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WON the injunctive writ issued in the annulment of foreclosure interfered with the
Sept. 24, 2002 Order in the rehab case?
Feb. 13, 2008; J. Velasco, Jr. No, it did not.

NATURE: Petition for Review on Certiorari of a decision of CA

FACTS: Rombe is a corp. organized and existing under Philippine laws with its main Rehab – special proceeding – summary and non-adversarial in nature
office in Mandaluyong. It owns real properties in Malolos, Bulacan. It is represented - def’n.
by the spouses Romeo and Marrionette Peralta. Rule 1
Section 3
In 2002, Rombe filed a Petition for the Declaration of a State of Suspension of (c.) one that seeks to establish the status of a party or a particular fact
Payments with Approval of Proposed Rehab. Plan with RTC. - the status or fact sought to be established is the inability of the corp debtor
to pay its debts when they fall due so that a rehab plan, containing the
On May 3, 2002, RTC issued a Stay Order in accordance with Interim Rules of formula for the successful recovery of the corporation, may be approved in
Procedure on Corp Rehab (IRPCR), Rule 4, Section 6. the end.
- No COA.
SEC, BPI, Asiatrust opposed the petition. - Governed by special rules, in this case A.M. No. 00-8-10-SC Sept. 4, 2001
RTC dismissed the case on September 24, 2002, due to -
1.) Rombe misrepresented materially its true financial status
a.) Did not submit audited f/s Annulment of Foreclosure – civil action – def’n. Rule 1 S3.
b.) Made it appear that it had sufficient assets to pay its outstanding obligations, but when
(a.) One by which a party sues another for the enforcement or protection of a
examined were registered with other persons and only 2 were unencumbered
c.) Mis-declared the value of its assets right or the prevention or rederess of a wrong.
d.) Gave only general references to the location of the properties without mention of the - The COA in this case is the act of Asiatrust in foreclosing the mortgage on
book values nor condition of the properties in its Inventory of Assets Rombe’s properties by which the latter’s right to the properties was allegedly
e.) Did not attach evidence of title or ownership to the properties enumerated violated;
f.) Did not attach nor provide a Schedule of A/R, indicating amount of each, maturity - Also to annul the unilateral increase in interest rate by Asiatrust
dates, degree of collectivity, - Rule 2
g.) Had not complied with its reportorial duty to file Gen. Info Sheet and F/S from 1992- Section 2. Cause of Action – act or omission by which a party violates a
1995 and 2002, which its F/S 1999-2000 were filed late
right of another.
h.) B/S claimed it had receivables but did not indicate nature, basis and other information
2.) Did not have a feasible Rehab Plan - Governed by regular rules of procedure under 1997 Rules of Civil Procedure
3.) Was Insolvent.
Furthermore, upon the Annulment of Foreclosure Proceedings, there was no rehab
case pending before any court to speak of, being dismissed already.
Rombe did not appeal.

Instead, anticipating the foreclosure, it filed a Complaint for Annulment of Documents

and Damages with Prayer for a TRO and Injunction against Asiatrust and the Sheriff, DISPOSITION: CA REVERSED & SET ASIDE. RTC to conduct further proceedings
in the civil case with dispatch.
which was granted.

CA reversed, lifting the preliminary injunction, ground: the Order of Dismissal in the
Rehab Proceedings. NOTES:

1. WON the rehabilitation case is distinct and dissimilar from the annulment of the
foreclosure case (Nature, Purpose, Reliefs Sought)?


SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 1
TOPIC: II. UNDER RULES OF COURT The jurisdiction assumed by a court, so far as it depends on the place of
A. SETTLEMENT OF ESTATES residence of the decedent, or of the location of his estate, shall not be contested
1. VENUE & JURISDICTION in a suit or proceedings, except in an appeal from that court, in the original case,
or when the want of jurisdiction appears on the record.”
Nov. 29, 1976; J. Martin Fule’s own submitted Death Certificate shows that the deceased resided in QC at the
time of his death, therefore the venue of Laguna was improper.
NATURE: Petitions for review of the decision of the CA
Venue is subject to waiver (RULE 4 SECTION 4), but Preciosa did not waive it,
FACTS: merely requested for alternative remedy to assert her rights as surviving spouse.
On April 26, 1973 Amado G. Garcia died, he owned property in Calamba, Laguna.
However, venue is distinct from “jurisdiction” which is conferred by Judiciary Act of
On May 2, 1973, Virginia G. Fule field with CFI Laguna a petition for letters of 1948, as amended to be with CFIs independently from the place of residence of the
administration and ex parte appointment as special administratix over the estate. deceased.
Motion was granted.
(there was an allegation that the wife was Carolina Carpio) SECTION 2, demands that the petition should show the existence of jurisdiction to
make the appointment sought, and should allege all the necessary facts such as
Preciosa B. Garcia, wife of deceased, and in behalf of their child: Agustina B. Garcia death, name, last residence, existence, situs of assets, intestacy, right of person who
opposed, which was denied by CFI. seeks administration as next of kin, creditor or otherwise to be appointed.

(Preciosa alleged that Fule was a creditor of the estate, and as a mere illegitimate
sister of the deceased is not entitled to succeed from him1) b.) Resides – ex vi termini “actual residence”
- Elastic and should be interpreted in the light of the object or purpose of the
CA reversed and annulled the appointment of Fule. statute or rule in which it is employed.
- Same meaning as “inhabitant”.
Preciosa became special administratrix upon a bond of P30k. - Popular sense – the personal, actual or physical habitation of a person,
actual residence or place of abode
ISSUES: - Must be more than temporary
a.) Venue v. jurisdiction
b.) What does the word “resides” in Revised Rules of Court Rule 73 Section 1 Distinguished from
c.) Who is entitled? “legal residence or domicile” – requires bodily presence and an intention to make
it one’s domicile.
a.) RULE 73
SECTION 1. “if the decedent is an inhabitant of the Philippines at the time of his c.) Preciosa is prima facie entitled to the appointment of special administratrix.
death, whether a citizen or an alien, his will shall be proved, or letters of
administration granted, and his estate settled at the CFI in the province in which The New Rules RULE 80 SECTION 1 broadened the basis for appointment of
he resides at the time of his death, special administrator (temporarily) to take possession and charge of the estates of
the deceased until the questions causing the delay are decided and (regular)
And if he is an inhabitant of a foreign country, the CFI of any province in which he executors or administrators appointed.
had estate.
Old rules basis ay: appeal of allowance of disallowance of a will;
The court 1st taking cognizance of the settlement of the estate of a decedent shall
exercise jurisdiction to the exclusion of all other courts. New: added - “xxx delay in granting letters testamentary or of administration by any
cause (includes parties cannot agree among themselves) including an appeal of
allowance of disallowance of a will, the court may appoint a xxx”
NCC Art. 992. An illegitimate child has no right to inherit ab intestado from the legitimate
children and relatives of his father or mother; nor shall such children or relatives inherit in the
same manner from the illegitimate child.
SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 2
The discretion to appoint a special administrator or not is with the probate court, the SECTION 2. Venue of Personal Actions. All other actions may be
paramount consideration is the beneficial interest of the appointee in the estate of the commenced and tried where the plaintiff or any of the principal plaintiffs
decedent. reside, or where the defendant or any of the principal defendants resides, or
in the case of a non-resident defendant, where he may be found, at the
In re: Fule, it is not required that the administratrix be entitled to share in the estate of election of the plaintiff.
the decedent – only that one is entitled to the administration;
but the preference of Preciosa is with sufficient reason – the widow would have the
right of succession over a portion of the exclusive property of the decedent, besides Venue in Special Proceedings
her share in the conjugal partnership. - RULE 73
For such reason, she would have as such, if not more, interest in administering the - that domicile is where the records of the properties are kept and where most
entire estate correctly than any other next of kin. of the properties of the decedents are located;

Death Certificate entry by Rodolfo was that the spouses last resided with him in QC.
DISPOSITION: Fule’s petition DENIED.
RTC designated J. Carlos L. Sundiam as special administrator of the estate.

