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RAFAEL S. DIZON, in his capacity as Administrator of the Estate of the Deceased JOSE P.

FERNANDEZ, REDENTOR MELO, ELIODORO C. CRUZ, PIER 8 ARRASTRE & STEVEDORING
SERVICES, INC., COMPAÑIA MARITIMA, PASIG STEVEDORING COMPANY, INC., and
WESTERN PACIFIC CORPORATION vs. HON. COURT OF APPEALS, HON. PROTACIO C. STO.
TOMAS, Judge, RTC, Branch 14, Ligao, Albay, and JOSE BALDE, G.R. No. 96296, June 18,
1992

In the original action has given rise to the proceedings at bar
1
— instituted in 1975 by the
plaintiff Jose Balde (private respondent herein) principally for the recovery of damages
resulting from the allegedly illegal termination of his employment from the so-called
"Fernandez Companies"
2
effected by herein petitioners — one of the defendants, Jose P.
Fernandez, denominated the "principal" one, died before final judgment of the Trial Court.
The legal consequences of that party's death are what are now chiefly in issue.
The complaint filed in the Court a quo
3
named as defendants the six (6) petitioner
corporations herein, as well as (1) Jose P. Fernandez "in his own personal capacity and/or as
Chairman of the Board, President, or Director" of said firms; (2) Redentor R. Melo, "in his
own personal capacity and/or as Chief Legal Counsel of Pier 8 Arrastre & Stevedoring
Services, Inc.;" and (3) Eliodoro C. Cruz, "in his own personal capacity and/or as a legal
assistant" in the same company. It alleged that Balde was "summarily ousted and dismissed"
from his job as "Chief Accountant and Credit & Collection Manager of Pier 8 Arrastre and
Stevedoring Services . . . (since) 1973 and Chief Accountant of Western Pacific Corporation . .
. (since) 1974."
The defendants filed a motion to dismiss on the ground that the Court had no jurisdiction
over the nature of the action, which was essentially a "money claim" arising from an
employer-employee relationship exclusively cognizable by the National Labor Relations
Commission, and that no official decision had yet been reached regarding termination of
Balde's employment.
4
The defendants also filed a supplemental motion urging dismissal of
the action because venue had been improperly laid.
5
After oppositions were filed to both
motions, the Court issued an Order holding "in abeyance the resolution . . . (thereof) until
pre-trial is conducted and evidence is presented . . . without prejudice to dismissing the case
when the ground for dismissal becomes apparent."
6

The defendants thereafter presented their "Answer with Compulsory Counterclaim," which
contained specific denials and qualified admissions of the averments of the complaint;
alleged as affirmative defenses the same grounds alleged in their motions to dismiss, and the
fact that they had acted entirely in accordance with law and in all good faith in discharging
Balde from employment, he having "done acts prejudicial and inimical to their interest and
(which) have caused damage;" and seeking recovery of moral, actual and exemplary damages
resulting from Balde's "completely unfounded and baseless action."
7
Pre-trial and trial
ensued after Balde filed his answer to the counterclaim and a reply to the answer.
Balde's presentation of his evidence-in-chief was concluded upon the admission by the Court
of his exhibits over the defendants' objections, by Order dated October 21, 1987.
Some two weeks afterwards, or more precisely on November 7, 1987, defendant Jose P.
Fernandez died. Notice thereof was given to the Court by his counsel, through a
manifestation dated November 16, 1987.
As intimated in the opening paragraph of this Decision, the death of Fernandez brought up
the question of the legal consequences of that demise, and the action that Trial Court should
properly take in view thereof. For the sake of clarify, and the better to gauge the propriety of
the action actually taken by Trial Court, the narration of the material facts is interrupted at
this point, so that a brief exposition of the applicable law may be made.
The effects of the death of a defendant in a civil suit are dependant upon of the nature
action: whether (a) the action is a personal one for "recovery of money, debt or interest
thereon," 8 or (b) is not for said purpose,
9
i.e., it is a real action,
10
or one for recovery of
personal property "or to enforce a lien thereon, and actions to recover damages for an injury
to person or property, real or personal."
11
The effects of the defendant's death are
dependent, as well, on the time of his demise.
The law says that "(w)hen the action is for recovery of money, debt or interest thereon, and
the defendant dies before final judgment in the Court of First Instance (now Regional Trial
Court), it shall be dismissed to be prosecuted in the manner especially provided in these
rule."
12

The "especial" manner of the prosecution of said money claims against the decedent is set
forth in Rule 86 of the Rules of Court,
13
in connection with the judicial proceedings for the
settlement of the estate of a deceased person. "The reason for the dismissal of the ordinary
action," as a noted commentator stresses, "is that upon the death of the defendant a testate
or intestate proceeding shall be instituted in the proper court wherein all his creditors must
appear and file their claims which shall be paid proportionately out of the property left by
the deceased. It is, therefore, to avoid useless duplicity of procedure that the ordinary action
must be wiped out from the ordinary courts."
14

If the defendant dies after final judgment of the Regional Trial Court, the action (for money,
debt or interest thereon) is not dismissed, and an appeal may be taken by or against the
administrator;
15
but if that judgment against the deceased becomes final and executory, it
shall be enforced, not by execution under Rule 39, but in accordance with Section 5 of Rule
86,
16
i.e., by presenting the same as a claim against the estate.
If, on the other hand, the claim against the defendant is other than for "money, debt or
interest thereon" — i.e., it is a real action,
17
or one for recovery of personal property "or to
enforce a lien thereon, and actions to recover damages for an injury to person or property,
real or personal," supra
18
— and the defendant dies, the claim against him is not thereby
extinguished, and the action will not be dismissed but continue against the decedent's legal
representative. Section 17, Rule 3 specifies the procedure to be followed, viz.
. . . After a party dies and the claim is not thereby extinguished, the court
shall order, upon proper notice, the legal representative of the deceased
to appear and to be substituted for the deceased, within a period of
thirty (30) days, or within such time as may be granted. If the legal
representative fails to appear within said time, the court may order the
opposing party to procure the appointment of a legal representative of
the deceased within a time to be specified by the court, and the
representative shall immediately appear for and on behalf of the interest
of the deceased. The court charges involved in procuring such
appointment, if defrayed by the opposing party, may be recovered as
costs. The heirs of the deceased may be allowed to be substituted for the
deceased, without requiring the appointment of an executor or
administrator and the court may appoint guardianad litem for the minor
heirs.
The record discloses that the Court did not dismiss the action as against the deceased
defendant, Fernandez, conformably with Section 21, Rule 3. What it did was: (a) to require
the defendants' new counsel, former Supreme Court Justice Arsenio P. Dizon, by Order dated
November 21, 1987, "to effect the substitution of said deceased defendant within thirty (30)
days . . .,"
19
(a requirement it reiterated in another Order dated October 4, 1988); and (b) on
later learning that said Justice Dizon was the Administrator of the Fernandez Estate, to
require the latter, by Order dated January 2, 1989, to appear before it on February 4, 1989
(later reset to March 6, 1989) "to be substituted as party defendant for and in behalf of the
deceased Jose P. Fernandez" The Trial Judge was obviously proceeding in accordance with
Section 17, Rule 3; and it was doing so quite erroneously, since the action against the
deceased and his co-defendants was clearly one for the"recovery of money, debt or interest
thereon" which, by direction of Section 21 of the same Rule, should "be dismissed to be
prosecuted in the manner especially provided in these rules," at least in so far as concerned
the deceased defendant.
Justice Dizon was unable to appear at the hearing of March 6, 1989, on account of the poor
state of his health at the time. This he alleged in a telegram to the Court, and in a subsequent
formal motion, seeking on that account a resetting of the hearing to "either April 17, 18 and
28/89 or May 1, 2 and
3/89."
20
Unfortunately, neither the telegram nor the motion was received by the Trial Court
in time. Hence, by Order dated March 6, 1989, the Court directed plaintiff Jose Balde to
formally move in writing to have the case submitted for decision by reason of the
defendant's failure to appear despite notice.
When the defendants received notice of the Order of March 6, 1989, they promptly moved
for reconsideration through Atty. Rafael Dizon, under date of March 18, 1989.
21
By order
dated March 31, 1989, the Trial Court, without referring to its earlier Order of March 6, 1989,
re-schedule the hearing on April 24 1989, but required that "if and when Atty. Arsenio Dizon
shall still be indisposed during the next hearing, one of the associates of the law firm shall
appear for the defendants in order to avoid further delay in the disposition of this case . . .
(considering that) this case was fled since 1975 and this case could not be disposed of
because of continuous postponement by the parties."
22

