

skewed presentation could lead to the waste of the Court’s time in sifting through the maze of the

parties’ narrations of facts and arguments and is a danger the Rules of Court seeks to avoid.

Our examination of Metrobank’s petition shows that it contains AMC’s opposition to its motion

to admit fourth-party complaint among its annexes. The rest of the pleadings have been

subsequently submitted as attachments in Metrobank’s Reply. A reading of these pleadings

shows that their arguments are the same as those stated in the orders of the trial court and the

Court of Appeals. Thus, even if Metrobank’s petition did not contain some of AMC’s pleadings,

the Court still had the benefit of a clear narration of facts and arguments according to both

parties’ perspectives. In this broader view, the mischief that the Rules of Court seeks to avoid has

not really been present. If at all, the omission is not a grievous one that the spirit of liberality

cannot address.

The Merits of the Main Issue

The main issue poses to us two essential points that must be addressed. First, are quasi-contracts

included in claims that should be filed pursuant to Rule 86, Section 5 of the Rules of Court?

Second, if so, is Metrobank’s claim against the Estate of Jose Chua based on a quasi-contract?

Quasi-contracts are included in

claims that should be filed under Rule

86, Section 5 of the Rules of Court

In Maclan v. Garcia,39 Gabriel Maclan filed a civil case to recover from Ruben Garcia the

necessary expenses he spent as possessor of a piece of land. Garcia acquired the land as an heir

of its previous owner. He set up the defense that this claim should have been filed in the special

proceedings to settle the estate of his predecessor. Maclan, on the other hand, contended that his

claim arises from law and not from contract, express or implied. Thus, it need not be filed in the

settlement of the estate of Garcia’s predecessor, as mandated by Section 5, Rule 87 of the Rules

of Court (now Section 5, Rule 86).

The Court held under these facts that a claim for necessary expenses spent as previous possessor

of the land is a kind of quasi-contract. Citing Leung Ben v. O’Brien,40 it explained that the term

"implied contracts," as used in our remedial law, originated from the common law where

obligations derived from quasi-contracts and from law are both considered as implied contracts.

Thus, the term quasi-contract is included in the concept "implied contracts" as used in the Rules

of Court. Accordingly, liabilities of the deceased arising from quasi-contracts should be filed as

claims in the settlement of his estate, as provided in Section 5, Rule 86 of the Rules of Court.41

Metrobank’s fourth-party complaint is

based on quasi-contract

Both the RTC and the CA described Metrobank’s claim against Chua’s estate as one based on

quasi-contract. A quasi-contract involves a juridical relation that the law creates on the basis of

certain voluntary, unilateral and lawful acts of a person, to avoid unjust enrichment.42 The Civil

Code provides an enumeration of quasi-contracts,43 but the list is not exhaustive and merely

provides examples.44

According to the CA, Metrobank’s fourth-party complaint falls under the quasi-contracts

enunciated in Article 2154 of the Civil Code.45 Article 2154 embodies the concept "solutio

indebiti" which arises when something is delivered through mistake to a person who has no right

to demand it. It obligates the latter to return what has been received through mistake.46

Solutio indebiti, as defined in Article 2154 of the Civil Code, has two indispensable requisites:

first, that something has been unduly delivered through mistake; and second, that something was

received when there was no right to demand it.47

In its fourth-party complaint, Metrobank claims that Chua’s estate should reimburse it if it

becomes liable on the checks that it deposited to Ayala Lumber and Hardware’s account upon

Chua’s instructions.

This fulfills the requisites of solutio indebiti. First, Metrobank acted in a manner akin to a

mistake when it deposited the AMC checks to Ayala Lumber and Hardware’s account; because

of Chua’s control over AMC’s operations, Metrobank assumed that the checks payable to AMC

could be deposited to Ayala Lumber and Hardware’s account. Second, Ayala Lumber and

Hardware had no right to demand and receive the checks that were deposited to its account;

despite Chua’s control over AMC and Ayala Lumber and Hardware, the two entities are distinct,

and checks exclusively and expressly payable to one cannot be deposited in the account of the

other. This disjunct created an obligation on the part of Ayala Lumber and Hardware, through its

sole proprietor, Chua, to return the amount of these checks to Metrobank.

The Court notes, however, that its description of Metrobank’s fourth-party complaint as a

claimclosely analogous to solutio indebiti is only to determine the validity of the lower courts’

orders denying it. It is not an adjudication determining the liability of Chua’s estate against

Metrobank. The appropriate trial court should still determine whether Metrobank has a lawful

claim against Chua’s estate based on quasi-contract.1âwphi1

Metrobank’s fourth-party complaint,

as a contingent claim, falls within the

claims that should be filed under

Section 5, Rule 86 of the Rules of

Court

A distinctive character of Metrobank’s fourth-party complaint is its contingent nature – the claim

depends on the possibility that Metrobank would be adjudged liable to AMC, a future event that

may or may not happen. This characteristic unmistakably marks the complaint as a contingent

one that must be included in the claims falling under the terms of Section 5, Rule 86 of the Rules

of Court:

Sec. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. – All claims

for money against the decedent, arising from contract, express or implied, whether the same be

due, not due, or contingent, all claims for funeral expenses and expenses for the last sickness of

the decedent, and judgment for money against the decedent, must be filed within the time limited

in the notice. [italics ours]

Specific provisions of Section 5, Rule

86 of the Rules of Court prevail over

general provisions of Section 11, Rule

6 of the Rules of Court

Metrobank argues that Section 11, Rule 6 of the Rules of Court should apply because it

impleaded Chua’s estate for reimbursement in the same transaction upon which it has been sued

by AMC. On this point, the Court supports the conclusion of the CA, to wit:

Notably, a comparison of the respective provisions of Section 11, Rule 6 and Section 5, Rule 86

of the Rules of Court readily shows that Section 11, Rule 6 applies to ordinary civil actions while

Section 5, Rule 86 specifically applies to money claims against the estate. The specific

provisions of Section 5, Rule 86 x x x must therefore prevail over the general provisions of

Section 11, Rule 6.48

We read with approval the CA’s use of the statutory construction principle of lex specialis

derogat generali, leading to the conclusion that the specific provisions of Section 5, Rule 86 of

the Rules of Court should prevail over the general provisions of Section 11, Rule 6 of the Rules

of Court; the settlement of the estate of deceased persons (where claims against the deceased

should be filed) is primarily governed by the rules on special proceedings, while the rules

provided for ordinary claims, including Section 11, Rule 6 ofthe Rules of Court, merely apply

suppletorily.49

In sum, on all counts in the considerations material to the issues posed, the resolution points to

the affirmation of the assailed CA decision and resolution. Metrobank's claim in its fourth-party

complaint against Chua's estate is based on quasi-contract. It is also a contingent claim that

depends on another event. Both belong to the category of claims against a deceased person that

should be filed under Section 5, Rule 86 of the Rules of Comi and, as such, should have been so

filed in Special Proceedings No. 99-0023.

WHEREFORE, premises considered, we hereby DENY the petition for lack of merit. The

decision of the Court of Appeals dated August 25, 2005, holding that the Regional Trial Court of

Quezon City, Branch 80, did not commit grave abuse of discretion in denying Metropolitan Bank

& Trust Company's motion for leave to admit fourth-party complaint Is

AFFIRMED. Costs against Metropolitan Bank & Trust Company.

Marianne Grace C. De Vera

Boston Equity Resources vs. Court of Appeals and Lolita ToledoG. R. No. 173946

July 19, 2013

Section 6, Rule 86

PART 1

Case Doctrine

It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in

this matter. Said provision gives the creditor the right to "proceed against anyone of the solidary

debtors or some or all of them simultaneously." The choice is undoubtedly left to the solidary

creditor to determine against whom he will enforce collection. In case of the death of one of the

solidary debtors, he (the creditor) may, if he so chooses, proceed against the surviving solidary

debtors without necessity of filing a claim in the estate of the deceased debtors. It is not

mandatory for him to have the case dismissed as against the surviving debtors and file its claim

against the estate of the deceased solidary debtor, x x x. For to require the creditor to proceed

against the estate, making it a condition precedent for any collection action against the surviving

debtors to prosper, would deprive him of his substantive rights provided by Article 1216 of the

As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were

applied literally, Article 1216 of the New Civil Code would, in effect, be repealed since under

the Rules of Court, petitioner has no choice but to proceed against the estate of [the deceased

debtor] only. Obviously, this provision diminishes the [creditor’s] right under the New Civil

Code to proceed against any one, some or all of the solidary debtors. Such a construction is not

sanctioned by principle, which is too well settled to require citation, that a substantive law cannot

be amended by a procedural rule. Otherwise stated, Section 6, Rule 86 of the Revised Rules of

Court cannot be made to prevail over Article 1216 of the New Civil Code, the former being

merely procedural, while the latter, substantive.

Part II

Case Digest

Facts:

Petitioner filed a complaint for sum of money against the spouses Manuel (deceased) and

Lolita Toledo. Respondent instead filed a motion to dismiss the complaint on the ground that the

case should be filed against the estate of Manuel in accordance with Section 5 and 6 of Rule 86.

Issue: Whether or not the estate of Manuel Toledo is an indispensable party

Ruling: No. Applying the foregoing pronouncements to the case at bar, it is clear that the estate

of Manuel is not an indispensable party to the collection case, for the simple reason that the

obligation of Manuel and his wife, respondent herein, is solidary.

In other words, the collection case can proceed and the demands of petitioner can be satisfied by

respondent only, even without impleading the estate of Manuel. Consequently, the estate of

Manuel is not an indispensable party to petitioner’s complaint for sum of money.

However, the Court of Appeals, agreeing with the contention of respondent, held that the claim

of petitioner should have been filed against the estate of Manuel in accordance with Sections 5

and 6 of Rule 86 of the Rules of Court. The aforementioned provisions

provide:cralavvonlinelawlibrary

SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims for money against the decedent, arising from contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and judgment for money against the decedent, must be filed within the time limited in the notice; otherwise, they are barred forever, except that they may be set forth as counterclaims in any action that the executor or administrator may bring against the claimants. x x x.

SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is solidary with another debtor, the claim shall be filed against the decedent as if he were the only debtor, without prejudice to the right of the estate to recover contribution from the other debtor. x x x.

The Court of Appeals erred in its interpretation of the above-quoted provisions.

In construing Section 6, Rule 87 of the old Rules of Court, the precursor of Section 6, Rule 86 of the Revised Rules of Court, which latter provision has been retained in the present Rules of Court without any revisions, the Supreme Court, in the case of Manila Surety & Fidelity Co., Inc. v. Villarama, et. al.,49 held:50

Construing Section 698 of the Code of Civil Procedure from whence [Section 6, Rule 87] was

taken, this Court held that where two persons are bound in solidum for the same debt and one of

them dies, the whole indebtedness can be proved against the estate of the latter, the decedent’s

liability being absolute and primary;  x x x. It is evident from the foregoing that Section 6 of

Rule 87 provides the procedure should the creditor desire to go against the deceased debtor, but

there is certainly nothing in the said provision making compliance with such procedure a

condition precedent before an ordinary action against the surviving solidary debtors, should the

creditor choose to demand payment from the latter, could be entertained to the extent that failure

to observe the same would deprive the court jurisdiction to take cognizance of the action against

the surviving debtors. Upon the other hand, the Civil Code expressly allows the creditor to

proceed against any one of the solidary debtors or some or all of them simultaneously. There is,

therefore, nothing improper in the creditor’s filing of an action against the surviving solidary

debtors alone, instead of instituting a proceeding for the settlement of the estate of the deceased

debtor wherein his claim could be filed.

The foregoing ruling was reiterated and expounded in the later case of Philippine National Bank

v. Asuncion51 where the Supreme Court pronounced:cralavvonlinelawlibrary

A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing

therein prevents a creditor from proceeding against the surviving solidary debtors. Said provision

merely sets up the procedure in enforcing collection in case a creditor chooses to pursue his

claim against the estate of the deceased solidary debtor. The rule has been set forth that a creditor

(in a solidary obligation) has the option whether to file or not to file a claim against the estate of

the solidary debtor. x x x

Part III

Full Case

SECOND DIVISION

G.R. No. 173946, June 19, 2013

BOSTON EQUITY RESOURCES, INC., Petitioner, v. COURT OF APPEALS AND LOLITA G. TOLEDO,Respondents.

D E C I S I O N

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside: (1) the Decision,1 dated 28 February 2006 and (2) the Resolution,2 dated 1 August 2006 of the Court of

Appeals in CA-G.R. SP No. 88586. The challenged decision granted herein respondent’s petition forcertiorari upon a finding that the trial court committed grave abuse of discretion in denying respondent’s motion to dismiss the complaint against her.3 Based on this finding, the Court of Appeals reversed and set aside the Orders, dated 8 November 20044 and 22 December 2004,5respectively, of the Regional Trial Court (RTC) of Manila, Branch 24.

The Facts

On 24 December 1997, petitioner filed a complaint for sum of money with a prayer for the issuance of a writ of preliminary attachment against the spouses Manuel and Lolita Toledo.6 Herein respondent filed an Answer dated 19 March 1998 but on 7 May 1998, she filed a Motion for Leave to Admit Amended Answer7 in which she alleged, among others, that her husband and co-defendant, Manuel Toledo (Manuel), is already dead.8 The death certificate9 of Manuel states "13 July 1995" as the date of death. As a result, petitioner filed a motion, dated 5 August 1999, to require respondent to disclose the heirs of Manuel.10 In compliance with the verbal order of the court during the 11 October 1999 hearing of the case, respondent submitted the required names and addresses of the heirs.11Petitioner then filed a Motion for Substitution,12 dated 18 January 2000, praying that Manuel be substituted by his children as party-defendants. It appears that this motion was granted by the trial court in an Order dated 9 October 2000.13

Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its pre-trial order containing, among others, the dates of hearing of the case.14

The trial of the case then proceeded. Herein petitioner, as plaintiff, presented its evidence and its exhibits were thereafter admitted.

On 26 May 2004, the reception of evidence for herein respondent was cancelled upon agreement of the parties. On 24 September 2004, counsel for herein respondent was given a period of fifteen days within which to file a demurrer to evidence.15 However, on 7 October 2004, respondent instead filed a motion to dismiss the complaint, citing the following as grounds: (1) that the complaint failed to implead an indispensable party or a real party in interest; hence, the case must be dismissed for failure to state a cause of action; (2) that the trial court did not acquire jurisdiction over the person of Manuel pursuant to Section 5, Rule 86 of the Revised Rules of Court; (3) that the trial court erred in ordering the substitution of the deceased Manuel by his heirs; and (4) that the court must also dismiss the case against Lolita Toledo in accordance with Section 6, Rule 86 of the Rules of Court.16

The trial court, in an Order dated 8 November 2004, denied the motion to dismiss for having been filed out of time, citing Section 1, Rule 16 of the 1997 Rules of Court which states that: "[W]ithin the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made x x x."17 Respondent’s motion for reconsideration of the order of denial was likewise denied on the ground that "defendants’ attack on the jurisdiction of this Court is now barred by estoppel by laches" since respondent failed to raise the issue despite several chances to do so.18

Aggrieved, respondent filed a petition for certiorari with the Court of Appeals alleging that the

trial court seriously erred and gravely abused its discretion in denying her motion to dismiss despite discovery, during the trial of the case, of evidence that would constitute a ground for dismissal of the case.19

The Court of Appeals granted the petition based on the following grounds:cralavvonlinelawlibrary

It is elementary that courts acquire jurisdiction over the person of the defendant x x x only when the latter voluntarily appeared or submitted to the court or by coercive process issued by the court to him, x x x. In this case, it is undisputed that when [petitioner] Boston filed the complaint on December 24, 1997, defendant Manuel S. Toledo was already dead, x x x. Such being the case, the court a quo could not have acquired jurisdiction over the person of defendant Manuel S. Toledo.

x x x the court a quo’s denial of [respondent’s] motion to dismiss was based on its finding that [respondent’s] attack on the jurisdiction of the court was already barred bylaches as [respondent] failed to raise the said ground in its [sic] amended answer and during the pre-trial, despite her active participation in the proceedings.

However, x x x it is well-settled that issue on jurisdiction may be raised at any stage of the proceeding, even for the first time on appeal. By timely raising the issue on jurisdiction in her motion to dismiss x x x [respondent] is not estopped [from] raising the question on jurisdiction. Moreover, when issue on jurisdiction was raised by [respondent], the court a quo had not yet decided the case, hence, there is no basis for the court a quo to invoke estoppel to justify its denial of the motion for reconsideration;chanroblesvirtualawlibrary

It should be stressed that when the complaint was filed, defendant Manuel S. Toledo was already dead. The complaint should have impleaded the estate of Manuel S. Toledo as defendant, not only the wife, considering that the estate of Manuel S. Toledo is an indispensable party, which stands to be benefited or be injured in the outcome of the case. x x x

x x x x

[Respondent’s] motion to dismiss the complaint should have been granted by public respondent judge as the same was in order. Considering that the obligation of Manuel S. Toledo is solidary with another debtor, x x x, the claim x x x should be filed against the estate of Manuel S. Toledo, in conformity with the provision of Section 6, Rule 86 of the Rules of Court, x x x.20

The Court of Appeals denied petitioner’s motion for reconsideration. Hence, this petition.