NOTES: CA dismissed Rodolfo’s petition for certiorari.

SECTION 2. Powers and Duties of Special Administrator ISSUES: Where should the settlement proceedings be had?


May 29, 2002; J. Ynares-Santiago SECTION 1.
Clearly provides where the decedent resides at the time of his death.
NATURE: Petition for Review on Certiorari of a decision of CA
Eusebio is not applicable in the case at bar, because there, he was in the process of
FACTS: Spouses Ignacio Jao Tayag and Andrea V. Jao, decedents, had 2 sons: transferring his personal belongings to his new QC house and died before he could
Rodolfo and Perico Jao. move therein.

Perico Jao instituted a petition for issuance of letters of administration with request for Here their parents lived with Rodolfo for 3-4 years before they died.
appointment of special administrator before RTC QC, alleging that his brother is
dissipating the assets of the estate. Plus Ignacio died a year before Andrea, but Rodolfo did not correct the entry in their
mother’s death certificate either.
Rodolfo opposed claiming that their parents resided at Angeles, Pampanga, that their
staying with him due to their medical treatments and hospitalization were transitory. In Raymond V CA (1988) and Bejer V CA (1989), SC held that venue for ordinary civil
actions and for special proceedings have one and the same meaning.
Rodolfo cited Eusebio V. Eusebio, et. al. (1956), wherein the decedent was from San
Fernando, Pampanga, suffering from a heart ailment, and purchased a house in QC The contention is non-sequitur.
to be nearer to his doctor, died and the Court held that the situs of the settlement
proceedings was at his domicile; Death certificates are admissible in evidence and were properly considered and
presumed to be correct by the court a quo.
and differentiated between:
SC cited Garcia-Fule V. CA as to the term “resides”.
Venue in ordinary civil actions
- RULE 4 Factual findings substantiated by evidence are conclusive and binding.
SPEC PRO - - - - - 2 SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 3
DISPOSITION: Petition DENIED. CA AFFIRMED. RATIO: The intestate estate has long been closed, and none of the 3 heirs nor any
affected 3rd party has ever questioned the extra-judicial partition of the more recent
NOTES: discovered real properties.

The probate court had already lost jurisdiction over the estate.

There is no longer any property of the estate to administer or distribute and settle
CASE # 4: LEE V. CA among the recognized 3 heirs who have no claims whatsoever for the probate court
Dec. 28, 1973; J. Teehankee to adjudicate.

NATURE: Petition for Review on Certiorari of a decision of CA The issue in the case to quiet title is simply a question of conflicting claims of
FACTS: Andres Tabar died and his estate was left to 3 heirs.
This is the proper subject matter of the action to quiet title and is beyond the
Alberto Tabar Tabada, one of the heirs before the partition of the estate sold all his jurisdiction of the probate court to determine.
rights and interests over the estate 1st to his co-heirs; and 2nd to the spouses Salvador
& Dolores Saldana. The probate court has no authority to decide in the estate proceedings whether
property disputed belongs to one or the other, but such question of ownership has to
The co-heirs filed a petition for the annulment of the Deed of Sale to the spouses. be resolved in an appropriate separate action. (see also RULE 87, SEC 2 & SEC 6)

CFI upheld the validity of the 1st sale, and declared the nullity of the 2nd sale.
DISPOSITION: CA Order SET ASIDE. CFI Order to Archive is also SET ASIDE. CFI
CA affirmed. directed to proceed with the hearing and determination of the action to quiet title on its
SC dismissed petition for certiorari.
Judgment became final and was executed.

After the Special Proceedings was terminated, the heirs discovered some more real
properties belonging to the estate of the deceased, and without reopening the Spec
Pro executed an extra-judicial partition of said real properties.

Again, Alberto Tabar Tabada sold his share twice 1st to his co-heirs; 2nd to the
spouses Salvador & Dolores Saldana.

This time the spouses Saldana sold it to Cesar T. Villareal and Epitasia Tan.

The co-heirs filed a petition to quiet their title over the 3 lots conveyed by Alberto
Tabar Tabaada.

CFI issued an Order to Archive the Case in the meantime, saying that the parties are
required to reopen the Special Intestate Estate Proceedings and there settle the
distribution of the newly discovered properties.

CA denied MFR, affirming CFI.

HELD: CA gravely erred in upholding CFI’s order to archive the petitioners’ action to
quiet title and requiring the parties to reopen the intestate estate.
SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 4
CASE # 5: VALERA V. INSERTO b.) that the Title of the Garin Heirs is a stronger claim that rebuts the presumption that
May 7, 1987; J. Narvasa the estate owns the fishpond
c.) that assuming the Probate Court had competence to resolve ownership, a
NATURE: Petition to Review the judgment of CFI & CA separate action has to be filed.

FACTS: ISSUE: WON Probate Court had authority to order reconveyance of the fishpond?
Rafael Valera was granted leasehold rights over an 18 hectare fishpond in Iloilo by
the government to last during his lifetime. HELD: No

He transferred it by “fictitious sale” to his daughter Teresa to support her children with RATIO:
the agreement that when the children finishes schooling, the fishpond will be returned ♥ The Probate Court exercises limited jurisdiction and has no power to take
to him. cognizance of and determine the issue of title to property claimed by a 3 rd person
adversely to the decedent, unless
Valera and his spouse Consolacion Sarosa and their child Teresa died. *issue is procedural:*
The claimant and all the other parties having legal interest in the property
The heirs of Teresa – her husband Jose Garin and their children bought the fishpond consent, expressly or impliedly, to the submission of the question to the Probate
from the government, acquiring title thereto. Court for adjudgement,
Or the interests of 3rd persons are not thereby prejudiced.
Rafael Valera - - - - - - - - - - - Consolacion Sarosa
♥ The cognizance of the Probate Court as to the title over the fishpond was not
definite, permanent nor writing a “finis” thereto, but merely to determine whether
Teresa - - - - - - Jose Garin or not it should be included in the inventory of the estate of the spouses.

children It is merely provisional in character. The fishpond cannot be subject of execution.

The administrators of the spouses claim that the fishpond should be returned to the ♥ Presumption of conclusiveness of the title, especially if the holder is in
spouses’ estates. possession.