However, notice of the Order of March 31, 1989 — resetting the hearing on April 24, 1989 —
sent from Ligao, Albay, was not received by the defendants in Metro Manila until the very
day of the hearing, April 24, 1989. Atty. Rafael Dizon immediately dispatched a telegram to
the Court that same day, reading as follows: "RECEIVED COPY MARCH 31, 1989 ORDER
SETTING HEARING OF CIVIL CASE, 528 APRIL 24 ONLY TODAY APRIL 24, 1989, REQUEST RESET
TO MAY 2, 14, 25, 31, JUNE 1, 2, 1989. FORMAL MOTION TO FOLLOW." The telegram
evidently came too late. What the Court had before it when the case was called at the
appointed hour on April 24, 1989 was Atty. Dizon's motion dated March 18, 1989 for
reconsideration of the Order of March 6, 1989, which had already been granted (the Court
having on March 31, 1989, reset the hearing on April 24, 1989). The Court then proceeded to
declare said motion of April 18, 1989 "moot and academic" and, in view of the defendants'
absence at the hearing of April 24, 1989, to consider the case submitted for decision. These
disposition it made in the following Order, to wit:
When this case was called for hearing this morning, the court received
the Motion seeking for reconsideration of the order dated March 6, 1989
considering this case submitted for decision, for failure of counsel for the
defendants to appear on the said setting. The record shows that the
order sought to be reconsidered by defendants has already been
reconsidered by this court, when the court ordered on March 31, 1989 to
set this case for today.
The Motion for Reconsideration filed by Atty. Rafael S. Dizon, now
appearing as counsel for the defendants, is hereby considered moot and
academic.
In view, however, of the fact that the defendants and counsel failed to
appear today without justifiable cause, on motion of plaintiff, this case is
hereby ordered submitted for decision based on the evidence so far
presented.
According to the petitioners, notices of the Orders of April 24, 1989 and March 31, 1989
were never served on them or their counsel.
23
This is why, under date of October 19, 1989,
they filed a "Motion to Resolve Motion for Reconsideration dated March 18, 1989 and to Set
Case for Hearing."
24
This last motion was resolved by the Trial Court — now presided over by
Hon. Protacio C. Sto. Tomas — in an Order dated October 17, 1989. In said Order the Court
quoted verbatim the Order of April 24, 1989 of "Hon. Salvador D. Silerio, then Presiding
Judge of this Court;" pointed out that said order of April 24, 1989 "has not been reconsidered
and set aside;" and directed the immediate transmittal, "pursuant to an existing
Administrative Order issued by the Supreme Court, . . . (of) the records . . . to Judge Salvador
D. Selerio, Presiding Judge of RTC, Branch 8, Legazpi City for him to render the corresponding
decision."
25

The petitioners received copy of the Order of October 17, 1989 on November 7, 1989. On the
same day, they also received a copy of another Order of the same Court dated October 25,
1989,
26
dealing with their motion of October 19, 1989 and reading as follows:
The records disclosed that the Motion to Resolve Motion for
Reconsideration dated March 18, 1989 and to Set Case for Hearing filed
by Atty. Rafael S. Dizon dated October 19, 1989 has already been
resolved and acted upon, in the sense, that this case was already
submitted for decision as of April 24, 1989 signed by Hon. Salvador D.
Silerio, presiding Judge, copy of which was furnished Atty. Rafael Dizon.
Atty. Dizon appears not to have a fixed address as the order of the court
sent to him addressed at 5th Floor, Strata Building, Emerald Avenue,
Ortigas Commercial Complex, Pasig, Metro Manila has not been claimed
by said counsel.
Examining the instant motion, we find that it does not conform with the
mandatory of Sections 4, 5 and 6 of Rule 15 of the Rules of Court.
Wherefore, the motion is denied.
On November 21, 1989, the petitioners once again filed a motion for reconsideration, this
time directed against the Orders of April 24, October 17, and October 25, 1989. In that
motion, denominated "Motion for Reconsideration with Motion to Dismiss,"
27
the
petitioners —
1) averred that they had failed to appear at the hearing on April 24, 1989 at 8:30 a.m., as
directed in the Order of March 31, 1989, because they received notice thereof "ONLY ON THE
VERY SAME DAY AND PAST THE TIME OF THE SCHEDULED HEARING," as stated in their
telegram of April 24, 1989; and
2) argued that, "due to defendant Jose P. Fernandez death on November 7, 1987" and in light
of "Rule 3, Sec. 21," the case "must necessarily be dismissed and prosecuted pursuant to Sec.
1, Rule 87 of the Rules of Court."
The petitioners set the motion for hearing on December 6, 1989 at 8:30 A.M., furnishing copy
thereof on advance counsel by registered mail. In anticipation of his attendance at the
hearing of his motion, Atty. Rafael Dizon booked passage on the PAL flight from Manila to
Legazpi City on December 5, 1989 and from Legazpi to Manila on December 6, 1989.
28

Events however made it impossible for Atty. Dizon to appear at the sala of Judge Sto. Tomas,
on December 6, 1989. These events, specified by Dizon, were those resulting from the
aborted coup d'etat on December 1, 1989,i.e., "the closure of the Manila Domestic Airport,
the indefinite cancellation of all domestic airline flights and the unavailability of Public
transportation going out of Metro Manila." Alleging these as basis, Atty. Dizon sought a
resetting of the hearing on his motion to December 20, 1989, through a telegram,
29
and an
"Urgent Motion to Reset" dated December 4, 1989.
30

The Court denied the telegraphic request for postponement, in an Order dated December 6,
1989, viz.:
When the Motion for Reconsideration with Motion to Dismiss dated
November 21, 1989 was called for hearing, the movant Rafael S. Dizon
failed to appear notwithstanding that this is the date set forth by him.
However, a telegram has been received wherein said movant prays for a
postponement of the hearing of said motion alleging that a formal
motion will follow.
Examining the records, we find that the first motion for reconsideration
dated March 18, 1989 was already resolved and denied by this Court in
its order of October 25, 1989. This being the case, and considering that
the rules does not allow a second motion for reconsideration without
first securing leave of court, the instant motion for reconsideration dated
November 21, 1989 is DENIED.
In view of the foregoing development, the petitioners felt constrained to institute, as they
did institute in the Court of Appeals a special civil action of certiorari to annul and set aside
the Trial Court's five (5) Orders just mentioned, of April 24, May 29, October 17, October 25,
and December 6, 1989.
31
Their action failed. The Appellate Tribunal declared that upon the
facts, it was "not prepared to rule that respondent Court's issuance of the assailed orders is
tainted with grave abuse of discretion calling for the application of the extra-ordinary writ
of certiorari," and accordingly dismissed their petition. More particularly, it ruled that —
1) "the alleged error committed by respondent Court in not dismissing the complaint against
the deceased defendant Jose Fernandez, if at all, is merely an error of judgment and not of
jurisdiction," and hence, not correctible by the special civil action of certiorari under Rule 65;
2) "even if the claim against the deceased . . . Fernandez may de dismissed, it does not
necessarily follow that the complaint in Civil Case No. 528-LV should be dismissed in
toto, considering that there are other defendants in the case, and considering further that
some of the defendants in the case, and considering further that some of the defendants, the
principals at that, are corporate entities with separate juridical personalities;" and
3) "if petitioners did not receive copies of the orders issued by respondent Court, it was for
the reason that they have been continuously changing their address."
Their motion for reconsideration having been denied, by Resolution of the Court of Appeals
dated November 21, 1990, the petitioners have appealed to this Court. Here they contend
that:
1) "The Rules of Court mandate the dismissal of the case and not substitution of the
deceased defendant;" and
2) They "had a valid/justifiable cause for failing to appear in the scheduled hearing."
The private respondent's two-page comment dated February 16, 1991 submitted in response
to the Court's requirement therefor, does nothing except to assert, basically, that "there is
no showing at all that the Hon. Court of Appeals acted with grave abuse of discretion,"
contrary to the petitioners' claim of "patent excess of jurisdiction and/or grave abuse of
discretion" on the part of the Appellate Court."
32