The Issues

Petitioner claims that the Court of Appeals erred in not holding that:cralavvonlinelawlibrary

1. Respondent is already estopped from questioning the trial court’s jurisdiction;chanroblesvirtualawlibrary

2. Petitioner never failed to implead an indispensable party as the estate of Manuel is not an indispensable party;chanroblesvirtualawlibrary

3. The inclusion of Manuel as party-defendant is a mere misjoinder of party not warranting the dismissal of the case before the lower court; and

4. Since the estate of Manuel is not an indispensable party, it is not necessary that petitioner file its claim against the estate of Manuel.

In essence, what is at issue here is the correctness of the trial court’s orders denying respondent’s motion to dismiss.

The Ruling of the Court

We find merit in the petition.

Motion to dismiss filed out of time

To begin with, the Court of Appeals erred in granting the writ of certiorari in favor of respondent. Well settled is the rule that the special civil action for certiorari is not the proper remedy to assail the denial by the trial court of a motion to dismiss. The order of the trial court denying a motion to dismiss is merely interlocutory, as it neither terminates nor finally disposes of a case and still leaves something to be done by the court before a case is finally decided on the merits.21 Therefore, "the proper remedy in such a case is to appeal after a decision has been rendered."22

As the Supreme Court held in Indiana Aerospace University v. Comm. on Higher Education:23

A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is resorted only to correct a grave abuse of discretion or a whimsical exercise of judgment equivalent to lack of jurisdiction. Its function is limited to keeping an inferior court within its jurisdiction and to relieve persons from arbitrary acts – acts which courts or judges have no power or authority in law to perform. It is not designed to correct erroneous findings and conclusions made by the courts. (Emphasis supplied)

Even assuming that certiorari is the proper remedy, the trial court did not commit grave abuse of discretion in denying respondent’s motion to dismiss. It, in fact, acted correctly when it issued the questioned orders as respondent’s motion to dismiss was filed SIX YEARS AND FIVE MONTHS AFTER SHE FILED HER AMENDED ANSWER. This circumstance alone already warranted the outright dismissal of the motion for having been filed in clear contravention of the express mandate of Section 1, Rule 16, of the Revised Rules of Court. Under this provision, a motion to dismiss shall be filed within the time for but before the filing of an answer to the complaint or pleading asserting a claim.24

More importantly, respondent’s motion to dismiss was filed after petitioner has completed the presentation of its evidence in the trial court,25 giving credence to petitioner’s and the trial court’s conclusion that the filing of the motion to dismiss was a mere ploy on the part of respondent to delay the prompt resolution of the case against her.

Also worth mentioning is the fact that respondent’s motion to dismiss under consideration herein is not the first motion to dismiss she filed in the trial court. It appears that she had filed an earlier motion to dismiss26 on the sole ground of the unenforceability of petitioner’s claim under the Statute of Frauds, which motion was denied by the trial court. More telling is the following narration of the trial court in its Order denying respondent’s motion for reconsideration of the denial of her motion to dismiss:cralavvonlinelawlibrary

As can be gleaned from the records, with the admission of plaintiff’s exhibits, reception of defendants’ evidence was set on March 31, and April 23, 2004 x x x . On motion of the defendant[s], the hearing on March 31, 2004 was cancelled.

On April 14, 2004, defendants sought the issuance of subpoena ad testificandum and duces tecum to one Gina M. Madulid, to appear and testify for the defendants on April 23, 2004. Reception of defendants’ evidence was again deferred to May 26, June 2 and June 30, 2004, x x x.

On May 13, 2004, defendants sought again the issuance of a subpoena duces tecum and ad testificandum to the said Gina Madulid. On May 26, 2004, reception of defendants [sic] evidence was cancelled upon the agreement of the parties. On July 28, 2004, in the absence of defendants’ witness, hearing was reset to September 24 and October 8, 2004 x x x.

On September 24, 2004, counsel for defendants was given a period of fifteen (15) days to file a demurrer to evidence. On October 7, 2004, defendants filed instead a Motion to Dismiss x x x.27nadcralavvonlinelawlibrary

Respondent’s act of filing multiple motions, such as the first and earlier motion to dismiss and then the motion to dismiss at issue here, as well as several motions for postponement, lends credibility to the position taken by petitioner, which is shared by the trial court, that respondent is deliberately impeding the early disposition of this case.  The filing of the second motion to dismiss was, therefore, "not only improper but also dilatory."28 Thus, the trial court, "far from deviating or straying off course from established jurisprudence on [the] matter, x x x had in fact faithfully observed the law and legal precedents in this case."29 The Court of Appeals, therefore, erred not only in entertaining respondent’s petition for certiorari, it likewise erred in ruling that the trial court committed grave abuse of discretion when it denied respondent’s motion to dismiss.

On whether or not respondent is estopped fromquestioning the jurisdiction of the trial court

At the outset, it must be here stated that, as the succeeding discussions will demonstrate, jurisdiction over the person of Manuel should not be an issue in this case. A protracted discourse

on jurisdiction is, nevertheless, demanded by the fact that jurisdiction has been raised as an issue from the lower court, to the Court of Appeals and, finally, before this Court. For the sake of clarity, and in order to finally settle the controversy and fully dispose of all the issues in this case, it was deemed imperative to resolve the issue of jurisdiction.

1. Aspects of Jurisdiction

Petitioner calls attention to the fact that respondent’s motion to dismiss questioning the trial court’s jurisdiction was filed more than six years after her amended answer was filed. According to petitioner, respondent had several opportunities, at various stages of the proceedings, to assail the trial court’s jurisdiction but never did so for six straight years.  Citing the doctrine laid down in the case of Tijam, et al. v. Sibonghanoy, et al.30 petitioner claimed that respondent’s failure to raise the question of jurisdiction at an earlier stage bars her from later questioning it, especially since she actively participated in the proceedings conducted by the trial court.

Petitioner’s argument is misplaced, in that, it failed to consider that the concept of jurisdiction has several aspects, namely: (1) jurisdiction over the subject matter; (2) jurisdiction over the parties; (3) jurisdiction over the issues of the case; and (4) in cases involving property, jurisdiction over the res or the thing which is the subject of the litigation.31

The aspect of jurisdiction which may be barred from being assailed as a result of estoppel by laches is jurisdiction over the subject matter. Thus, in Tijam, the case relied upon by petitioner, the issue involved was the authority of the then Court of First Instance to hear a case for the collection of a sum of money in the amount of P1,908.00 which amount was, at that time, within the exclusive original jurisdiction of the municipal courts.

In subsequent cases citing the ruling of the Court in Tijam, what was likewise at issue was the jurisdiction of the trial court over the subject matter of the case. Accordingly, in Spouses Gonzaga v. Court of Appeals,32 the issue for consideration was the authority of the regional trial court to hear and decide an action for reformation of contract and damages involving a subdivision lot, it being argued therein that jurisdiction is vested in the Housing and Land Use Regulatory Board pursuant to PD 957 (The Subdivision and Condominium Buyers Protective Decree). In Lee v. Presiding Judge, MTC, Legaspi City,33 petitioners argued that the respondent municipal trial court had no jurisdiction over the complaint for ejectment because the issue of ownership was raised in the pleadings. Finally, in People v. Casuga,34 accused-appellant claimed that the crime of grave slander, of which she was charged, falls within the concurrent jurisdiction of municipal courts or city courts and the then courts of first instance, and that the judgment of the court of first instance, to which she had appealed the municipal court's conviction, should be deemed null and void for want of jurisdiction as her appeal should have been filed with the Court of Appeals or the Supreme Court.

In all of these cases, the Supreme Court barred the attack on the jurisdiction of the respective courts concerned over the subject matter of the case based on estoppel by laches, declaring that parties cannot be allowed to belatedly adopt an inconsistent posture by attacking the jurisdiction of a court to which they submitted their cause voluntarily.35

Here, what respondent was questioning in her motion to dismiss before the trial court was that court’s jurisdiction over the person of defendant Manuel. Thus, the principle of estoppel by laches finds no application in this case. Instead, the principles relating to jurisdiction over the person of the parties are pertinent herein.

The Rules of Court provide:cralavvonlinelawlibrary

RULE 9EFFECT OF FAILURE TO PLEAD

Section 1. Defenses and objections not pleaded. — Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim.

RULE 15MOTIONS

Sec. 8. Omnibus motion. — Subject to the provisions of Section 1 of Rule 9, a motion attacking a pleading, order, judgment, or proceeding shall include all objections then available, and all objections not so included shall be deemed waived.

Based on the foregoing provisions, the "objection on jurisdictional grounds which is not waived even if not alleged in a motion to dismiss or the answer is lack of jurisdiction over the subject matter. x x x Lack of jurisdiction over the subject matter can always be raised anytime, even for the first time on appeal, since jurisdictional issues cannot be waived x x x subject, however, to the principle of estoppel by laches."36

Since the defense of lack of jurisdiction over the person of a party to a case is not one of those defenses which are not deemed waived under Section 1 of Rule 9, such defense must be invoked when an answer or a motion to dismiss is filed in order to prevent a waiver of the defense.37 If the objection is not raised either in a motion to dismiss or in the answer, the objection to the jurisdiction over the person of the plaintiff or the defendant is deemed waived by virtue of the first sentence of the above-quoted Section 1 of  Rule 9 of the Rules of Court.38

The Court of Appeals, therefore, erred when it made a sweeping pronouncement in its questioned decision, stating that "issue on jurisdiction may be raised at any stage of the proceeding, even for the first time on appeal" and that, therefore, respondent timely raised the issue in her motion to dismiss and is, consequently, not estopped from raising the question of jurisdiction. As the question of jurisdiction involved here is that over the person of the defendant Manuel, the same is deemed waived if not raised in the answer or a motion to dismiss. In any case, respondent cannot claim the defense since "lack of jurisdiction over the person, being subject to waiver, is a personal defense which can only be asserted by the party who can thereby waive it by silence."39

2. Jurisdiction over the person of a defendant is acquired through a valid service of summons; trial court did not acquire jurisdiction over the person of Manuel Toledo

In the first place, jurisdiction over the person of Manuel was never acquired by the trial court. A defendant is informed of a case against him when he receives summons. "Summons is a writ by which the defendant is notified of the action brought against him.  Service of such writ is the means by which the court acquires jurisdiction over his person."40

In the case at bar, the trial court did not acquire jurisdiction over the person of Manuel since there was no valid service of summons upon him, precisely because he was already dead even before the complaint against him and his wife was filed in the trial court. The issues presented in this case are similar to those in the case of Sarsaba v. Vda. de Te.41

In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was illegally dismissed from employment and ordering the payment of his monetary claims. To satisfy the claim, a truck in the possession of Sereno’s employer was levied upon by a sheriff of the NLRC, accompanied by Sereno and his lawyer, Rogelio Sarsaba, the petitioner in that case. A complaint for recovery of motor vehicle and damages, with prayer for the delivery of the truck pendente lite was eventually filed against Sarsaba, Sereno, the NLRC sheriff and the NLRC by the registered owner of the truck. After his motion to dismiss was denied by the trial court, petitioner Sarsaba filed his answer. Later on, however, he filed an omnibus motion to dismiss citing, as one of the grounds, lack of jurisdiction over one of the principal defendants, in view of the fact that Sereno was already dead when the complaint for recovery of possession was filed.

Although the factual milieu of the present case is not exactly similar to that of Sarsaba, one of the issues submitted for resolution in both cases is similar: whether or not a case, where one of the named defendants was already dead at the time of its filing, should be dismissed so that the claim may be pursued instead in the proceedings for the settlement of the estate of the deceased defendant. The petitioner in the Sarsaba Case claimed, as did respondent herein, that since one of the defendants died before summons was served on him, the trial court should have dismissed the complaint against all the defendants and the claim should be filed against the estate of the deceased defendant. The petitioner in Sarsaba, therefore, prayed that the complaint be dismissed, not only against Sereno, but as to all the defendants, considering that the RTC did not acquire jurisdiction over the person of Sereno.42 This is exactly the same prayer made by respondent herein in her motion to dismiss.

The Court, in the Sarsaba Case, resolved the issue in this wise:cralavvonlinelawlibrary

x x x We cannot countenance petitioner’s argument that the complaint against the other defendants should have been dismissed, considering that the RTC never acquired jurisdiction over the person of Sereno. The court’s failure to acquire jurisdiction over one’s person is a defense which is personal to the person claiming it.Obviously, it is now impossible for Sereno to invoke the same in view of his death.Neither can petitioner invoke such ground, on behalf of Sereno, so as to reap the benefit of having the case dismissed against all of the defendants. Failure to serve summons on Sereno’s person will not be a cause for the dismissal of the complaint against the other defendants, considering that they have been served with copies of the summons and complaints and have long submitted their respective responsive pleadings. In fact, the other defendants in the complaint were given the chance to raise all possible defenses

and objections personal to them in their respective motions to dismiss and their subsequent answers.43 (Emphasis supplied.)

Hence, the Supreme Court affirmed the dismissal by the trial court of the complaint against Sereno only.

Based on the foregoing pronouncements, there is no basis for dismissing the complaint against respondent herein. Thus, as already emphasized above, the trial court correctly denied her motion to dismiss.

On whether or not the estate of ManuelToledo is an indispensable party

Rule 3, Section 7 of the 1997 Rules of Court states:cralavvonlinelawlibrary

SEC. 7. Compulsory joinder of indispensable parties. — Parties-in-interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants.

An indispensable party is one who has such an interest in the controversy or subject matter of a case that a final adjudication cannot be made in his or her absence, without injuring or affecting that interest. He or she is a party who has not only an interest in the subject matter of the controversy, but "an interest of such nature that a final decree cannot be made without affecting [that] interest or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience. It has also been considered that an indispensable party is a person in whose absence there cannot be a determination between the parties already before the court which is effective, complete or equitable." Further, an indispensable party is one who must be included in an action before it may properly proceed.44

On the other hand, a "person is not an indispensable party if his interest in the controversy or subject matter is separable from the interest of the other parties, so that it will not necessarily be directly or injuriously affected by a decree which does complete justice between them. Also, a person is not an indispensable party if his presence would merely permit complete relief between him or her and those already parties to the action, or if he or she has no interest in the subject matter of the action." It is not a sufficient reason to declare a person to be an indispensable party simply because his or her presence will avoid multiple litigations.45

Applying the foregoing pronouncements to the case at bar, it is clear that the estate of Manuel is not an indispensable party to the collection case, for the simple reason that the obligation of Manuel and his wife, respondent herein, is solidary.

The contract between petitioner, on the one hand and respondent and respondent’s husband, on the other, states:cralavvonlinelawlibrary

FOR VALUE RECEIVED, I/We jointly and severally46 (in solemn) promise to pay BOSTON EQUITY RESOURCES, INC. x x x the sum of PESOS: [ONE MILLION FOUR HUNDRED (P1,400,000.00)] x x x.47

The provisions and stipulations of the contract were then followed by the respective signatures of respondent as "MAKER" and her husband as "CO-MAKER."48 Thus, pursuant to Article 1216 of the Civil Code, petitioner may collect the entire amount of the obligation from respondent only. The aforementioned provision states: "The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected."

In other words, the collection case can proceed and the demands of petitioner can be satisfied by respondent only, even without impleading the estate of Manuel. Consequently, the estate of Manuel is not an indispensable party to petitioner’s complaint for sum of money.

However, the Court of Appeals, agreeing with the contention of respondent, held that the claim of petitioner should have been filed against the estate of Manuel in accordance with Sections 5 and 6 of Rule 86 of the Rules of Court. The aforementioned provisions provide:cralavvonlinelawlibrary

SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims for money against the decedent, arising from contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and judgment for money against the decedent, must be filed within the time limited in the notice; otherwise, they are barred forever, except that they may be set forth as counterclaims in any action that the executor or administrator may bring against the claimants. x x x.

SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is solidary with another debtor, the claim shall be filed against the decedent as if he were the only debtor, without prejudice to the right of the estate to recover contribution from the other debtor. x x x.

The Court of Appeals erred in its interpretation of the above-quoted provisions.

