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G.R. No.

L-14713 April 28, 1960

Intestate Estate of ARSENIO R. AFAN, deceased. MARIAN AFAN, petitioner-appellee,


vs.
APOLINARIO S. DE GUZMAN, creditor-appellant.

Vicente L. Santiago for appellee.


Bausa Ampil & Suarez for appellant.

CONCEPCION, J.:

This is an appeal, taken by Apolinario S. de Guzman, from an order of the Court of First Instance of
Manila, dated July 27, 1957.

It appears that, on July 12, 1957, De Guzman filed, in this special proceeding for the settlement of
intestate estate of Arsenio R. Afan, a claim for P1,000, allegedly due from the latter, with interest
thereon, within 30 days from August 16, 1949, as set forth in a promissory note then issued by Afan. On
July 22, 1957, the administratrix of his estate objected to the consideration of the claim upon the
ground, among others, that it had been filed long after the expiration of the period for the presentation
of claims against said estate. For this reason, the lower court issued the order appealed from, refusing to
entertain the aforementioned claim. De Guzman invokes, in support of his appeal, section 2, Rule 87 of
the Rules of Court, reading:

Time within which claims shall be filed.—In the notice provided in the preceding section, the
court shall state the time for the filing of claims against the estate, which shall not be more than
twelve nor less than six months after the date of the first publication of the notice. However, at
any time before an order of distribution is entered, on application of a creditor who has failed to
file his claim within the time previously limited, the court may, for cause shown and on such
terms as are equitable, allow such claims to be filed within a time not exceeding one month.

Relying upon this provision, De Guzman maintains that the lower court should have entertained his
claim, the same having been filed prior to the distribution of the estate of the deceased. This pretense is
not borne out, however, by the rule above quoted.

The second sentence thereof clothes the court with authority to permit the filing of a claim after the
lapse of the period stated in the first sentence, but prior to and distribution, subject to the following
conditions, namely(1) there must be tin application therefor; (2) a cause must be shown why the
permission should be granted; and (3) the extension of time granted for the filing of the claim shall not
exceed one (1) month.

De Guzman has not sought permission to file the claim. Moreover, the same does not allege any reason
why he should be excused for his failure to file the claim in this proceeding within the period stated in
the Rules of Court. Again, whether or not the reasons given — and none were set forth in De Guzman's
claim — are sufficient, rests upon the discretion of the court (Roguera vs. Tanodra, 81 Phil., 404; Umpig,
et al. vs. De Gala, et al., 96 Phil., 77; 50 Off. Gaz., 5305), and the record before us does not show that the
lower court has abused its discretion in acting as it did in the present case. De Guzman now alleges, for
the first time, a "cause" why the lower court should allegedly have considered his claim. He says, in his
brief (p. 6, thereof) that "he had no actual knowledge of the fact that the estate of the deceased . . . was
then already in the process of settlement . . . . " He did not explain why he refrained from making such
averment either in his claim or in the motion, filed by him in the lower court, for a reconsideration of
the order appealed from. The reason is, however, not difficult to surmise — he had actual knowledge of
the present proceeding long before the filing of his claim therein on July 27, 1957. To be precise, he was
aware of its existence as early as August, 1955.

In this connection, it appears that, during the lifetime of Afan, or on May 24, 1950, De Guzman
instituted, against him, Civil Case No. 1148 of the Court of First Instance of Rizal, to recover the amount
of the promissory note above referred to. On appeal, the decision of said court in favor of De Guzman
was set aside, and a trial de novo ordered, by the Court of Appeals, in case CA-G.R. No. 7340-R.
Sometime after the records had been remanded to the lower court, Afan died. On August 15, 1955, that
court issued an order requiring counsel for his heirs "to submit to the court the number of the intestate
estate proceedings of the deceased Arsenio R. Afan now pending in the Court of First Instance of
Manila." This order was complied with on August 30, 1955, by the filing with the Court of First Instance
of Rizal, in said Case No. 1148, of a "notification" containing the required information, copy of which
"notification" was served upon counsel for De Guzman, as plaintiff therein. On January 18, 1956, his
counsel filed in said case a motion for the appointment of a legal representative of the deceased Afan,
to substitute him as defendant therein. Accordingly, on January 21, 1956, said court gave De Guzman
five (5) days within which to submit the names of the legal heirs of Afan who may be appointed as his
legal representative. On January 24, 1956 De Guzman filed, therefore, with the aforementioned court, a
statement, entitled "compliance", setting forth the names, ages and addresses of the heirs of the
deceased, "as shown by the records in Special Proceedings No. 26858, entitled 'Instance estate of
Arsenio R. Afan' before the Court of First Instance of Manila," with the prayer that said "heirs be
substituted as party defendants" in Case No. 1148, "in place of the deceased Arsenio R. Afan." Yet, De
Guzman choose not to file his claim in such proceeding until July 27, 1957, one year and a half after the
filing of his aforementioned "compliance."

Instead of furnishing a "cause" for the extension of the reglementary period for the filing of his claim,
this omission on the part of De Guzman fully justifies the denial of such extension and the order
appealed from. We have already held that failure to file a claim within the time provided therefor upon
the sole ground that the claimant was negotiating with one of the heirs for payment, is not sufficient to
justify extension (In Re: Estate of De Dios, 24 Phil., 573, 576; see also Santos vs. Manarang, 27 Phil., 209),
and that, where a claimant knew of the death of the decedent and for four (4) or five (5) months
thereafter he did nothing to present his claim, this can hardly be considered as a good excuse for such
neglect (In Re: Estate of Tiangco, 39 Phil., 967).

Wherefore, the order appealed from is hereby affirmed with costs against appellant Apolinario S. de
Guzman. It is so ordered.
G.R. No. L-51278 May 9, 1988

HEIRS OF RAMON PIZARRO, SR., petitioners,


vs.
HON. FRANCISCO Z. CONSOLACION, CFI of Davao and LUIS TAN alias CHEN YEH-AN, respondents.

Rogelio A. Barba for petitioners.

Oscar Breva for private respondent.

GANCAYCO, J.:

This is a petition for review on certiorari seeking the reversal of the Order of June 1, 1979, of the then
Court of First Instance of Davao * dismissing petitioners' claim against the estate of the late Dominga
Garcia, and questioning the legality of the Order of the same court dated July 17, 1979 which denied due
course to the petitioners' notice of appeal to the Court of Appeals and directed them to file instead a
petition for review before this Tribunal.

Petitioners are the oppositors in Special Proceeding No. 2116 in the then Court of First Instance (CFI) of
Davao City Branch II, for settlement of the estate of the deceased Dominga Garcia, filed by private
respondent herein, Luis Tan alias Chen Yeh-An.

The records disclose that on August 12,1977, Luis Tan filed a verified petition with the CFI of Davao for
the issuance of letters of administration in favor of a certain Alfonso Atilano. The petition alleged,
among others that private respondent is the only surviving son of the deceased Dominga Garcia who
died intestate sometime in 1930 in Canton, China; that the deceased left a parcel of land 1 located at
C.M. Recto Avenue, Davao City; and that the said lot is in the possession of the heirs of Ramon Pizarro, 2
petitioners herein.

On October 4, 1977, petitioners filed an opposition to the said petition claiming that they are the heirs
of Ramon Pizarro who died intestate on June 16, 1974; and that the deceased was the vendee of one-
half (1/2) of the aforementioned lot by virtue of an extrajudicial settlement of estate and deed of
absolute sale executed by Vicente Tan in Hongkong on May 27, 1966. Petitioners prayed that letters of
administration of Dominga Garcia's estate be issued in favor of anyone of them.

The respondent court set the petition for hearing. Said order and the petition were duly published in the
Mindanao Times. ** The City of Davao 3 was likewise served with a copy of said petition. On December
6, 1977, after private respondent had begun presentation of evidence in support of his petition, the
parties herein entered into a compromise whereby petitioners agreed, among others, to withdraw their
opposition to the appointment of private respondent's recommendee and for the intestate proceedings
to proceed in due course. Said agreement was approved in the order of respondent court dated
December 6,1977. 4

Accordingly, on March 27, 1978, after the judicial administrator had qualified and his inventory of the
assets of the late Dominga Garcia was approved, respondent court issued an order requiring the filing of
creditors' claim against the said estate within the period of six (6) months from the date of the first
publication. 5 Copy of said order was received by petitioners through counsel on March 28, 1979. 6

Meanwhile, on January 23,1979, private respondent and the City of Davao filed a joint motion asking
respondent court to take notice of their agreement which in substance provides for an agreement to file
a joint motion in the CFI of Davao to proceed with the determination of the heirs of the deceased
Domingao Garcia which shall be determinative of their respective claims against the estate. On February
19, 1979, petitioners filed their opposition to the said joint motion on the sole ground that it is without
procedural basis. Private respondent filed his reply thereto on February 21, 1979. On February 22, 1979,
respondent court issued an order taking note of the agreement between private respondent and the
City of Davao.

On February 28, 1979, private respondent filed a motion to drop and exclude the petitioners on the
ground that they do not even claim to be the heirs of the deceased Dominga Garcia and that the
extrajudicial deed of partition and deed of absolute sale allegedly executed in Hongkong in favor of the
petitioners' deceased father is spurious and simulated. On March 5, 1979, petitioners filed their
opposition to said motion. They likewise filed a claim against the estate of the deceased Garcia in the
amount of P350,000.00 representing services allegedly rendered by their deceased father in favor of
Vicente Tan. On March 8, 1979, private respondent filed a reply to petitioners' opposition and a motion
to strike out or dismiss the claim on the ground that it is spurious and barred for having been filed
beyond the six (6) month period set in the notice for the filing of creditors' claim. On March 29, 1979,
petitioners filed another claim against the estate for P200,000.00 allegedly advanced by their deceased
father for the payment of realty and income taxes of the said lot sometime in 1936, to which claim
private respondent filed an opposition on the ground that it is barred for having been filed beyond the
six (6) month period and that it was merely intended to delay the proceedings.

In the Order of June 1, 1979, respondent court dismissed both claims of the petitioners on the ground
that they are barred for having been filed out of time. 7 On June 26, 1979, petitioners filed a notice of
appeal stating that they are appealing the order of June 1, 1979 to the Court of Appeals in so far as it
declared their claims barred. 8 On July 5, 1979, private respondent filed an opposition to the projected
appeal on the ground that the appeal involves a pure question of law and thus, the same should be
directed to the Supreme Court. 9 On July 17, 1979, respondent court issued an order dismissing
petitioners' appeal and directed petitioners to file instead a petition for review on certiorari before this
Court.10

Hence, the present petition. ***

It is the position of the petitioners that the order of June 1, 1979 of the respondent court, which
directed that the filing of claims against the estate of the late Dominga Garcia be filed within six (6)
months after the first publication of the notice thereof, is null and void in that it is violative of Section 2,
Rule 86 of the Revised Rules of Court. They contend that said provision mandates that the filing of such
claims should be for a period of six (6) months starting from the sixth month after the date of the first
publication of the notice down to the twelfth month. 11 They argue that to require filing of claims within
the sixth month from publication of notice will shorten the period in violation of the mandatory
provisions of Section 2, Rule 86, which provides:

Sec. 2. Time within which claims shall be filed. — In the notice provided in the preceding
section, the court shall state the time for the filing of claims against the estate, which
shall not be more than twelve (12) nor less than six (6) months after the date of the first
publication of the notice. However, at anytime before an order of distribution is
entered, on application of a creditor who has failed to file his claim within the time
previously limited, the court may, for cause shown and on such terms as are equitable,
allow such claim to be filed within a time not exceeding one (1) months.