By this Court's Resolution of April 15, 1991, the petition was given due course and
memoranda required of the parties, which have since been
submitted.
33

The first point raised by petitioners is well taken. As already stated,
34
the law is quite explicit
and leaves the Trial Court with no choice: "When the action is for recovery of money, debt or
interest thereon, and the defendant dies before final judgment in the Court of First Instance
(now Regional Trial Court), it shall be dismissed to be prosecuted in the manner especially
provided in these rules."
35
It was therefore error for the Trial Court to decline to dismiss the
suit as against the deceased Fernandez and to insists on continuing with the action as to
Fernandez by ordering his substitution by his administrator.
36

It was error, too, for the Trial Court to deny Atty. Dizon's motion dated November 21, 1989
for reconsideration of the Orders of April 24, October 17, and October 25, 1989, on the
ground that it was in effect a second motion for reconsideration "the rules does (sic) not
allow a second motion for reconsideration without first securing leave of court . . ." There is
no such rule as regards interlocutory orders like those sought to be reconsidered. The Trial
Judge might possibly have had in mind Section 4, Rule 37, of the Rules of Court, governing a
"second motion for new trial, based on a ground not existing nor available when the first
motion was made," but the section clearly applies only to final judgments, not to
interlocutory orders. The Trial Judge might have had in mind Section 1, Rule 52 pertinently
providing that "(n)o more than one motion for re-hearing or reconsideration shall be filed
without express leave of court," but again, it is clear that the proviso applies only to final
judgments of the Court of Appeals, not to interlocutory orders or resolutions. The Trial Judge
might have had in view Section 11 of Batas Pambansa Bilang 129 (Judiciary Reorganization
Act of 1980) which inter alia decrees that "no second motion for reconsideration shall be
entertained," or paragraph 4 of the Interim or Transitional Rules relative to the
implementation of said B.P. Blg. 129, promulgated by this Court, declaring that "(n)o party
shall be allowed a second motion for reconsideration of a final order or judgment;" but again
these provisions obviously have reference not to interlocutory orders but to final judgments
or orders. A second motion attacking an interlocutory order might possibly be denied on the
ground that it is a "rehash" or mere reiteration of grounds and arguments already passed
upon and resolved by the Court; it cannot be rejected on the ground that a second motion
for reconsideration of an interlocutory order is forbidden by law.
The question that now arises is whether these errors amount to grave abuse of discretion on
the part of the Trial Judge. The first does. In adamantly refusing to dismiss the action against
the deceased Fernandez so that the claim against him might be filed in the special
proceedings for the settlement of his estate, it is clear that His Honor was refusing to apply
an explicit mandate of the Rules of Court although well aware of it, and of the fact that no
reason existed in the record for excepting the case at bar from the operation of the rule.
Such a refusal, in other words, may not be deemed to constitute "merely an error of
judgment and not of jurisdiction," as the Court of Appeals characterizes it, but as an outright
defiance of the plain provisions of the Rules of Court which had been insistently brought to
his attention; an act therefore, executed without any jurisdiction in law, whimsically,
capriciously, and oppressively; an act, in short, done with grave abuse of discretion.
37

What has just been stated makes inconsequential the failure of Atty. Dizon to appear before
the Court on December 6, 1989, the date set by him for the hearing of his motion for
reconsideration of November 21, 1989 — in which he asked that said hearing be reset
because fortuitous events precluded his appearance, and reiterated the prayer that the
action be dismissed as against defendant Fernandez because of the latter's demise. For even
assuming that Atty. Dizon's failure to receive notices of, and consequent omission to appear
at, the hearings of February 4, 1989, March 6, 1989 and April 24, 1989 were inexcusable,
because the failure to receive said notices was due to his "continuously changing his
address," as the Court of Appeals points out, that circumstance did not make unmeritorious
the motion for dismissal of the suit as against deceased Fernandez. It must be mentioned,
however, in fairness to Atty. Dizon, that he had as a matter of fact made preparation for
presenting himself before the Trial Court at the hearing of December 6, 1989, booking
passage on Philippine Airlines on December 5, 1989, and that the closure of airports and
cancellation of domestic flights on account of the aborted coup d'etat of December 1, 1989
— of which the Court takes judicial notice — had indeed made impossible his intended
appearance before the Trial Court on the appointed day, December 6, 1989.
Not to be overlooked in this case is the nature of the complaint instituted by Jose Balde in
the Trial Court,
38
which upon sufficient reflection is disclosed as pertaining to the exclusive
jurisdiction of the Labor Arbiters of the Department of Labor and Employment and not the
regular courts of justice. That complaint alleged that Balde was "summarily ousted and
dismissed" from his job as "Chief Accountant and Credit & Collection Manager of Pier 8
Arrastre and Stevedoring Services . . . (a job he had held since) 1973 and Chief Accountant of
Western Pacific Corporation . . . (held since) 1974. " It averred that despite his having worked
efficiently and caused an increase in the profitability of the companies, and allegedly on
evidence known by defendant Cruz to be sham — that he (Balde) was implicated in some
anomaly in the procurement of supplies and spare parts — said defendant Cruz
unceremoniously relieved him of his duties and sealed and searched his personal belongings;
that on his (Balde's) insistence, an investigation was eventually conducted by defendant
Melo, the Chief Legal Counsel, ostensibly to ascertain the truth but which was actually
nothing but an "inquisition" characterized by "malice, bias, prejudice and partiality, " at
which he was not accorded full opportunity to defend himself; and that Fernandez, the
highest corporate official in the corporations, turned a deaf ear to Balde's pleas for a "speedy
and impartial investigation." Upon these factual assertions, the complaint prayed for the
payment by the defendants to Balde of actual, moral, and exemplary damages in the
aggregate amount of P1,100,000.00, attorney's fees in the sum of P100,000.00, and "such
other reliefs equitable in the premises." It did not include reinstatement as a specific relief.
The complaint, in other words, set forth claims for money arising from employer-employee
relations. Now, at the time that the complaint was filed, in 1975, exclusive jurisdiction over
such "money claims arising form employer-employee relations"
39
as well " all other cases or
matters arising from employer-employee relations,"
40
was vested by the law in the Labor
Arbiters of the National Labor Relations Commission.
41
That jurisdiction remained
substantially unaffected by subsequent amendments of the Labor Code up to 1989,
42
when
Republic Act No. 6715 became effective, except that for a time, about three (3) years, Labor
Arbiters were divested of competence to "entertain claims for moral or other forms of
damages."
43

Under Republic Act No. 6715,
44
embodying the latest amendments to the Labor Code of the
Philippines, the following casesinter alia fall within the "original and exclusive jurisdiction" of
Labor Arbiters, to wit:
xxx xxx xxx
(2) Termination disputes;
(3) If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and other
terms and conditions of employment;
(4) Claims for actual, moral, exemplary and other forms of damages
arising from employer-employee relations;
xxx xxx xxx
(6) Except claims for employees compensation, social security, medicare
and maternity benefits, all other claims arising from employer-employee
relations, including those persons in domestic or household services,
involving an amount not exceeding five thousand pesos (P5,000.00)
whether or not accompanied with a claim for reinstatement.
The claims in question do not involve "wages, rates of pay hours of work and other terms and
conditions of employment." They do constitute, however, a "termination dispute," and are
actually "claims for actual, moral, exemplary and other forms of damages arising from
employer-employee relations," unaccompanied by a prayer for reinstatement. As such they
are, as the law clearly says, within the "original and exclusive jurisdiction" of Labor Arbiters.
In other words, whether under the law at present in force, or that at the time of the filing of
the complaint, Jose Balde's cause falls within the exclusive original jurisdiction of the Labor
Arbiters and not of the Regional Trial Court (formerly, Court of First Instance).
To be sure, this jurisdictional defect in the proceedings has not been explicity put at issue in
the appeal at bar, although references appear in the pleadings to the various motions filed by
Fernandez and his co-defendants with the Regional Trial Court to dismiss the action for want
of jurisdiction over the nature of the suit instituted by Jose Balde. This omission is of no
moment. Excepted from the general rule that in appellate proceedings in the Court of
Appeals or this Court, " no error . . . will be considered unless stated in the assignment of
errors and properly argued in the brief" (or otherwise raised as an issue), are (1) errors which
"affect the jurisdiction over the subject matter," (2) "plain errors," and (3) "clerical errors".
45