In construing Section 6, Rule 87 of the old Rules of Court, the precursor of Section 6, Rule 86 of the Revised Rules of Court, which latter provision has been retained in the present Rules of Court without any revisions, the Supreme Court, in the case of Manila Surety & Fidelity Co., Inc. v. Villarama, et. al.,49 held:50

Construing Section 698 of the Code of Civil Procedure from whence [Section 6, Rule 87] was taken, this Court held that where two persons are bound in solidum for the same debt and one of them dies, the whole indebtedness can be proved against the estate of the latter, the decedent’s liability being absolute and primary;  x x x. It is evident from the foregoing that Section 6 of Rule 87 provides the procedure should the creditor desire to go against the deceased debtor, but there is certainly nothing in the said provision making compliance with such procedure a condition precedent before an ordinary action against the surviving solidary debtors, should the creditor choose to demand payment from the latter, could be entertained to the extent that failure to observe the same would deprive the court jurisdiction to take cognizance of the action against the surviving debtors. Upon the other hand, the Civil Code expressly allows the creditor to proceed against any one of the solidary debtors or some or all of them simultaneously. There is,

therefore, nothing improper in the creditor’s filing of an action against the surviving solidary debtors alone, instead of instituting a proceeding for the settlement of the estate of the deceased debtor wherein his claim could be filed.

The foregoing ruling was reiterated and expounded in the later case of Philippine National Bank v. Asuncion51 where the Supreme Court pronounced:cralavvonlinelawlibrary

A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing therein prevents a creditor from proceeding against the surviving solidary debtors. Said provision merely sets up the procedure in enforcing collection in case a creditor chooses to pursue his claim against the estate of the deceased solidary debtor. The rule has been set forth that a creditor (in a solidary obligation) has the option whether to file or not to file a claim against the estate of the solidary debtor. x x x

x x x x

It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter. Said provision gives the creditor the right to "proceed against anyone of the solidary debtors or some or all of them simultaneously." The choice is undoubtedly left to the solidary creditor to determine against whom he will enforce collection. In case of the death of one of the solidary debtors, he (the creditor) may, if he so chooses, proceed against the surviving solidary debtors without necessity of filing a claim in the estate of the deceased debtors. It is not mandatory for him to have the case dismissed as against the surviving debtors and file its claim against the estate of the deceased solidary debtor, x x x. For to require the creditor to proceed against the estate, making it a condition precedent for any collection action against the surviving debtors to prosper, would deprive him of his substantive rights provided by Article 1216 of the New Civil Code. (Emphasis supplied.)

As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were applied literally, Article 1216 of the New Civil Code would, in effect, be repealed since under the Rules of Court, petitioner has no choice but to proceed against the estate of [the deceased debtor] only. Obviously, this provision diminishes the [creditor’s] right under the New Civil Code to proceed against any one, some or all of the solidary debtors. Such a construction is not sanctioned by principle, which is too well settled to require citation, that a substantive law cannot be amended by a procedural rule. Otherwise stated, Section 6, Rule 86 of the Revised Rules of Court cannot be made to prevail over Article 1216 of the New Civil Code, the former being merely procedural, while the latter, substantive.

Based on the foregoing, the estate of Manuel is not an indispensable party and the case can proceed as against respondent only. That petitioner opted to collect from respondent and not from the estate of Manuel is evidenced by its opposition to respondent’s motion to dismiss asserting that the case, as against her, should be dismissed so that petitioner can proceed against the estate of Manuel.

On whether or not the inclusion of Manuel asparty defendant is a misjoinder of party

Section 11 of Rule 3 of the Rules of Court states that "[n]either misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately."

Based on the last sentence of the afore-quoted provision of law, a misjoined party must have the capacity to sue or be sued in the event that the claim by or against the misjoined party is pursued in a separate case. In this case, therefore, the inclusion of Manuel in the complaint cannot be considered a misjoinder, as in fact, the action would have proceeded against him had he been alive at the time the collection case was filed by petitioner. This being the case, the remedy provided by Section 11 of Rule 3 does not obtain here. The name of Manuel as party-defendant cannot simply be dropped from the case. Instead, the procedure taken by the Court in Sarsaba v. Vda. de Te,52 whose facts, as mentioned earlier, resemble those of this case, should be followed herein.  There, the Supreme Court agreed with the trial court when it resolved the issue of jurisdiction over the person of the deceased Sereno in this wise:cralavvonlinelawlibrary

As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over the person of Patricio Sereno since there was indeed no valid service of summons insofar as Patricio Sereno is concerned. Patricio Sereno died before the summons, together with a copy of the complaint and its annexes, could be served upon him.

However, the failure to effect service of summons unto Patricio Sereno, one of the defendants herein, does not render the action DISMISSIBLE, considering that the three (3) other defendants, x x x, were validly served with summons and the case with respect to the answering defendants may still proceed independently. Be it recalled that the three (3) answering defendants have previously filed a Motion to Dismiss the Complaint which was denied by the Court.

Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed as a claim against the estate of Patricio Sereno, but the case with respect to the three (3) other accused [sic] will proceed. (Emphasis supplied.)53

As a result, the case, as against Manuel, must be dismissed.

In addition, the dismissal of the case against Manuel is further warranted by Section 1 of Rule 3 of the Rules of Court, which states that: [o]nly natural or juridical persons, or entities authorized by law may be parties in a civil action." Applying this provision of law, the Court, in the case of Ventura v. Militante,54 held:cralavvonlinelawlibrary

Parties may be either plaintiffs or defendants. x x x. In order to maintain an action in a court of justice, the plaintiff must have an actual legal existence, that is, he, she or it must be a person in law and possessed of a legal entity as either a natural or an artificial person, and no suit can be lawfully prosecuted save in the name of such a person.

The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he institutes a judicial proceeding, to name the proper party defendant to his cause of action. In a suit or proceeding in personam of an adversary character, the court can acquire no jurisdiction for the purpose of trial or judgment until a party defendant who actually or legally exists and is

legally capable of being sued, is brought before it. It has even been held that the question of the legal personality of a party defendant is a question of substance going to the jurisdiction of the court and not one of procedure.

The original complaint of petitioner named the "estate of Carlos Ngo as represented by surviving spouse Ms. Sulpicia Ventura" as the defendant. Petitioner moved to dismiss the same on the ground that the defendant as named in the complaint had no legal personality. We agree.

x x x. Considering that capacity to be sued is a correlative of the capacity to sue, to the same extent, a decedent does not have the capacity to be sued and may not be named a party defendant in a court action. (Emphases supplied.)

Indeed, where the defendant is neither a natural nor a juridical person or an entity authorized by law, the complaint may be dismissed on the ground that the pleading asserting the claim states no cause of action or for failure to state a cause of action pursuant to Section 1(g) of Rule 16 of the Rules of Court, because a complaint cannot possibly state a cause of action against one who cannot be a party to a civil action.55

Since the proper course of action against the wrongful inclusion of Manuel as party-defendant is the dismissal of the case as against him, thus did the trial court err when it ordered the substitution of Manuel by his heirs. Substitution is proper only where the party to be substituted died during the pendency of the case, as expressly provided for by Section 16, Rule 3 of the Rules of Court, which states:cralavvonlinelawlibrary

Death of party;duty of counsel. — Whenever a party to a pending action dies, and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after such death of the fact thereof, and to give the name and address of his legal representative or representatives. x x x

The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of an executor or administrator x x x.

The court shall forthwith order said legal representative or representatives to appear and be substituted within a period of thirty (30) days from notice. (Emphasis supplied.)

Here, since Manuel was already dead at the time of the filing of the complaint, the court never acquired jurisdiction over his person and, in effect, there was no party to be substituted.

WHEREFORE, the petition is GRANTED. The Decision dated 28 February 2006 and the Resolution dated 1 August 2006 of the Court of Appeals in CA-G.R. SP No. 88586 are REVERSED and SET ASIDE. The Orders of the Regional Trial Court dated 8 November 2004 and 22 December 2004, respectively, in Civil Case No. 97-86672, are REINSTATED. The Regional Trial Court, Branch 24, Manila is hereby DIRECTED to proceed with the trial of Civil Case No. 97-86672 against respondent Lolita G. Toledo only, in accordance with the above pronouncements of the Court, and to decide the case with dispatch.

SO ORDERED.

Carpio, (Chairperson), Brion, Del Castillo, and Villarama, Jr.,* JJ., concur.

(88) GAVINO ALDAMIZ v. THE JUDGE OF THE COURT OF FIRST INSTANCE OF

MINDORO, et. al

Doctrine:

A writ of execution is not the proper procedure to satisfy debts.

Facts:

Santiago Rementeria y Aldamizcogeascoa died in Spain in 1937, and a probate proceeding was

instituted in the same year in the Court of First Instance of Mindoro by Gavino Aldamiz

represented by Atty. Juan L. Luna. Gavino Aldamiz was appointed administrator and as such

was represented by respondent Atty. Juan Luna up to January 21, 1947, when the order

complained for was issued. Juan L. Luna, submitted his accounts for the years 1944, 1945 and

1946 and also a project of partition with a view to closing the proceedings. On said date, the

court approved the accounts by refused to approve the project of partition unless all debts

including attorney's fees be first paid. The Court ordered payment of these amounts within thirty

days. After several demands made upon him by respondent attorney, the Gavino on April 17,

1948, filed an ex-parte motion for execution which was granted by the respondent Court on April

19,1948.

Issue:

Whether or not a writ of execution is the proper procedure to satisfy debts.

Ruling:

No. A writ of execution is not the proper procedure to satisfy debts.

We also hold that the order of execution issued on April 19,1948, is null and void, not only

because it was intended to implement the order of January 21, 1947, which in itself was null and

void, but because a writ of execution is not the proper procedure allowed by the Rules of the

Court for the payment of debts and expenses of administration. The proper procedure is for the

court to order the sale of personal estate or the sale of mortgaged of real property of the deceased

and all debts or expenses of administration should be paid out of the proceeds of the sale or

mortgage. The order for the sale or mortgage should be issued upon motion of the administrator

and with the written notice to all the heirs, legatees and devisees residing in the Philippines,

according to Rule 89, section 3, and Rule 90, section 2. And when sale or mortgage of real estate

is to be made, the regulations contained in Rule 90, section 7, should be complied with.

G.R. No. L-2360          December 29, 1949

GAVINO ALDAMIZ, as administrator of the estate of the deceased Santiago Rementeria y

Aldamizcogeascoa, petitioner, 

vs.

THE JUDGE OF THE COURT OF FIRST INSTANCE OF MINDORO, THE

PROVINCIAL SHERIFF OF MINDORO and JUAN L. LUNA, respondents.

Jose W. Diokno and Daniel Romualdez for petitioner.

Laurel, Sabido, Almario and Laurel and Juan L. Luna for respondents.

 

MORAN, C.J.:

This is a petition for certiorari filed by Gavino Aldamiz, administrator of the testate of the

deceased Santiago Rementeria y Aldamizcogeascoa, to set aside the order of the Court of First

Instance of Mindoro issued in the said testate estate proceedings, fixing the amount of fees for

respondent Juan L. Luna, as attorney for said administrator.

The facts material to the issues raised in the petition are as follows:

Santiago Rementeria y Aldamizcogeascoa, the decedent was a Spaniard and member of the

commercial partnership "Aldamiz y Rementeria." The other members were the brothers, Gavino

and Jose, surnamed Aldamiz. Santiago Rementeria died in Spain in 1937, and probate

proceeding No. 705 was instituted in the same year in the Court of First Instance of Mindoro by

Gavino Aldamiz represented by Atty. Juan L. Luna. Gavino Aldamiz was appointed

administrator and as such was represented by respondent Atty. Juan Luna up to January 21,

1947, when the order complained for was issued. In that order it is said that "said attorney is the

one who instituted this testate proceeding ten years ago and has from its incipiency to the present

stage of the proceedings actively intervened in the same."lawphi1.net

On January 15, 1947, After ten years from the date of his appointment, Gavino Aldamiz, as

administrator, through his attorney, Juan L. Luna, submitted his accounts for the years 1944,

1945 and 1946 and also a project of partition with a view to closing the proceedings. On said

date, the court approved the accounts by refused to approve the project of partition unless all

debts including attorney's fees be first paid. In the project of partition, it was expressly stated that

attorney's fees, debts and incidental expenses would be proportionately paid by the beneficiaries

after the closure of the testate proceedings, but the court refused to sanction this clause of the

project. It is for this reason that right then and there, Attorney Luna, to comply with the wishes

of the court, without previously preparing and filing a written petition to have his professional

fees fixed, and without previous notice to all the interested parties, submitted evidence of his

services and professional standing so that the court might fix the amount of his compensation

and the administrator may make payment thereof. This failure to file a written claim and to

notify the interested parties thereof was not due to bad faith or fraudulent purpose but to an

honest belief on the part of the respondent attorney that such requirements were not necessary

under the circumstance.

In this connection, it must be stated, in justice to Attorney Luna, that during the ten years he

served as attorney for the administrator and during the 25 years as legal consultants to Santiago

Rementeria, Gavino Aldamiz and Jose Aldamiz individually and as commercial partnership

under the firm name "Aldamiz y Rementeria," he never took the trouble of charging them for his

professional services, thus showing disinterested and extreme liberality on his part due to

friendship and other personal considerations toward his clients. And it is to be observed further

that even after ten years of active work in the testate proceedings, when he wanted to close the

same and it was then time for him to demand payment for his services, he showed no interest in

demanding preferring to leave the matter to the future negotiation or understanding with the

interested parties. And when the amount of his fees was fixed by the court and Gavino Aldamiz

asked him for a substantial reduction, he answered that it was not he who had fixed the amount

but the court, and advised his client to file a motion for reconsideration, with the assurance that

he would offer no objection to any reduction in amount and to any extension of the time for

paying what might be granted by the court. And again, when Gavino Aldamiz paid him P5,000

on account, respondent attorney told him that he would be satisfied with any additional amount

that Gavino might later desire to pay him. Only subsequent occurrences which proved distasteful

to the parties, led them to take steps which culminated in the filing of the instant civil action.

At the time respondent's evidence was submitted to the court, the interested parties who were

residing in the Philippines were Gavino Aldamiz and his brother Jose Aldamiz. The others were

then residing in Spain. No written claim had ever been filed for respondent's fees, and the

interested parties had not been notified thereof nor of the hearing, not even Gavino Aldamiz who

did not know when he was called to testify that he would testify in connection with respondent's

fees. The Court, after considering the whole evidence presented, issued its order of January 21,

1947, awarding respondent Attorney Luna, in payment of his professional services, an aggregate

sum of P28,000 in the following manner:

1. For the institution, preparation of the pleadings in the voluminous probate case,

allowance of the will, project of partition and the final closing of this proceeding, —

P15,000;

2. For the registration of a parcel of land of seventy-eight hectares in favor of the testate,

— P5,000;

3. For three naturalization cases at the rate of P1,000 each, — P3,000; and

4. For services rendered in the deduction of inheritance tax from P28,000 to P433.40 —

P5,000.

The Court ordered payment of these amounts within thirty days. Petitioner Gavino Aldamiz

received copy of this order on February 21,1948. Out of the total amount of P28,000, petitioner

was able to pay P5,000 only, and upon his failure to pay the balance of P23,000 after several

demands made upon him by respondent attorney, the latter on April 17, 1948, filed an ex-parte

motion for execution which was granted by the respondent Court on April 19,1948. Pursuant to

the order of execution on two parcels of land belonging, not to the testate estate of Santiago

Rementeria y Aldamizcogeascoa, but to the commercial partnership "Aldamiz y Rementeria"

with a total area of three hundred fifty seven(357) hectares, more or less, assessed at one hundred

eighty-two thousand, three hundred and sixty pesos (P182,360), which was sold at a public

auction on July 20,1948, in favor of respondent attorney for only twenty thousand

pesos(P20,000). This sale was made after preliminary injunction had been issued by this court in

the instant case.

We believe and so hold that the order of the respondent court issued on January 21,1948, fixing

the amount of respondent attorney's fees is null and void. The correct procedure for the collection

of attorney's fees, is for the counsel to request the administrator to make payment and file an

actin against him in his personal capacity and not as an administrator should he fail to pay

(Palileo vs. Mendoza, G.R. No. 47106, 40 Off. Gaz. [8th Supp.], 132.)1 If the judgment is

rendered against the administrator and he pays, he may include the fees so paid in his account to

the court. (Uy Tioco vs. Imperial, 53 Phil., 802.) The attorney also may, instead of bringing such

an action, file a [petition in the testate or intestate proceeding "asking that the court, after notice

to all persons interested, allow his claim and direct the administrator to pay it as an expense of

administration." (Emphasis ours.) (Escueta vs. Sy Juilliong, 5 Phil., 405.)

In the instance case, as above stated, no written petition for the payment of attorney's fees has

ever been filed by the respondent attorney and the interested parties had not been previously

notified thereof nor of the hearing held by the court. Consequently, the order issued by the

respondent court on January 21, 1947, and all subsequent orders implementing it, are null and

void, as having been issued an excess of jurisdiction.

We also hold that the order of execution issued on April 19,1948, is null and void, not only

because it was intended to implement the order of January 21, 1947, which in itself was null and

void, but because a writ of execution is not the proper procedure allowed by the Rules of the

Court for the payment of debts and expenses of administration. The proper procedure is for the

court to order the sale of personal estate or the sale of mortgaged of real property of the deceased

and all debts or expenses of administration should be paid out of the proceeds of the sale or

mortgage. The order for the sale or mortgage should be issued upon motion of the administrator

and with the written notice to all the heirs, legatees and devisees residing in the Philippines,

according to Rule 89, section 3, and Rule 90, section 2. And when sale or mortgage of real estate

is to be made, the regulations contained in Rule 90, section 7, should be complied with.