We agree. The range of the period specified in the rule is intended to give the probate court the
discretion to fix the period for the filing of claims. The probate court is permitted by the rule to set the
period provided it is not less than six (6) months nor more than twelve (12) months from the date of the
first publication of the notice thereof. Such period once fixed by the court is mandatory.

The purpose of the law, in fixing a period within which claims against an estate must be presented, is to
insure a speedy settlement of the affairs of the deceased person and the early delivery of the property
to the person entitled to the same. 12

In Sikat vs. Vda. Mafincode Villanueva, 13 this Court ruled that the speedy settlement of the estate of
deceased persons for the benefit of creditors and those entitled to the residue by way of inheritance or
legacy after the debts and expenses of administration have been paid is the ruling spirit of our probate
law.

However, in this case the trial court set the period for the filing of the claims within six (6) months from
the date of the first publication of the notice. It was obviously short of the minimum limit of six (6)
months provided for by the law. Petitioner correctly observed that the trial court thereby shortened the
period set by the law.

Since the notice issued and the period set by the trial court was not in accordance with the
requirements of Section 2, Rule 86 of the Rules of Court, what should then apply is the period as
provided for by the rules which is not less than six months nor more than twelve (12) months from the
date of first publication of notice. The first publication of the notice in the Mindanao Times was on
March 30, 1978. Thus the two claims of petitioners against the estate which were filed on March 5, 1979
and March 29, 1979 respectively were filed on time.

The other issue raised in the petition is the authority of the trial court to determine whether the appeal
involves a question of law or both questions of law and facts. The petitioners cite Section 3, Rule 50 of
the Rules of Court, which provides as follows:

Sec. 3. Where appealed case erroneously brought. — Where the appealed case has been
erroneously brought to the Court of Appeals, it shall not dismiss the appeal, but shall
certify the case to the proper court, with a specific and clear statement of the grounds
therefor.

Petitioners contend that it is the Court of Appeals which has the authority to determine whether the
issue in the appeal is purely a question of law in which case it shall certify the same to the proper court,
which in this case is this Tribunal.

In the present case, when the lower court found that the order sought to be appealed was its order of
June 1, 1979, wherein it held that the claims filed by petitioners against the estates were barred having
been filed beyond the period fixed by the trial court in the notice, which appeal involves an
interpretation of Section 2, Rule 86 of the Rules of Court, instead of giving due course to the notice of
appeal to the Court of Appeals filed by petitioners, the petitioners were instructed to file a petition for
review with this Court as the issue is a pure question of law.

We find the action taken by the trial court to be well-taken. Certainly, it is within the competence and
jurisdiction of the trial court to determine whether the appeal interposed was based on pure questions
of law or involves both questions of law and facts in considering the appeal.14 The provision of Section
3, Rule 50 of the Rules of Court applies only when the appeal is already brought to the Court of Appeals
at which time it may, instead of dismissing the appeal, upon determination that it involves a pure
question of law, order that the case be certified to this Court.

It must be noted that in the notice of appeal it is not even required that the appellant indicate the court
to which its appeal is being interposed. The requirement is merely directory and failure to comply with it
or error in the court indicated is not fatal to the appeal. 15

WHEREFORE, the petition is GRANTED and the orders of the respondent court of June 1, 1979 and July
17, 1979 are reversed and set aside in so far as the claims filed by petitioners were found to be barred,
the same having been timely filed, without pronouncement as to costs.

SO ORDERED.
G.R. No. L-17175 July 31, 1962

RICARDO M. GUTIERREZ, plaintiff-appellant,


vs.
LUCIA MILAGROS BARRETTO-DATU, Executrix of the Testate Estate of the deceased MARIA GERARDO
VDA. DE BARRETTO, defendant-appellee.

Teofilo Sison and Mariano G. Bustos and Associates for plaintiff-appellant.


Deogracias T. Reyes and Luison and Associates for defendant-appellee.

MAKALINTAL, J.:

Ricardo M. Gutierrez appeals from the orders of Court of First Instance of Rizal (1) dismissing his
complaint against Lucia Milagros Barretto-Datu, as executive of the estate of the deceased Maria
Gerardo Vda. de Barreto, and (2) denying his motion for reconsideration the dismissal.

The relevant facts alleged by appellant are as follows; In 1940, Maria Gerardo Vda. de Barretto, owner of
hectares of fishpond lands in Pampanga, leased the same to appellant Gutierrez for a term to expire on
May 1, 1947. On November 1, 1941, pursuant to a decision of Department of Public Works rendered
after due investigation the dikes of the fishponds were opened at several points, resulting in their
destruction and in the loss great quantities of fish inside, to the damage and prejudice of the lessee.

In 1956, the lessor having died in 1948 and the corresponding testate proceeding to settle her estate
having been opened (Sp. Proc. No. 5002, C.F.I., Manila), Gutierrez filed a claim therein for two items:
first, for the sum of P32,000.00 representing advance rentals he had to the decedent (the possession of
the leased property is alleged, having been returned to her after the open of the dikes ordered by the
government); and second, the sum of P60,000.00 as damages in the concept of earned profits, that is,
profits which the claimant failed to realize because of the breach of the lease contract allegedly
committed by the lessor.

On June 7, 1957 appellant commenced the instant ordinary civil action in the Court of First Instance of
Rizal (Quezon City branch) against the executrix of the testate for the recovery of the same amount of
P60,000 referred to as the second item claimed in the administration proceeding. The complaint
specifically charges decedent Manila Gerardo Vda. de Barretto, is lessor, was having violated a warranty
in the lease contract again any damages the lessee might suffer by reason of the claim of the
government that several rivers and creeks of the public domain were included in the fishponds.

In July 1957 appellant amended his claim in the testate proceeding by withdrawing therefrom the item
of P60,000.00, leaving only the one for refund of advance rentals in the sum of P32,000.00.

After the issues were joined in the present case with the filing of the defendant's answer, together with
a counterclaim, and after two postponements of the trial were granted, the second of which was in
January 1958, the court dismissed the action for abandonment by both parties in an order dated July 31,
1959. Appellant moved to reconsider; appellee opposed the motion; and after considerable written
argument the court, on March 7, 1960, denied the motion for reconsideration on the ground that the
claim should have been prosecuted in the testate proceeding and not by ordinary civil action.
Appellant submits his case on this lone legal question: whether or not his claim for damages based on
unrealized profits is a money claim against the estate of the deceased Maria Gerardo Vda. de Barretto
within the purview of Rule 87, Section 5. This section states:

SEC. 5. Claims which must be filed under the notice. If not filed, barred; exception. — All claims
for money against the decedent, arising from contract, express or implied, whether the same be
due, not due, or contingent, all claims for funeral expenses and expenses of the last sickness of
the decedent, and judgment for money against the decedent, must be filed within the time
limited in the notice; otherwise they are barred forever, except that they may be set forth as
counterclaims in any action that the executor or administrator may bring against the claimants.
Where an executor or administrator commences an action, or prosecutes an action already
commenced by the deceased in his lifetime, the debtor may set forth by answer the claims he
has against the decedent, instead of presenting them independently to the court as herein
provided, and mutual claims may be set off against each other in such action; and if final
judgment is rendered in favor of the defendant, the amount so determined shall be considered
the true balance against the estate, as though the claim had been presented directly before the
court in the administration proceedings. Claims not yet due, or contingent, may be approved at
their present value.

The word "claims" as used in statutes requiring the presentation of claims against a decedent's estate is
generally construed to mean debts or demands of a pecuniary nature which could have been enforced
against the deceased in his lifetime and could have been reduced to simple money judgments; and
among these are those founded upon contract. 21 Am. Jur. 579. The claim in this case is based on
contract — specifically, on a breach thereof. It falls squarely under section 5 of Rule 87 "Upon all
contracts by the decedent broken during his lifetime, even though they were personal to the decedent
in liability, the personal representative is answerable for the breach out of the assets." 3 Schouler on
Wills, Executors and Administrators, 6th Ed., 2395. A claim for breach of a covenant in a deed of the
decedent must be presented under a statute requiring such presentment of all claims grounded on
contract. Id. 2461; Clayton v. Dinwoody, 93 P. 723; James v. Corvin, 51 P. 2nd 689.1

The only actions that may be instituted against the executor or administrator are those to recover real
or personal property from the estate, or to enforce a lien thereon, and actions to recover damages for
an injury to person or property, real or personal. Rule 88, section 1. The instant suit is not one of them.

Appellant invokes Gavin v. Melliza, 84 Phil. 794, in support of his contention that this action is proper
against the executrix. The citation is not in point. The claim therein, which was filed in the testate
proceeding, was based upon a breach of contract committed by the executrix herself, in dismissing the
claimant as administrator of the hacienda of the deceased. While the contract was with the decedent,
its violation was by the executrix and hence personal to her. Besides, the claim was for indemnity in the
form of a certain quantity of palay every year for the unexpired portion of the term of the contract. The
denial of the claim was affirmed by this Court on the grounds that it was not a money claim and that it
arose after the decedent's demise, placing it outside the scope of Rule 87, Section 5.

The orders appealed from are affirmed, with costs against appellant.
G.R. No. L-18107 August 30, 1962

MARIA G. AGUAS, FELIX GUARDINO and FRANCISCO SALINAS, plaintiffs-appellants,


vs.
HERMOGENES LLEMOS, deceased defendant substituted by his representatives,
PERPETUA YERRO-LLEMOS, HERMENEGILDO LLEMOS, FELINO LLEMOS and AMADO LLEMOS,
defendants-appellees.

Jesus M. Aguas for plaintiffs-appellants.


Serafin P. Ramento for defendants-appellees.

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

On 14 March 1960, Francisco Salinas and the spouses Felix Guardino and Maria Aguas jointly filed an
action in the Court of First Instance of Catbalogan, Samar (Civil Case No. 4824), to recover damages from
Hermogenes Llemos, averring that the latter had served them by registered mail with a copy of a
petition for a writ of possession, with notice that the same would be submitted to the said court of
Samar on February 23, 1960 at 8: 00 a.m.; that in view of the copy and notice served, plaintiffs
proceeded to the court from their residence in Manila accompanied by their lawyers, only to discover
that no such petition had been filed; and that defendant Llemos maliciously failed to appear in court, so
that plaintiffs' expenditure and trouble turned out to be in vain, causing them mental anguish and
undue embarrassment.

On 1 April 1960, before he could answer the complaint, the defendant died. Upon leave of court,
plaintiffs amended their complaint to include the heirs of the deceased. On 21 July 1960, the heirs filed
a motion to dismiss, and by order of 12 August 1960, the court below dismissed it, on the ground that
the legal representative, and not the heirs, should have been made the party defendant; and that
anyway the action being for recovery of money, testate or intestate proceedings should be initiated and
the claim filed therein (Rec. on Appeal, pp. 26-27).