♥ Probate Court (Judge Adil): there has been an implied trust created, therefore the ♥ The same norm governs the situation contemplated in Section 6, Rule 87 of the
fishpond should be restored to the estate of the spouses. Rules of Court, expressly invoked by the Probate Court in justification of its
holding a hearing on the issue arising from the parties' conflicting claims over the
NCC fishpond.
Art. 1451. When land passes by succession to any person and he causes the legal
title to be put in the name of another, a trust is established by implication of law for The examination provided in the cited section is intended merely to elicit
the benefit of the true owner. evidence relevant to property of the decedent from persons suspected of
having possession
Art. 1453. When property is conveyed to a person in reliance upon his declared or knowledge thereof,
intention to hold it for, or transfer it to another or the grantor, there is an implied trust or of having concealed,
in favor of the person whose benefit is contemplated. embezzled,
or conveyed away the same.
♥ Pursuant thereto, he directed the sheriff to enforce reconveyance of the fishpond
to the estate. Of course, if the latter lays no claim to the property and manifests willingness to
tum it over to the estate, no difficulty arises; the Probate Court simply issues the
The fishpond was leased by the Garin Heirs to Fabiana, who although willingly appropriate direction for the delivery of the property to the estate.
surrendered it to the sheriff filed a complaint – in – intervention, which when
dismissed, then instituted a separate action for injunction and damages. On the other hand, if the third person asserts a right to the property contrary to
the decedent's, the Probate Court would have no authority to resolve the issue; a
Court of Appeals reversed (fishpond to be returned to Garin Heirs and their lessee separate action must be instituted by the administrator to recover the
Fabiana) saying that property.
a.) Probate Court had no jurisdiction

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 5

NOTES: ISSUES: WON separate proceedings should be filed to determine ownership?

HELD: No, the case is an exception.


Jan. 31, 1978; J. Aquino The probate court may provisionally pass upon the question of inclusion in, or
exclusion from, the inventory of a piece of property without prejudice to its final
NATURE: Petition for Review on Certiorari of a decision of CA determination in a separate action.

FACTS: GR: Probate Ct. may not pass upon ownership

Juan Pangilinan –(married)-- Teresa Magtuba
Except: If the interested parties are all heirs, (case at bar)
they had 3 children: - or if the question is one of collation or advancement,
- or the parties consent to the assumption of jurisdiction by the probate court,
Concepcion Prima Francisco and the rights of 3rd parties are not impaired,

Yamuta then the probate court is competent to decide the question of ownership.

Maria Eusebio Apolinar The appellees belong to the poor stratum of society. They should not be forced to
Guadalupe incur additional expenses by bringing a separate action to determine ownership of the
Pizarras 12 hectare portion.

Francis Agerian Benjamin Perla Francisco Helen DISPOSITION: The lower court’s Order excluding the 12 hectares and the 2 orders
Jr. regarding the claim of Guadalupe Pizarras and her children are REVERSED & SET

A new trial should be held on those matters.

Roseller Desmothenes Eliza
Case remanded to CFI for further proceedings in accordance with the guidelines set
forth here.
• CFI ordered - partitioned the properties:
- Giving atty’s fees to Crispin Borromeo NOTES:
- Without taking into consideration ownership of a 12-ha land claimed by the
heirs of Francisco Pangilinan, of a 6 ha land claimed by Crispin Borromeo
a) Debt to Concepcion’s estate
b) If Prima sold her share to Francisco
Note: WON Prima was excluded as an heir

CFI ordered that a separate ordinary action is needed to determine ownership of the
land in dispute.

Later on, they approved the project of partition but excluded the 12 ha and did not
bother to decide how the remainder should be partitioned and WON Prima had a
share in that remainder.

CA sustained CFI.
SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 6
TOPIC: II. UNDER RULES OF COURT • The son by bigamous marriage and his mother (2nd wife) in 1996 [not extrajudicial
A. SETTLEMENT OF ESTATES settlement] filed claim to annul title issued to Aleli, claiming they are the legal

• RTC dismissed:
CASE # 7: PEREIRA V. CA - Grounds: probate court has jurisdiction
J. Gancayco; June 20, 1989
- 2: because determination of staus as heirs is SPEC PRO [RULE 1, SEC. 3 (C)]
NATURE: Petition for Review on Certiorari of a decision of CA Not civil procedure

FACTS: Andres de Guzman Pereira left only 2 heirs Enforce rights

a) Wife of 10 months • CA affirmed:
b) Sister - Main issue is annulment of title to property
• sister filed petition for issuance of administration in her favor - Contending parties’ status and rights not establish in proper proceedings
• wife opposed:
a) property 1: death benefits she is only beneficiary
In Carino: the main issue is which of the 2 marriages is valid?
b) savings deposit: used for burial expenses
Who the rightful heir is between the two wives is only secondary.
c) only real property – house in Rizal
ISSUES: do petitioners have to institute special proceedings to establish their status
ISSUES: Should there be judicial proceedings?
as heirs before they can pursue case for annulment of Aleli’s affidavit of adjudication
and TCT?
HELD: No. Summary Settlement Only
HELD: no
RATIO: action for partition lang ang kelangan.
Estate not substantial
Simple case, No administrator need be assigned
GENERAL RULE: when a peson dies, his estate is judicially administered - Rule 78
EXCEPTION: Rule 74, sec.1 when only 1 heir or when heirs are all of legal age
DISPOSITION: Letters of Administration issued by RTC to sister Rita Pereira Nagac
are hereby revoked and the administration proceedings dismissed w/o prejudice to
her right to commence an action for partition of the property left by decedent. • Only property need not be burdened with burdensome superfluous expensive
long proceedings when RTC could have easily determined the issues
• In the cases: Litam
J. Carpio Morales – Aug 16, 2005 There was a need to file one

NATURE: Petition for Review on Certiorari of a decision of CA but if putative heir

- Lost the right to spec pro (my thought example by prescription)
FACTS: Jose Q. Portugal (RIP 1985) - Or spec pro was instituted & has ended then ORD. CIV. ACTIONS can be
filed and RTC can pass upon those issues (heirship, legitimacy, validity of
Married both: marriage, etc.) so long as they are essential as to the determination of the
case. (citing Cariño)
Paz Lazaro (in 1942) Isabel dela Puerta (in 1948)
DISPOSITION: remanded to RTC, RTC to proceed with the case
Leonila Perpetua Jose Douglas
Aleli Portugal Portugal, Jr. NOTES:

• Only has 1 property: a lot in Caloocan

• Aleli believing sole heir adjudicated everything to herself by Rule 74 sec.1

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 7
TOPIC: II. UNDER RULES OF COURT - NCC ART. 1083 only allows a deceased’s estate to remain undivided for a
A. SETTLEMENT OF ESTATES period of 20years.
RULES e) Compromise future legitimes

CASE # 9: BALANAY, JR. V. MARTINEZ • Felix Sr. conformed to his wife’s will and renounced his share in favor of their
June 27, 1975; J. Aquino children

NATURE: Petition for Certiorari of an Order of CFI • Felix Jr., Beatriz, Carolina, Emilia – Pro will
• Avelina, Delia – Anti-probate
FACTS: Felix Balanay Sr ----- Leodegaria Julian - Claimed that the renunciation of Felix Sr. was not valid.