Execution may issue only where the devisees, legatees or heirs have entered into possession of

their respective portions in the estate prior to settlement and payment of the debts and expenses

of administration and it is later ascertained that there are such debts and expenses to be paid, in

which case "the court having jurisdiction of the estate may, by order for that purpose, after

hearing, settle the amount of their several liabilities, and order how much and in what manner

each person shall contribute, and may issue execution if circumstances require" (Rule 89, section

6; see also Rule 74, section 4; Emphasis ours). And this is not the instant case.

It is alleged by respondent that petitioner is guilty of laches. True that petitioner failed to appeal

from the order of January 21, 1947, within the time provided by the Rules and the instant petition

for certiorari was filed one (1) year, four (4) months and fourteen (14) days after petitioner had

received a copy of said order. And we have held in Prifeta vs. David, 40 Off. Gaz., 14th Supp., p.

152, 2 that orders issued without previous notice to parties will be deemed cured if said parties

fail to appeal within time provided by the rules and their appeal is lost due to their own

negligence. But here, aside from petitioner, there are interested parties who have never been

notified of the order complained of, and as to them, said order has not become final and

executory . And with respect to petitioner, he has not lost his appeal through his own negligence.

When he received the notice of the order of the Court fixing respondent's fees in the amount of

P28,000, he immediately wrote his lawyer a letter asking for a substantial reduction and

extension of time to pay. The lawyer answered advising him to file his motion for

reconsideration within thirty days, but he received his lawyer's letter after said period had

expired. And petitioner had no other attorney to advice him except respondent who was his

adversary on the matter now in dispute. After receiving said letter, he again sought equitable

compromise with respondent attorney and later paid him P5,000, and respondent then told him

that he would be satisfied with whatever additional amount petitioner might desire to pay him.

And petitioner would perhaps have taken no action were it not because without previous notice

to him, the respondent attorney asked authority from the court to sell two parcels of land totalling

13 hectares, for the payment of said professional fees and later, on July 26, 1947, respondent

attorney, again without previous notice to petitioner, filed a motion for execution for the same

purpose. Both motions were, however, abandoned. But a second motion for execution was filed

by respondent without petitioner's knowledge, which was granted by the Court on April 19,

1948. Respondent Sheriff levied on two parcels of land belonging to the partnership "Aldamiz y

Rementeria" with a total area of 357 hectares and assessed at P182,360 and the sale was

announced by the sheriff for July 20, 1948. Two motions for consideration were filed by

petitioner, one on June 16,1948, and the other on June 28, 1948, asking that the order of January

21, 1947, and the order of execution of April 19,1948 be set aside, but both motions were denied

and the last order of denial is dated July 1,1948. The petition in the instant case was filed on July

17, 1948. We hold that under the circumstances, particularly the fiduciary relation between

petitioner and respondent attorney, the former is not guilty of laches.

Respondents maintain that the case for the petitioner is one of pure technicality, premised upon a

supposed failure of the respondent attorney to follow a supposed procedure. It is said that the

amount of P28,000 fixed and allowed by the respondent court as professional fees of the

respondent attorney is not unconscionable or unreasonable because the entire estate was worth

P315,112 and now it is worth about half a million pesos because of many improvements existing

thereon. It appears, however, that due to lack of notice upon the interested parties mistakes have

been committed by but the court which could have been avoided. For instance, the court awarded

fees for services rendered not to the estate but to the other persons, such as the supposed services

in connection with the petitions for naturalization filed in behalf of Gavino Aldamiz and Jose

Aldamiz and the application for registration of a parcel of land of 78 hectares filed not in favor of

the testate estate but of the partnership "Aldamiz y Rementeria." These services evidently could

not be charged against the estate of Santiago Rementeria. And furthermore, due to lack of

preparation on the part of respondent attorney, it appears that while he was testifying to his

professional services he was apparently not sure of being able to recite them all for at the end of

his testimony he said: "Son los servicios que me acuerdo ahora. . . ." Had he been afforded ample

time to recollect the nature and details of his long and continuos services, considering his high

professional standing as recited by the respondent court in its disputed order and the increased

value of the estate then, perhaps, a more reasonable compensation would have been fixed, or at

least, the court could have rendered a decision with full knowledge of all the facts and with

justice to all the parties concerned.

For all the foregoing, the order of the respondent court of January 21,1947, and all the

subsequent orders implementing it, particularly the order of execution issued by the court on

April 19, 1948, and the sale made by the sheriff on July 20,1948, in favor of respondent attorney,

are null and void and are hereby set aside, with costs against respondents. It is so ordered.

Ozaeta, Pablo, Bengzon, Padilla, Tuason, Reyes and Torres, JJ., concur.

ROSITA SANTIAGO DE BAUTISTA, et. al v. VICTORIA DE GUZMAN, et. al

Doctrine:

It has been ruled that the only instance wherein a creditor can file an action, against a distributee

of the debtor’s assets is under Rule 88, Sec. 5. The contingent claims must first have been

established and allowed in the probate court before the creditors can file an action against the

distributes.

Facts:

On May 10, 1952, Numeriano Bautista, husband and father of the plaintiffs-appellees was a

passenger of jeepney owned and operated by Rosendo de Guzman, deceased husband and father

of defendants-appellants, respectively, as one of the jeepneys used in his transportation business.

Eugenio Medrano y Torres was employed by said Rosendo de Guzman as the driver of said

jeepney, the latter drove and managed said jeepney at that time along Taft Avenue, Pasay City,

in a negligent and reckless manner and, as a result, the jeepney turned turtle and, consequently,

passenger Numeriano Bautista sustained physical injuries which caused his death. Eugenio

Medrano, the driver, was accused and convicted of homicide through reckless imprudence by the

trial court. On May 12, 1952, Rosendo de Guzman died.

Because of their failure to collect the said sum of P3,000.00 from the driver, Eugenio Medrano,

plaintiffs-appellees filed a complaint dated October 7, 1952, with the Court of First Instance of

Rizal, Pasay City Branch, against defendants-appellants alleging, among other things besides the

above-mentioned incidents, that they demanded from Rosendo de Guzman and from the

defendants-appellants the payment but Rosendo de Guzman and later the herein defendants-

appellants refused to pay the same. Defendants-appellants through counsel filed a motion to

dismiss, in support of said motion, they maintained that the suit was for a money claim against

the supposed debtor who was already dead and as such it should be filed in testate or intestate

proceedings or, in the absence of such proceedings, after the lapse of thirty (30) days, the

creditors should initiate such proceedings, that the heirs could not be held liable therefor since

there was no allegation that they assumed the alleged obligation.

Issue:

Whether or not the creditor may file an action against a distribute?

Ruling:

The only instance wherein a creditor can file an action against a distributee of the debtor's asset

is under Section 5, Rule 88 of the Rules of Court which provides: têñ.£îhqwâ£

If such contingent claim becomes absolute and is presented to the court, or to the executor or

administrator, within two (2) years from the time limited for other creditors to present their

claims, it may be allowed by the court if not disputed by the executor or administrator, and, if

disputed, it may be proved and allowed or disallowed by the court as the facts may warrant. If

the contingent claim is allowed, the creditor shall receive payment to the same extent as the other

creditors if the estate retained by the executor or administrator is sufficient. But if the claim is

not so presented, after having become absolute, within said two (2) years, and allowed, the assets

retained in the hands of the executor or administrator, not exhausted in the payment of claims,

shall be distributed by the order of the court to the persons entitled to the same; but the assets so

distributed may still be applied to the payment of the claim when established, and the creditor

may maintain an action against the distributees to recover the debt, and such distributees and

their estates shall be liable for the debt in proportion to the estate they have respectively received

from the property of the deceased.

Even under the above rule, the contingent claims must first have been established and allowed in

the probate court before the creditors can file an action directly, against the distributees. Such is

not the situation, however, in the case at bar. The complaint herein was filed after the intestate

proceedings had terminated and the estate finally distributed to the heirs. If we are to allow the

complaint to prosper and the trial court to take cognizance of the same, then the rules providing

for the claims against the estate in a testate or intestate proceedings within a specific period

would be rendered nugatory as a subsequent action for money against the distributees may be

filed independently of such proceedings. This precisely is what the rule seeks to prevent so as to

avoid further delays in the settlement of the estate of the deceased and in the distribution of his

property to the heirs, legatees or devisees.

G.R. No. L-28298 November 25, 1983

ROSITA SANTIAGO DE BAUTISTA, ET AL., plaintiffs-appellees, 

vs.

VICTORIA DE GUZMAN, ET AL., defendants-appellants.

Jose D. Villena for plaintiffs-appellees.

Antonio Gonzales for defendants-appellants.

 

GUTIERREZ, JR., J.:

This is an appeal from the decision of the Court of First Instance of Rizal, Pasay City branch, in

Civil Case No. 3530, ordering the defendants-appellants to pay the plaintiffs-appellees damages

and attorney's fees and dismissing the former's counterclaim. As no questions of facts were

raised by the appellants in their brief, the Court of Appeals certified this case to us for decision.

The facts, as stated in the resolution of the appellate court, are as follows: têñ.£îhqwâ£

On May 10, 1952, Numeriano Bautista, husband and father of the plaintiffs-

appellees, respectively, was a passenger of jeepney bearing Plate No. TPU-4013,

owned and operated by Rosendo de Guzman, deceased husband and father of

defendants-appellants, respectively, as one of the jeepneys used in his

transportation business. Eugenio Medrano y Torres was employed by said

Rosendo de Guzman as the driver of said jeepney. Said driver drove and managed

said jeepney at that time along Taft Avenue, Pasay City, in a negligent and

reckless manner and, as a result, the jeepney turned turtle and, consequently,

passenger Numeriano Bautista sustained physical injuries which caused his death.

Eugenio Medrano, the driver, was accused and convicted of homicide through

reckless imprudence by the trial court in a decision promulgated on May 27, 1952

and sentenced to a penalty of imprisonment of four (4) months and one (1) day

of arresto mayor and to indemnify the heirs of Numeriano Bautista, plaintiffs-

appellees herein, in the sum of P3,000.00. A writ of execution was issued against

said driver, Eugenio Medrano for the said sum of P3,000.00 but the same was

returned to the Court unsatisfied.

On May 12, 1952, Rosendo de Guzman died.

Because of their failure to collect the said sum of P3,000.00 from the driver,

Eugenio Medrano, plaintiffs-appellees filed a complaint (Civil Case No. 2050)

dated October 7, 1952, with the Court of First Instance of Rizal, Pasay City

Branch, against defendants-appellants alleging, among other things besides the

above-mentioned incidents, that they demanded from Rosendo de Guzman and

from the defendants-appellants the payment of the sums of P3,000.00 as

subsidiary liability; P10,000.00 as actual exemplary and moral damages and

Pl,000.00 as attorney's fees for the suit by reason of the death of Numeriano

Bautista as related above, but Rosendo de Guzman and later the herein

defendants-appellants refused to pay the same. Plaintiffs-appellees therefore

prayed that the defendants-appellants be ordered to pay the said sums as well as

the costs of suit.

Defendants-appellants through counsel filed a motion to dismiss predicated on

two grounds, namely, that the lower court had no jurisdiction over the subject

matter of the litigation and that the complaint stated no cause of action. In support

of said motion, they maintained that the suit was for a money claim against the

supposed debtor who was already dead and as such it should be filed in testate or

intestate proceedings or, in the absence of such proceedings, after the lapse of

thirty (30) days, the creditors should initiate such proceedings, that the heirs could

not be held liable therefor since there was no allegation that they assumed the

alleged obligation.

The lower court sustained the motion to dismiss in an order dated May 11, 1953,

stating, among other things, that: têñ.£îhqwâ£

The procedure thus opened for a money claimant against a

deceased person, as in the instant case, is for said claimant to file

proceedings for the opening of the judicial administration of the

estate of said deceased person and to present his claim in said

proceedings. The claimant may only proceed to sue the heirs of the

deceased directly where such heirs have entered into an extra-

judicial partition of such estate and have distributed the latter

among themselves, in which case, the heirs become liable to the

claimant in proportion to the share which they have received as

inheritance. Plaintiffs' complaint does not state that the defendants

have received any such inheritance from their said deceased father,

Rosendo de Guzman, and hence, there is no cause of action against

aforesaid defendants.

This order became final.

Then on December 14, 1954, plaintiffs-appellees filed with the same trial court

Civil Case No. 3530 (subject of this appeal) against the same defendants in the

former case, the complaint containing analogous allegations as those embodied in

the first complaint but in this second complaint they further allege that on June

12, 1952, Rosendo de Guzman died intestate and that intestate proceedings were

filed in the same court and docketed therein as Special Proceedings No. 1303-P,

wherein on April 20, 1953, a project of partition was presented in and approved

by said Court with the five heirs receiving their shares valued at P2,294.05 each,

and on May 14, 1953, said intestate proceedings were closed. They also alleged

that Numeriano Bautista during his lifetime was the only one supporting them and

his death caused them shock, sufferings and anxiety and therefore defendants-

appellants should pay to them, aside from the P3,000.00, an additional amount of

P15,000.00 as moral, exemplary and compensatory damages, plus the sum of

P2,000.00 as attorney's fees for the prosecution of this case, besides the costs of

suit.

Defendants-appellants again filed a motion to dismiss on May 5, 1955, alleging

the same grounds as those interposed in the first complaint but adding the further

ground of res judicata in view of the dismissal of the first case which became final

as no appeal or any other action was taken thereon by the appellees. On August

22, 1955, the lower court denied the motion to dismiss for lack of sufficient merit.

xxx xxx xxx

Then on July 11, 1961, the parties through their respective counsel submitted a

partial stipulation of facts found on pages 63 to 67 of the amended record on

appeal which stipulation of facts, was made the basis of the decision of the lower

court which was rendered on August 26, 1961 (should be August 14, 1961), aside

from the testimony of the widow of Numeriano Bautista, appellee Rosita Bautista,

who testified on the same incidents already recited herein and on the sufferings

and shock she and her children, all appellees in this case, suffered. From said

decision, the present appeal has been interposed ...

Defendants-appellants assign the following errors:

Itêñ.£îhqwâ£

THE COURT BELOW ERRED IN NOT SUSTAINING THE MOTION TO

DISMISS MOCION DE SOBRESIMIENTO) FILED BY THE DEFENDANTS-

APPELLANTS ON OR ABOUT MAY, 1955, APPEARING ON PAGE 10 ET

SEQ. OF THE AMENDED RECORD ON APPEAL.

IItêñ.£îhqwâ£

THE COURT BELOW ERRED IN NOT DECLARING THAT THE CLAIM OF

THE PLAINTIFFS-APPELLEES IS ALREADY BARRED FOR FAILURE ON

THEIR PART TO FILE THEIR CLAIM IN THE INTESTATE PROCEEDINGS

OF THE DECEASED ROSENDO DE GUZMAN (SPECIAL PROCEEDINGS

NO. 1303-P) OF THE COURT OF FIRST INSTANCE OF RIZAL.

IIItêñ.£îhqwâ£

THE COURT ERRED IN NOT SUSTAINING THE DEFENSE OF RES

JUDICATA INTERPOSED BY DEFENDANTS-APPELLANTS BY VIRTUE

OF THE FINAL ORDER RENDERED OR ISSUED BY THE COURT OF

FIRST INSTANCE OF RIZAL IN CIVIL CASE NO. 2050, DATED MAY 11,

1953, COPY OF SAID ORDER IS ATTACHED AS EXHIBIT "F" AND MADE

AN INTEGRAL PART OF THE PARTIAL STIPULATION OF FACTS.

IVtêñ.£îhqwâ£

THE COURT BELOW ERRED IN RENDERING A DECISION ORDERING

THE HEREIN DEFENDANTS-APPELLANTS TO JOINTLY AND

SEVERALLY PAY THE PLAINTIFFS-APPELLEES THE SUM OF THREE

THOUSAND PESOS (p3,000.00), WITH INTERESTS AND COSTS.

V têñ.£îhqwâ£

HE COURT BELOW ERRED IN DISMISSING DEFENDANTS-

APPELLANTS' COUNTER-CLAIM AND IN NOT RENDERING A DECISION

IN ACCORDANCE THEREWITH.

The only question presented in the assigned errors is whether or not the trial court erred in giving

due course to the complaint on the grounds stated above. We sympathize with the plight of the

plaintiffs-appellees but they have lost their right to recover because of negligence and a failure to

observe mandatory provisions of the law and the Rules. They overlooked the fact that they were

no longer suing Rosendo de Guzman who died shortly after the accident but his heirs.