Motion for reconsideration having been denied, the case was appealed to us on points of
law.1äwphï1.ñët

Plaintiffs argue with considerable cogency that contrasting the correlated provisions of the Rules of
Court, those concerning claims that are barred if not filed in the estate settlement proceedings (Rule 87,
sec. 5) and those defining actions that survive and may be prosecuted against the executor or
administrator (Rule 88, sec. 1), it is apparent that actions for damages caused by tortious conduct of a
defendant (as in the case at bar) survive the death of the latter. Under Rule 87, section 5, the actions
that are abated by death are: (1) claims for funeral expenses and those for the last sickness of the
decedent; (2) judgments for money; and (3) "all claims for money against the decedent, arising from
contract express or implied". None of these includes that of the plaintiffs-appellants; for it is not enough
that the claim against the deceased party be for money, but it must arise from "contract express or
implied", and these words (also used by the Rules in connection with attachments and derived from the
common law) were construed in Leung Ben vs. O'Brien, 38 Phil., 182, 189-194.

to include all purely personal obligations other than those which have their source in delict or
tort.
Upon the other hand, Rule 88, section 1, enumerates actions that survive against a decedent's executors
or administrators, and they are: (1) actions to recover real and personal property from the estate; (2)
actions to enforce a lien thereon; and (3) actions to recover damages for an injury to person or property.
The present suit is one for damages under the last class, it having been held that "injury to property" is
not limited to injuries to specific property, but extends to other wrongs by which personal estate is
injured or diminished (Baker vs. Crandall, 47 Am. Rep. 126; also 171 A.L.R., 1395). To maliciously cause a
party to incur unnecessary expenses, as charged in this case, is certainly injurious to that party's
property (Javier vs. Araneta, L-4369, Aug. 31, 1953).

Be that as it may, it now appears from a communication from the Court of First Instance of Samar that
the parties have arrived at an amicable settlement of their differences, and that they have agreed to
dismiss this appeal. The settlement has been approved and embodied in an order of the Court of First
Instance.

The case having thus become moot, it becomes unnecessary to resolve the questions raised therein.
This appeal is, therefore, ordered dismissed, without special pronouncement as to costs.
G.R. No. L-27701 July 21, 1928

THE BANK OF THE PHILIPPINE ISLANDS, plaintiff-appellant,


vs.
V. CONCEPCION E HIJOS, INC., and VENANCIO CONCEPCION,
defendants-appellants. HENRY W. ELSER, defendant-appellee.

Araneta & Zaragoza for plaintiff-appellant.


No appearance for defendants-appellants.
DeWitt, Perkins & Brady for defendant-appellee.

OSTRAND, J.:

It appears from the record that on July 6, 1921, the defendants Concepcion executed a promissory note
in favor of the plaintiff for the sum of P342,372.64, payable on demand, and as security for payment,
deposited 700 shares of the Philippine National Bank as collateral with the plaintiff and gave it a
mortgage on 5,680 square meters of land, with improvements, situated on R. Hidalgo Street in Manila.
The defendants Concepcion defaulted in the payment of the note, and on February 3, 1922, the plaintiff
bank instituted the present foreclosure proceedings.

Shortly afterwards, Henry W. Elser entered into negotiations with the Concepcions and offered to take
over the mortgaged property and assume the mortgage debt. To this the Concepcions agreed on the
condition that they be relieved of all liability for the debt.

On March 23, 1922, Elser wrote the plaintiff bank the following letter:

DEAR SIR: Confirming our conversation of this morning, I take pleasure in advising you that I
have made arrangements with Mssrs. Puno & Concepcion to take over their property on Calle R.
Hidalgo, consisting of 5,680 square meters, including all improvements thereon, and also 700
shares in the Philippine National Bank mortgaged to you in the total sum of P342,000, and by
which arrangement I am to be substituted in the place and stead of Messrs. Puno & Concepcion
in the obligation to your bank.

I have present prospects of renting the entire property and in consideration thereof I will
undertake to pay to the bank on the obligation thus undertaken by me, the sum of not less than
five thousand pesos (P5,000) monthly on the principal, together with interest every six months. I
will also reduce the mortgage not less than 25 per cent during the first year, not less than 50 per
cent during the second year, and the balance within the third year, without prejudice, however,
to my right to mortgage the property to any bonding institution or to take up the mortgage
myself at any time during the three years period mentioned above, which I expect that I may be
in a position to do.

Yours very truly,


(Sgd.) H. W. ELSER

No answer to this letter was given by the bank, and it clearly appears from the allegations in its
amended complaint, and from the evidence, that it was unwilling to release the Concepcions from their
liability for the mortgage debt and insisted on their confessing a judgment in the foreclosure
proceedings. This the Concepcions refused to do unless the bank would agree to bid in the mortgage
property for the full amount of the judgment.

After further conversations with the representatives of the plaintiff bank, Elser on April 21, 1922, wrote
in the following letter:

DEAR SIRS (Attention of Mr. Zaragoza): With reference to our recent conversation regarding the
R. Hidalgo property belonging to Venancio Concepcion (Puno & Concepcion), I respectfully
request that you confirm in writing your verbal agreement that should the property in question
become the property of your bank, in the amount of P342,000 plus interest to date, that you will
sell the same to me for the same amount.

This information is desired by the Attorneys for Venancio Concepcion, Mr. R. M. Calvo, in order
to satisfy himself that in case Messrs. Puno & Concepcion accept judgment, turning over the
property to you, that you in return will sell the property to me for the above mentioned sum,
and not less than that sum.

Trusting you will see your way clear to furnish this confirmation, in accordance with our
conversation, we are

Very truly,
(Sgd.) H. W. ELSER

It must be inferred from this letter that Elser had been led to understand that the bank would bid in the
land at the foreclosure sale for the full amount of the judgment and sell it to him for the same price. It
will be readily seen that this proposition is entirely different from that contained in the letter of March
23d.

The plaintiff made no direct reply to the letter of April 21st, but Calvo, testifying for the plaintiff, stated
that on April 28, Elser invited him to a conference with Nolting, the president of the bank, in regard to
the matter; that on meeting Nolting, Elser said: "Mr. Nolting, do you still adhere to your acceptation of
the offer I have made you in writing?" to which Nolting answered that he did not think that there was
any reason for him to go back on his word. He thereupon referred Elser and Calvo to Zaragoza, who in
some matters appears to have acted as counsel for the bank, for further conferences. The negotiations
did not lead to any action on the part of the bank, but on May 5, 1922, Elser entered into an agreement
in the form of bilateral deed of sale, with V. Concepcion & Hijos, Inc., and Venancio Concepcion which
appears in the record as Exhibit C and reads as follows in translation from Spanish:

DEED OF PURCHASE AND SALE

This deed of purchase and sale executed in the City of Manila, P.I., this fifth day of May 1922 A.
D., by and between V. Concepcion & Hijos, Inc., a domestic corporation duly organized under
the laws of Philippine Islands domiciled at No. 861 Calle R. Hidalgo, District of Quiapo, City of
Manila, represented herein by the president, Mr. Venancio Concepcion, by virtue of the powers
granted him by the Board of Directors of said corporation in a resolution dated May 2, 1922, a
copy of which duly certified, is attached hereto and made a part hereof, and Mr. Venancio
Concepcion, of age, married with Mrs. Rosario San Agustin and resident of City of Manila, his
place of residence being in the municipality of San Juan, Province of Rizal, P.I., as party of the
first part, and Mr. Henry W. Elser, of age, married with Mrs. Elaine Childs Elser, and a resident of
City of Manila, with her place of residence at No. 600 Calle M. H. del Pilar, District of Malate, as
party of the second part,

WITNESSETH:

Whereas, V. Concepcion e Hijos, Inc., is at present indebted to the Bank of the Philippine Islands,
in the sum of P342,372.64, Philippine currency with interest thereon at the rate of 9 per cent
per annum from September 30, 1921, to secure the payment of which, the firm of V.
Concepcion e Hijos, Inc., and Mr. Venancio Concepcion as joint land several obligors, have
executed in favor of the creditor bank on the 6th of July, 1921, a deed of mortgage and one of
pledge upon the following properties:

A tract of land with the buildings of strong materials erected thereon, situated on Calle Sa n
Sebastian, District of Quiapo. Bounded on the N. by Calle San Sebastian; on the E. by property
Maximino Paterno and Manuel Zamora; on the S. by property of the City of Manila; and on W.
by the Estero de Curtidor; containing an area of 5,686.80 square meters, more or less, of which
land, buildings and improvements, the aforesaid Venancio Concepcion is the registered owner in
accordance with the Land Registration Act, according to transfer certificate of title No. 14019,
issued by the registrar of deeds of the City of Manila.

Seven hundred shares of stock of the Philippine National Bank, belonging to Mr. Venancio
Concepcion, issued to him and indorsed in the blank in favor of the Bank of the Philippine
Islands, described as follows: (Here follows the numbers and amounts of the certificates of
shares.)

Whereas on January 20, 1922, Mr. Venancio Concepcion, owner of the property above
described, in consideration of the fact that they were subject to the payment of the sum of
P342,372.64 with interest thereon at the rate of 9 per cent per annum, which was owing from V.
Concepcion e Hijos, Inc., to the Bank of Philippine Islands, as per deeds of mortgage and of
pledge executed on July 6, 1921, has sold, assigned, and transferred to said firm of V.
Concepcion e Hijos, Inc., the aforesaid properties for the sum of P290,000 Philippine currency,
the agreed and stipulated price of the urban property being P220,000, Philippine currency, and
that of the 700 shares of stock of the Philippine National Bank, the sum of P70,000 Philippine
currency, as per public document executed on said date before Mr. Recaredo Ma. Calvo, a
notary public in and for the City of Manila.

Whereas, on February 28, 1922 the Bank of the Philippine Islands, filed with the clerk's office of
the Court of First Instance of Manila, under No. 21537, a complaint, against V. Concepcion e
Hijos, Inc., and Venancio Concepcion for the recovery of its mortgage credit evidenced by the
deeds of mortgage and of pledge executed on July 6, 1921, notwithstanding the offer made by
V. Concepcion e Hijos, Inc., to assign absolutely and forever to said creditor entity the properties
which are the subject matter of the mortgage and pledge in full and total payment of their
obligation.
Whereas, Mr. Henry W. Elser is willing to subrogate himself to the obligation of V. Concepcion e
Hijos, Inc., and Venancio Concepcion in favor of the Bank of Philippine Islands and release them
from the total of said obligation contracted by them on July 6, 1921, as per deeds of mortgage
and of pledge executed on said date, in consideration of the sale, assignment and transfer in his
favor of all the rights, interest, action or share that they have or may have upon the properties
described in said deeds of mortgage and pledge;

Now, therefore, we, V. Concepcion e Hijos, Inc., and Venancio Concepcion, in consideration of
the sum of one peso (P1) Philippine currency, which we have this day and which we declare was
paid to us to our complete satisfaction, and of other important considerations, especially the
subrogation into our joint and several obligations in favor of the Bank of the Philippine Islands,
amounting to P342,372.64, Philippine currency, with interest thereon at the rate of 9 per cent
per annum from September 30, 1921, which said Mr. Henry W. Elser hereby makes, binding
himself, moreover, to release us from our obligation contracted in favor of the Bank of the
Philippine Islands on July 6, 1921, do hereby sell, assign, and transfer absolutely and forever to
said Mr. Henry W. Elser, his heirs and successors in interest the properties described herein with
the incumbrances created and existing in favor of the Bank of the Philippine Islands.

That I, Henry W. Elser, accept this contract upon the precise terms in which it is executed.

In testimony whereof, we sign third presents in place and on the date above-mentioned.