Six children • RTC dismissed petition for probate; will was void.
:. Intestate proceedings
Felix Jr. Avelina Beatriz Carolina Delia Emilia

• Leodegaria excuted a will with some void provisions: ISSUES/HELD:

a) Declaring she owns southern half of 9 conjugal lots a) Validity of RTC order to disallow will from probate? No
- Although she was a co-owner, her share was inchoate and pro-indiviso NCC
ART. 143. b) WON RTC assignment of clerk of court as special administrator proper? No

b) Disposing of her husband’s share as well c) WON notice to creditors proper? No

- NCC ART. 930. The legacy or device of a thing belonging to another person
is void, if the testator erroneously believed that the thing pertained to him. d) WON Felix, Sr.’s conformity to his wife’s will was valid? Yes
But if the thing bequeathed, though not belonging to the testator when he
made the will, afterwards becomes his, by whatever title, the disposition
shall take effect.” RATIO:
a.) Generally the probate of a will is mandatory.
c) Husband was preterited
- Succession class: There is no preterition of the husband. The rule is that “the invalidity of one of several dispositions contained in a will does
- Preterition can only be in the ascending or descending line. not result in the invalidity of the other dispositions, unless it is presumed that the
- Different from Nuguid case because there, parents were preterited in favor testator would not have made such other dispositions if the 1 st invalid disposition had
of siblings not been made.” (NCC ART. 792)
- Here, his preterition did not produce intestacy.
- NCC ART 854 “the preterition or omission of one, some, or all of the The will is intrinsically valid, and the partition therein may be given effect if it does not
compulsory heirs in the direct line, whether living at the time of the execution prejudice the creditors and impair the legitimes.
of the will or born after the death of the testator shall annul the institution of
heir; but the devises and legacies shall be valid insofar as they are not Testacy is preferred over intestacy. An interpretation that will render a testamentary
inofficious. disposition operative takes precedence over a construction that will nullify a provision
of the will (NCC ART. 788 & 791).
d) Non division of estate, without assigning the whole estate to any single or
more children heirs, and providing that the legitimes be paid in cash from The expressed desire of the testator must be followed. Any disposition in his will is
fruits of the land better than that which the law can make.

- NCC ART. 1080 envisages that 1 or more children are assigned the whole NCC ART 794 provides that “property acquired after the making of a will shall only
estate, that’s why the rest of the children are to be paid their legitimes in pass thereby, as if the testator had possessed it at the time of making the will, should
cash it expressly appear by the will that such was his intention.”

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 8
b.) It is not a salutary practice because it might engender the suspicion that the NATURE: Petition for Review on Certiorari of a decision of CA
probate judge and his clerk of court are in cahoots in milking the decedent’s
estate. FACTS: Martin Jugo died on July 16, 1974 in Malabon, Rizal.

Should the clerk of court commit any abuse or devastavit in the course of his He left behind a will, not signed by the witnesses on the margin of page 3 (out of 4
administration, the probate judge might find it difficult to hold him to a strict pages, the rest compliant with statute).
The will contained “that he has been estranged from his wife with whom he had 2
A court employee should devote his official time to his official duties and should legitimate children: Oscar and Carmelita and is living with Sofia J. Nepomuceno.”
not have as a sideline, the administration of a decedent’s estate.
Nepomuceno filed a petition for the probate of the deceased and asked for issuance
of letters testamentary.
c.) A notice to creditors is not in order if only a special administrator has been
appointed. The legal wife Rufina Gomez opposed the petition.

RULE 86 CFI denied probate because on the face of the will, the invalidity of the intrinsic
SECTION 1 “immediately after granting letters of testamentary or of provisions is evident.
administration, the court shall issue a notice requiring all persons having money
claims against the decedent to file them in the office of the clerk of said court” CA reversed and set aside the CFI decision, declaring the Will to be valid except the
devise in favor of Nepomuceno as being null and void pursuant to NCC ART 7392 in
Clearly contemplates the appointment of an executor or regular administrator and relation with ART 10283.
not that of a special administrator.

RULE 86 ISSUES: WON the CA has jurisdiction to declare the provision in favor of
SECTION 10 Nepomuceno as null and void?
RULE 88 HELD: Yes it has.
It is the executor or regular administrator who is supposed to oppose the claims RATIO:
against the estate and to pay such claims when duly allowed. GR: in probate proceedings, the court’s area of inquiry is limited to an examination
and resolution of the extrinsic validity of the Will.

d.) He could validly do so, but insofar as said renunciation partakes of a donation, it One of the Exceptions: the probate of a will might become an idle ceremony if on its
should be subject to the limitations in NCC ART 750 & 752. face the will appears to be intrinsically void. Where practical considerations demand
that the intrinsic validity of the will be passed upon, even before it is probated, the
- A portion of the estate should be adjudicated to the widower for his support court should meet the issue. (Nuguid V. Nuguid)
and maintenance.
- Or at least his legitime should be respected.
The following donations shall be void:
(1) Those made between persons who were guilty of adultery or concubinage at the time of the
DISPOSITION: CFI decision SET ASIDE. Its Order setting for hearing the petition for donation;
probate is AFFIRMED. CFI directed to conduct further proceedings in consonance (2) Those made between persons found guilty of the same criminal offense, in consideration
with this opinion. thereof;
(3) Those made to a public officer or his wife, descendants and ascendants, by reason of his
NOTES: office.

In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse
of the donor or done; and the guild of the donor and done may be proved by preponderance of
evidence in the same action.
J. Gutierrez, Jr.; Oct. 9, 1985 3
The prohibitions mentioned in ART 739, concerning donations inter vivos shall apply to
testamentary provisions.
SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 9
In addition, Nepomuceno is not innocent nor in good faith.
In view hereof, the CFI disapproved the compromise agreement and allowed the
probate of the 2nd will.
The CA affirmed the disapproval of the compromise agreement but disallowed the
NOTES: probate of the will on the ground that evidence failed to establish that the testatrix
signed her will in the presence of instrumental witnesses in accordance with NCC
ART 805.

CASE # 11: RAMOS V. CA ISSUE: WON the last testament and its accompanying codicil were executed in
Jan. 31, 1978; J. Guerrero accordance with the formalities of the law?

NATURE: Appeal by way of Certiorari of a decision of CA HELD: Yes. Probate of 2nd will allowed.

FACTS: Eugenia Danila died on May 21, 1966. RATIO:

Substantial Evidence of due execution.
On June 2, 1966, Adelaida Nista filed a petition for the probate of the alleged will and
testament and codicil dated April 18, 1963 of the deceased. Presumption of regularity - that the lawyers who drafted the will uphold the lofty
purposes of the law;
Buenaventura and Marcelina (Martina) Guerra filed an opposition alleging that they - no evidence to show that the lawyers were motivated by any material
are the legally adopted son and daughter of the spouses Florentino Guerra and interest to take sides or that his statement is truth perverted
Eugenia Danila; and that their adoptive mother already made a will in 1951 which was - of the acknowledgement before a Notary Public
probated in her lifetime and never withdrawn.
A negative testimony does not enjoy equal standing with a positive assertion,
The parties entered into a compromise agreement: especially faced with the convincing appearance of the will. (plus their negative
1. Inter vivos, Eugenia Danila already sold, donated or disposed of all her testimony is self-serving, & half-hearted, did not know what they signed daw)
properties, some of which to Marcelina Guerra;
2. And a parcel of land to Adelaida Nista; The Attestation Clause was signed by all 3 witnesses.
3. That therefore the deceased has no more estate left
4. The 1963 will and codicil are considered abrogated and set aside; That there was photographs of witness signing and none of the testatrix signing –
5. That the deceased owed P6,800 to creditors which was assumed by Marcelina pictures are worthy only of what they show and prove and NOT OF WHAT THEY DO
Guerra but Adelaida Nista shall contribute P3,400; NOT SPEAK OF including the events they FAIL TO CAPTURE.
6. That any other property of the deceased which may be discovered later, shall
belong to her adopted children, and the other signatories waive such in favor of The Probate of a Will is a Special Proceeding not embued with adversary character,
Buenaventura and Marcelina Guerra. wherein courts should relax the rules on evidence “to the end that nothing less than
7. That the parties waive and renounce further claims against each other the best evidence of which the matter is susceptible” should be presented to the court
before a purported will may be probated or denied probate.
Rosario de Ramos, Miguel Danila, Felix Danila, Miguel Gavino, Amor Danila,
Consolacion Santos, Miguel Danila – son of late Fortunato Danila, filed a motion for DISPOSITION: CA reversed insofar as to allow the probate of the 2nd will.
leave to intervene as co-petitioners alleging that they are heirs of the late Eugenia
Danila. (PRO - 2nd - WILL) NOTES:

They allege that the adopted children: CASE # 12: RODELAS V. ARANZA
1. Repudiated their institution as heirs and executors when they failed to cause the Dec. 7, 1982; J. Relova
recording of the 1951 will
2. committed acts of ingratitude when they abandoned the testatrix and denied her NATURE: Petition for Review the order of CA
support after they managed, through fraud and undue influence, to secure the
schedule of partition dated Jan. 15, 1962. FACTS: On Jan. 11, 1977, appellant filed a petition for the probate of the holographic
will of Ricardo B. Bonilla and the issuance of letters testamentary in her favor.
2 out of 3 witnesses did not see the testatrix sign the will.
SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 10
There were oppositors.

ISSUE: Whether a holographic will which was lost or cannot be found can be proven
by means of a photostatic copy?


Art. 811. In the probate of a holographic will, it shall be necessary that at least one
witness who knows the handwriting and signature of the testator explicitly declare that
the will and the signature are in the handwriting of the testator. If the will is contested,
at least three of such witnesses shall be required.

In the absence of any competent witness referred to in the preceding paragraph, and
if the court deem it necessary, expert testimony may be resorted to. (619a)

Probate of holographic wills is the allowance of the will by the court after its due
execution has been proved. The probate may be uncontested or not.

If uncontested, at least 1 identifying witness is required and, if no witness is available,

experts may be resorted to.

If contested, at least 3 identifying witnesses are required.

However, if the holographic will has been lost or destroyed and no other copy is
available, the will can not be probated because the best and only evidence is the
handwriting of the testator in said will.

It is necessary that there be a comparison between sample handwritten statements of

the testator and the handwritten will.

A photostatic copy of the holographic will may be allowed because comparison can
be made with the standard writings of the testator.
The authenticity of the handwriting of the deceased can be determined by the probate

Gan V. Yap, its footnote 8, was cited.

DISPOSITION: CA Order denying MFR, dismissal of CFI of petition to approve the



SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 11
TOPIC: II. UNDER RULES OF COURT Those disposed with remunerations still belong to his wife’s estate.
RULES 78-85 3. Mrs. Hodges simultaneously instituted her brothers & sisters as co-heirs with her
husband, with the condition that,
March 29, 1974; J. Barredo Her husband would have complete rights of dominion over the whole estate
during his lifetime, with no obligation to preserve anything for them
Discussed in SUCCESSION already 
and what would go to the brothers & sisters would be only the remainder of Mrs.
NATURE: Petition for Review on Certiorari of a decision of CA Hodges’ estate, left at the time of Mr. Hodges’ death.

FACTS: Linnie Jane Hodges died on May 23, 1957. This is only a simple case of conditional simultaneous institution of heirs,
whereby the institution of Hodges is subject to a partial resolutory condition, the
5 and a half years later, her husband, Charles Newton Hodges died as well. operative contingency of which is coincidental with that of the suspensive
condition of the institution of his brothers and sisters in law, which manner of
Both of them left wills with the clause “I give, devise and bequeath all of the rest, institution is not prohibited by law.
residue and remainder, of my estate, both real and personal, wherever situated or
located, to my beloved spouse to have to hold unto (him/her) – during (his/her)
natural lifetime,” subject to the condition that upon the death of whoever of them 4. The estate of Mrs. Hodges inherited by her brothers & sisters could be more than
survived the other, the remainder of what he or she would inherit from the other is just stated but is dependent on:
“given, devised and bequeathed” to the brothers and sisters of the latter. (1) Whether upon the proper application of the principle of renvoi in relation to
NCC Article 16, and the pertinent laws of Texas, it will appear that Hodges
The brothers and sisters of Linnie Jane alleged that Charles Newton Hodges made had no legitime as contended by Magno
statements and ratifications that he had renounced his inheritance from his wife in (2) WON Hodges had legally and effectively renounced his inheritance from his
favor of her other heirs. wife

Magno – administratrix of Mrs. Hodges’ estate

- Claims that naked ownership passed to siblings, 5. There is an estate of Mrs. Hodges to be distributed. How much is not yet
- Only lifetime usufruct was given to Mr. Hodges ascertained.
- Claims that under Texas law, spouse has no legitime

PCIB – administrator of Mr. Hodges’ estate 6. As to the contracts to sell executed by Hodges “after” the death of his wife, the
- Claims that what was passed to Mr. Hodges was not only usufruct but also proceeds belong to the estate of Mrs. Hodges.
ownership with right to dispose of the properties
- Said that under Texas law, brothers & sisters only had ¼ as legitime
1. No final distribution and adjudication can be made yet. Probate Courts to proceed with the proceedings, and determine:
1. The manner of applying NCC Article 16 to the situation and
At best, RULE 109 2. Factual and legal issue as to WON Charles Newton Hodges had effectively and
SECTION 2 allowed Hodges to dispose of portions of his inheritance in advance legally renounced his inheritance under the will of his wife
of final adjudication, there being no possible prejudice to 3rd parties, inasmuch as 3. Liquidation of the estates
Mrs. Hodges had no creditors and all pertinent taxes have been paid.

2. On the assumption that Hodges’ purported renunciation should not be upheld, NOTES:
the estate of Mrs. Hodges inherited by her siblings consists of 1/4 of the
community estate of the spouses at the time of her death, minus whatever
Hodges had gratuitously disposed of therefrom during the period from her death
to his death.

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 12
TOPIC: III. CORPORATIONS and it was crystal clear that the law was designed not only for the benefit of the
B. INSOLVENCY creditors but more importantly for the benefit of the debtor himself
2. That the RTC placed a very strained and restrictive interpretation of the term
CASE #56: STATE INVESTMENT HOUSE V. CITIBANK resident as to exclude foreign banks which have been operating in this country
OCT. 17, 1991; J. Narvasa since the early part of the century, and the better approach would have been to
harmonize Insolvency Law with succeeding laws such as Corporation Code,
NATURE: Petition for review on certiorari on Rule 45 of a decision & resolution of CA General Banking Act, Offshore Banking Law, National Internal Revenue Code.

FACTS: That the terms “domicile” and “residence” are different.