WHEREFORE, the Decision of the Court of Appeals promulgated on July 20, 1990 and its
Resolution dated November 21, 1990, in CA-G.R. SP No. 19602, as well as the Orders of the
Regional Trial Court (Branch 14) at Ligao, Albay in Civil Case No. 528-LV dated May 9, 1989,
October 17, 1989, October 25, 1989 and December 6, 1989 are REVERSED and SET ASIDE,
and said Civil Case No. 528-LV is ORDERED DISMISSED for lack of jurisdiction of the subject
matter and, as regards the deceased Jose P. Fernandez, on the additional ground set forth in
Section 17, Rule 3 of the Rules of Court, without pronouncement as to costs.
SO ORDERED.

JOSE PENEYRA and MILAGROS CALDERON, petitioners, vs. HON. INTERMEDIATE APPELLATE
COURT and HONORABLE GODOFREDO RILLORAZA, respondents. G.R. No. L-68935 January
22, 1990
FACTS:
On May 7, 1976, the Board of Trustees of the Corregidor College Inc. Awarded the
management and operation of its canteen at a monthly rental of P80.00 to Jose Peneyra and
Milagros Calderon. They are also stockholders of the said College.
A few years after, Eulogio Dizon, the current Chairman of the Board of Trustees of
Corregidor College, Inc refused accepting payment of rentals from the petitioners without
any cause. On August t 6, 1980, partial demolition of the canteen was effected.
Consequently, on September 9, 1980, petitioners filed in the then Court of First Instance of
Nueva Ecija an action against Eulogio R. Dizon for damages with preliminary mandatory
injunction.
On December 25, 1983, Eulogio Dizon died. Thereafter, his counsel moved to
dismiss the complaint by reason thereof. The trial court dismissed petitioners' complaint on
the ground that the action for damages did not survive the death of Dizon. Petitioners
moved to reconsider but were unsuccessful.
Arguing that the trial court gravely abused its discretion in denying admission of
their amended complaint and in subsequently dismissing their case, petitioners filed a special
civil action of certiorari and mandamus against respondent judge before the IAC.
ISSUE: WON the action for damages against Euologio Dizon survive his death.
HELD: YES!
As argued convincingly by petitioners, an action for the recovery of damages for
injury to personal property is not extinguished by the death of the defendant. This is because
such action may still be brought against the executor or administrator of the estate of the
defendant. Since the demolition of petitioners' canteen is a ground for the recovery of
damages arising from injury to personal property, then, as provided in Section 1 of Rule 87 of
the Rules of Court, the deceased defendant should now be substituted by the executor,
administrator or legal representative of his estate as party-defendant.
The successor Regional Trial Court is ordered to reinstate Civil Case No. 774-G, to
cause the deceased defendant Eulogio Dizon to be substituted by the executor, administrator
or legal representative of his estate as party-defendant and thereafter to proceed with the
trial of the case with dispatch.

FABIANA C. VDA. DE SALAZAR, petitioner, vs. COURT OF APPEALS, PRIMITIVO
NEPOMUCENO and EMERENCIANA NEPOMUCENO, respondents. G.R. No. 121510
November 23, 1995

FACTS: On July 23, 1970, both private respondents Primitive Nepomuceno and Emerenciana
Nepomuceno filed separate complaints 1 with the then Court of Agrarian Relations of
Malolos, Bulacan, for ejectment on the ground of personal cultivation and conversion of land
for useful non-agricultural purposes against petitioner's deceased husband, Benjamin
Salazar. After protracted proceedings in the agrarian court and then the Regional Trial Court
2 spanning from 1970 to 1993, the trial court rendered its joint decision in favor of private
respondents. An appeal 4 therefrom was interposed in the name of petitioner's deceased
husband on the ground that private respondents herein failed to satisfy the requirements
pertaining to personal cultivation and conversion of the landholdings into non-agricultural
uses. The Court of Appeals rejected such contention upon finding that the record was replete
with evidence justifying private respondents' assertion of their right of cultivation and
conversion of their landholdings. 5
Almost a year after the termination of that appeal, the same trial court decision subject
thereof was once again assailed before the Court of Appeals through a petition for
annulment of judgment. Herein petitioner assailed the same trial court decision as having
been rendered by a court that did not have jurisdiction over her and the other heirs of her
deceased husband because notwithstanding the fact that her husband had already died on
October 3, 1991, the trial court still proceeded to render its decision on August 23, 1993
without effecting the substitution of heirs in accordance with Section 17, Rule 3, of the Rules
of Court thereby depriving her of her day in court.
Petitioner, not having asserted the matter of fraud or collusion in her petition for annulment
of judgment, the Court of Appeals decided the same on the basis of the sole issue of non-
jurisdiction resulting from the alleged deprivation of petitioner's right to due process and
ruled in favor of the validity of the challenged decision. Petitioner filed a motion for
reconsideration of the decision of the appellate court reiterating the trial court's lack of
jurisdiction over the heirs of petitioner's deceased husband as a consequence of the failure
of the trial court to effectuate a valid substitution of heirs. Said motion was denied in a
resolution promulgated on August 14, 1995. Hence this petition.
ISSUE: WON the trial courts failure to effectuate a substitution of heirs before its rendition of
judgment render such judgment null and void.
HELD: We are not unaware of several cases where we have ruled that a party having died in
an action that survives, the trial held by the court without appearance of the deceased's legal
representative or substitution of heirs and the judgment rendered after such trial, are null
and void because the court acquired no jurisdiction over the persons of the legal
representatives or of the heirs upon whom the trial and the judgment would be binding. This
general rule notwithstanding, in denying petitioner's motion for reconsideration, the Court of
Appeals correctly ruled that formal substitution of heirs is not necessary when the heirs
themselves voluntarily appeared, participated in the case and presented evidence in defense
of deceased defendant.
In the instant case, only jurisdiction over the person of the heirs is in issue. Jurisdiction over
the person may be acquired by the court more easily than jurisdiction over the subject
matter. Jurisdiction over the person may be acquired by the simple appearance of the person
in court as did herein petitioner appear;
Consequently, we rule that, as in the case at bench, the defendant in an ejectment case
having died before the rendition by the trial court of its decision therein, its failure to
effectuate a formal substitution of heirs before its rendition of judgment, does not invalidate
such judgment where the heirs themselves appeared before the trial court, participated in
the proceedings therein, and presented evidence in defense of deceased defendant, it
undeniably being evident that the heirs themselves sought their day in court and exercised
their right to due process.
Respondent Court of Appeals also correctly ruled that ejectment, being an action involving
recovery of real property, is a real action which as such, is not extinguished by the
defendant's death.
There is no dispute that an ejectment case survives the death of a party, which death did not
extinguish the deceased's civil personality.
While it is true that a decision in an action for ejectment is enforceable not only against the
defendant himself but also against members of his family, his relatives, and his privies who
derived their right of possession from the defendant and his successors-in-interest, it had
been established that petitioner had, by her own acts, submitted to the jurisdiction of the
trial court. She is now estopped to deny that she had been heard in defense of her deceased
husband in the proceedings therein. As such, this petition evidently has no leg to stand on.
WHEREFORE, the instant petition is dismissed for lack of merit. Costs against petitioner.