V. CONCEPCION E HIJOS, INC.


(Sgd.) V. CONCEPCION
(Sgd.) V. CONCEPCION
(Sgd.) H. W. ELSER

Signed in the presence of:


(Sgd.) ERNESTO Ma. CALVO
GREGORIO BUHAY

The bank never gave notice of its conformity with the agreement above quoted but of June 15, 1922, it
petitioned the court to include Henry W. Elser as defendant in the complaint, on the strength of the
obligations assumed by him in said agreement.

On June 23, 1922, the defendants Concepcion answered said petition praying that instead of merely
being included, said Elser be substituted in their place as defendants, on the ground that the plaintiff
had accepted the substitution of Elser in their place as its debtor.

On June 27, 1922, the trial court entered an order including Henry W. Elser as defendant and one month
later, the plaintiff filed an amended complaint against the defendants Concepcion and Elser asking for a
joint and several judgment against them in the amount prayed for in the original complaint and for the
foreclosure of the mortgage securing the same.

On July 18, 1922, the defendants Concepcion filed a supplemental answer alleging the consent of the
plaintiff to the subrogation of Elser in their place with respect to the obligations sued upon and asking
for the dismissal of the case as to them on the ground.
On October 16, 1922, the defendant Elser demurred to the amended complaint on the ground that it
failed to alleged that the plaintiff had consented to the substitution of Elser in place of the Concepcions
so as to render Elser personally liable to the plaintiff. This demurrer was sustained by the court and due
exception was taken by the plaintiff.

On November 1, 1922, the plaintiff presented a second amended complaint, in which it is alleged that
the sale from the Concepcions to Elser was with the knowledge and consent of the plaintiff but without
waiver of it as right of action against the Concepcions. The defendant Elser demurred on the ground that
it did not appear from the amended complaint that the plaintiff had accepted Elser as debtor and on the
further ground that there was no showing therein as to the disposition of the collateral security held by
the plaintiff for the same debt. This demurrer was sustained on both grounds, on December 1, 1922.

On December 6, 1922, the plaintiff presented its third amended complaint, without material change in
the averments of the second amended complaint, and a third demurrer thereto was sustained on
December 28, 1922.

The plaintiff thereupon filed a fourth amended complaint, reiterating the allegations of the third
amended complaint, alleging that the defendant Elser entered into possession of the mortgaged
premises with plaintiff's consent; that plaintiff had not sold the shares of the Philippine National Bank
held by it as collateral, and asking for judgment decreeing that said shares and the mortgaged property
be sold under order of the court, and that the defendants Concepcion and Elser be condemned to pay
the deficiency, if any there should be. A demurrer to this complaint was sustained, on the ground that it
failed to show a contractual relationship between the plaintiff and the defendant Elser.

On March 2, 1923, the plaintiff presented a fifth amended complaint, similar to the foregoing, but
containing the additional allegation that the plaintiff accepted the assumption of the mortgage by the
defendant Elser "without releasing the liability of the defendants" Concepcion. This complaint was
demurred to on the ground that it did not sufficiently state that the plaintiff had accepted the
substitution of Elser in place of the Concepcions, as the contract between them provided. The demurrer
was overruled and the defendant Elser excepted.

On April 2, 1923, the defendant Elser answered, denying generally and specifically the allegations of the
plaintiff's complaint. On the same date, C. W. Rosenstock, as guardian of the defendant Elser, filed a
cross-complaint alleging that at the time Elser is alleged to have assumed the obligations of the
Concepcions to the plaintiff, he was of unsound mind that he had been induced to sign the same by false
representations on the part of the Concepcion to the effect that the plaintiff had agreed that he be
substituted in place of Concepcions with respect to the obligations set up in the plaintiff's complaint and
that the plaintiff would accept payment of the same in monthly installments on account of the principal
of not less than P5,000, with interest payable every six months, and that the mortgage should be
reduced not less than 25 per cent the first year, not less than 50 per cent the second year, and the
balance within the third year, when, as a matter of fact, the plaintiff had not agreed hereto or accepted
said terms of payment, as the Concepcions well knew, and had never accepted Elser's offer to the
plaintiff made pursuant to said representations, and praying for the reasons stated, that the deed from
the Concepcions to Elser, wherein he assumed the obligations of the former to the plaintiff be cancelled.
These allegations were denied by the plaintiff and the defendants Concepcion in their replies.

Elser died on June 18, 1923, and on January 4, 1924, the plaintiff suggested the death of the defendant
Elser, and asked that the administrator of the estate, C. W. Rosenstock, be substituted in his place as
defendants, and that the action be continued against Rosenstock in the capacity on the ground that this
action is for the foreclosure of a mortgage

On January 11, 1924, the attorneys of record for the defendant Elser filed an opposition to the
application to have the action continued against Rosenstock, in substitution of Elser, this is not a
foreclosure action, and hence this action, as to him, abated by reason of his death, and any claim of the
plaintiff against him should be presented to the committee on claims and appraisals of his estate.

This objection was overruled and Rosenstock, as Elser's administrator, was substituted in his place as
defendant, by order of the court dated January 14, 1924, and exception thereto was duly taken.
Subsequently, Rosenstock became the executor of Elser's estate, and as such, filed various amended
answers and cross-complaints.

The last amended cross-complaint was filed by him on August 9, 1924 in case No. 24485 of the Court of
First Instance of Manila, in which the estate of the deceased Elser was being administered. He repeated
therein the allegations and prayer of his cross-complaint as guardian filed on April 2, 1923, and referred
to above. The last amended answer was filed by him on August 21, 1925. It consisted of denial of the
allegations of the complaint and of the authenticity of the document whereby Elser is alleged to have
assumed the obligations of the defendants Concepcion to the plaintiff; an allegation that at the time of
execution thereof, Elser was of unsound mind; and a statement of willingness to relinquished and
abandon any rights Elser might have acquired under said document in favor of the plaintiff.

After a lengthy trial, the court below, on January 22, 1927, rendered its decision absolving the Elser
estate from the complaint, ordering the Concepcions to pay the plaintiff the sum of P342,372.64, with
interest of 9 per cent and costs, and providing for the sale of the mortgaged property, in case of non-
payment of the judgment.

Both the plaintiff and the defendants Concepcion excepted to this judgment and moved for a new trial
on the usual statutory grounds. The motions were denied and exceptions noted.

The case is now before this court on a joint bill of exceptions presented by the plaintiff and the
defendants Concepcion pursuant to stipulation. No briefs have been filed by the Concepcions.

From the facts stated and from the pleadings it will be readily seen that as far as the defendant Elser is
concerned, the plaintiff alleged cause of action rests exclusively on the deed of contract Exhibit C. The
well known general rule is that a contract affects only the parties and privies thereto. But there are
exceptions to this rule and the plaintiff contends that though it is neither a party nor a privy to the
contract here in question, the subrogation of Elser to the obligations of the Concepcions in favor of the
plaintiff as provided for in the contract, is a stipulation pour autrui upon which the plaintiff may
maintain its action

The nature and reach of the doctrine of the stipulations pour autrui is so thoroughly discussed in the
case of Uy Tam and Uy Yet vs. Leonard (30 Phil., 471), that no further discussion thereof is here
necessary. We wish , however, to emphasize the fact that it was there held that in order to constitute a
valid stipulation pour autrui, it must be the purpose and intent of the stipulating parties to benefit the
third person may be incidentally benefited by stipulation. This conclusion is supported by numerous
authorities and is in complete harmony with the second paragraph of article 1257 of the Civil Code,
which reads as follows:

Should the contract contain any stipulation in favor of the third person, he may demand its
fulfillment, provided he has given notice of his acceptance to the person bound before the
stipulation has been revoked.

Applying this test, it seems clear that neither Exhibit C nor any other agreement between the
Concepcion and the Elser contained any stipulation pour autrui in favor of the plaintiff. As stated in the
appellee's brief:

The Concepcion owed the plaintiff a large sum of money and wanted to be relieved of that
obligation. Elser wanted the property which he had been mortgaged to secure that obligation,
and had to assume the obligation and agree to secure the discharge of the Concepcion
therefrom, in order to get the property. Neither of them had any desire to confer any benefit to
the bank. Neither of them entered into the contract for the sake of the bank. It is obvious that
each entered into the contract impelled by the advantage accruing to him personally as a result
thereof.

We may add that the stipulation here in question is not merely for the assumption of the mortgaged
debt by Elser, but is a provision for the subrogation of Elser to the Concepcion obligations to the
plaintiff. Inasmuch as the mere assumption of the mortgage debt by the purchaser of the mortgaged
land does not relieved the mortgagor from his liability, it might be said that some show of reason that by
such an arrangement the mortgagee will have two debtors for the same debt instead of only one and
that this furnishes additional security and is to the creditor's advantage and for his benefit. But such is
not the case where, as here, the stipulation is for the subrogation of the purchasers to the obligation of
the original debtor; if such a stipulation is duly accepted by the creditor, it works a novation of the
original agreement and releases the original debtor from further liability. Such subrogation is rarely for
the benefit of the creditor and that, in the present case, it was not believed to be of any advantage to
the bank is well shown by the fact that the parties were unable to obtain its written consent to the
stipulation.

But assuming that the stipulation is for the benefit of a third person, the plaintiff is nevertheless not in
position to maintain its action against Elser. In order to be enforceable, such stipulations must be
accepted by the third person and not has not been done here. The plaintiff asserts that it accepted the
stipulations in part, but that is not a sufficient acceptance. The ordinary rules of offer and acceptance
are applicable, and it is a cardinal rule of the law of contracts that in order to create a binding
agreement, the acceptance must be absolute, unconditional, and identical with the terms of the offer;
otherwise there is no meeting of the minds or an expression of one and the same common intention,
one of the essential elements of a valid contract (Civil Code, art., 1257; Page on Contracts, sec. 1308,
and authorities there cited).

But the plaintiff argues that in American jurisprudence, the purchaser of the mortgaged property who
assumes the payment of the mortgage debt, may for the reason alone sued for the debt by the creditor
and that the rule is applicable in this jurisdiction. Aside from the fact that we are not dealing with a
mere assumption of the debt, but with a subrogation, it may be noted that this court has already held
that the American doctrine in this respect is not in harmony with the spirit of our legislation and has not
been adopted in this country. In the case of E.C. McCullough & Co. vs. Veloso and Serna (46 Phil., 1), the
court. speaking through its present Chief Justice, said:

The effects of transfer of a mortgaged property to a third person are well determined by the
Civil Code. According to article 1879 of this Code, the creditor may demand of the third person
in possession of the property mortgaged payment of such part of the debt, as is secured by the
property in his possession, in the manner and form established by law. The Mortgage Law in
force at the promulgation of the Civil Code and referred to in the latter, exacted, among other
conditions, also the circumstance that after judicial or notarial demand, the original debtor had
failed to make payment of the debt at maturity. (Art. 135 of the Mortgage Law of the Philippines
of 1889.) According to this, the obligation of the new possessor to pay the debt originated from
the right of the creditor to demand payment of him, it being necessary that a demand for
payment should have previously been made upon the debtor and the latter should have failed
to pay. And even if these requirements were complied with, still the third possessor might
abandon the property mortgaged, and in that case it is considered to be in the possession of the
debtor. (Art. 136 of the same law.) This clearly shows that the spirit of the Civil Code is to let the
obligation of the debtor to pay the debt stand although the property mortgaged to secure
payment of said debt may have been transferred to a third person. While the Mortgage Law of
1893 eliminated this provisions, it contained nothing indicating any change in the spirit of the
law in this respect. Article 129 of this law, which provides for the substitution of the debtor by
the third person in possession of the property, for the purposes of giving notice, does not show
this change and has reference to a case where the action is directed only against the property
burdened with the mortgage. (Art. 168 of the Regulation.)