CMI obtained loans from: amounts:
1. Bank of America NT & SA P15,296,367.67 That the banks complied with laws, rules and regulations for doing business in
US $ 4, 175, 831.88 the country.

2. Citibank N.A. US $ 4, 920, 548.85 That to deprive them of their right to proceed against their debtors through
insolvency proceedings would contravene basic standards of equity and fair play,
3. Hongkong and Shanghai Banking Corporation (HSBC) would discourage their operations in economic development projects that create
P 6,233,969.24 not only jobs for our people but also opportunities for advancement as a nation.
US $ 5, 389, 434.12
Therefore that the 3 banks are residents of the Philippines for purposes of doing
In November 1981, business in the Philippines and even for tax matters.
State Investment House, Inc. (SIHI) and
State Financing Center, Inc. (SFCI)
had separately instituted actions for collection of sums of money and damages in the ISSUES: WON foreign banks licensed to do business in the Philippines, may be
CFI of Rizal against CMI. considered “residents of the Philippine Islands” within the meaning of Section 20 of
the Insolvency Law (Act No. 1956, as amended, effective May 20, 1909)
Writs of Preliminary Injunction were issued and executed on the Royalty/ profit
sharing payments due CMI from Benguet Consolidated Mining, Inc. Reading in part as follows:
“An adjudication of insolvency may be made on the petition of 3 or more creditors,
residents of the Philippine Islands, whose credits or demands accrued in the
On Dec. 11, 1981, the banks jointly filed a petition for involuntary insolvency of Philippine Islands, and the amount of which credits or demands are in the aggregate
Consolidated Mines, Inc. (CMI). not less than once thousand pesos.

The petition was opposed by CMI, SIHI and SFCI: Provided, that none of said creditors has become a creditor by assignment, however
1.) That CMI is not insolvent, and had paid them P10.8M a few days earlier to the made, within 30 days prior to the filing of said petition.
Such filing must be filed in the CFI of
(note: SC said this is immaterial kasi 4.4% of the total loan lang yung nabayaran.
Qoq )
HELD: The 3 banks are resident banks.
2.) That Court had no jurisdiction because the 3 banks are not resident creditors of
CMI in the contemplation of the Insolvency Law;
RTC dismissed based on not “resident creditors”. The “locality of existence” is the “necessary element in the signification” of the term
“resident corporation”.
CA reversed, saying that:
1. The purpose of the Insolvency law is to convert the assets of the bankrupt in Corporation Code, in Section 123, defines foreign corporation to be one formed,
cash for distribution among the creditors and to relieve the honest debtor from organized or existing under laws other than those of the Philippines, but does not
the weight of oppressive indebtedness and permit him to start life anew, free define whether they are “residents” or not.
from the obligations and responsibilities consequent upon business misfortunes,

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 13
National Internal Revenue Code declares that a ““resident foreign corporation” applies The motives of the banks is not looked into – apart from the desire to share in the
to a foreign corporation engaged in trade or business within the Philippines,”” as assets of the insolvent in satisfying its credits.
distinguished from a ““non-resident foreign corporation” which is one not engaged in
trade or business within the Philippines,”” Corp Code
Section 68 provides for 3 options for foreign companies:
PD 1934: Offshore Banking Law, in Section 1 (e) states: “that branches, subsidiaries,
affiliation, extension offices or any other units of corporation or juridical person 1. Incorporate its branch or branches into a new bank in accordance with Philippine
organized under the laws of any foreign country operating in the Philippine shall be laws;
considered residents of the Philippines.”
2. Assign capital permanently to the local branch with the concurrent maintenance
RA 337: General Banking Act, in Section 2, places, “branches and agencies in the of a “net due to” head office account which shall include all net amounts due to
Philippines of foreign banks xx (which are) called Philippine branches,” in the same other branches outside the Philippines in an amount which when added to the
category as “commercial banks, savings associations, mortgage banks, development assigned capital shall at all times be not less than the minimum amount of capital
banks, rural banks, stock savings and loan associations” (domestic), making no accounts required for domestic commercial banks under section 22 of this Act; or
distinction between the former and the latter in so far as the terms “banking
institution” and “bank” are used in the Act. 3. Maintain a “net due to” head office account which shall include all net amounts
due to other branches outside the Philippines, in an amount which shall not be
And in Section 18, that “all matters not specifically covered by special provisions less than the minimum amount of capital accounts required for domestic
applicable only to foreign banks, or their branches and agencies in the Philippines, commercial banks under section 22 of this Act.
said foreign banks or their branches and agencies lawfully doing business in the
Philippines “shall be bound by all laws, rules and regulations applicable to domestic The banks have complied with the laws, rules and regulations necessary.
banking corporations of the same class, except such laws, rules and regulations as
provided for the creation, formation, organization, or dissolution of corporations or as
fix the relation, liabilities, responsibilities, or duties of members, stockholders or DISPOSITION: Petition DENIED. CA AFFIRMED.
officers of corporation.”
In Claude Neon Lights V. Philippine Advertising Corp., the foreign corporations were
assimilated to the status of domestic corporations, the basis is their being found and
operating, hence residing, in our country.

American law recognizes the same principle that the “residence of a corporation, is
necessarily where it exercises corporate functions xx;” that it is considered dwelling
“in the place where its business is done xx,” as being “located where its franchises
are exercised xx,” and as being “present where it is engaged in the prosecution of the
corporate enterprise;” that a “foreign corporation licensed to do business in a state is
a resident of any country where it maintains an office or agent for transaction

While there is no substantive law granting foreign banks the power to petition for the
adjudication of a Philippine corporation as bankrupt, this is inconsequential as neither
is there any legal provision granting domestic banks the same power, yet their
capacity to petition for insolvency can scarcely be disputed.

There is no requirement in the Insolvency Act that the laws of the State under which a
foreign corporation has been formed or organized should grant reciprocal rights to
Philippine citizens to apply for involuntary insolvency of a resident or citizen thereof.
Corp Code Section 123 only requires that the foreign corp’s country allows Filipino
corps to do business there. This point of CMI, SIHI and SFCI is not well taken and
need not be elaborated.

The law is not lacking in sanctions against foreign banks.

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 14
CASE # 57: RADIOLA – TOSHIBA PHILS., INC. V. IAC directed to participate in the meeting of all creditors/claimants presided by the duly
JULY 18, 1991; J. Bidin elected assignee.

NATURE: Petition for review on certiorari on Rule 45 of a decision & resolution of CA IAC denied petition for certiorari and mandamus.

On Feb. 15, 1980, Radiola-Toshiba filed a case for collection of sum of money for ISSUE: WON the levy on attachment in favor of Radiola-Toshiba is dissolved by the
P721,825.91 plus 14% interest per annum plus P20,000 attorney’s fees and cost of insolvency proceedings against respondent spouses commenced 4 months after said
suit against Carlos and Teresita Gatmaytan. attachment?

CFI issued a levy on attachment on 2 parcels of land owned by the debtors on March HELD: No.
4, 1980.

Judgment was rendered on December 10, 1980 and became final and executory. RATIO: CFI Rizal committed grave abuse of discretion amounting to want of
jurisdiction, correctible by certiorari by freezing the properties which were not within
On March 18, 1981 a Writ of Execution was issued, the lands were sold at auction on its jurisdiction.
May 4, 1981.
Radiola-Toshiba was correct that the properties in question were never under the
Radiola-Toshiba was the highest bidder. jurisdiction of the insolvency court so as to be made available for the payment of
claim filed against the Gatmaytans in the insolvency proceedings.
The properties were not redeemed.