SO ORDEREDEDMUNDO BENAVIDEZ vs. COURT OF APPEALS and ARISTON MELENDRES
represented by NARCISO M. MELENDRES Jr., G.R. No. 125848, September 6, 1999

FATCS: Respondent was the owner and actual possessor, by himself and through his
predecessors in interest. He claimed that the subject land was devoted to the planting of
palay and worked on and cultivated by agricultural tenants the last of whom was Felino
Mendez. He further alleged that petitioner, using force, intimidation, strategy and stealth,
entered the property and destroyed the barbed-wire fence, filled the property with soil and
other filling materials, and constructed permanent, concrete structures thereon thereby
converting its use from agricultural to commercial without necessary clearance or permit
from the DAR.
Petitioners answer alleged:
(a) that private respondent had no cause of action against him because he was the rightful
owner of the land by virtue of a deed of sale dated 5 February 1990 executed by Alicia
Catambay in his favor;
(b) that Tax Declaration No. 597 covering the subject land had been cancelled and a new one
already issued to him; and,
(c) that the property claimed by private respondent was different from that occupied by him.
MTC issued a writ preliminary injunction and later declared respondent as the rightful
possessor of the land in controversy. The court a quo disregarded the claim of petitioner that
he was the owner of the land as ownership of the property was not material in actions for
recovery of possession. Moreover, such claim of ownership, even if valid, was belied by the
Deed of Sale petitioner presented in court as it was only executed on 5 February 1990 or
more than two (2) months after the date of his unlawful entry on 29 November 1989.
Certainly, even if petitioner was the lawful owner of the property, he could not resort to
force to gain possession thereof as “regardless of the actual condition of the title to the
property, the party in peaceable quiet possession shall not be turned out by strong hand,
violence or terror.”
On appeal, the Regional Trial Court reversed the decision of the Municipal Trial Court. It held
that the issue involved in the case was not merely physical or de facto possession but one of
title to or ownership of the subject property; consequently, the Municipal Trial Court did not
acquire jurisdiction over it.
CA reversed the decision of the Regional Trial Court and reinstated that of the Municipal Trial
Court.
ISSUE: WON MTC had jurisdiction to try the case
HELD:
YES. The allegation that an agricultural tenant tilled the land in question does not
automatically make the case an agrarian dispute which calls for the application of the
Agricultural Tenancy Act and the assumption of jurisdiction by the Department of Agrarian
Reform Adjudication Board (DARAB). It is necessary to first establish the existence of a
tenancy relationship between the party litigants.
The following essential requisites must concur in order to establish a tenancy relationship:
(a) the parties are the landowner and the tenant;
(b) the subject matter is agricultural land;
(c) there is consent;
(d) the purpose is agricultural production;
(e) there is personal cultivation by the tenant; and
(f) there is a sharing of harvests between the parties.
In the instant case, there is no showing that there exists any tenancy relationship between
petitioner and private respondent. Thus, the case falls outside the coverage of the
Agricultural Tenancy Act; consequently, it is the Municipal Trial Court and not the DARAB
which has jurisdiction over the controversy between petitioner and private respondent.
Furthermore, Rule 70, Sec. 1 of the Rules of Court "x x x x the provisions of Rule 70 shall not
apply to cases covered by the Agricultural Tenancy Act" is not applicable.
Petitioner’s reliance on principle that “an inferior court loses its jurisdiction where the
question of ownership is so necessarily involved that it would be impossible to decide the
question of bare possession without first settling that of ownership” is erroneous as this was
already modified by B.P. Blg. 129. The Municipal Trial Court now retains jurisdiction over
ejectment cases even if the question of possession cannot be resolved without passing upon
the issue of ownership provided that such issue of ownership shall be resolved only for the
purpose of determining possession.
CA decision affirmed.

CASIMIRO MENDOZA vs. HON. COURT OF APPEALS and TEOPISTA TORING TUÑACAO, G.R.
No. 86302, September 24, 1991

Facts: Teopista Toring Tufiacao alleged that she was born to Brigida Toring, who was then
single, and defendant Casimiro Mendoza, married at that time to Emiliana Barrientos. She
averred that Mendoza recognized her as an illegitimate child by treating her as such and
according her the rights and privileges of a recognized illegitimate child. Casimiro Mendoza,
then already 91 years old, specifically denied the plaintiffs allegations and set up a
counterclaim for damages and attorney's fees. He denied it to his dying day.
RTC: rejected Teopista’s claim that she was in continuous possession of the status of a child
of the alleged father by the direct acts of the latter or of his family. His Honor declared:
Teopista continuously lived with her mother, together with her sister Paulina. At most, only
their son, Lolito Tufiacao was allowed to construct a small house in the land of Casimiro,
either by Casimiro or by Vicente Toring. Casimiro never spent for her support and education.
He did not allow her to carry his surname. The instances when the defendant gave money
were, more or less, off-and-on or rather isolatedly periodic…All these acts, taken altogether,
are not sufficient to show that the plaintiff had possessed continuously the status of a
recognized illegitimate child.
CA: Teopista has sufficiently proven her continuous possession of such status. We consider
the witnesses for the plaintiff as credible and unbiased. Vicente Toring was an interested
party who was claiming to be the sole recognized natural child of Casimiro and stood to lose
much inheritance if Teopista's claim were recognized.
A motion for consideration was filed. It was at this time that Casimoro died. Counsel then
asked the court to substitute Vicente Toring for the deceased.
Issue:
1. WON the case will continue?
2. WON the estate be partitioned?
Ruling:
1. Rule 3, section 17 provides that after a party dies and the claim is not extinguished,
legal representative of the deceased may appear and be substituted for the
deceased.
Rule 87, section 2 provides that the executor of administrator may bring or defend
actions which survive for the protection of the property and rights of the deceased.
2. Rule 90, section 1 provides that if there is a controversy before the court as to who
are the lawful heirs of the deceased person or as to the distributive shares of the
deceased person is entitled under the law, the controversy shall be heard and
decided as in ordinary case.

PURITA ALIPIO vs. COURT OF APPEALS and ROMEO G. JARING, represented by his
Attorney-In-Fact RAMON G. JARING, G.R. No. 134100, September 29, 2000

Facts: Respondent Romeo Jaring was the lessee of a 14.5 hectare fishpond in Bataan for a
period of 5 years ending on September 12, 1990. On June 19, 1987, he subleased the
fishpond for the remaining period of his lease to the spouses Placido and Purita Alipio and
the spouses Bienvenido and Remedios Manuel for an amount of Php 485,600.oo payable in 2
installments in the amount of Php 300,000.00 and 185,600.00 respectively. The 2nd
installment will fall due on June 30, 1989. The 1st installment was duly paid but the 2nd
installment was only partially fulfilled leaving a balance of Php 50,600.00. The sub lessees
failed to settle the remaining balance despite repeated demands. This prompted private
respondent Jaring to file a complaint on Oct. 13, 1989 against the Alipio and Manuel spouses
in the RTC Bataan for the collection of the said amount and prayed in the alternative, the
rescission of the sublease contract in case of failure to pay. However, prior to the institution
of the complaint, on Dec. 1, 1988, one of the sub lessees, Placido Alipio, died. His wife, Purita
moved to dismiss the complaint citing Rule 3 Sec 21 of the 1964 Rules of Court which states
that in an action for recovery of money, debt or interests and the defendant dies before the
CFI renders the final judgment, the case shall be dismissed and prosecuted in the manner
especially provided in these rules. This rule was however amended, so that in Rule 3 Sec 20
of the 1997 Rules of Civil procedure, it states that there is no longer need to dismiss, that the
case will be allowed to continue until entry of final judgment and that the claims will then be
pursued in the manner provided by the rules on prosecuting claims against the estate of a
deceased person. The RTC however, denied petitioner’s motion while the Manuel spouses
were defaulted for failure to file an answer. The RTC rendered a decision ordering the
petitioner and the Manuel spouses to pay the unpaid balance of Php 50,600 plus Php
10,000.00 for atty’s fees and cost of suit.
Petitioner Alipio appealed to the CA but her appeal was also dismissed by the said appellate
court citing the cases (1) Climaco vs. Siy-Uy - that the rule invoked by petitioner does not
apply where there are another defendants against whom the action is instituted; and (2)
Imperial insurance Ins. vs. David – that where a husband and wife bound themselves jointly
and severally, in case of death, the liability of the surviving spouse is independent and
separate so that she may be sued for the whole debt.
Hence, petitioner Alipio, filed a petition for review on certiorari questioning the applicability
of the above 2 cases.
Issue: Whether or not a creditor can sue the surviving spouse for the collection of a debt
which is owed by the conjugal partnership of gains or whether such claims must be filed in
proceedings for the settlement of the estate of the decedent
Held: Petitioner and her late husband and the Manuel spouses signed the
sublease contract binding themselves to pay the rentals stipulated which under Art. 161 of
the Civil Code will make the conjugal partnership liable. However, when petitioner’s husband
died, the conjugal partnership of gains was automatically dissolved thus all debts
chargeable to it are to be paid in the intestate of testate proceedings of the deceased
spouse. And even when there is no liquidation that has been made, this would not mean that
the conjugal partnership of gains continues to exist in order to pursue the claim against
the surviving spouse alone. The creditor under Sec 6 Rule 78 of the Revised Rules of Court
can have the remedy of applying in court for letters of administration in his capacity as the
principal creditor.
SC ruled that the 2 cases cited by the CA do not apply in this case because such cases are
based on different sets of facts not similar to the case herein. Private respondent cannot
maintain the present suit against petitioner. The proper remedy is to file a claim against the
Alipios in a proceeding for the settlement of the estate of the deceased husband.
SC also ruled that the CA decision ordering payment of the balance does not specify whether
it is to be paid jointly or solidarily. Applying Art 1207 of the Civil Code, the obligation of
petitioner and theManuel spouses is presumed to be only JOINT, i.e. the debt is divided into
as many equal shares as there are debtors, each debt being considered distinct from one
another. SC therefore grants the petition and orders the Manuel spouses to pay Php
25,300.00 plus Php 10,000.00 for atty’s fees and cost of suit. The complaint against petitioner
was dismissed without prejudice to the filing of claim by private respondent in a proceeding
for the settlement of the estate ofthe deceased husband.