From what we have said it follows that the plaintiff can have no cause of action against Elser, or rather
against his estate. Assuming that Elser was of sound mind at the time of the execution of Exhibit C —
and that is a much debated question — the Concepcion, and not the plaintiff might have maintained an
action against the Elser state; but that action is now barred through their failure to present their claim
and appraisal in the probate proceedings, and the plaintiff can therefore, not successfully invoked article
1111 of the Civil Code, which in effect provides that after exhausting the property of which the debtor
may be in possession, the creditor may have recourse to the debtor's credit and choses an action for the
collection of unpaid portion of the debt.

Counsel for the appellee also argue that the bank, having failed to present its claim to the committee on
claims and appraisal, it must be regarded as having elected to rely on its mortgage alone and therefore
can have no personal judgement against the Elser estate. That is good law. Section 708 of the Code of
Civil Procedure provides as follows:

SEC. 708. 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 before the committee, and share in the general distribution of the assets of the estate; or
he may foreclose his mortgage or realize upon security, by ordinary 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 pledge, in the foreclosure or other
proceedings to realize upon the security, he any prove his deficiency judgment before the
committee against the estate of the deceased; or he may rely upon his mortgage or other
security alone, and foreclose the same at any time, within the period of statute of limitations,
and in that event he shall not be admitted as an creditor, and shall receive no share in the
distribution of the other assets of the estate;

As will be seen, the mortgagee has the election of one out of three courses: (1) He may abandon his
security and share in the general distribution of the assets of the estate, or (2) he may foreclose, secure
a deficiency judgment and prove his deficiency judgment before the committee, or (3) he may rely upon
his security alone, in which case he can receive no share in the distribution of the assets of the estate.

In this case the bank did not abandon the security and took no steps of any sort before the committee
within the time limit provided by the sections 689 and 690 of the Code of Civil Procedure. The
committed ceased to function long ago, and the bank has now nothing to rely on except the mortgage.
Internationally or not, it has bought itself within the third course provided for in section 708; it has no
alternative.

But counsel for the plaintiff say that the amount of the deficiency, if any, could not be proved before the
foreclosure sale and had been effected; that section 708 expressly provide for the proof of the
deficiency judgment before the committee after the sale of the mortgaged property; that this provisions
must be construed to mean that the presentation and prosecution of the claim of the deficiency must be
made after, not before, the sale; and that if the mortgagee presents his claim from a deficiency before a
deficiency judgment have been rendered, he will loose his rights under the mortgage and be regarded as
having abandon his security.

This clearly a misconception of the statute, and the cases cited by the appellant in support for its
contention are not in point. Until the foreclosure sale is made, the demand for the payment of
deficiency is a contingent claim within the meaning of sections 746, 747, and 748 of the Code of Civil
Procedure, which sections reads as follows:

SEC. 746. Claims may be presented to committee. — If a person is liable as surety for the
deceased, or has other contingent claims against his estate which cannot be proved as a debt
before the committee, the same may be presented with the proof, to the committee, who shall
state in their report that such claim was presented to them.

SEC. 747. Estate to be retained to meet claims. — If the court is satisfied from the report of the
committee, or from proofs exhibited to it, that such contingent claim is valid, it may order the
executor or administrator to retains in his hands sufficient estate to pay such contingent claim,
when the same becomes absolute, or if the estate is insolvent, sufficient to pay a portion equal
to the dividend of the other creditors.

SEC. 748. Claim becoming absolute in two years, how allowed. — If such contingent claims
becomes absolute and is presented to the court, or to the executor or administrator, within two
years from the time limited for other creditors to present their claims, it may be allowed by the
court if not disputed by the executor or administrator, and, if disputed, it may be proved that
the committee already appointed, or before others to be appointed, for the purpose, as if
presented for allowance before the committee had made its report.

These sections are in entire harmony with section 708; the amount of the deficiency cannot be
ascertained or proven until the foreclosure proceedings have terminated, but the claim for the
deficiency must be presented to the committee within the period fixed by sections 689 and 690 of the
Code. The committee does not then pass upon the validity of the claim but reports it to the court. If the
court "from the report of the committee" or from "the proofs exhibited to it" is satisfied that the
contingent claim is valid, the executor or administrator may be required to retain in his possession
sufficient assets to pay the claim when it becomes absolute, or enough to pay the creditor his
proportionate share if the assets of the estate are insufficient to pay the debts. When the contingent
claim has become absolute, its amount may be ascertained and established in the manner indicated by
sections 748 and 749. As will be seen, the bank both could and should have presented its claim to the
committee within the time prescribed by the law. The concurring opinion of Justices Malcolm and Fisher
in the case of Jaucian vs. Querol (38 Phil., 707), contains a very lucid expositions of the law on the
subject and further comment is therefore unnecessary.

The appeal is without merit and the judgment of the court below is affirmed with the costs against the
plaintiff-appellant. So ordered.
G.R. No. L-32425 November 21, 1984

THE IMPERIAL INSURANCE, INC., plaintiff-appellee,


vs.
EMILIA T. DAVID, defendant-appellant.

RELOVA, J.:

Petition for review on certiorari of the decision rendered by the then Court of First Instance of Manila in
Civil Case No. 67713, sustaining the money claims of plaintiff-appellee, The Imperial Insurance, Inc.
against defendant-appellant Emilia T. David, based on three (3) different causes of action in the
complaint.

The first two causes of action involve the indemnity agreements which defendant-appellant and her
deceased husband, Felicisimo V. Reyes, jointly and severally, executed in favor of herein appellee, for
and in consideration of two (2) surety bonds underwritten by it to lift the lift the writs of attachment in
Civil Case No. 5213 of the Rizal Court of First Instance for the amount of P60,000.00, and in Civil Case
No. Q-5214, also with the same court for the amount of P40,000.00

The third cause of action involves accrued premiums and documentary stamps for four (4) years with
legal interest therein from the filing of the complaint also underwritten by appellee.

Records show that Felicisimo V. Reyes and his wife, herein appellant, executed two (2) indemnity
agreements in favor of appellee jointly and severally to assure indemnification of the latter for whatever
liability it may incur in connection with its posting the security bonds to lift the attachments in Civil Case
No. Q-5213 for the amount of P60,000.00, and in Civil Case No. Q-5214 for the amount of P40,000.00,
for the benefit of Felicisimo V. Reyes.

Later, Felicisimo V. Reyes and his wife, jointly and severally, executed another indemnity agreement in
favor of appellee to assure indemnification of the latter under a homestead bond for the sum of
P7,500.00 it had executed jointly and severally with them in favor of the Development Bank of the
Philippines. On the same date, Felicisimo V. Reyes and his wife paid to appellee the sum of P153.33
covering the premium and other expenses for the homestead bond on the first year.

Felicisimo V.Reyes died and Special Proceedings No. 12948 of the then Court of First Instance of
Bulacan, entitled "In the Matter of the Instestate of Felicisimo V. Reyes," was commenced. His wife,
herein appellant, qualified and took her oath of office as the administratrix of said intestate estate.
Corresponding notices to creditors were issued and published for three (3) consecutive weeks in the
"Manila Chronicle" and were duly posted in the required places.

Meanwhile, judgment was rendered in the aforesaid two cases (Civil Cases Nos. Q-5213 and Q-5214)
against the spouses Felicisimo V. Reyes and appellant Emilia T. David which has become final and
executory. Writs of execution of the decision on the said cases were returned unsatisfied. As a
consequence, judgment was rendered against the surety bonds for the sum of P60,000.00 in Civil Case
No. Q-5213 and for the sum of P40,000.00 in Civil Case No. Q-5214.
Appellee made demands on Emilia T. David to pay the amounts of P60,000.00 and P40,000.00 under the
surety bonds and arrears in premiums thereon. When appellant David failed to make payments,
appellee filed Civil Case No. 67713 in the then Court of First Instance of Manila, Branch 1, for collection
of sums of money under three (3) different causes of action.

A motion to dismiss was filed by herein appellant on the following grounds. to wit: (1) the court has no
jurisdiction over the nature of the action or suit; (2) the complaint states no cause of action; and (3) the
plaintiff's causes of action, if there be any, have been barred for its failure to file its claims against the
estate of the deceased Felicisimo V. Reyes in due time.

The lower court denied the motion for lack of merit. Thereafter, appellant, as defendant in said Civil
Case No. 67713, filed her answer.

After trial, the court rendered judgment ordering defendant Emilia T. David (herein appellant)

1. to pay the plaintiff under the first cause of action, the amount of P60,000.00 with
interest at legal rate from the filing of the complaint until fun payment shall be effected;
and a further sum of P1,522.50 annually from June 20, 1961 until termination of this
case, said amount representing premiums and documentary stamps in the surety bond,
Exh. "B", with interest at legal rate from the filing of the complaint until full payment is
made;

2. to pay the plaintiff under the second cause of action, the amount of P40,000.00 with
interest at the legal rate from the filing of the complaint until full payment shag be
made; and a further sum of P1,105.00 annually from June 20, 1961 until termination of
this case, said amount representing premiums and documentary stamps on the surety
bond Exh. "B", with interest at the legal rate from the filing of the complaint until full
payment is made;

3. to pay the plaintiff under the third cause of action the amount of P153.33 annually for
a period of 4 years from June 29, 1962 representing premiums and documentary stamps
on the Homestead Bond Exh. "C-1" with interest at the legal rate from the filing of the
complaint until full payment is made;

4. to pay the plaintiff in concept of attorney's fees the sum of P20,000.00, representing
20% of the principal claim of plaintiff; plus cost. (pp. 39-40, Rollo)

The principal issue raised by appellant Emilia T. David in this appeal is whether or not the lower court
has jurisdiction over plaintiff's causes of action. She contends that appellee's claim should have been
presented according to Rule 86 of the Revised Rules of Court and its failure to do so operates to bar its
claim forever; that the complaint failed to state a cause of action; that the writ of attachment was
improvidently issued; and, that the lower court should have discharged the writs. Further, she argues
that the judgment on attorney's fees has neither legal nor factual basis.

We find no merit in this appeal. Under the law and well settled jurisprudence, when the obligation is a
solidary one, the creditor may bring his action in toto against any of the debtors obligated in solidum.
Thus, if husband and wife bound themselves jointly and severally, in case of his death her liability is
independent of and separate from her husband s; she may be sued for the whole debt and it would be
error to hold that the claim against her as well as the claim against her husband should be made in the
decedent's estate. (Agcaoili vs. Vda. de Agcaoili, 90 Phil. 97)

In the case at bar, appellant signed a joint and several obligation with her husband in favor of herein
appellee; as a consequence, the latter may demand from either of them the whole obligation. As
distinguished from a joint obligation where each of the debtor is liable only for a proportionate part of
the debt and the creditor is entitled only to a proportionate part of the credit, in a solidary obligation
the creditor may enforce the entire obligation against one of the debtors.