Section 5, Rule 86 of the Rules of Court provides: têñ.£îhqwâ£

All claims for money against the decedent arising from contract, express or

implied, whether the same be due, not due, or contingent, all claims for funeral

expenses and expenses for the last sickness of the decedents, and judgment for

money against the decedent, must be filed within the time in the notice; otherwise

they are barred forever; except that they may be set forth as counterclaims in any

action that the executor or administrator may bring against the claimants ...

Claims not yet due, or contingent, may be approved at their present value.

The above-quoted rule is mandatory. The requirement therein is for the purpose of protecting the

estate of the deceased. The executor or administrator is informed of the claims against it, thus

enabling him to examine each claim and to determine whether it is a proper one which should be

allowed. Therefore, upon the dismiss of the first complaint of herein plaintiffs-appellees in Civil

Case No. 2050, they should have presented their claims before the intestate proceedings filed in

the same court and docketed as Special Proceedings No. 1303-P. Instead of doing so, however.

the plaintiffs-appellees slept on their right. They allowed said proceedings to terminate and the

properties to be distributed to the heirs pursuant to a project of partition before instituting this

separate action. Such do not sanctioned by the above rule for it strictly requires the prompt

presentation and disposition of claims against the decedent's estate in order to settle the affairs of

the estate as soon as possible, pay off its debts and distribute the residue. (See Py Eng Chong v.

Herrera, 70 SCRA 130). With the exception provided for in the above rule, the failure of herein

plaintiffs-appellees to present their claims before the intestate proceedings of the estate of

Rosendo de Guzman within the prescribed period constituted a bar to a subsequent claim against

the estate or a similar action of the same import.

Therefore, it was an error on the part of the trial court to hold that the plaintiffs-appellees had a

cause of action against the defendants-appellants who are the heirs of the deceased against whom

the liability is sought to be enforced, much less take cognizance of the complaint. As in the first

complaint, said court could not have assumed jurisdiction over the second case for the simple

reason that it was no longer acting as a probate court which was the proper forum to file such

complaint. The termination of the intestate proceedings and the distribution of the estate to the

heirs did not alter the fact that plaintiffs-appellees' claim was a money claim which should have

been presented before the probate court. The liability of the late Rosendo de Guzman arose from

the breach of his obligations under the contract of carriage between him and the unfortunate

passenger. The obligations are spelled out by law but the liability arose from a breach of

contractual obligations. The resulting claim is a money claim.

The only instance wherein a creditor can file an action against a distributee of the debtor's asset

is under Section 5, Rule 88 of the Rules of Court which provides: têñ.£îhqwâ£

If such contingent claim becomes absolute and is presented to the court, or to the

executor or administrator, within two (2) years from the time limited for other

creditors to present their claims, it may be allowed by the court if not disputed by

the executor or administrator, and, if disputed, it may be proved and allowed or

disallowed by the court as the facts may warrant. If the contingent claim is

allowed, the creditor shall receive payment to the same extent as the other

creditors if the estate retained by the executor or administrator is sufficient. But if

the claim is not so presented, after having become absolute, within said two (2)

years, and allowed, the assets retained in the hands of the executor or

administrator, not exhausted in the payment of claims, shall be distributed by the

order of the court to the persons entitled to the same; but the assets so distributed

may still be applied to the payment of the claim when established, and the creditor

may maintain an action against the distributees to recover the debt, and such

distributees and their estates shall be liable for the debt in proportion to the estate

they have respectively received from the property of the deceased.

Even under the above rule, the contingent claims must first have been established and allowed in

the probate court before the creditors can file an action directly, against the distributees. Such is

not the situation, however, in the case at bar. The complaint herein was filed after the intestate

proceedings had terminated and the estate finally distributed to the heirs. If we are to allow the

complaint to prosper and the trial court to take cognizance of the same, then the rules providing

for the claims against the estate in a testate or intestate proceedings within a specific period

would be rendered nugatory as a subsequent action for money against the distributees may be

filed independently of such proceedings. This precisely is what the rule seeks to prevent so as to

avoid further delays in the settlement of the estate of the deceased and in the distribution of his

property to the heirs, legatees or devisees.

Furthermore, even assuming that the plaintiffs-appellees had no knowledge of the intestate

proceedings which is not established, the law presumes that they had such knowledge because

the settlement of estate is a proceeding in remark and therefore the failure to file their claims

before such proceedings barred them from subsequently filing the same claims outside said

proceedings.

WHEREFORE, the decision of the Court of First Instance appealed from is hereby reversed and

set aside and another one entered dismissing the complaint and the counterclaim. No costs.

SO ORDERED.1äwphï1.ñët

Plana and Relova, JJ., concur.

Teehankee (Chairman), J., concur in the result.

 

 

Separate Opinions

 

MELENCIO-HERRERA, J., concurring in the result:

I concur in the result.

In this case, the deceased Numeriano Bautista was a passenger in a public utility jeepney owned

by the deceased Rosendo de Guzman and whose driver was Eugenio Medrano. It was a vehicular

accident involving the jeep which caused the death of Numeriano.

The driver was prosecuted for criminal negligence resulting in death, and he was sentenced, inter

alia, to pay a civil liability of P3,000.00 to the heirs of Numeriano. Since the driver could not

pay that civil liability adjudged in the criminal case, Rosendo, or his estate, became subsidiary

liable for the amount.

In the case at bar, after the estate of Rosendo de Guzman had been judicially settled and closed,

plaintiff heirs of Numeriano had sued defendant heirs of Rosendo de Guzman in a separate

action, before the then Court of First Instance in Pasay City (a) for settlement of the subsidiary

liability of P3,000.00, (b) as well as for damages resulting from the death of Numeriano. The

Trial Court gave judgment to the plaintiffs for the P3,000.00. but did not grant the claim for

damages for the death of Numeriano pursuant to the provisions of Section 5, Rule 86. The heirs

of the deceased passenger accepted the judgment of the trial Court, but the heirs of Rosendo de

Guzman appealed to the Intermediate Appellate Court which subsequently endorsed the case to

us as only a question of law was involved.

The civil liability adjudged in the criminal case, and for which Rosendo de Guzman or his estate

became subsidiary liable, is plainly a money claim. On the other hand, any direct liability of

Rosendo de Guzman or his estate, for damages for the death of the passenger Numeriano, is not a

claim for damages for injury to person, which should be filed under Section 1, Rule 87. Rosendo

de Guzman was not personally responsible for the death of Numeriano. The claim of the heirs of

Numeriano is one arising from the contract of transportation (Vda. de Medina, et al. v. Cresencia,

et al., 99 Phil. 506). In the case of Gutierrez vs. Barreto Datu (115 Phil. 741), it was held that a

claim for damages arising from breach of contract is within the purview of Section 5, Rule 86.

The claim of plaintiff heirs of Numeriano should have been presented in the judicial proceedings

for the settlement of the estate of Rosendo de Guzman and, not having been so presented, has

already been barred. It was clear error on the part of the Trial Court not to have summarily

dismissed the complaint for lack of cause of action.

 

Separate Opinions

MELENCIO-HERRERA, J., concurring:

I concur in the result.

In this case, the deceased Numeriano Bautista was a passenger in a public utility jeepney owned

by the deceased Rosendo de Guzman and whose driver was Eugenio Medrano. It was a vehicular

accident involving the jeep which caused the death of Numeriano.

The driver was prosecuted for criminal negligence resulting in death, and he was sentenced, inter

alia, to pay a civil liability of P3,000.00 to the heirs of Numeriano. Since the driver could not

pay that civil liability adjudged in the criminal case, Rosendo, or his estate, became subsidiary

liable for the amount.

In the case at bar, after the estate of Rosendo de Guzman had been judicially settled and closed,

plaintiff heirs of Numeriano had sued defendant heirs of Rosendo de Guzman in a separate

action, before the then Court of First Instance in Pasay City (a) for settlement of the subsidiary

liability of P3,000.00, (b) as well as for damages resulting from the death of Numeriano. The

Trial Court gave judgment to the plaintiffs for the P3,000.00. but did not grant the claim for

damages for the death of Numeriano pursuant to the provisions of Section 5, Rule 86. The heirs

of the deceased passenger accepted the judgment of the trial Court, but the heirs of Rosendo de

Guzman appealed to the Intermediate Appellate Court which subsequently endorsed the case to

us as only a question of law was involved.

The civil liability adjudged in the criminal case, and for which Rosendo de Guzman or his estate

became subsidiary liable, is plainly a money claim. On the other hand, any direct liability of

Rosendo de Guzman or his estate, for damages for the death of the passenger Numeriano, is not a

claim for damages for injury to person, which should be filed under Section 1, Rule 87. Rosendo

de Guzman was not personally responsible for the death of Numeriano. The claim of the heirs of

Numeriano is one arising from the contract of transportation (Vda. de Medina, et al. v. Cresencia,

et al., 99 Phil. 506). In the case of Gutierrez vs. Barreto Datu (115 Phil. 741), it was held that a

claim for damages arising from breach of contract is within the purview of Section 5, Rule 86.

The claim of plaintiff heirs of Numeriano should have been presented in the judicial proceedings

for the settlement of the estate of Rosendo de Guzman and, not having been so presented, has

already been barred. It was clear error on the part of the Trial Court not to have summarily

dismissed the complaint for lack of cause of action.

JOSEPHINE PAHAMOTANG and ELEANOR PAHAMOTANG-BASA, v. THE PHILIPPINE

NATIONAL BANK (PNB) and the HEIRS OF ARTURO ARGUNA

Doctrine:

The requirements of Rule 89 of the Rules of Court are mandatory and failure to give notice to the

heirs would invalidate the authority granted by the intestate/probate court to mortgage or sell

estate assets.

Facts:

On July 1, 1972, Melitona Pahamotang died. She was survived by her husband Agustin

Pahamotang, and their eight (8) children.

On September 15, 1972, Agustin filed with the then Court of First Instance of Davao City a

petition for issuance of letters administration over the estate of his deceased wife.

On December 7, 1972, the intestate court issued an order granting Agustin’s petition.

On July 6, 1973, respondent Philippine National Bank (PNB) and Agustin executed

an Amendment of Real and Chattel Mortgages with Assumption of Obligation, the intestate court

approved the mortgage to PNB of certain assets of the estate to secure an obligation in the

amount of P570,000.00.

Issue:

Whether or not Rule 89 of the Rules of Court is mandatory.

Ruling:

Settled is the rule in this jurisdiction that when an order authorizing the sale or encumbrance

of real property was issued by the testate or intestate court without previous notice to the heirs,

devisees and legatees as required by the Rules, it is not only the contract itself which is null and

void but also the order of the court authorizing the same.[11]

Thus, in Maneclang vs. Baun,[12] the previous administrator of the estate filed a petition with

the intestate court seeking authority to sell portion of the estate, which the court granted despite

lack of notice of hearing to the heirs of the decedent. The new administrator of the estate filed

with the Regional Trial Court an action for the annulment of the sales made by the previous

administrator. After trial, the trial court held that the order of the intestate court granting

authority to sell, as well as the deed of sale, were void. On appeal directly to this Court, We held

that without compliance with Sections 2, 4 and 7 of Rule 89 of the Rules of Court, the authority

to sell, the sale itself and the order approving it would be null and void ab initio.

JOSEPHINE PAHAMOTANG and ELEANOR PAHAMOTANG-BASA, petitioners, vs.

THE PHILIPPINE NATIONAL BANK (PNB) and the HEIRS OF ARTURO

ARGUNA, respondents.

D E C I S I O N

GARCIA, J.:

Assailed and sought to be set aside in this appeal by way of a petition for review

on certiorari under Rule 45 of the Rules of Court are the following issuances of the Court of

Appeals inCA-G.R. CV No. 65290, to wit:

1. Decision dated March 20, 2002,[1] granting the appeal and reversing the appealed

August 7, 1998 decision of the Regional Trial Court at Davao City; and

2. Resolution dated November 20, 2002, denying herein petitioners' motion for

reconsideration.[2]

The factual background:

On July 1, 1972, Melitona Pahamotang died. She was survived by her husband Agustin

Pahamotang, and their eight (8) children, namely: Ana, Genoveva, Isabelita, Corazon, Susana,

Concepcion and herein petitioners Josephine and Eleonor, all surnamed Pahamotang.

On September 15, 1972, Agustin filed with the then Court of First Instance of Davao City a

petition for issuance of letters administration over the estate of his deceased wife. The petition,

docketed as Special Case No. 1792, was raffled to Branch VI of said court, hereinafter referred

to as the intestate court.

In his petition, Agustin identified petitioners Josephine and Eleonor as among the heirs of

his deceased spouse. It appears that Agustin was appointed petitioners' judicial guardian in an

earlier case - Special Civil Case No. 1785 also of the CFI of Davao City, Branch VI.

On December 7, 1972, the intestate court issued an order granting Agustins petition.

On July 6, 1973, respondent Philippine National Bank (PNB) and Agustin executed

an Amendment of Real and Chattel Mortgages with Assumption of Obligation. It appears

that earlier, or on December 14, 1972, the intestate court approved the mortgage to PNB of

certain assets of the estate to secure an obligation in the amount of P570,000.00. Agustin signed

the document in behalf of (1) the estate of Melitona; (2) daughters Ana and Corazon; and (3) a

logging company named Pahamotang Logging Enterprises, Inc. (PLEI) which appeared to have

an interest in the properties of the estate. Offered as securities are twelve (12) parcels of

registered land, ten (10) of which are covered by transfer certificates of title (TCT) No. 2431,

7443, 8035, 11465, 21132, 4038, 24327, 24326, 31226 and 37786, all of the Registry of Deeds

of Davao City, while the remaining two (2) parcels by TCTs No. (3918) 1081 and (T-2947) 562

of the Registry of Deeds of Davao del Norte and Davao del Sur, respectively.

On July 16, 1973, Agustin filed with the intestate court a Petition for Authority To

Increase Mortgage on the above mentioned properties of the estate.

In an Order dated July 18, 1973, the intestate court granted said petition.

On October 5, 1974, Agustin again filed with the intestate court another petition, Petition

for Declaration of Heirs And For Authority To Increase Indebtedness, whereunder he

alleged the necessity for an additional loan from PNB to capitalize the business of the estate, the

additional loan to be secured by additional collateral in the form of a parcel of land covered by

Original Certificate of Title (OCT) No. P-7131 registered in the name of Heirs of Melitona

Pahamotang. In the same petition, Agustin prayed the intestate court to declare him and Ana,

Genoveva, Isabelita, Corazon, Susana, Concepcion and herein petitioners Josephine and Eleonor

as the only heirs of Melitona.

In an Order of October 19, 1974, the intestate court granted Agustin authority to seek

additional loan from PNB in an amount not exceeding P5,000,000.00 to be secured by the land

covered by OCT No. P-7131 of the Registry of Deeds of Davao Oriental, but denied Agustins

prayer for declaration of heirs for being premature.

On October 22, 1974, a real estate mortgage contract for P4,500,000.00 was executed by

PNB and Agustin in his several capacities as: (1) administrator of the estate of his late wife; (2)

general manager of PLEI; (3) attorney-in-fact of spouses Isabelita Pahamotang and Orlando

Ruiz, and spouses Susana Pahamotang and Octavio Zamora; and (4) guardian of daughters

Concepcion and Genoveva and petitioners Josephine and Eleonor. Offered as securities for the

additional loan are three (3) parcels of registered land covered by TCTs No. T-21132, 37786 and

43264.

On February 19, 1980, Agustin filed with the intestate court a Petition (Request for

Judicial Authority To Sell Certain Properties of the Estate), therein praying for authority to

sell to Arturo Arguna the properties of the estate covered by TCTs No. 7443, 8035, 11465,

24326 and 31226 of the Registry of Deeds of Davao City, and also TCT No. (T-3918) T-1081 of

the Registry of Deeds of Davao del Norte.

On February 27, 1980, Agustin yet filed with the intestate court another petition, this time

a Petition To Sell the Properties of the Estate, more specifically referring to the property

covered by OCT No. P-7131, in favor of PLEI.

In separate Orders both dated February 25, 1980, the intestate court granted Agustin

authority to sell estate properties, in which orders the court also required all the heirs of Melitona

to give their express conformity to the disposal of the subject properties of the estate and to sign

the deed of sale to be submitted to the same court. Strangely, the two (2) orders were dated two

(2) days earlier than February 27, 1980, the day Agustin supposedly filed his petition.

In a motion for reconsideration, Agustin prayed the intestate court for the amendment of one

of its February 25, 1980 Orders by canceling the requirement of express conformity of the heirs

as a condition for the disposal of the aforesaid properties.

In its Order of January 7, 1981, the intestate court granted Agustins prayer.

Hence, on March 4, 1981, estate properties covered by TCTs No. 7443,11465, 24326,

31226, 8035, (T-2947) 662 and (T-3918) T-1081, were sold to respondent Arturo Arguna,

while the property covered by OCT No. P-7131 was sold to PLEI. Consequent to such sales,

vendees Arguna and PLEI filed witt the intestate court a motion for the approval of the

corresponding deeds of sale in their favor. And, in an Order dated March 9, 1981, the intestate

court granted the motion.