MANOLO P. CERNA vs. THE HONORABLE COURT OF APPEALS and CONRAD C. LEVISTE, G.R.
No. L-48359, March 30, 1993

FACTS: On or about October 16, 1972, Celerino Delgado (Delgado) and Conrad Leviste
(Leviste) entered into a loan agreement for a total sum of SEVENTEEN THOUSAND FIVE
HUNDRED (P17,500.00) PESOS. On the same date, Delgado executed a chattel mortgage over
a Willy's jeep owned by him and "Taunus" car owned by herein petitioner, Manolo P. Cerna,
acting as the attorney-in-fact of the latter.
The period lapsed without Delgado paying the loan. This prompted Leviste to file a collection
suit docketed as Civil Case No. 17507 with the Court of First Instance of Rizal, Branch XXII
against Delgado and petitioner as solidary debtors. Herein petitioner filed his first Motion to
Dismiss 4on April 4, 1973 on the grounds of lack of cause of action against petitioner and the
death of Delgado. This Motion to Dismiss was denied on August 15, 1973 by Judge Nicanor S.
Sison. Thereafter, petitioner filed with the Court of Appeals a special civil action forcertiorari,
mandamus, and prohibition with preliminary injunction docketed as CA-G.R. No. 03088 on
the ground that the respondent judge committed grave abuse of discretion in refusing to
dismiss the complaint. On June 28, 1976, the Court of Appeals 5denied the petition because
herein petitioner failed to prove the death of Delgado and the consequent settlement
proceedings regarding the latter's estate. Neither did petitioner adequately prove his claim
that the special power of attorney in favor of Delgado was
forged.chanroblesvirtualawlibrarychanrobles virtual law library
On February 18, 1977, petitioner filed his second Motion to Dismiss on the ground that the
trial court, now presided by Judge Nelly L. Romero Valdellon, acquired no jurisdiction over
deceased defendant, that the claim did not survive, and that there was no cause of action
against him. The trial court still denied this motion. The appellate court denied it as well
when an appeal was made.
ISSUE: Whether or not Manolo maybe held liable for the loan aggreement
HELD: No. Only Delgado signed the promissory note and accordingly, he was the only one
bound by the contract of loan. Nowhere did it appear in the promissory note that petitioner
was a co-debtor.
As to the mortgage contract, it was also signed only by Delgado as mortgagor. Although
Delgado was designated as attorney in fact of Manolo, but this alone does not make
petitioner a co-mortgagor especially so since only Delgado signed the chattel mortgage as
mortgagor. The Special Power of Attorney did not make petitioner a mortgagor. All it did was
to authorize Delgado to mortgage certain properties belonging to petitioner.
Granting, however, that petitioner was obligated under the mortgage contract to answer for
Delgado's indebtedness, under the circumstances, petitioner could not be held liable because
the complaint was for recovery of a sum of money, and not for the foreclosure of the
security. We agree with petitioner that the filing of collection suit barred the foreclosure of
the mortgage. Thus:
A mortgagee who files a suit for collection abandons the remedy of foreclosure of the chattel
mortgage constituted over the personal property as security for the debt or value of the
promissory note which he seeks to recover in the said collection suit. 14chanrobles virtual
law library
Hence, Leviste, having chosen to file the collection suit, could not now run after petitioner for
the satisfaction of the debt. This is even truer in this case because of the death of the
principal debtor,
Delgado. Leviste was pursuing a money claim against a deceased person. Section 7, Rule 86
of the Rules of Court provides:
Sec. 7. Mortgage debt due from estate. - A creditor holding a claim against the deceased
secured by 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; . . . .

TOMASA VDA. DE JACOB, as Special Administratrix of the Estate of the Deceased ALFREDO
E. JACOB vs. HONORABLE COURT OF APPEALS, BICOL SAVINGS & LOAN ASSOCIATION,
JORGE CENTENERA, AND LORENZO C. ROSALES, G.R. No. 88602, April 6, 1990

FACTS: Dr. Jacob was the registered owner of a parcel of land. Sometime in 1972 Jorge
Centenera was appointed as administrator of Hacienda Jacob until January 1, 1978 when the
Special Power of Attorney executed in his favor by Dr. Jacob was revoked by the latter.
Because of the problem of paying realty taxes, internal revenue taxes and unpaid wages of
farm laborers of the hacienda, Dr. Jacob asked Centenera to negotiate for a loan. For this
purpose, a special power of attorney was executed and acknowledged by Dr. Jacob before
notary public.
Consequently, Centenera secured a loan from the Bicol Savings & Loan Association.
Centenera signed and executed the real estate mortgage and promissory note as attorney-in-
fact of Dr. Jacob. When the loan fell due in 1975 Centenera failed to pay the same but was
able to arrange a restructuring of the loan using the same special power of attorney and
property as security. Another set of loan documents, namely: an amended real estate
mortgage and promissory note 1975 was executed by Centenera as attorney-in-fact of Dr.
Jacob. Again, Centenera failed to pay the loan when it fell due and so he arranged for
another restructuring of the loan with the bank. The corresponding promissory note was
again executed by Centenera on behalf of Jacob under the special power of attorney.
The mortgage was annotated on the title and when the loan was twice re-structured, the
proceeds of the same were not actually given by the bank to Centenera since the transaction
was actually nothing but a renewal of the first or original loan and the supposed proceeds
were applied as payment for the loan. The accrued interest for sixty (60) days was, however,
paid by Centenera.
Centenera again failed to pay the loan upon the maturity date forcing the bank to send a
demand letter. A copy of the demand letter was sent to Dr. Jacob but no reply or denial was
received by the bank. Thus, the bank foreclosed the real estate mortgage and the
corresponding provisional sale of the mortgaged property to the respondent bank was
effected. On November 5, 1982 a definite deed of sale of the property was executed in favor
of the respondent bank as the sole and highest bidder.
Vda. de Jacob who was subsequently named administratrix of the estate of Dr. Jacob and
who claimed to be an heir of the latter, conducted her own investigation and therefore she
filed a complaint in the RTC alleging that the special power of attorney and the documents
therein indicated are forged and therefore the loan and/or real estate mortgages and
promissory notes are null and void.
However, while the action for annulment of mortgage, etc. aforestated was pending in the
trial court, on November 5, 1982, a definite deed of sale was issued by the sheriff in favor of
respondent bank. Without redemption having been exercised within the prescribed period,
the title in the name of Dr. Jacob was cancelled and in its place, TCT was issued in favor of
respondent bank. Respondent bank then filed a petition for the issuance of a writ of
possession which was opposed by petitioner. In due course a writ of possession was issued in
favor of the respondent bank

ISSUES:
1. WON an extrajudicial foreclosure of a mortgage may proceed even after the death of the
mortgagor;
2. WON a petition for the issuance of a writ of possession may be barred by estoppel.