-------------------------------------------------------- ACT NO. 1956. INSOLVENCY LAW

Sec. 32. As soon as an assignee is elected or appointed and qualified, the clerk of the court
On July 2, 1980, 3 creditors filed a petition for the involuntary insolvency of Carlos shall, by an instrument under his hand and seal of the court, assign and convey to the assignee
and Teresita Gatmaytan. all the real and personal property, estate, and effects of the debtor with all his deeds, books and
papers relating thereto,
CFI (now RTC) issued an Order: and such assignment shall relate back to the commencement of the proceedings in insolvency,
and shall relate back to the acts upon the adjudication was founded,
“xxx forbids the payment of any debts, and the delivery of any property owing and belonging to
said respondents-debtors from other persons, or, to any other persons for the use and benefit of and by operation of law shall vest the title to all such property, estate, and effects in the
the same respondents-debtors assignee, although he same is then attached on mesne process, as the property of the debtor.

and/or the transfer of any property by and for the said respondents-debtors to another, Such assignment shall operate to vest in the assignee all of the estate of the insolvent debtor
not exempt by law from execution.
upon petitioners’ putting up a bond by way of certified and reputable sureties.”
It shall dissolve any attachment levied within one month next preceding the commencement of
On April 12, 1983, the petitioner-creditors filed a 2nd urgent motion for issuance of the insolvency proceedings
insolvency order and resolution of the case, because despite the prohibition from
disposing personal and real properties of the insolvent debtors, they found out of the and vacate and set aside any judgment entered in any action commenced within 30 days
real properties transferred to Radiola-Toshiba Phil. Inc. which has already shut immediately prior to the commencement of the insolvency proceedings
and shall set aside any judgment entered by default or consent of the debtor within 30 days
immediately prior to the commencement of the insolvency proceedings.
On April 22, 1983, judgment was rendered declaring the insolvency.
The law is very clear:
Radiola-Toshiba filed an opposition. Grounds: a.) attachments dissolved are those levied within 1 month next preceding the
1. The levy in their favor 4 months prior is not dissolved; commencement of the insolvency proceedings and;
2. The property was never under the jurisdiction of the Insolvency Court;
b.) judgments vacated and set aside are judgments entered in any action, including
RTC granted that a final deed of sale be issued over the 2 parcels of land acquired by judgment entered by default or consent of the debtor, where the action was filed
Radiola-Toshiba, but due to opposition by the other creditors were denied and

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 15
within 30 days immediately prior to the commencement of the insolvency

There are cut-off periods provided:

a.) 1 month in attachments cases;
b.) 30 days in judgments entered in actions commenced prior to insolvency

Private respondents alleged violation of Section 70 & 79:

Sec. 79. When an attachment has been made and is not dissolved before the commencement
of proceedings in insolvency, or is dissolved by an undertaking given by the defendant, if the
claim upon which the attachment suit was commenced is proved against the estate of the
debtor, the plaintiff may prove the legal costs and disbursements of the suit, and of the keeping
of the property, and the amount thereof shall be a preferred debt.

But they are in error because Sec. 79 provides for the right of the plaintiff if the
attachment is not dissolved before the commencement of proceedings in insolvency,

or is dissolved by an undertaking given by the defendant, if the claim upon which the
attachment suit was commenced is proved against the estate of the debtor.

Even granting that there exists a conflict between Sec. 32 and Sec. 79, the rules of
construction provides ut maqis valeat quam pereat – construction is to be sought
which gives effect to the whole of the statute- its every word.

The court should adopt such reasonable and beneficial construction as will render the
provision thereof operative and effective and harmonious with each other (Javellana
V. Tayo (1962); Agpalo, Ruben. Statutory Construction. p. 182).

There is no violation of the Insolvency Law, Section 70 contemplates acts and

transactions occurring within the 30 day period.


The attachment and execution sale are given due course and Radiola-Toshiba’s
ownership of subject properties is ordered consolidated.


SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 16
APRIL 25, 2002; J. Carpio The last DOA contained the ff. additional stipulation:

NATURE: Petition for review on certiorari on Rule 45 of a decision & resolution of CA “xxx Likewise, it is hereby understood that the warranties which the ASSIGNOR hereby made
are deemed part of the consideration for this transaction, such that any violation of any one,
FACTS: some, or all of said warranties shall be deemed as deliberate misrepresentation on the part of
Great Asian is engaged in the business of buying and selling general merchandise, in
particular household appliances. In such event, the monetary obligation herein conveyed unto the ASSIGNEE shall be
conclusively deemed defaulted, giving rise to the immediate responsibility on the part of the
On March 17, 1981, the BOD approved a resolution authorizing its Treasurer and GM ASSIGNOR to make good said obligation, and making the ASSIGNOR liable to pay the penalty
Arsenio Lim Piat, Jr. to secure a loan from Bancasia not to exceed P1M. stipulated hereinabove as if the original obligor/s of the receivables actually defaulted.”

On Feb. 10, 1982, the BOD again approved a 2nd resolution authorizing Great Asian
through the same person to secure a discounting line with Bancasia in an amount not Great Asian contends that the Assignment of the Checks were not “Loan
to exceed P2M. Accomodations” but “Purchase and Sale” of the Receivables; and thus that it is not
liable, and their customers – drawers of the checks are.
On March 4, 1981, Tan Chong Lin, President of Great Asian signed a Surety
Agreement in favor of Bancasia to guarantee, solidarily, the debts of Great Asian.
Tan Chong Lin contends that the following warranties enlarge or increase his risks
On January 29, 1982, Tan Chong Lin signed a Comprehensive and Continuing Surety and releases him from liability:
Agreement in favor of Bancasia to guarantee, solidarily, the debts of Great Asian.
The ASSIGNOR warrants:
Great Asian, through its treasurer and GM Assigned its Receivables – postdated 1. The soundness of the receivables herein assigned;
checks from customers to Bancasia. The checks were dishonored. 2. That said receivables are duly noted in its books and are supported by appropriate
3. That said receivables are genuine, valid and subsisting;
On March 16, 1982, Bancasia through counsel, Atty. Eladia Reyes, sent a demand 4. That said receivables represent bona fide sale of goods, merchandise, and/or services
letter via registered mail and by personal delivery to the surety. rendered in the ordinary course of its business transactions;
5. That the obligors of the receivables herein assigned are solvent;
On May 21, 1982, Great Asian filed with CFI a Petition for Insolvency, verified under 6. That it has valid and genuine title to and indefeasible right to dispose of said accounts;
oath by its Corporate Secretary, Mario Tan. This contains a schedule of its liability, 7. That said receivables are free from all liens and encumbrances;
admitting that it owes Bancasia P1,243,632. 8. That the said receivables are freely and legally transferable, and that the obligor/s therein
will not interpose any objection to this assignment, and has in fact given his/ their consent
Great Asian subsequently withdrew the petition.

On June 23, 1982, Bancasia filed a complaint for collection of a sum of money
RTC held for Bancasia. CA affirmed.
against Great Asian and Tan Chong Lin.