Thereafter, three (3) daughters of Agustin, namely, Ana, Isabelita and Corazon petitioned

the intestate court for the payment of their respective shares from the sales of estate properties,

which was granted by the intestate court.

Meanwhile, the obligation secured by mortgages on the subject properties of the estate was

never satisfied. Hence, on the basis of the real estate mortgage contracts dated July 6,

1973 and October 22, 1974, mortgagor PNB filed a petition for the extrajudicial foreclosure of

the mortgage.

Petitioner Josephine filed a motion with the intestate court for the issuance of an order

restraining PNB from extrajudicially foreclosing the mortgage. In its Order dated August 19,

1983, the intestate court denied Josephines motion. Hence, PNB was able to foreclose the

mortgage in its favor.

Petitioners Josephine and Eleanor, together with their sister Susana Pahamatong-Zamora,

filed motions with the intestate court to set aside its Orders of December 14, 1972 [Note: the

order dated July 18, 1973 contained reference to an order dated December 14, 1972 approving

the mortgage to PNB of certain properties of the estate], July 18, 1973, October 19,

1974 and February 25, 1980.

In an Order dated September 5, 1983, the intestate court denied the motions, explaining:

"Carefully analyzing the aforesaid motions and the grounds relied upon, as well as the opposition

thereto, the Court holds that the supposed defects and/or irregularities complained of are mainly

formal or procedural and not substantial, for which reason, the Court is not persuaded to still

disturb all the orders, especially that interests of the parties to the various contracts already

authorized or approved by the Orders sought to be set aside will be adversely affected.[3]

Such was the state of things when, on March 20, 1984, in the Regional Trial Court at Davao

City, petitioners Josephine and Eleanor, together with their sister Susana, filed their complaint

for Nullification of Mortgage Contracts and Foreclosure Proceedings and Damages against

Agustin, PNB, Arturo Arguna, PLEI, the Provincial Sheriff of Mati, Davao Oriental, the

Provincial Sheriff of Tagum, Davao del Norte and the City Sheriff of Davao City. In their

complaint, docketed as Civil Case No. 16,802 which was raffled to Branch 12 of the court, the

sisters Josephine, Eleanor and Susana prayed for the following reliefs:

"1.) The real estate mortgage contracts of July 6, 1973 and that of October 2, 1974, executed

by and between defendants PNB AND PLEI be declared null and void ab initio;

2.) Declaring the foreclosure proceedings conducted by defendants-sheriffs, insofar as they

pertain to the assets of the estate of Melitona L. Pahamotang, including the auction

sales thereto, and any and all proceedings taken thereunder, as null and void ab initio;

3.) Declaring the Deed of Absolute Sale, Doc. No. 473; Page No.96; Book No.VIII, Series

of 1981 of the Notarial Registry of Paquito G. Balasabas of Davao City evidencing the

sale/transfer of the real properties described therein to defendant Arturo S. Arguna, as

null and void ab initio;

4.) Declaring the Deed of Absolute Sale, Doc. No. 474; Page No. 96, Book No. VIII, series

of 1981 of the Notarial Registry of Paquito G. Balasabas of Davao City, evidencing

the sale/transfer of real properties to PLEI as null and void ab initio;

5.) For defendants to pay plaintiffs moral damages in such sums as may be found to be just

and equitable under the premises;

6.) For defendants to pay plaintiffs, jointly and severally, the expenses incurred in

connection with this litigation;

7.) For defendants to pay plaintiffs, jointly and severally attorney's fees in an amount to be

proven during the trial;

8.) For defendants to pay the costs of the suit.[4]

PNB moved to dismiss the complaint, which the trial court granted in its Order of January

11, 1985.

However, upon motion of the plaintiffs, the trial court reversed itself and ordered defendant

PNB to file its answer.

Defendant PNB did file its answer with counterclaim, accompanied by a cross-claim against

co-defendants Agustin and PLEI.

During the ensuing pre-trial conference, the parties submitted the following issues for the

resolution of the trial court, to wit:

"1. Whether or not the Real Estate Mortgage contracts executed on July 6, 1973 and October

2, 1974 (sic) by and between defendants Pahamotang Logging Enterprises, Inc. and the

Philippine National Bank are null and void?

2. Whether or not the foreclosure proceedings conducted by defendants-Sheriffs, insofar as

they affect the assets of the Estate of Melitona Pahamotang, including the public

auction sales thereof, are null and void?

3. Whether or not the Deed of Absolute Sale in favor of defendant Arturo Arguna entered as

Doc. No. 473; Page No. 96; Book No. VIII, series of 1981 of the Notarial Register of

Notary Public Paquito Balasabas is null and void?

4. Whether or not the Deed of Absolute Sale in favor of defendant Pahamotang Logging

Enterprises, Inc. entered as Doc. No. 474; Page No. 96; Book No. VIII, series of 1981

of the Notarial Register of Notary Public Paquito Balasabas is null and void?

5. On defendant PNB's cross-claim, in the event the mortgage contracts and the foreclosure

proceedings are declared null and void, whether or not defendant Pahamotang Logging

Enterprises, Inc. is liable to the PNB?

6. Whether or not the defendants are liable to the plaintiffs for damages?

7. Whether or not the plaintiffs are liable to the defendants for damages?[5]

With defendant Arturo Argunas death on October 31, 1990, the trial court ordered his

substitution by his heirs: Heirs of Arturo Alguna.

In a Decision dated August 7, 1998, the trial court in effect rendered judgment for the

plaintiffs. We quote the decisions dispositive portion:

"WHEREFORE, in view of all the foregoing, judgment is hereby rendered as follows:

1. Declaring the Mortgage Contracts of July 6, 1973 and October 22, 1974, as well as the

foreclosure proceedings, void insofar as it affects the share, interests and property rights of the

plaintiffs in the assets of the estate of Melitona Pahamotang, but valid with respect to the other

parties;

2. Declaring the deeds of sale in favor of defendants Pahamotang Logging Enterprises, Inc. and

Arturo Arguna as void insofar as it affects the shares, interests and property rights of herein

plaintiffs in the assets of the estate of Melitona Pahamotang but valid with respect to the other

parties to the said deeds of sale.

3. Denying all the other claims of the parties for lack of strong, convincing and competent

evidence.

No pronouncement as to costs.

SO ORDERED.[6]

From the aforementioned decision of the trial court, PNB, PLEI and the Heirs of Arturo

Arguna went on appeal to the Court of Appeals in CA-G.R. CV No. 65290. While the appeal

was pending, the CA granted the motion of Susana Pahamatong-Zamora to withdraw from the

case.

As stated at the threshold hereof, the Court of Appeals, in its Decision dated March 20,

2002,[7] reversed the appealed decision of the trial court and dismissed the petitioners complaint

in Civil Case No. 16,802, thus:

WHEREFORE, the appeal is hereby GRANTED. The assailed August 07, 1998 Decision

rendered by the Regional Trial Court of Davao City, Branch 12, is

hereby REVERSED and SET ASIDE and a new one is entered DISMISSING the complaint

filed in Civil Case No. 16,802.

SO ORDERED.

The appellate court ruled that petitioners, while ostensibly questioning the validity of the

contracts of mortgage and sale entered into by their father Agustin, were essentially attacking

collaterally the validity of the four (4) orders of the intestate court in Special Case No. 1792,

namely:

1. Order dated July 18, 1973, granting Agustins Petition for Authority to Increase

Mortgage;

2. Order dated October 19, 1974, denying Agustins petition for declaration of heirs but

giving him authority to seek additional loan from PNB;

3. Order dated February 25, 1980, giving Agustin permission to sell properties of the

estate to Arturo Arguna and PLEI; and

4. Order dated January 7, 1981, canceling the requirement of express conformity by the

heirs as a condition for the disposal of estate properties.

To the appellate court, petitioners committed a fatal error of mounting a collateral attack on the

foregoing orders instead of initiating a direct action to annul them. Explains the Court of

Appeals:

"A null and void judgment is susceptible to direct as well as collateral attack. A direct attack

against a judgment is made through an action or proceeding the main object of which is to annul,

set aside, or enjoin the enforcement of such judgment, if not carried into effect; or if the property

has been disposed of, the aggrieved party may sue for recovery. A collateral attack is made

when, in another action to obtain a different relief, an attack on the judgment is made as an

incident in said action. This is proper only when the judgment, on its fact, is null and void, as

where it is patent that the court which rendered such judgment has no jurisdiction. A judgment

void on its face may also be attacked directly.

xxx xxx xxx

Perusing the above arguments and comparing them with the settled ruling, the plaintiffs-

appellees [now petitioners], we believe had availed themselves of the wrong remedy before the

trial court. It is clear that they are collaterally attacking the various orders of the intestate court in

an action for the nullification of the subject mortgages, and foreclosure proceedings in favor of

PNB, and the deeds of sale in favor of Arguna. Most of their arguments stemmed from their

allegations that the various orders of the intestate court were issued without a notification given

to them. An examination, however, of the July 18, 1973 order shows that the heirs of Melitona

have knowledge of the petition to increase mortgage filed by Agustin, thus:

`The petitioner testified that all his children including those who are of age have no objection to

this petition and, as matter of fact, Ana Pahamotang, one of the heirs of Melitona Pahamotang,

who is the vice-president of the logging corporation, is the one at present negotiating for the

increase of mortgage with the Philippine National Bank.'

The presumption arising from those statements of the intestate court is that the heirs were

notified of the petition for the increase of mortgage.

The same can be seen in the October 19, 1974 order:

`The records show that all the known heirs, namely Ana, Isabelita, Corazon, Susana, including

the incompetent Genoveva, and the minors Josephine, Eleanor and Concepcion all surnamed

were notified of the hearing of the petition.'

On the other hand, the February 25, 1980 order required Agustin to obtain first express

conformity from the heirs before the subject property be sold to Arguna. The fact that this was

reconsidered by the intestate court in its January 07, 1981 is of no moment. The questioned

orders are valid having been issued in accordance with law and procedure. The problem with the

plaintiffs-appellees is that, in trying to nullify the subject mortgages and the foreclosure

proceedings in favor of PNB and the deeds of sale in favor of Arguna, they are assailing the

aforesaid orders of the intestate court and in attacking the said orders, they attached documents

that they believe would warrant the conclusion that the assailed orders are null and void. This is a

clear collateral attack of the orders of the intestate court which is not void on its face and which

cannot be allowed in the present action. The defects alleged by the plaintiff-appellees are not

apparent on the face of the assailed orders. Their recourse is to ask for the declaration of nullity

of the said orders, not in a collateral manner, but a direct action to annul the same.[8]

The same court added that petitioners failure to assail said orders at the most opportune time

constitutes laches:

"In their complaint below, plaintiffs, appellees are assailing in their present action, four orders of

the intestate court namely: July 18, 1973, October 19, 1974, February 25, 1980 and January 07,

1981 orders which were then issued by Judge Martinez. It should be recalled that except for the

January 07, 1981 order, Judge Jacinto, upon taking over Sp. No. 1792, denied the motion of the

plaintiffs-appellees to set aside the aforesaid orders. Aside from their motion before Judge

Jacinto, nothing on the records would show that the plaintiffs-appellees availed of other remedies

to set aside the questioned orders. Further, the records would not show that the plaintiffs-

appellees appealed the order of Judge Jacinto. If an interval of two years, seven months and

ninety nine days were barred by laches, with more reason should the same doctrine apply to the

present case, considering that the plaintiffs-appellees did not avail of the remedies provided by

law in impugning the various orders of the intestate court. Thus, the questioned orders of the

intestate court, by operation of law became final. It is a fundamental principle of public policy in

every jural system that at the risk of occasional errors, judgments of courts should become final

at some definite time fixed by law (interest rei publicae ut finis sit litum). The very object of

which the courts were constituted was to put an end to controversies. Once a judgment or an

order of a court has become final, the issues raised therein should be laid to rest. To date, except

as to the present action which we will later discuss as improper, the plaintiff-appellees have not

availed themselves of other avenues to have the orders issued by Judge Martinez and Judge

Jacinto annulled and set aside. In the present case, when Judge Jacinto denied the motion of the

plaintiffs-appellees, the latter had remedies provided by the rules to assail such order. The ruling

by Judge Jacinto denying plaintiffs-appellees motion to set aside the questioned orders of Judge

Martinez has long acquired finality. It is well embedded in our jurisprudence, that judgment

properly rendered by a court vested with jurisdiction, like the RTC, and which has acquired

finality becomes immutable and unalterable, hence, may no longer be modified in any respect

except only to correct clerical errors or mistakes. Litigation must have and always has an end. If

not, judicial function will lose its relevance.

In time, petitioners moved for a reconsideration but their motion was denied by the appellate

court in its Resolution of November 20, 2002.

Hence, petitioners present recourse, basically praying for the reversal of the CA decision and

the reinstatement of that of the trial court.

We find merit in the petition.

It is petitioners posture that the mortgage contracts dated July 6, 1973 and October 22,

1974 entered into by Agustin with respondent PNB, as well as his subsequent sale of estate

properties to PLEI and Arguna on March 4, 1981, are void because they [petitioners] never

consented thereto. They assert that as heirs of their mother Melitona, they are entitled to notice of

Agustin's several petitions in the intestate court seeking authority to mortgage and sell estate

properties. Without such notice, so they maintain, the four orders of the intestate court datedJuly

18, 1973, October 19, 1974, February 25, 1980 and January 7, 1981, which allowed Agustin

to mortgage and sell estate properties, are void on account of Agustins non-compliance with the

mandatory requirements of Rule 89 of the Rules of Court.

Prescinding from their premise that said orders are completely void and hence, could not

attain finality, petitioners maintain that the same could be attacked directly or collaterally,

anytime and anywhere.

For its part, respondent PNB asserts that petitioners cannot raise as issue in this proceedings

the validity of the subject orders in their desire to invalidate the contracts of mortgage entered

into by Agustin. To PNB, the validity of the subject orders of the intestate court can only be

challenged in a direct action for such purpose and not in an action to annul contracts, as the

petitioners have done. This respondent adds that the mortgage on the subject properties is valid

because the same was made with the approval of the intestate court and with the knowledge of

the heirs of Melitona, petitioners included.[9]

Upon the other hand, respondent Heirs of Arturo Arguna likewise claim that petitioners

knew of the filing with the intestate court by Agustin of petitions to mortgage and sell the estate

properties. They reecho the CAs ruling that petitioners are barred by laches in filing Civil Case

No. 16,802.[10]

As we see it, the determinative question is whether or not petitioners can obtain relief from

the effects of contracts of sale and mortgage entered into by Agustin without first initiating a

direct action against the orders of the intestate court authorizing the challenged contracts.

We answer the question in the affirmative.

It bears emphasizing that the action filed by the petitioners before the trial court in Civil

Case No. 16,802 is for the annulment of several contracts entered into by Agustin for and in

behalf of the estate of Melitona, namely: (a) contract of mortgage in favor of respondent PNB,

(b) contract of sale in favor of Arguna involving seven (7) parcels of land; and (c) contract of

sale of a parcel of land in favor of PLEI.

The trial court acquired jurisdiction over the subject matter of the case upon the allegations

in the complaint that said contracts were entered into despite lack of notices to the heirs of the

petition for the approval of those contracts by the intestate court.

Contrary to the view of the Court of Appeals, the action which petitioners lodged with the

trial court in Civil Case No. 16,802 is not an action to annul the orders of the intestate court,

which, according to CA, cannot be done collaterally. It is the validity of the contracts of

mortgage and sale which is directly attacked in the action.

And, in the exercise of its jurisdiction, the trial court made a factual finding in its decision of

August 7, 1998 that petitioners were, in fact, not notified by their father Agustin of the filing of

his petitions for permission to mortgage/sell the estate properties. The trial court made the

correct conclusion of law that the challenged orders of the intestate court granting Agustins

petitions were null and void for lack of compliance with the mandatory requirements of Rule 89

of the Rules of Court, particularly Sections 2, 4, 7 thereof, which respectively read:

Sec. 2. When court may authorize sale, mortgage, or other encumbrance of realty to pay debts

and legacies through personalty not exhausted. - When the personal estate of the deceased is not

sufficient to pay the debts, expenses of administration, and legacies, or where the sale of such

personal estate may injure the business or other interests of those interested in the estate, and

where a testator has not otherwise made sufficient provision for the payment of such debts,

expenses, and legacies, the court, on the application of the executor or administrator and

on written notice to the heirs, devisees, and legatees residing in the Philippines, may authorize

the executor or administrator to sell, mortgage, or otherwise encumber so much as may be

necessary of the real estate, in lieu of personal estate, for the purpose of paying such debts,

expenses, and legacies, if it clearly appears that such sale, mortgage, or encumbrance would be

beneficial to the persons interested; and if a part cannot be sold, mortgaged, or otherwise

encumbered without injury to those interested in the remainder, the authority may be for the sale,

mortgage, or other encumbrance of the whole of such real estate, or so much thereof as is

necessary or beneficial under the circumstances.