RULING:
1. YES.
Section 7, Rule 86 of the Rules of Court provides as follows:
Sec. 7. Mortgage debt due from estate. — A creditor holding a claim against the deceased
secured by mortgage or other collateral security, may abandon the security and prosecute
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 adjudge it to be for the best interest of the estate that such redemption shall be
made
From the foregoing provision of the Rules it is clearly recognized that a mortgagee has three
remedies that may be alternately availed of in case the mortgagor dies, to wit:
(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 the deficiency as an ordinary claim; and;
(3) to rely on the mortgage exclusively, or other security and foreclose the same at anytime,
before it is barred by prescription, without the right to file a claim for any deficiency.
From the foregoing it is clear that the mortgagee does not lose its light to extrajudicially
foreclose the mortgage even after the death of the mortgagor as a third alternative under
Section 7, Rule 86 of the Rules of Court.
The power to foreclose a mortgage is not an ordinary agency that contemplated exclusively
the representation of the principal by the agent but is primarily an authority conferred upon
the mortgagee for the latter's own protection. That power survives the death of the
mortgagor.
The right of the mortgagee bank to extrajudicially foreclose the mortgage after the death of
the mortgagor, acting through his attorney-in-fact, did not depend on the authority in the
deed of mortgage executed by the latter. That right existed independently of said stipulation
and is clearly recognized in Section 7, Rule 86 of the Rules of Court aforecited.
2. NO.
While it is true that the question of the validity of said mortgage and consequently the
extrajudicial foreclosure thereof was raised in a separate proceeding before the trial court
the pendency of such separate civil suit can be no obstacle to the issuance of the writ of
possession which is a ministerial act of the trial court after a title on the property has been
consolidated in the mortgagee.

DAVID MAGLAQUE, JOSE MAGLAQUE MAURO MAGLAQUE and PACITA MAGLAQUE vs.
PLANTERS DEVELOPMENT BANK, and SPOUSES ANGEL S. BELTRAN AND ERLINDA C.
BELTRAN, G.R. No. 109472, May 18, 1999

FACTS: A real estate mortgage was executed to secure a loan in the amount of P2,000 at 12%
per annum obtained by the spouses Sabina and Egmidio Maglaque from Bulacan
Development Bank now known as Planters Development Bank. After the death of Sabina,
payment was made by Egmidio in the amount of P2,000 which the bank accepted. However,
the real estate mortgage was extra-judicially foreclosed for non-payment in full of the loan.
Title was consolidated in the name of the bank as the highest bidder. Thereafter, petitioners,
heirs of the spouses, filed a complaint for annulment of sale, reconveyance of title, with
damages, and injunction. Meanwhile, the subject property was sold to herein private
respondents. The trial court rendered judgment dismissing the complaint for insufficiency of
evidence. This was affirmed on appeal by the Court of Appeals.

ISSUE: WON the bank should have filed its claim in the settlement of estate of estate of the
deceased mortgagor.

HELD:

The rule is that a secured creditor holding a real estate mortgage has three (3) options
in case of death of the debtor. These are:
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.

Obviously, respondent bank availed itself of the third option.

PHILIPPINE NATIONAL BANK vs. HON. COURT OF APPEALS, ALLAN M. CHUA as Special
Administrator of the Intestate Estate of the late ANTONIO M. CHUA and Mrs. ASUNCION
M. CHUA, G.R. No. 121597, June 29, 2001

Facts: Spouses Antonio and Asuncion Chua were registered owners of a certain parcel of
land. Upon the death of Antonio, his son Allan, herein respondent was appointed by the
probate court as special administrator. With the court’s authority, Allan obtained a loan in
the amount of Php 450,000.00, payable one year thereafter and with interest 18.8% per
annum from petitioner PNB, secured by a real estate mortgage instituted on the said land
owned by the spouses. However, upon the loan maturity, Allan was unable to pay the loan.
Thus, PNB extrajudicially foreclosed the mortgage and subsequently conducted a public
auction. PNB emerged as the highest bidder with a bid price of P306,360.00. However, the
outstanding loan payable as of auction date had already ballooned to Php 679,185.63,
leaving a deficiency payable of Php 372,825.63. Petitioner filed a civil case for the recovery
of said deficiency against Asuncion and Allan Chua, the latter in his capacity as special
administrator of his father’s estate.
Petitioner contended that under prevailing jurisprudence when proceeds of sale are
insufficient to satisfy the debt, mortgagee has the right to recover balance from debtor and
that the applicable law in the case at bar is Act 3135 and not Sec. 7 of Rule 86(Rules of
Court). The respondent contended on the other hand that since the remedy of extrajudicial
foreclosure was availed of, PNB is precluded from filing an action to recover the balance
pursuant to Sec. 7 of Rule 86.
The RTC rendered a decision dismissing the petitioner PNB’s complaint. On appeal, CA
affirmed the dismissal for lack of merit. Thus, petitioner filed a petition for review on
certiorari with the SC.
Issue: Whether or not PNB can recover the deficiency
Ruling: Petitioner PNB can no longer recover deficiency.
However, it must be pointed out that petitioner’s cited cases involve ordinary debts
secured by a mortgage. The case at bar, we must stress, involves a foreclosure of mortgage
arising out of a settlement of estate, wherein the administrator mortgaged a property
belonging to the estate of the decedent, pursuant to an authority given by the probate court.
As the Court of Appeals correctly stated, the Rules of Court on Special Proceedings comes into
play decisively.
To begin with, it is clear from the text of Section 7, Rule 89, that once the deed of
real estate mortgage is recorded in the proper Registry of Deeds, together with the
corresponding court order authorizing the administrator to mortgage the property, said deed
shall be valid as if it has been executed by the deceased himself. Section 7 provides in part:
Sec. 7. Rule 89. 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 when it appears necessary or beneficial under the
following regulations:
x x x
(f) There shall be recorded in the registry of deeds of the province in which the real estate thus
sold, mortgaged, or otherwise encumbered is situated, a certified copy of the order of the
court, together with the deed of the executor or administrator for such real estate, which
shall be valid as if the deed had been executed by the deceased in his lifetime.
In the present case, it is undisputed that the conditions under the aforecited rule
have been complied with. It follows that we must consider Sec. 7 of Rule 86, appropriately
applicable to the controversy at hand.
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 any time before it is barred by
prescription without right to file a claim for any deficiency.9
In Perez v. Philippine National Bank,10 reversing Pasno vs. Ravina,11 we held:
The ruling in Pasno vs. 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 vs.
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.12 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.

VIRGINIA O. GOCHAN, ET AL. vs. RICHARD G. YOUNG, DAVID G. YOUNG, JANE G. YOUNG-
LLABAN, JOHN D. YOUNG JR., MARY G. YOUNG-HSU and ALEXANDER THOMAS G. YOUNG
as heirs of Alice Gochan; the INTESTATE ESTATE OF JOHN D. YOUNG SR.; and CECILIA
GOCHAN-UY and MIGUEL C. UY, for themselves and on behalf and for the benefit of FELIX
GOCHAN & SONS REALTY CORPORATION, G.R. No. 131889, March 12, 2001

Facts: Felix Gochan and Sons Realty Corporation (Gochan Realty) was registered with the SEC
on June 1951, with Felix Gochan, Sr., Maria Pan Nuy Go Tiong, Pedro Gochan, Tomasa
Gochan, Esteban Gochan and Crispo Gochan as its incorporators. Felix Gochan Sr.'s daughter,
Alice inherited 50 shares of stock in Gochan Realty from the former. Alice died in 1955,
leaving the 50 shares to her husband, John Young, Sr. In 1962, the Regional Trial Court of
Cebu adjudicated 6/14 of these shares to her children, Richard Young, David Young, Jane
Young Llaban, John Young Jr., Mary Young Hsu and Alexander Thomas Young (the Youngs).
Having earned dividends, these stocks numbered 179 by 20 September 1979. 5 days later (25
September), at which time all the children had reached the age of majority, their father John
Sr., requested Gochan Realty to partition the shares of his late wife by cancelling the stock
certificates in his name and issuing in lieu thereof, new stock certificates in the names of the
Youngs. On 17 October 1979, Gochan Realty refused, citing as reason, the right of first refusal
granted to the remaining stockholders by the Articles of Incorporation. In 1990, John, Sr.
died, leaving the shares to the Youngs. On 8 February 1994, Cecilia Gochan Uy and Miguel Uy
filed a complaint with the SEC for issuance of shares of stock to the rightful owners,
nullification of shares of stock, reconveyance of property impressed with trust, accounting,
removal of officers and directors and damages against Virginia Gochan, et. al. (Gochans) A
Notice of Lis Pendens was annotated to the real properties of the corporation.