Where the obligation assumed by several persons is joint and several, each of the
debtors is answerable for the whole obligation with the right to seek contribution from
his co-debtors. (Philippine International Surety Co., Inc. vs. Gonzales, 3 SCRA 391)

And, in Manila Surety and Fidelity Co., Inc. vs. Villarama, et al., 107 Phil. 891, this Court
ruled that the Rules of Court provide the procedure should the creditor desire to go
against the. deceased debtor, "but there is noting in the aid provision making
compliance with such procedure a condition precedent an ordinary action against the
solidary debtors. should the creditor choose to demand payment from the latter, could
be entertained to the extent that failure to observe the same would deprive the court
jurisdiction to make cognizance of the action against the surviving debtors. Upon lie
other hand, the Civil Code expressly allows the creditor to proceed against any one of
the solidary debtors or some or all of them simultaneously. Hence, there is nothing
improper in the creditor's filing of an action against the surviving solidary debtors alone,
instead of instituting a proceeding for the settlement of the estate of the deceased
debtor wherein his claim could be filed.

ACCORDINGLY, the decision of the court a quo is hereby AFFIRMED in toto with costs against appellant.

SO ORDERED.
G.R. No. 147561 June 22, 2006

STRONGHOLD INSURANCE COMPANY, INC., Petitioner,


vs.
REPUBLIC-ASAHI GLASS CORPORATION, Respondent.

DECISION

PANGANIBAN, CJ:

Asurety company’s liability under the performance bond it issues is solidary. The death of the principal
obligor does not, as a rule, extinguish the obligation and the solidary nature of that liability.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to reverse the March 13,
2001 Decision2 of the Court of Appeals (CA) in CA-GR CV No. 41630. The assailed Decision disposed as
follows:

"WHEREFORE, the Order dated January 28, 1993 issued by the lower court is REVERSED and SET ASIDE.
Let the records of the instant case be REMANDED to the lower court for the reception of evidence of all
parties."3

The Facts

The facts of the case are narrated by the CA in this wise:

"On May 24, 1989, [respondent] Republic-Asahi Glass Corporation (Republic-Asahi) entered into a
contract with x x x Jose D. Santos, Jr., the proprietor of JDS Construction (JDS), for the construction of
roadways and a drainage system in Republic-Asahi’s compound in Barrio Pinagbuhatan, Pasig City,
where [respondent] was to pay x x x JDS five million three hundred thousand pesos (P5,300,000.00)
inclusive of value added tax for said construction, which was supposed to be completed within a period
of two hundred forty (240) days beginning May 8, 1989. In order ‘to guarantee the faithful and
satisfactory performance of its undertakings’ x x x JDS, shall post a performance bond of seven hundred
ninety five thousand pesos (P795,000.00). x x x JDS executed, jointly and severally with [petitioner]
Stronghold Insurance Co., Inc. (SICI) Performance Bond No. SICI-25849/g(13)9769.

"On May 23, 1989, [respondent] paid to x x x JDS seven hundred ninety five thousand pesos
(P795,000.00) by way of downpayment.

"Two progress billings dated August 14, 1989 and September 15, 1989, for the total amount of two
hundred seventy four thousand six hundred twenty one pesos and one centavo (P274,621.01) were
submitted by x x x JDS to [respondent], which the latter paid. According to [respondent], these two
progress billings accounted for only 7.301% of the work supposed to be undertaken by x x x JDS under
the terms of the contract.
"Several times prior to November of 1989, [respondent’s] engineers called the attention of x x x JDS to
the alleged alarmingly slow pace of the construction, which resulted in the fear that the construction
will not be finished within the stipulated 240-day period. However, said reminders went unheeded by x
x x JDS.

"On November 24, 1989, dissatisfied with the progress of the work undertaken by x x x JDS,
[respondent] Republic-Asahi extrajudicially rescinded the contract pursuant to Article XIII of said
contract, and wrote a letter to x x x JDS informing the latter of such rescission. Such rescission, according
to Article XV of the contract shall not be construed as a waiver of [respondent’s] right to recover
damages from x x x JDS and the latter’s sureties.

"[Respondent] alleged that, as a result of x x x JDS’s failure to comply with the provisions of the contract,
which resulted in the said contract’s rescission, it had to hire another contractor to finish the project, for
which it incurred an additional expense of three million two hundred fifty six thousand, eight hundred
seventy four pesos (P3,256,874.00).

"On January 6, 1990, [respondent] sent a letter to [petitioner] SICI filing its claim under the bond for not
less than P795,000.00. On March 22, 1991, [respondent] again sent another letter reiterating its
demand for payment under the aforementioned bond. Both letters allegedly went unheeded.

"[Respondent] then filed [a] complaint against x x x JDS and SICI. It sought from x x x JDS payment of
P3,256,874.00 representing the additional expenses incurred by [respondent] for the completion of the
project using another contractor, and from x x x JDS and SICI, jointly and severally, payment of
P750,000.00 as damages in accordance with the performance bond; exemplary damages in the amount
of P100,000.00 and attorney’s fees in the amount of at least P100,000.00.

"According to the Sheriff’s Return dated June 14, 1991, submitted to the lower court by Deputy Sheriff
Rene R. Salvador, summons were duly served on defendant-appellee SICI. However, x x x Jose D. Santos,
Jr. died the previous year (1990), and x x x JDS Construction was no longer at its address at 2nd Floor,
Room 208-A, San Buena Bldg. Cor. Pioneer St., Pasig, Metro Manila, and its whereabouts were unknown.

"On July 10, 1991, [petitioner] SICI filed its answer, alleging that the [respondent’s] money claims against
[petitioner and JDS] have been extinguished by the death of Jose D. Santos, Jr. Even if this were not the
case, [petitioner] SICI had been released from its liability under the performance bond because there
was no liquidation, with the active participation and/or involvement, pursuant to procedural due
process, of herein surety and contractor Jose D. Santos, Jr., hence, there was no ascertainment of the
corresponding liabilities of Santos and SICI under the performance bond. At this point in time, said
liquidation was impossible because of the death of Santos, who as such can no longer participate in any
liquidation. The unilateral liquidation on the party (sic) of [respondent] of the work accomplishments did
not bind SICI for being violative of procedural due process. The claim of [respondent] for the forfeiture
of the performance bond in the amount of P795,000.00 had no factual and legal basis, as payment of
said bond was conditioned on the payment of damages which [respondent] may sustain in the event x x
x JDS failed to complete the contracted works. [Respondent] can no longer prove its claim for damages
in view of the death of Santos. SICI was not informed by [respondent] of the death of Santos. SICI was
not informed by [respondent] of the unilateral rescission of its contract with JDS, thus SICI was deprived
of its right to protect its interests as surety under the performance bond, and therefore it was released
from all liability. SICI was likewise denied due process when it was not notified of plaintiff-appellant’s
process of determining and fixing the amount to be spent in the completion of the unfinished project.
The procedure contained in Article XV of the contract is against public policy in that it denies SICI the
right to procedural due process. Finally, SICI alleged that [respondent] deviated from the terms and
conditions of the contract without the written consent of SICI, thus the latter was released from all
liability. SICI also prayed for the award of P59,750.00 as attorney’s fees, and P5,000.00 as litigation
expenses.

"On August 16, 1991, the lower court issued an order dismissing the complaint of [respondent] against x
x x JDS and SICI, on the ground that the claim against JDS did not survive the death of its sole proprietor,
Jose D. Santos, Jr. The dispositive portion of the [O]rder reads as follows:

‘ACCORDINGLY, the complaint against the defendants Jose D. Santos, Jr., doing business under trade and
style, ‘JDS Construction’ and Stronghold Insurance Company, Inc. is ordered DISMISSED.

‘SO ORDERED.’

"On September 4, 1991, [respondent] filed a Motion for Reconsideration seeking reconsideration of the
lower court’s August 16, 1991 order dismissing its complaint. [Petitioner] SICI field its ‘Comment and/or
Opposition to the Motion for Reconsideration.’ On October 15, 1991, the lower court issued an Order,
the dispositive portion of which reads as follows:

‘WHEREFORE, premises considered, the Motion for Reconsideration is hereby given due course. The
Order dated 16 August 1991 for the dismissal of the case against Stronghold Insurance Company, Inc., is
reconsidered and hereby reinstated (sic). However, the case against defendant Jose D. Santos, Jr.
(deceased) remains undisturbed.

‘Motion for Preliminary hearing and Manifestation with Motion filed by [Stronghold] Insurance
Company Inc., are set for hearing on November 7, 1991 at 2:00 o’clock in the afternoon.

‘SO ORDERED.’

"On June 4, 1992, [petitioner] SICI filed its ‘Memorandum for Bondsman/Defendant SICI (Re: Effect of
Death of defendant Jose D. Santos, Jr.)’ reiterating its prayer for the dismissal of [respondent’s]
complaint.

"On January 28, 1993, the lower court issued the assailed Order reconsidering its Order dated October
15, 1991, and ordered the case, insofar as SICI is concerned, dismissed. [Respondent] filed its motion for
reconsideration which was opposed by [petitioner] SICI. On April 16, 1993, the lower court denied
[respondent’s] motion for reconsideration. x x x."4

Ruling of the Court of Appeals

The CA ruled that SICI’s obligation under the surety agreement was not extinguished by the death of
Jose D. Santos, Jr. Consequently, Republic-Asahi could still go after SICI for the bond.

The appellate court also found that the lower court had erred in pronouncing that the performance of
the Contract in question had become impossible by respondent’s act of rescission. The Contract was
rescinded because of the dissatisfaction of respondent with the slow pace of work and pursuant to
Article XIII of its Contract with JDS.

The CA ruled that "[p]erformance of the [C]ontract was impossible, not because of [respondent’s] fault,
but because of the fault of JDS Construction and Jose D. Santos, Jr. for failure on their part to make
satisfactory progress on the project, which amounted to non-performance of the same. x x x [P]ursuant
to the [S]urety [C]ontract, SICI is liable for the non-performance of said [C]ontract on the part of JDS
Construction."5

Hence, this Petition.6

Issue

Petitioner states the issue for the Court’s consideration in the following manner:

"Death is a defense of Santos’ heirs which Stronghold could also adopt as its defense against obligee’s
claim."7

More precisely, the issue is whether petitioner’s liability under the performance bond was automatically
extinguished by the death of Santos, the principal.

The Court’s Ruling

The Petition has no merit.

Sole Issue:

Effect of Death on the Surety’s Liability

Petitioner contends that the death of Santos, the bond principal, extinguished his liability under the
surety bond. Consequently, it says, it is automatically released from any liability under the bond.

As a general rule, the death of either the creditor or the debtor does not extinguish the obligation.8
Obligations are transmissible to the heirs, except when the transmission is prevented by the law, the
stipulations of the parties, or the nature of the obligation.9 Only obligations that are personal10 or are
identified with the persons themselves are extinguished by death.11

Section 5 of Rule 8612 of the Rules of Court expressly allows the prosecution of money claims arising
from a contract against the estate of a deceased debtor. Evidently, those claims are not actually
extinguished.13 What is extinguished is only the obligee’s action or suit filed before the court, which is
not then acting as a probate court.14

In the present case, whatever monetary liabilities or obligations Santos had under his contracts with
respondent were not intransmissible by their nature, by stipulation, or by provision of law. Hence, his
death did not result in the extinguishment of those obligations or liabilities, which merely passed on to
his estate.15 Death is not a defense that he or his estate can set up to wipe out the obligations under the
performance bond. Consequently, petitioner as surety cannot use his death to escape its monetary
obligation under its performance bond.