Sec. 4. When court may authorize sale of estate as beneficial to interested persons. Disposal of

proceeds. - When it appears that the sale of the whole or a part of the real or personal estate, will

be beneficial to the heirs, devisees, legatees, and other interested persons, the court may, upon

application of the executor or administrator and on written notice to the heirs, devisees and

legatees who are interested in the estate to be sold, authorize the executor or administrator to sell

the whole or a part of said estate, although not necessary to pay debts, legacies, or expenses of

administration; but such authority shall not be granted if inconsistent with the provisions of a

will. In case of such sale, the proceeds shall be assigned to the persons entitled to the estate in the

proper proportions.

Sec. 7. Regulations for granting authority to sell, mortgage, or otherwise encumber estate. - The

court having jurisdiction of the estate of the deceased may authorize the executor or

administrator to sell personal estate, or to sell, mortgage, or otherwise encumber real estate; in

cases provided by these rules and when it appears necessary or beneficial, under the following

regulations:

(a) The executor or administrator shall file a written petition setting forth the debts due

from the deceased, the expenses of administration, the legacies, the value of the

personal estate, the situation of the estate to be sold, mortgaged, or otherwise

encumbered, and such other facts as show that the sale, mortgage, or other

encumbrance is necessary or beneficial;

(b) The court shall thereupon fix a time and place for hearing such petition,

and cause notice stating the nature of the petition, the reason for the same, and the

time and place of hearing, to be given personally or by mail to the persons

interested, and may cause such further notice to be given, by publication or

otherwise, as it shall deem proper; (Emphasis supplied).

xxx xxx xxx

Settled is the rule in this jurisdiction that when an order authorizing the sale or encumbrance

of real property was issued by the testate or intestate court without previous notice to the heirs,

devisees and legatees as required by the Rules, it is not only the contract itself which is null and

void but also the order of the court authorizing the same.[11]

Thus, in Maneclang vs. Baun,[12] the previous administrator of the estate filed a petition

with the intestate court seeking authority to sell portion of the estate, which the court granted

despite lack of notice of hearing to the heirs of the decedent. The new administrator of the estate

filed with the Regional Trial Court an action for the annulment of the sales made by the previous

administrator. After trial, the trial court held that the order of the intestate court granting

authority to sell, as well as the deed of sale, were void. On appeal directly to this Court, We held

that without compliance with Sections 2, 4 and 7 of Rule 89 of the Rules of Court, the authority

to sell, the sale itself and the order approving it would be null and void ab initio.

In Liu vs. Loy, Jr.,[13] while the decedent was still living, his son and attorney-in-fact sold in

behalf of the alleged decedent certain parcels of land to Frank Liu. After the decedent died, the

son sold the same properties to two persons. Upon an ex parte motion filed by the 2nd set of

buyers of estate properties, the probate court approved the sale to them of said properties.

Consequently, certificates of title covering the estate properties were cancelled and new titles

issued to the 2nd set of buyers. Frank Liu filed a complaint for reconveyance/ annulment of title

with the Regional Trial Court. The trial court dismissed the complaint and the Court of Appeals

affirmed the dismissal. When the case was appealed to us, we set aside the decision of the

appellate court and declared the probate court's approval of the sale as completely void due to the

failure of the 2nd set of buyers to notify the heir-administratrix of the motion and hearing for the

sale of estate property.

Clearly, the requirements of Rule 89 of the Rules of Court are mandatory and failure to give

notice to the heirs would invalidate the authority granted by the intestate/probate court to

mortgage or sell estate assets.

Here, it appears that petitioners were never notified of the several petitions filed by Agustin

with the intestate court to mortgage and sell the estate properties of his wife.

According to the trial court, the [P]etition for Authority to Increase

Mortgage and [P]etition for Declaration of Heirs and for Authority to Increase Indebtedness,

filed by Agustin on July 16, 1973 and October 5, 1974, respectively, do not contain information

that petitioners were furnished with copies of said petitions. Also, notices of hearings of those

petitions were not sent to the petitioners.[14] The trial court also found in Civil Case No. 16,802

that Agustin did not notify petitioners of the filing of his petitions for judicial authority to sell

estate properties to Arturo Arguna and PLEI.[15]

As it were, the appellate court offered little explanation on why it did not believe the trial

court in its finding that petitioners were ignorant of Agustins scheme to mortgage and sell the

estate properties.

Aside from merely quoting the orders of July 18, 1973 and October 19, 1974 of the

intestate court, the Court of Appeals leaves us in the dark on its reason for disbelieving the trial

court. The appellate court did not publicize its appraisal of the evidence presented by the parties

before the trial court in the matter regarding the knowledge, or absence thereof, by the petitioners

of Agustins petitions. The appellate court cannot casually set aside the findings of the trial court

without stating clearly the reasons therefor. Findings of the trial court are entitled to great

weight, and absent any indication to believe otherwise, we simply cannot adopt the conclusion

reached by the Court of Appeals.

Laches is negligence or omission to assert a right within a reasonable time, warranting the

presumption that the party entitled to assert it has either abandoned or declined the right. [16]The

essential elements of laches are: (1) conduct on the part of the defendant, or of one under whom

he claims, giving rise to the situation of which complaint is made and for which the complaint

seeks a remedy; (2) delay in asserting the complainant's rights, the complainant having had

knowledge or notice of the defendant's conduct and having been afforded an opportunity to

institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant

would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in

the event relief is accorded to the complainant, or the suit is not held barred.[17]

In the present case, the appellate court erred in appreciating laches against petitioners. The

element of delay in questioning the subject orders of the intestate court is sorely lacking.

Petitioners were totally unaware of the plan of Agustin to mortgage and sell the estate properties.

There is no indication that mortgagor PNB and vendee Arguna had notified petitioners of the

contracts they had executed with Agustin. Although petitioners finally obtained knowledge of

the subject petitions filed by their father, and eventually challenged the July 18, 1973, October

19, 1974, February 25, 1980 and January 7, 1981 orders of the intestate court, it is not clear from

the challenged decision of the appellate court when they (petitioners) actually learned of the

existence of said orders of the intestate court. Absent any indication of the point in time when

petitioners acquired knowledge of those orders, their alleged delay in impugning the validity

thereof certainly cannot be established. And the Court of Appeals cannot simply impute laches

against them.

WHEREFORE, the assailed issuances of the Court of Appeals are hereby REVERSED and

SET ASIDE and the decision dated August 7, 1998 of the trial court in its Civil Case No. 16,802

REINSTATED.

SO ORDERED.

Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

(90)JUANA PIMENTEL v. ENGRACIO PALANCA, 5 Phil. 436

Doctrine:

When a will has been proved, an administrator appointed, and the estate is in process of

settlement in the Court of First Instance in a special proceeding, as provided in Part II of the

Code of Civil Procedure, and no final decree has been entered therein, no ordinary action

between the parties can be maintained for the purpose of determining who are the heirs of the

deceased.

Facts:

Margarita Jose, a native and citizen of the Philippine Islands, died in the city of Amoy, China, on

the 4th of February, 1902. Her last will was duly proved and allowed in the Court of First

Instance of Manila on the 15th day of April, 1902, and on the same day Engracio Palanca was

duly appointed administrator of the state of the deceased.

Jose left all her property to her two children, Vicente Barreto, alias Tan-Teng, and Benito Carlos,

alias Doon. On the 8th day of July, 1902, Juana Pimentel and the mother of said Margarita Jose,

commenced this, an ordinary action, in the Court of First Instance of Manila, alleging that the

two children of Margarita Jose were illegitimate, and that she was the heir at law and entitled to

the whole state. The prayer of the original complaint was that the plaintiff be declared the lawful

heir and entitled to all the property of her daughter, Margarita Jose. 

Issue:

Whether or not an order of distribution is at the same time a declaration of heirs.

Ruling:

Yes. The order of distribution must also be at the same time a declaration of heirs since a

separate action for the declaration of heirship is not proper.

An examination of the prayer of the amended complaint above quoted will show that to grant it

would be to prevent the settlement of the estate of a deceased person in one proceeding in the

Court of First Instance. It would require, in the first place, the revocation of the judgment

probating the will. This relief can not be obtained in an ordinary action. The plaintiff not having

appealed from the order admitting the will to probate, as she had a right to do, that order is final

and conclusive. It does not, however, as the court below held, determine that the plaintiff is not

entitled to any part of the estate. The effect of such a decree was stated in the case of Castañeda

v. Alemany 1 (2 Off. Gaz., 366). The statements there made need not be repeated here. The

plaintiff in her amended complaint asks also that the appointment of Engracio Palanca be

annulled. This relief can not be granted in an ordinary action. The plaintiff had a right to appeal

from the order of the court appointing the administrator in this case, and not having exercised

that right such order is final and conclusive against her. The plaintiff also asks that the

administrator be required to render an account to her of his administration, and deposit in court

the money which he has in his possession. To grant this relief in an ordinary action between

parties would be to take away from the court having in charge the settlement of the estate the

express powers conferred upon it by law. To grant that part of the prayer of the amended

complaint which asks that the plaintiff be declared to be entitled to three fourths of the property

of the estate, would be to take away from the court administering the estate the power expressly

given to it by section 753 to determine that question in the proceeding relating to the estate.  

G.R. No. L-2108 December 18, 1905

JUANA PIMENTEL, plaintiff-appellant, 

vs.

ENGRACIO PALANCA, as administrator of the estate of Margarita Jose, deceased, ET AL.,

defendants-appellees.

Del-Pan, Ortigas and Fisher for appellant.

M. Caringal and R. del Rosario for appellees.

 

WILLARD, J.:

Margarita Jose, a native and citizen of the Philippine Islands, died in the city of Amoy, China, on

the 4th of February, 1902. Her last will was duly proved and allowed in the Court of First

Instance of Manila on the 15th day of April, 1902, and on the same day Engracio Palanca was

duly appointed administrator of the estate of the deceased. He entered upon the discharge of his

duties as such administrator, and is still engaged therein. As far as appears from the bill of

exceptions the estate still remains unsettled, and no final decree has ever been entered therein.

By her said will Margarita Jose left all her property, amounting to over 50,000 pesos, to her two

children, Vicente Barreto, alias Tan-Keng, and Benito Carlos, alias Doon. On the 8th day of

July, 1902, Juana Pimentel, the mother of said Margarita Jose, commenced this, an ordinary

action, in the Court of First Instance of Manila, alleging that the two children of Margarita Jose

were illegitimate, and that she was the heir at law and entitled to the whole estate. The prayer of

the original complaint was that the plaintiff be declared the lawful heir and entitled to all the

property of her daughter, Margarita Jose.

The defendant named in this original complaint was the "Estate of Doña Margarita Jose." The

summons in the action was served upon the administrator, Engracio Palanca. He appeared and

demurred, on the ground, among others, that there was a defect of parties, and that the two sons

should have been made defendants. This demurrer was overruled. He took an exception to the

overruling of the demurrer, and answered, denying generally the facts state in the complaint. A

trial was had in the Court of First Instance, and judgment was entered in favor of the defendant

on the 28th of July, 1903, the court holding that Vicente Barreto was the legitimate son of

Margarita Jose. Plaintiff made a motion for a new trial, which was granted on the 15th day of

September, 1903. On the 22nd day of January, 1904, the plaintiff presented an amended

complaint, naming as defendants Engracio Palanca, as administrator of the estate of margarita

Jose, and Benito Carlos and Vicente Barreto. The prayer of that complaint is as follows:

Por todo lo expuesto la demandante pide al Juzgado:

(a) Que la legalizacion de dicho testamento sea revocada y anulada;

(b) Que la institucion de los demandados Vicente barreto alias Tan-Keng y Benito

Carlos alias Doon como herederos en dicho testamento sea declarada nula por razon de la

pretericion de un heredero forzoso.

(c) Que la demandante sea declarada heredera de tres cuartas partes de los bienes de los

cuales era dueña la citada Margarita Jose al tiempo de su fallecimiento.

(d) Que el nombramiento de administrador conferido por virtud del auto del Juzgado a

favor del demandado Engracio Palanca sea anulado;

(e) Que el demandado Engracio Palanca como tal administrador sea requerido a rendir

cuentas de su administracion y a depositar en el Juzgado todo el dinero que tenga en su

poder perteneciente a los herederos de la citada difunta;

(f) Que el Juzgado conceda a la demandante cualquier otro remedio adecuado y

equitativo.

The defendants all answered the amended complaint. A trial was had in the court below, and on

the 7th of April, 1904, judgement was entered in favor of the defendants. The court held that

Vicente Barreto was the legitimate son of Margarita Jose; that Benito Carlos was an illegitimate

son, and that Margarita Jose had a right to bequeath her property to these sons to the exclusion of

the plaintiff. He held also that the plaintiff, not having appealed from the probate of the will,

could not maintain this action.

We think that judgment should be entered for the defendants, but not upon the ground stated in

the decision of the court below.

The will of Margarita Jose was made and she died after the present Code of Civil Procedure went

into effect in these Islands. Her will was duly proved and allowed under the provisions of that

code. An administrator was duly appointed and he is now engaged in settling the affairs of the

estate. The important question in this case is, Can an ordinary action at law be maintained under

these circumstances by a person claiming to be an heir of the deceased against other persons,

also claiming to be such heirs, for the purpose of having their rights in the estate determined? We

think that such an action is inconsistent with the provisions of the new code, and that it can not

be maintained. Section 600 of the present Code of Civil Procedure provides that the will of an

inhabitant of the Philippine Islands shall be proved and his estate settled in the Court of First

Instance in which he resided at the time of his death. By section 641 when a will is proved it is

obligatory upon the court to appoint an executor or administrator. By virtue of other provisions

of the code this executor or administrator has, under the direction of the court, the full

administration and control of the deceased's property, real and personal, until a final decree is

made in accordance with section 753. During the period of administration the heirs, devisees,

and legatees have no right to interfere with the administrator or executor in the discharge of his

duties. They have no right, without his consent, to the possession of any part of the estate, real or

personal. The theory of the present system is that the property is all in the hands of the court, and

must stay there until the affairs of the deceased are adjusted and liquidated, and then the net

balance is turned over to the persons by law entitled to it. For the purpose of such administration

and distribution there is only one proceeding in the Court of First Instance. That proceeding is

not an action of law, but fall under Part II of the Code of Civil Procedure, and is a special

proceeding. After the estate is fully settled, and all the debts and expenses of administration are

paid, the law contemplates that there shall be a hearing or trial in this proceeding in the Court of

First Instance for the purpose of determining who the parties are that are entitled to the estate in

the hands of the executor or administrator for distribution, and after such hearing or trial it is

made the duty of the court to enter a decree or final judgment, in which decree, according to

section 753, the court "shall assign the residue of the estate to the persons entitled to the same,

and in its order the court shall name the persons and proportions or parts to which each is

entitled." (See also sec. 782 of the Code of Civil Procedure.) By section 704 it is expressly

provided that no action shall be maintained by an heir or devisee against an executor or

administrator for the recovery of the possession or ownership of lands until there is a decree of

the court assigning such lands to such heir or devisee, or until the time allowed for paying debts

has expired.

It seems clear from these provisions of the law that while the estate is being settled in the Court

of First Instance in a special proceeding, no ordinary action can be maintained in that court, or in

any other court, by a person claiming to be the heir, against the executor or against other persons

claiming to be heirs, for the purpose of having the rights of the plaintiff in the estate determined.

The very purpose of the trial or hearing provided for in section 753 is to settle and determine

those questions, and until they are settled and determined in that proceeding and under that

section no action such as the present one can be maintained.

An examination of the prayer of the amended complaint above quoted will show that to grant it

would be to prevent the settlement of the estate of a deceased person in one proceeding in the

Court of First Instance. It would require, in the first place, the revocation of the judgment

probating the will. This relief can not be obtained in an ordinary action. The plaintiff not having

appealed from the order admitting the will to probate, as she had a right to do, that order is final

and conclusive. It does not, however, as the court below held, determine that the plaintiff is not

entitled to any part of the estate. The effect of such a decree was stated in the case of

Castañedavs. Alemany 1 (2 Off. Gaz., 366). The statements there made need not be repeated

here. The plaintiff in her amended complaint asks also that the appointment of Engracio Palanca

be annulled. This relief can not be granted in an ordinary action. The plaintiff had a right to

appeal from the order of the court appointing the administrator in this case, and not having

exercised that right such order is final and conclusive against her. The plaintiff also asks that the

administrator be required to render an account to her of his administration, and deposit in court

the money which he has in his possession. To grant this relief in an ordinary action between

parties would be to take away from the court having in charge the settlement of the estate the

express powers conferred upon it by law. To grant that part of the prayer of the amended

complaint which asks that the plaintiff be declared to be entitled to three-fourths of the property

of the estate, would be to take away from the court administering the estate the power expressly

given to it by section 753 to determine that question in the proceeding relating to the estate.