On 16 March 1994, the Gochans moved to dismiss the complaint alleging that: (1) the SEC
had no jurisdiction over the nature of the action; (2) the the Youngs were not the real
parties-in-interest and had no capacity to sue; and (3) the Youngs' causes of action were
barred by the Statute of Limitations. The motion was opposed by the Youngs. On 29 March
1994, the Gochans filed a Motion for cancellation of Notice of Lis Pendens. The Youngs
opposed the said motion. On 9 December 1994, the SEC, through its Hearing Officer, granted
the motion to dismiss and ordered the cancellation of the notice of lis pendens annotated
upon the titles of the corporate lands; holding that the Youngs never been stockholders of
record of FGSRC to confer them with the legal capacity to bring and maintain their action,
and thus, the case cannot be considered as an intra-corporate controversy within the
jurisdiction of the SEC; and that on the allegation that the Youngs brought the action as a
derivative suit on their own behalf and on behalf of Gochan Realty, rhe failure to comply with
the jurisdictional requirement on derivative action necessarily result in the dismissal of the
complaint. The Youngs filed a Petition for Review with the Court of Appeals. On 28 February
1996, the Court of Appeals ruled that the SEC had no jurisdiction over the case as far as the
heirs of Alice Gochan were concerned, because they were not yet stockholders of the
corporation. On the other hand, it upheld the capacity of Cecilia Gochan Uy and her spouse
Miguel Uy. It also held that the Intestate Estate of John Young Sr. was an indispensable party.
The appellate court further ruled that the cancellation of the notice of lis pendens on the
titles of the corporate real estate was not justified. Moreover, it declared that the Youngs'
Motion for Reconsideration before the SEC was not pro forma; thus, its filing tolled the
appeal period. The Gochans moved for reconsideration but were denied in a Resolution
dated 18 December 1997. The Gochans filed the Petition for Review on Certiorari.

Issue: Whether the action filed by the Spouses Uy was not a derivative suit, because the
spouses and not the corporation were the injured parties.

Held: The following portions of the Complaint shows allegations of injury to the corporation
itself, to wit: "That on information and belief, in further pursuance of the said conspiracy and
for the fraudulent purpose of depressing the value of the stock of the Corporation and to
induce the minority stockholders to sell their shares of stock for an inadequate consideration
as aforesaid, respondent Esteban T. Gochan . . ., in violation of their duties as directors and
officers of the Corporation . . ., unlawfully and fraudulently appropriated [for] themselves the
funds of the Corporation by drawing excessive amounts in the form of salaries and cash
advances . . . and by otherwise charging their purely personal expenses to the Corporation";
and "That the payment of P1,200,000.00 by the Corporation to complainant Cecilia Gochan
Uy for her shares of stock constituted an unlawful, premature and partial liquidation and
distribution of assets to a stockholder, resulting in the impairment of the capital of the
Corporation and prevented it from otherwise utilizing said amount for its regular and lawful
business, to the damage and prejudice of the Corporation, its creditors, and of complainants
as minority stockholders." As early as 1911, the Court has recognized the right of a single
stockholder to file derivative suits. "Where corporate directors have committed a breach of
trust either by their frauds, ultra vires acts, or negligence, and the corporation is unable or
unwilling to institute suit to remedy the wrong, a single stockholder may institute that suit,
suing on behalf of himself and other stockholders and for the benefit of the corporation, to
bring about a redress of the wrong done directly to the corporation and indirectly to the
stockholders." Herein, the Complaint alleges all the components of a derivative suit. The
allegations of injury to the Spouses Uy can coexist with those pertaining to the corporation.
The personal injury suffered by the spouses cannot disqualify them from filing a derivative
suit on behalf of the corporation. It merely gives rise to an additional cause of action for
damages against the erring directors. This cause of action is also included in the Complaint
filed before the SEC. The Spouses Uy have the capacity to file a derivative suit in behalf of
and for the benefit of the corporation. The reason is that the allegations of the Complaint
make them out as stockholders at the time the questioned transaction occurred, as well as at
the time the action was filed and during the pendency of the action.

TEODORA A. RIOFERIO, VERONICA O. EVANGELISTA assisted by her husband ZALDY
EVANGELISTA, ALBERTO ORFINADA, and ROWENA O. UNGOS, assisted by her husband
BEDA UNGOS vs. COURT OF APPEALS, ESPERANZA P. ORFINADA, LOURDES P. ORFINADA,
ALFONSO ORFINADA, NANCY P. ORFINADA, ALFONSO JAMES P. ORFINADA, CHRISTOPHER
P. ORFINADA and ANGELO P. ORFINADA, G.R. No. 129008, January 13, 2004

FACTS: Alfonso Orfinada, Jr. died without a will leaving several personal and real
properties. He also left a widow, respondent Esperanza P. Orfinada, with whom he had seven
children who are the herein respondents. The demise of the decedent also left in mourning
his paramour, Teodora Rioferio and their children.
Respondents Alfonso James and Lourdes Orfinada, legitimate children of the deceased,
discovered that petitioner Teodora Rioferio and her children executed an Extrajudicial
Settlement of Estate of a Deceased Person with Quitclaim involving the properties of the
estate of the decedent. Respondents also found out that petitioners were able to obtain a
loan by executing a Real Estate Mortgage over the properties subject of the extra-judicial
settlement.
Respondents filed a Complaint for the Annulment/Rescission of Extra Judicial Settlement of
Estate of a Deceased Person with Quitclaim, Real Estate Mortgage and Cancellation of
Transfer Certificate of Titles.
Petitioners filed their Answer to the aforesaid complaint interposing the defense that the
property subject of the contested deed of extra-judicial settlement pertained to the
properties originally belonging to the parents of Teodora Riofero and that the titles thereof
were delivered to her as an advance inheritance but the decedent had managed to register
them in his name.

ISSUE: Whether the heirs have legal standing to prosecute the rights belonging to the
deceased subsequent to the commencement of the administration proceedings.

RULING: Yes.
Pending the filing of administration proceedings, the heirs without doubt have legal
personality to bring suit in behalf of the estate of the decedent in accordance with the
provision of Article 777 of the New Civil Code "that the rights to succession are transmitted
from the moment of the death of the decedent." The provision in turn is the foundation of
the principle that the property, rights and obligations to the extent and value of the
inheritance of a person are transmitted through his death to another or others by his will or
by operation of law.
Even if administration proceedings have already been commenced, the heirs may still bring
the suit if an administrator has not yet been appointed.
In Gochan v. Young, the Court recognized that there is no rule that categorically addresses
the situation in which special proceedings for the settlement of an estate have already been
instituted, yet no administrator has been appointed. In such instances, the heirs cannot be
expected to wait for the appointment of an administrator; then wait further to see if the
administrator appointed would care enough to file a suit to protect the rights and the
interests of the deceased; and in the meantime do nothing while the rights and the
properties of the decedent are violated or dissipated.
Even if there is an appointed administrator, jurisprudence recognizes two exceptions: (1) if
the executor or administrator is unwilling or refuses to bring suit; and (2) when the
administrator is alleged to have participated in the act complained of and he is made a party
defendant.
Therefore, the rule that the heirs have no legal standing to sue for the recovery of property
of the estate during the pendency of administration proceedings has three exceptions, the
third being when there is no appointed administrator such as in this case.