The liability of petitioner is contractual in nature, because it executed a performance bond worded as
follows:

"KNOW ALL MEN BY THESE PRESENTS:

"That we, JDS CONSTRUCTION of 208-A San Buena Building, contractor, of Shaw Blvd., Pasig, MM
Philippines, as principal and the STRONGHOLD INSURANCE COMPANY, INC. a corporation duly organized
and existing under and by virtue of the laws of the Philippines with head office at Makati, as Surety, are
held and firmly bound unto the REPUBLIC ASAHI GLASS CORPORATION and to any individual, firm,
partnership, corporation or association supplying the principal with labor or materials in the penal sum
of SEVEN HUNDRED NINETY FIVE THOUSAND (P795,000.00), Philippine Currency, for the payment of
which sum, well and truly to be made, we bind ourselves, our heirs, executors, administrators,
successors and assigns, jointly and severally, firmly by these presents.

"The CONDITIONS OF THIS OBLIGATION are as follows;

"WHEREAS the above bounden principal on the ___ day of __________, 19__ entered into a contract
with the REPUBLIC ASAHI GLASS CORPORATION represented by _________________, to fully and
faithfully. Comply with the site preparation works road and drainage system of Philippine Float Plant at
Pinagbuhatan, Pasig, Metro Manila.

"WHEREAS, the liability of the Surety Company under this bond shall in no case exceed the sum of
PESOS SEVEN HUNDRED NINETY FIVE THOUSAND (P795,000.00) Philippine Currency, inclusive of
interest, attorney’s fee, and other damages, and shall not be liable for any advances of the obligee to
the principal.

"WHEREAS, said contract requires the said principal to give a good and sufficient bond in the above-
stated sum to secure the full and faithfull performance on its part of said contract, and the satisfaction
of obligations for materials used and labor employed upon the work;

"NOW THEREFORE, if the principal shall perform well and truly and fulfill all the undertakings,
covenants, terms, conditions, and agreements of said contract during the original term of said contract
and any extension thereof that may be granted by the obligee, with notice to the surety and during the
life of any guaranty required under the contract, and shall also perform well and truly and fulfill all the
undertakings, covenants, terms, conditions, and agreements of any and all duly authorized
modifications of said contract that may hereinafter be made, without notice to the surety except when
such modifications increase the contract price; and such principal contractor or his or its sub-contractors
shall promptly make payment to any individual, firm, partnership, corporation or association supplying
the principal of its sub-contractors with labor and materials in the prosecution of the work provided for
in the said contract, then, this obligation shall be null and void; otherwise it shall remain in full force and
effect. Any extension of the period of time which may be granted by the obligee to the contractor shall
be considered as given, and any modifications of said contract shall be considered as authorized, with
the express consent of the Surety.
"The right of any individual, firm, partnership, corporation or association supplying the contractor with
labor or materials for the prosecution of the work hereinbefore stated, to institute action on the penal
bond, pursuant to the provision of Act No. 3688, is hereby acknowledge and confirmed."16

As a surety, petitioner is solidarily liable with Santos in accordance with the Civil Code, which provides as
follows:

"Art. 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so.

"If a person binds himself solidarily with the principal debtor, the provisions of Section 4,17 Chapter 3,
Title I of this Book shall be observed. In such case the contract is called a suretyship."

xxxxxxxxx

"Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them
simultaneously. The demand made against one of them shall not be an obstacle to those which may
subsequently be directed against the others, so long as the debt has not been fully collected."

Elucidating on these provisions, the Court in Garcia v. Court of Appeals18 stated thus:

"x x x. The surety’s obligation is not an original and direct one for the performance of his own act, but
merely accessory or collateral to the obligation contracted by the principal. Nevertheless, although the
contract of a surety is in essence secondary only to a valid principal obligation, his liability to the creditor
or promisee of the principal is said to be direct, primary and absolute; in other words, he is directly and
equally bound with the principal. x x x."19

Under the law and jurisprudence, respondent may sue, separately or together, the principal debtor and
the petitioner herein, in view of the solidary nature of their liability. The death of the principal debtor
will not work to convert, decrease or nullify the substantive right of the solidary creditor. Evidently,
despite the death of the principal debtor, respondent may still sue petitioner alone, in accordance with
the solidary nature of the latter’s liability under the performance bond.

WHEREFORE, the Petition is DENIED and the Decision of the Court of Appeals AFFIRMED. Costs against
petitioner.

SO ORDERED.
G.R. No. 170498 January 9, 2013

METROPOLITAN BANK & TRUST COMPANY, Petitioner,


vs.
ABSOLUTE MANAGEMENT CORPORATION, Respondent.

DECISION

BRION, J.:

We resolve petitioner Metropolitan Bank & Trust Company's (Metro bank's) petition for review on
certiorari1 seeking the reversal of the decision2 dated August 25, 2005 and the resolution3 dated
November 17, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 86336. The assailed decision affirmed
the order4 dated May 7, 2004 of the Regional Trial Court (RTC) of Quezon City, Branch 80. The RTC had
denied the admission of Metrobank's Fourth-Party Complaint5 against the Estate of Jose L. Chua for
being a money claim that falls under Section 5, Rule 86 of the Rules of Court; the claim should have been
filed in the pending judicial settlement of Chua’s estate before the RTC of Pasay City. The CA affirmed
the RTC’s order based on the same ground.

Factual Antecedents

On October 5, 2000, Sherwood Holdings Corporation, Inc. (SHCI) filed a complaint for sum of money
against Absolute Management Corporation (AMC). The complaint was docketed as Civil Case No. Q-00-
42105 and was assigned to the RTC of Quezon City, Branch 80.6

SHCI alleged in its complaint that it made advance payments to AMC for the purchase of 27,000 pieces
of plywood and 16,500 plyboards in the sum of ₱12,277,500.00, covered by Metrobank Check Nos.
1407668502, 140768507, 140768530, 140768531, 140768532, 140768533 and 140768534. These
checks were all crossed, and were all made payable to AMC. They were given to Chua, AMC’s General
Manager, in 1998.7

Chua died in 1999, 8 and a special proceeding for the settlement of his estate was commenced before
the RTC of Pasay City. This proceeding was pending at the time AMC filed its answer with counterclaims
and third-party complaint.9

SHCI made demands on AMC, after Chua’s death, for allegedly undelivered items worth ₱8,331,700.00.
According to AMC, these transactions could not be found in its records. Upon investigation, AMC
discovered that in 1998, Chua received from SHCI 18 Metrobank checks worth ₱31,807,500.00. These
were all payable to AMC and were crossed or "for payee’s account only."10

In its answer with counterclaims and third-party complaint,11 AMC averred that it had no knowledge of
Chua’s transactions with SHCI and it did not receive any money from the latter. AMC also asked the RTC
to hold Metrobank liable for the subject checks in case it is adjudged liable to SHCI.

Metrobank filed a motion for bill of particulars,12 seeking to clarify certain ambiguous statements in
AMC’s answer. The RTC granted the motion but AMC failed to submit the required bill of particulars.
Hence, Metrobank filed a motion to strike out the third-party complaint.13
In the meantime, Metrobank filed a motion to dismiss14 against AMC on the ground that the latter
engaged in prohibited forum shopping. According to Metrobank, AMC’s claim against it is the same
claim that it raised against Chua’s estate in Special Proceedings No. 99-0023 before the RTC of Pasay
City, Branch 112. The RTC subsequently denied this motion.15

The RTC of Quezon City opted to defer consideration16 of Metrobank’s motion to strike out third-party
complaint17 and it instead granted AMC’s motion for leave to serve written interrogatories on the third-
party defendant.18 While Metrobank filed its answer to the written interrogatories, AMC was again
directed by the RTC, in an order19 dated August 13, 2003, to submit its bill of particulars. Instead, AMC
filed a motion for reconsideration20 which was denied in an order21 dated October 28, 2003. AMC still
did not file its bill of particulars. The RTC, on the other hand, did not act on Metrobank’s motion to strike
out AMC’s third-party complaint.22

In its answer23 dated December 1, 2003, Metrobank admitted that it deposited the checks in question to
the account of Ayala Lumber and Hardware, a sole proprietorship Chua owned and managed. The
deposit was allegedly done with the knowledge and consent of AMC. According to

Metrobank, Chua then gave the assurance that the arrangement for the handling of the checks carried
AMC’s consent. Chua also submitted documents showing his position and interest in AMC. These
documents, as well as AMC’s admission in its answer that it allowed Chua to manage AMC with a
relative free hand, show that it knew of Chua’s arrangement with Metrobank. Further, Chua’s records
show that the proceeds of the checks were remitted to AMC which cannot therefore now claim that it
did not receive these proceeds.

Metrobank also raised the defense of estoppel. According to Metrobank, AMC had knowledge of its
arrangements with Chua for several years. Despite this arrangement, AMC did not object to nor did it
call the attention of Metrobank about Chua’s alleged lack of authority to deposit the checks in Ayala
Lumber and Hardware’s account. At this point, AMC is already estopped from questioning Chua’s
authority to deposit these checks in Ayala Lumber and Hardware’s account.

Lastly, Metrobank asserted that AMC gave Chua unbridled control in managing AMC’s affairs. This
measure of control amounted to gross negligence that was the proximate cause of the loss that AMC
must now bear.

Subsequently, Metrobank filed a motion for leave to admit fourth-party complaint24 against Chua’s
estate. It alleged that Chua’s estate should reimburse Metrobank in case it would be held liable in the
third-party complaint filed against it by AMC.

The RTC’s Ruling

In an order25 dated May 7, 2004, the RTC denied Metrobank’s motion. It likewise denied Metrobank’s
motion for reconsideration in an order26 dated July 7, 2004.

The RTC categorized Metrobank’s allegation in the fourth-party complaint as a "cobro de lo indebido"27
– a kind of quasi-contract that mandates recovery of what has been improperly paid. Quasi-contracts fall
within the concept of implied contracts that must be included in the claims required to be filed with the
judicial settlement of the deceased’s estate under Section 5, Rule 86 of the Rules of Court. As such
claim, it should have been filed in Special Proceedings No. 99-0023, not before the RTC as a fourth-party
complaint. The RTC, acting in the exercise of its general jurisdiction, does not have the authority to
adjudicate the fourth-party complaint. As a trial court hearing an ordinary action, it cannot resolve
matters pertaining to special proceedings because the latter is subject to specific rules.

Metrobank responded to the RTC ruling by filing a petition for certiorari28 under Rule 65 before the CA.

The CA’s Ruling

The CA affirmed the RTC’s ruling that Metrobank’s fourth-party complaint should have been filed in
Special Proceedings No. 99-0023.29 According to the CA, the relief that Metrobank prayed for was based
on a quasi-contract and was a money claim categorized as an implied contract that should be filed under
Section 5, Rule 86 of the Rules of Court.

Based on the statutory construction principle of lex specialis derogat generali, the CA held that Section
5, Rule 86 of the Rules of Court is a special provision that should prevail over the general provisions of
Section 11, Rule 6 of the Rules of Court. The latter applies to money claims in ordinary actions while a
money claim against a person already deceased falls under the settlement of his estate that is governed
by the rules on special proceedings. If at all, rules for ordinary actions only apply suppletorily to special
proceedings.

The Present Petition

In its present petition for review on certiorari,30 Metrobank asserts that it should be allowed to file a
fourth-party complaint against Chua’s estate in the proceedings before the RTC; its fourth-party
complaint was filed merely to enforce its right to be reimbursed by Chua’s estate in case Metrobank is
held liable to AMC. Hence, Section 11, Rule 6 of the Rules of Court should apply.