The judgment of the court below is reversed, and after the expiration of twenty days judgment

should be entered in accordance herewith and the case remanded to the court below, with

instructions to dismiss the same, with costs, but without prejudice to the right of the plaintiff to

present her claims in the special proceeding relating to the administration of the estate, when the

final decree is made therein under section 753. No costs will be allowed in this court. So ordered.

Johnson and Carson, JJ., concur.

 

 

 

Separate Opinions

 

ARELLANO, C.J., and MAPA, J., concurring:

In view of sections 753 and 782, we agree with the preceding opinion on the ground therein set

forth:

While the estate is being settled in the Court of First Instance in a special proceeding, no

ordinary action can be maintained in that court, or in any other court, by a person

claiming to be the heir, against the executor or against other persons claiming to be heirs,

for the purpose of having the rights of the plaintiff in the estate determined.

The purpose of this concurring opinion is to reserve the question as to any other action in

connection with the settlement of such estates not instituted during the period of administration

but independently and which may relate to rights to any part thereof, especially the action for

distribution which differs from the action of partition.

JUANITA LOPEZ GUILAS, petitioner, 

vs.

JUDGE OF THE COURT OF FIRST INSTANCE OF PAMPANGA AND ALEJANDRO

LOPEZ respondents .

Doctrine:

The probate court loses jurisdiction over the settlement proceedings only upon payment of all

debts and expenses of the obligor and delivery of the entire estate to all the heirs and/or persons

entitled thereto.

Facts:

It appears from the records that Jacinta Limson de Lopez, of Guagua, Pampanga was married to

Alejandro Lopez y Siongco and they had no children.

On April 28, 1936, Jacinta executed a will instituting her husband Alejandro as her sole heir and

executor (pp. 20-21, rec.).

In an order dated April 23, 1960, the lower court approved a project of partition and directed that

the records of the case be sent to the archives, upon payment of the estate and inheritance taxes.

Issue:

Whether or not the probate court has jurisdiction over the issue.

Ruling:

The probate court loses jurisdiction of an estate under administration only after the payment of

all the debts and the remaining estate delivered to the heirs entitled to receive the same. The

finality of the approval of the project of partition by itself alone does not terminate the probate

proceeding (Timbol vs. Cano, 1 SCRA 1271, 1276, L-15445, April 29, 1961; Siguiong vs.

Tecson, 89 Phil., pp. 28-30). As long as the order of the distribution of the estate has not been

complied with, the probate proceedings cannot be deemed closed and terminated Siguiong vs.

Tecson, supra.); because a judicial partition is not final and conclusive and does not prevent the

heir from bringing an action to obtain his share, provided the prescriptive period therefor has not

elapsed (Mari vs. Bonilla, 83 Phil., 137). The better practice, however, for the heir who has not

received his share, is to demand his share through a proper motion in the same probate or

administration proceedings, or for re-opening of the probate or administrative proceedings if it

had already been closed, and not through an independent action, which would be tried by another

court or Judge which may thus reverse a decision or order of the probate on intestate court

already final and executed and re-shuffle properties long ago distributed and disposed of (Ramos

vs. Ortuzar, 89 Phil., 730, 741-742; Timbol vs. Cano, supra.; Jingco vs. Daluz, L-5107, April 24,

1953, 92 Phil. 1082; Roman Catholic vs. Agustines, L-14710, March 29, 1960, 107 Phil., 455,

460-461).

Section 1 of Rule 90 of the Revised Rules of Court of 1964 as worded, which secures for the

heirs or legatees the right to "demand and recover their respective shares from the executor or

administrator, or any other person having the same in his possession", re-states the aforecited

doctrines.

G.R. No. L-26695 January 31, 1972

JUANITA LOPEZ GUILAS, petitioner, 

vs.

JUDGE OF THE COURT OF FIRST INSTANCE OF PAMPANGA AND ALEJANDRO

LOPEZ respondents .

Filemon Cajator for petitioner.

Eligio G. Lagman for respondent Alejandro Lopez.

 

MAKASIAR, J.:p

It appears from the records that Jacinta Limson de Lopez, of Guagua, Pampanga was married to

Alejandro Lopez y Siongco. They had no children.

On April 28, 1936, Jacinta executed a will instituting her husband Alejandro as her sole heir and

executor (pp. 20-21, rec.).

In a Resolution dated October 26, 1953 in Sp. Proc. No. 894 entitled "En el Asunto de la

Adopcion de la Menor Juanita Lopez y Limson" (pp. 92-94, 103, rec.), herein petitioner Juanita

Lopez, then single and now married to Federico Guilas, was declared legally adopted daughter

and legal heir of the spouses Jacinta and Alejandro. After adopting legally herein petitioner

Juanita Lopez, the testatrix Doña Jacinta did not execute another will or codicil so as to include

Juanita Lopez as one of her heirs.

In an order dated March 5, 1959 in Testate Proceedings No. 1426, the aforementioned will was

admitted to probate and the surviving husband, Alejandro Lopez y Siongco, was appointed

executor without bond by the Court of First Instance of Pampanga (Annexes "A" and "B", pp.

18-23, rec.). Accordingly, Alejandro took his oath of office as executor (Annex "C", p. 24, rec.).

Nevertheless, in a project of partition dated March 19, 1960 executed by both Alejandro Lopez

and Juanita Lopez Guilas, the right of Juanita Lopez to inherit from Jacinta was recognized and

Lots Nos. 3368 and 3441 (Jacinta's paraphernal property), described and embraced in Original

Certificate of Title No. 13092, both situated in Bacolor Pampanga — Lot 3368 with an area of

68,141 square meters and Lot 3441 with an area of 163,231 square meters, then assessed

respectively at P3,070.00 and P5,800.00 (Annex "D", pp. 27-36, rec.) — were adjudicated to

Juanita Lopez-Guilas as her share free from all liens, encumbrances and charges, with the

executor Alejandro Lopez, binding himself to free the said two parcels from such liens,

encumbrances and charges. The rest of the estate of the deceased consisting of 28 other parcels

of lands with a total assessed valuation of P69,020.00 and a combined area of 743,924.67 square

meters, as well as personal properties including a 1953 Buick car valued at P2,500.00 were

allotted to Don Alejandro who assumed all the mortgage liens on the estate (Annex "D", pp. 25-

37, rec.).

In an order dated April 23, 1960, the lower court approved the said project of partition and

directed that the records of the case be sent to the archives, upon payment of the estate and

inheritance taxes (Annex "E", p. 38, rec.). Upon ex-parte petition of the adjudicatees Alejandro

Lopez and Juanita Lopez-Guilas dated August 25, 1961 (Annex "F", pp. 39-40, rec.), the lower

court in an order dated August 28, 1961, approved the correction of clerical errors appearing in

the project of partition (Annex "G", p. 41, rec.).

On April 10, 1964, herein petitioner Juanita Lopez-Guilas filed a separate ordinary action to set

aside and annul the project of partition, which case was docketed as Civil Case 2539 entitled

"Juanita Lopez-Guilas vs. Alejandro Lopez" in the Court of First Instance of Pampanga, on the

ground of lesion, perpetration and fraud, and pray further that Alejandro Lopez be ordered to

submit a statement of accounts of all the crops and to deliver immediately to Juanita lots nos.

3368 and 3441 of the Bacolor Cadastre, which were allocated to her under the project of partition

(p. 132, rec.).

Meanwhile, in Testate Proceedings No. 1426, Juanita filed a petition dated July 20, 1964 praying

that Alejandro Lopez be directed to deliver to her the actual possession of said lots nos. 3368 and

3441 as well as the 1,216 caverns of palay that he collected from the ten (10) tenants or lessees

of the said two lots (Annex "H", pp. 42-44, rec.).

In his opposition dated August 5, 1964 to the said petition, Alejandro Lopez claims that, by

virtue of the order dated April 23, 1960 which approved the project of partition submitted by

both Alejandro and Juanita and directed that the records of the case be archived upon payment of

the estate and inheritance taxes, and the order of December 15, 1960 which "ordered closed and

terminated the present case", the testate proceedings had already been closed and terminated; and

that he ceased as a consequence to be the executor of the estate of the deceased; and that Juanita

Lopez is guilty of laches and negligence in filing the petition of the delivery of her share 4 years

after such closure of the estate, when she could have filed a petition for relief of judgment within

sixty (60) days from December 15, 1960 under Rule 38 of the old Rules of Court (Annex "I")

citing A. Austria vs. Heirs of Antonio Ventenilla, L-100808, Sept. 18, 1956 (pp. 45-48, rec.).

In her reply dated November 17, 1965 to said opposition, Juanita contends that the actual

delivery and distribution of the hereditary shares to the heirs, and not the order of the court

declaring as closed and terminated the proceedings, determines the termination of the probate

proceedings (citing Intestate estate of the deceased Mercedes Cano, Timbol vs. Cano, 59 O.G.

No. 30, pp. 46-73, April 29, 1961, where it was ruled that "the probate court loses jurisdiction of

an estate under administration only after the payment of all the taxes, and after the remaining

estate is delivered to the heirs entitled to receive the same"); that the executor Alejandro is

estopped from opposing her petition because he was the one who prepared, filed and secured

court approval of, the aforesaid project of partition, which she seeks to be implemented; that she

is not guilty of laches, because when she filed on July 20, 1964, her petition for he delivery of

her share allocated to her under the project of partition, less than 3 years had elapsed from

August 28, 1961 when the amended project of partition was approved, which is within the 5-year

period for the execution of judgment by motion (Annex "J", pp. 49-52, rec.).

In its order dated October 2, 1964, the lower court after a "pre-trial" stated that because the civil

action for the annulment of the project of partition was filed on April 13, 1964, before the filing

on July 2, 1964 of the petition for delivery of the shares of Juanita Lopez, "the parties have

agreed to suspend action or resolution upon the said petition for the delivery of shares until; after

the civil action aforementioned has been finally settled and decided", and forthwith set the civil

action for annulment for trial on November 25, and December 2, 1964 (Annex "K", pp. 53-54,

rec.).

On June 11, 1965, Juanita filed an amended complaint in Civil Case 2539 (pp. 78-110, rec.),

where she acknowledges the partial legality and validity of the project of partition insofar as the

allocation in her favor of the Lots Nos. 3368 and 3441, the delivery of which she is seeking (pp.

106-107, rec.).

In her motion dated November 17, 1965, Juanita sought the setting aside of the order dated

October 2, 1964 on the ground that while the said order considered her action for annulment of

the project of partition as a prejudicial question, her filing an amended complaint on June 11,

1965 in civil case No. 2539 wherein she admitted the partial legality and validity of the project of

partition with respect to the adjudication to her of the two lots as her share, rendered said civil

case No. 2539 no longer a prejudicial question to her petition of July 20, 1964 for the delivery of

her share (Annex "L", pp. 55-59, rec.).

Alejandro filed his opposition dated December 1, 1965 to the aforesaid motion of Juanita to set

aside the order dated October 2, 1964 (Annex "M", pp. 60-61, rec.), to which Juanita filed her

rejoinder dated December 6, 1965 wherein she stated among others that pursuant to the project of

partition, executor Alejandro secured the cancellation of OCT. No. 13093 covering the two

parcels of land adjudicated to her under the project of partition and the issuance in his exclusive

name on August 4, 1961 TCT No. 26638-R covering the said Lots Nos. 3368 and 3441 of the

Bacolor Cadastre (Annex "N", pp. 62-71, rec.).

In an order dated April 27, 1966, the lower court denied Juanita's motion to set aside the order of

October 2, 1964 on the ground that the parties themselves agreed to suspend resolution of her

petition for the delivery of her shares until after the civil action for annulment of the project of

partition has been finally settled and decided (Annex "O", p. 72, rec.).

Juanita filed a motion dated May 9, 1966 for the reconsideration of the order dated April 27,

1966 (Annex "P" pp. 73-77, rec.), to which Alejandro filed an opposition dated June 8, 1966

(Annex "Q", pp. 112-113, rec.).

Subsequently, Alejandro filed a motion dated July 25, 1966 praying that the palay deposited with

Fericsons and Ideal Rice Mill by the ten (10) tenants of the two parcels in question be delivered

to him (Annex "R", pp. 114-116, rec.),to which Juanita filed an opposition dated July 26, 1966

(Annex "S", pp. 117-121, rec.). In an order dated September 8, 1966, the lower court denied the

motion for reconsideration of the order dated April 27, 1966, and directed Fericsons Inc. and the

Ideal Rice Mills to deliver to Alejandro or his representative the 229 cavans and 46 kilos and 325

and 1/2 cavans and 23 kilos of palay respectively deposited with the said rice mills upon the

filing by Alejandro of a bond in the amount of P12,000.00 duly approved by the court (Annex

"T", pp. 122-127, rec.). Hence, this petition for certiorari and mandamus.

The position of petitioner Juanita Lopez-Guilas should be sustained and the writs prayed for

granted.

The probate court loses jurisdiction of an estate under administration only after the payment of

all the debts and the remaining estate delivered to the heirs entitled to receive the same. The

finality of the approval of the project of partition by itself alone does not terminate the probate

proceeding (Timbol vs. Cano, 1 SCRA 1271, 1276, L-15445, April 29, 1961; Siguiong vs.

Tecson, 89 Phil., pp. 28-30). As long as the order of the distribution of the estate has not been

complied with, the probate proceedings cannot be deemed closed and terminated Siguiong vs.

Tecson, supra.); because a judicial partition is not final and conclusive and does not prevent the

heir from bringing an action to obtain his share, provided the prescriptive period therefor has not

elapsed (Mari vs. Bonilla, 83 Phil., 137). The better practice, however, for the heir who has not

received his share, is to demand his share through a proper motion in the same probate or

administration proceedings, or for re-opening of the probate or administrative proceedings if it

had already been closed, and not through an independent action, which would be tried by another

court or Judge which may thus reverse a decision or order of the probate on intestate court

already final and executed and re-shuffle properties long ago distributed and disposed of (Ramos

vs. Ortuzar, 89 Phil., 730, 741-742; Timbol vs. Cano, supra.; Jingco vs. Daluz, L-5107, April 24,

1953, 92 Phil. 1082; Roman Catholic vs. Agustines, L-14710, March 29, 1960, 107 Phil., 455,

460-461).

Section 1 of Rule 90 of the Revised Rules of Court of 1964 as worded, which secures for the

heirs or legatees the right to "demand and recover their respective shares from the executor or

administrator, or any other person having the same in his possession", re-states the aforecited

doctrines.

The case of Austria vs. Heirs of Ventenilla (99 Phil. 1068) does not control the present

controversy; because the motion filed therein for the removal of the administratrix and the

appointment of a new administrator in her place was rejected by the court on the ground of

laches as it was filed after the lapse of about 38 years from October 5, 1910 when the court

issued an order settling and deciding the issues raised by the motion (L-10018, September 19,

1956, 99 Phil., 1069-1070). In the case at bar, the motion filed by petitioner for the delivery of

her share was filed on July 20, 1964, which is just more than 3 years from August 28, 1961 when

the amended project of partition was approve and within 5 years from April 23, 1960 when the

original project of partition was approved. Clearly, her right to claim the two lots allocated to her

under the project of partition had not yet expired. And in the light of Section 1 of Rule 90 of the

Revised Rules of Court of 1964 and the jurisprudence above cited, the order dated December 15,

1960 of the probate court closing and terminating the probate case did not legally terminate the

testate proceedings, for her share under the project of partition has not been delivered to her.

While it is true that the order dated October 2, 1964 by agreement of the parties suspended

resolution of her petition for the delivery of her shares until after the decision in the civil action

for the annulment of the project of partition (Civil Case 2539) she filed on April 10, 1964; the

said order lost its validity and efficacy when the herein petitioner filed on June 11, 1965 an

amended complaint in said Civil Case 2539 wherein she recognized the partial legality and

validity of the said project of partition insofar as the allocation in her favor of lots Nos. 3368 and

3441 in the delivery of which she has been insisting all along (pp. 106-107, rec.).

WHEREFORE, judgment is hereby rendered:

1. Granting the writs prayed for;

2. Setting aside the orders of the respondent court dated October 2, 1964 and April 27, 1966, as

null and void; and, without prejudice to the continuance of Civil Case No. 2539, which, by

reason of this decision, involves no longer Lots 3368 and 3441 of the Bacolor Cadastre, .

3. Directing.

(a) the Register of Deeds of Pampanga to cancel TCT No. 26638-R covering the

aforesaid lots Nos. 3368 and 3441 of the Bacolor Cadastre and to issue anew

Transfer Certificate of Title covering the said two lots in the name of herein

petitioner Juanita Lopez Guilas; and

(b) the respondent Alejandro Lopez

(1) to deliver to herein petitioner Juanita Lopez Guilas the possession of lots Nos.

3368 and 3441;

(2) to deliver and/or pay to herein, petitioner all the rents, crops or income

collected by him from said lots Nos. 3368 and 3441 from April 23, 1960 until the

possession of the two aforementioned lots is actually delivered to her, or their

value based on the current market price; and

(3) to pay the costs.

So ordered.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo

and Villamor, JJ., concur.