Bancasia’s basis is Breach of Contract under the Deeds of Assignment which

uniformly stipulate:

“if for any reason the receivables or any part thereof cannot be paid by the obligor/s the 1. WON Great Asian is liable? Yes
ASSIGNOR unconditionally and irrevocably agrees to pay the same, assuming the liability to
pay, by way of penalty 3% of the total amount unpaid, for the period of delay until the same is ♥ Great Asian also contends that Arsenio is liable in his personal capacity –
fully paid.
NO. He was acting as an Agent.
In case of any litigation which the ASSIGNEE may institute to enforce the terms of this
agreement, the ASSIGNOR shall be liable for all the costs, plus attorney’s fees equivalent to
25% of the total amount due.
♥ Sub-issue as to basis of liability-
Further thereto, the ASSIGNOR agrees that any and all actions which may be instituted relative
hereto shall be filed before the proper courts of the City of Manila, all other appropriate venues Bancasia has the option to choose between:
being hereby waived.”

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 17
a.) Negotiable Instruments Law
and separately and distinctly, --------------------------------------------------------

b.) Breach of Contract under New Civil Code, which it chose. 2ND SUB-ISSUE:


♥ 3rd sub-issue lack of consideration daw according to Great Asian - Article 1157. Obligations arise from:
(1) Law;
Evidence showed they received less than 24% discounted amount of the (2) Contracts;
face value of the checks. (3) Quasi-Contracts;
(4) Acts or Ommissions punished by law; and
(5) Quasi-Delicts.
2. WON the Surety is liable? Yes
Article 1159. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.
1. The 4 Deeds of Assignment entered into by Arsenio were the very transactions Article 1306. The contracting parties may establish such stipulations, clauses, terms
envisioned in the 2 board resolutions of Great Asian to raise funds for its and conditions as they may deem convenient, provided they are not contrary to law,
business. morals, good customs, public order or public policy.

Even if Great Asian was correct that the assignment of the checks is a sale, more The failure of the drawers to pay the checks is a suspensive condition4, the
properly a “discounting”, Great Asian sold the postdated checks with recourse basis happening of which gives rise to Bancasia’s right to demand payment from Great
against itself, making them liable. Asian.
There is no law prohibiting with recourse stipulations.
Section 23. The Board of Directors or Trustees. – Unless otherwise provided in The purpose of endorsements is not to make the assignee finance company a holder
this Code, the corporate powers of all corporations formed under this Code shall be in due course because of policy considerations – consumers who purchase
exercised, all business conducted and all property of such corporations controlled by appliances which later turn out to be defective, cannot go against finance companies.
the board of directors or trustees xxx.
Thus finance companies usually require an assignor, in a separate and distinct
In the ordinary course of business, a corp. may borrow funds or dispose of assets of contract, to pay the finance company in the event of dishonor of the notes or checks.
the corporation only on authority of the BOD. The BOD normally designates one or
more corporate officers to sign loan documents or deeds of assignments for the
corporation. --------------------------------------------------------

Great Asian correctly issued 2 board resolutions (“valid, binding and effective until
revoked”) to authorize Arsenio to represent it in applying for: 2. Tan Chong Lin explicitly and unconditionally bound himself to pay Bancasia,
solidarily with Great Asian, if the drawers of the checks fail to pay on due date.
1st a loan accommodation or credit line; and
2nd a discounting line, with Bancasia. The condition on which Tan Chong Lin’s obligation hinged had happened.

The Deeds of Assignment were clear: The warranties he cites are the usual warranties made by one who discounts
receivables with a financing company or bank and do not increase or enlarge the
“The ASSIGNOR, Great Asian Sales Center, a domestic corporation xxx herein risks of Tan Chong Lin under the Surety Agreements.
represented by its Treasurer Arsenio Lim Piat, Jr.”

“xxx for valuable consideration received, does hereby SELL, TRANSFER, CONVEY
NCC Article 1181. In conditional obligations, the acquisition of rights, as well as the
domestic corporation xxx, the following ACCOUNTS RECEIVABLES due and payable extinguishment or loss of those already acquired shall depend upon the happening of the event
to it, having an aggregate face value of xxx.” which constitutes the condition.
SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 18
Tan Chong Lin cannot feign ignorance of Great Asian’s business activities or - Purpose: to enable a business entity to generate cash out of its receivables
discounting transactions with Bancasia. which are still to mature at future dates. The financing company or bank
which buys the receivables makes its profit out of the difference between the
New Civil Code face value of the receivable and the discounted price.
Article 1215, what releases a solidary debtor is a “novation, compensation, confusion
or remission of the debt” made by the creditor with any of the solidary debtors. “Discount” – means the sale of a receivable at less than its face value.

None of which is present. Financing Company Act of 1998

Section 3
New Civil Code (a) “Financing Companies” are corporations xxx primarily organized for the
Article 1207 provides “xxx there is a solidary liability only when the obligation purpose of extending credit facilities to consumers and to industrial, commercial or
expressly so states, or when the law or nature of the obligation requires solidarity.” agricultural enterprises by discounting or factoring commercial papers or accounts
receivable, or by buying and selling contracts, leases, chattel mortgages, or other
The Suretyship agreements he signed are sufficiently broad to encompass the 15 evidences of indebtedness, or by financial leasing of movable as well as immovable
dishonored checks. property.

(this definition substantially the same in RA 5980, the old Financing Company Act,

Great Asian and Tan Chong Lin are ordered to pay, solidarily, Bancasia the following New Rules and Regulations Implementing Financing Company Act of 1998,
amounts: adopted by SEC
Section 1
a.) Loan plus 3% penalty clause (h) “Discounting” – a type of receivable financing whereby evidences of
indebtedness of a 3rd party, such as installment contracts, promissory notes and
♥ Due to silence as to period (monthly, annual), deemed as one-time penalty similar instruments are purchased by, or assigned to, a financing company in an
amount or for a consideration less than their face value.
b.) 12% interest per annum on the total amount
♥ Due to DOA did not provide for interest, legal rate applied and only from the
time Bancasia filed the complaint because no evidence of prior written Great Asian’s remedy is to proceed against the drawers.
demand to Great Asian (principal debtor), pursuant to Eastern Shipping
Lines, Inc. V CA (1993). Negotiable Instruments Law
Section 114. When notice need not be given to drawer. Notice of dishonor is not
c.) Attorney’s fees of 25% of: total amount + 12% interest required to be given to the drawer in either of the following cases:
(a) xxx;
♥ Not only pursuant to the stipulation in the DOA, but also because Great (d) Where the drawer has no right to expect or require that the drawee or acceptor will
Asian and Tan Chong Lin acted in gross and evident bad faith in refusing to honor the instrument;
pay Bancasia’s plainly valid, just and demandable claim. (examples: “account closed,” “account under garnishment,” “insufficiency of funds”)
(e) Where the drawer has countermanded payment.
d.) Costs of suit (i.e. “payment stopped”)


When it is a discounting the applicable law is the Financing Company Act. If the A/R
are used as collateral for the loan, the transaction is only a simple loan.

“Discounting line” – means a credit facility with a financing company or bank, which
allows a business entity to sell, on a continuing basis, its accounts
receivable at a discount.
SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO MARY ANN JOY R. LEE 19