AMC, in its comment,31 maintains the line that the CA and the RTC rulings should be followed, i.e., that
Metrobank’s claim is a quasi-contract that should be filed as a claim under Section 5, Rule 86 of the
Rules of Court.

AMC also challenges the form of Metrobank’s petition for failure to comply with Section 4, Rule 45 of
the Rules of Court. This provision requires petitions filed before the Supreme Court to be accompanied
by "such material portions of the record as would support the petition."

According to AMC, the petition’s annexes are mostly Metrobank’s pleadings and court issuances. It did
not append all relevant AMC pleadings before the RTC and the CA. For this reason, the petition should
have been dismissed outright.

Issues

The parties’ arguments, properly joined, present to us the following issues:

1) Whether the petition for review on certiorari filed by Metrobank before the Supreme Court
complies with Section 4, Rule 45 of the Rules of Court; and
2) Whether Metrobank’s fourth-party complaint against Chua’s estate should be allowed.

The Court’s Ruling

The Present Petition Complies With Section 4, Rule 45 of the Rules of Court

AMC posits that Metrobank’s failure to append relevant AMC pleadings submitted to the RTC and to the
CA violated Section 4, Rule 45 of the Rules of Court,32 and is a sufficient ground to dismiss the petition
under Section 5, Rule 45 of the Rules of Court.33

We disagree with AMC’s position.

In F.A.T. Kee Computer Systems, Inc. v. Online Networks International, Inc.,34 Online Networks
International, Inc. similarly assailed F.A.T. Kee Computer Systems, Inc.’s failure to attach the transcript of
stenographic notes (TSN) of the RTC proceedings, and claimed this omission to be a violation of Section
4, Rule 45 of the Rules of Court that warranted the petition’s dismissal. The Court held that the defect
was not fatal, as the TSN of the proceedings before the RTC forms part of the records of the case. Thus,
there was no incurable omission that warranted the outright dismissal of the petition.

The Court significantly pointed out in F.A.T. Kee that the requirement in Section 4, Rule 45 of the Rules
of Court is not meant to be an absolute rule whose violation would automatically lead to the petition’s
dismissal.35 The Rules of Court has not been intended to be totally rigid. In fact, the Rules of Court
provides that the Supreme Court "may require or allow the filing of such pleadings, briefs, memoranda
or documents as it may deem necessary within such periods and under such conditions as it may
consider appropriate";36 and "[i]f the petition is given due course, the Supreme Court may require the
elevation of the complete record of the case or specified parts thereof within fifteen (15) days from
notice."37 These provisions are in keeping with the overriding standard that procedural rules should be
liberally construed to promote their objective and to assist the parties in obtaining a just, speedy and
inexpensive determination of every action or proceeding.38

Under this guiding principle, we do not see Metrobank’s omission to be a fatal one that should warrant
the petition’s outright dismissal. To be sure, the omission to submit the adverse party’s pleadings in a
petition before the Court is not a commendable practice as it may lead to an unduly biased narration of
facts and arguments that masks the real issues before the Court. Such skewed presentation could lead
to the waste of the Court’s time in sifting through the maze of the parties’ narrations of facts and
arguments and is a danger the Rules of Court seeks to avoid.

Our examination of Metrobank’s petition shows that it contains AMC’s opposition to its motion to admit
fourth-party complaint among its annexes. The rest of the pleadings have been subsequently submitted
as attachments in Metrobank’s Reply. A reading of these pleadings shows that their arguments are the
same as those stated in the orders of the trial court and the Court of Appeals. Thus, even if Metrobank’s
petition did not contain some of AMC’s pleadings, the Court still had the benefit of a clear narration of
facts and arguments according to both parties’ perspectives. In this broader view, the mischief that the
Rules of Court seeks to avoid has not really been present. If at all, the omission is not a grievous one that
the spirit of liberality cannot address.

The Merits of the Main Issue


The main issue poses to us two essential points that must be addressed. First, are quasi-contracts
included in claims that should be filed pursuant to Rule 86, Section 5 of the Rules of Court? Second, if so,
is Metrobank’s claim against the Estate of Jose Chua based on a quasi-contract?

Quasi-contracts are included in


claims that should be filed under Rule
86, Section 5 of the Rules of Court

In Maclan v. Garcia,39 Gabriel Maclan filed a civil case to recover from Ruben Garcia the necessary
expenses he spent as possessor of a piece of land. Garcia acquired the land as an heir of its previous
owner. He set up the defense that this claim should have been filed in the special proceedings to settle
the estate of his predecessor. Maclan, on the other hand, contended that his claim arises from law and
not from contract, express or implied. Thus, it need not be filed in the settlement of the estate of
Garcia’s predecessor, as mandated by Section 5, Rule 87 of the Rules of Court (now Section 5, Rule 86).

The Court held under these facts that a claim for necessary expenses spent as previous possessor of the
land is a kind of quasi-contract. Citing Leung Ben v. O’Brien,40 it explained that the term "implied
contracts," as used in our remedial law, originated from the common law where obligations derived
from quasi-contracts and from law are both considered as implied contracts. Thus, the term quasi-
contract is included in the concept "implied contracts" as used in the Rules of Court. Accordingly,
liabilities of the deceased arising from quasi-contracts should be filed as claims in the settlement of his
estate, as provided in Section 5, Rule 86 of the Rules of Court.41

Metrobank’s fourth-party complaint is


based on quasi-contract

Both the RTC and the CA described Metrobank’s claim against Chua’s estate as one based on quasi-
contract. A quasi-contract involves a juridical relation that the law creates on the basis of certain
voluntary, unilateral and lawful acts of a person, to avoid unjust enrichment.42 The Civil Code provides
an enumeration of quasi-contracts,43 but the list is not exhaustive and merely provides examples.44

According to the CA, Metrobank’s fourth-party complaint falls under the quasi-contracts enunciated in
Article 2154 of the Civil Code.45 Article 2154 embodies the concept "solutio indebiti" which arises when
something is delivered through mistake to a person who has no right to demand it. It obligates the latter
to return what has been received through mistake.46

Solutio indebiti, as defined in Article 2154 of the Civil Code, has two indispensable requisites: first, that
something has been unduly delivered through mistake; and second, that something was received when
there was no right to demand it.47

In its fourth-party complaint, Metrobank claims that Chua’s estate should reimburse it if it becomes
liable on the checks that it deposited to Ayala Lumber and Hardware’s account upon Chua’s instructions.

This fulfills the requisites of solutio indebiti. First, Metrobank acted in a manner akin to a mistake when
it deposited the AMC checks to Ayala Lumber and Hardware’s account; because of Chua’s control over
AMC’s operations, Metrobank assumed that the checks payable to AMC could be deposited to Ayala
Lumber and Hardware’s account. Second, Ayala Lumber and Hardware had no right to demand and
receive the checks that were deposited to its account; despite Chua’s control over AMC and Ayala
Lumber and Hardware, the two entities are distinct, and checks exclusively and expressly payable to one
cannot be deposited in the account of the other. This disjunct created an obligation on the part of Ayala
Lumber and Hardware, through its sole proprietor, Chua, to return the amount of these checks to
Metrobank.

The Court notes, however, that its description of Metrobank’s fourth-party complaint as a claimclosely
analogous to solutio indebiti is only to determine the validity of the lower courts’ orders denying it. It is
not an adjudication determining the liability of Chua’s estate against Metrobank. The appropriate trial
court should still determine whether Metrobank has a lawful claim against Chua’s estate based on quasi-
contract.1âwphi1

Metrobank’s fourth-party complaint,


as a contingent claim, falls within the
claims that should be filed under
Section 5, Rule 86 of the Rules of
Court

A distinctive character of Metrobank’s fourth-party complaint is its contingent nature – the claim
depends on the possibility that Metrobank would be adjudged liable to AMC, a future event that may or
may not happen. This characteristic unmistakably marks the complaint as a contingent one that must be
included in the claims falling under the terms of Section 5, Rule 86 of the Rules of Court:

Sec. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. – All claims for
money against the decedent, arising from contract, express or implied, whether the same be due, not
due, or contingent, all claims for funeral expenses and expenses for the last sickness of the decedent,
and judgment for money against the decedent, must be filed within the time limited in the notice.
[italics ours]

Specific provisions of Section 5, Rule


86 of the Rules of Court prevail over
general provisions of Section 11, Rule
6 of the Rules of Court

Metrobank argues that Section 11, Rule 6 of the Rules of Court should apply because it impleaded
Chua’s estate for reimbursement in the same transaction upon which it has been sued by AMC. On this
point, the Court supports the conclusion of the CA, to wit:

Notably, a comparison of the respective provisions of Section 11, Rule 6 and Section 5, Rule 86 of the
Rules of Court readily shows that Section 11, Rule 6 applies to ordinary civil actions while Section 5, Rule
86 specifically applies to money claims against the estate. The specific provisions of Section 5, Rule 86 x
x x must therefore prevail over the general provisions of Section 11, Rule 6.48

We read with approval the CA’s use of the statutory construction principle of lex specialis derogat
generali, leading to the conclusion that the specific provisions of Section 5, Rule 86 of the Rules of Court
should prevail over the general provisions of Section 11, Rule 6 of the Rules of Court; the settlement of
the estate of deceased persons (where claims against the deceased should be filed) is primarily
governed by the rules on special proceedings, while the rules provided for ordinary claims, including
Section 11, Rule 6 ofthe Rules of Court, merely apply suppletorily.49

In sum, on all counts in the considerations material to the issues posed, the resolution points to the
affirmation of the assailed CA decision and resolution. Metrobank's claim in its fourth-party complaint
against Chua's estate is based on quasi-contract. It is also a contingent claim that depends on another
event. Both belong to the category of claims against a deceased person that should be filed under
Section 5, Rule 86 of the Rules of Comi and, as such, should have been so filed in Special Proceedings
No. 99-0023.

WHEREFORE, premises considered, we hereby DENY the petition for lack of merit. The decision of the
Court of Appeals dated August 25, 2005, holding that the Regional Trial Court of Quezon City, Branch 80,
did not commit grave abuse of discretion in denying Metropolitan Bank & Trust Company's motion for
leave to admit fourth-party complaint Is

AFFIRMED. Costs against Metropolitan Bank & Trust Company.

SO ORDERED.
G.R. No. L-8235 March 19, 1914

ISIDRO SANTOS, plaintiff-appellant,


vs.
LEANDRA MANARANG, administratrix, defendant-appellee.

W. A. Kincaid and Thomas L. Hartigan for appellant.


Ramon Salinas for appellee.

TRENT, J.:

Don Lucas de Ocampo died on November 18, 1906, possessed of certain real and personal property
which, by his last will and testament dated July 26, 1906, he left to his three children. The fourth clause
of this will reads as follows:

I also declare that I have contracted the debts detailed below, and it is my desire that they may
be religiously paid by my wife and executors in the form and at the time agreed upon with my
creditors.

Among the debts mentioned in the list referred to are two in favor of the plaintiff, Isidro Santos; one
due on April 14, 1907, for P5,000, and various other described as falling due at different dates (the dates
are not given) amounting to the sum of P2,454. The will was duly probated and a committee was
regularly appointed to hear and determine such claims against the estate as might be presented. This
committee submitted its report to the court on June 27, 1908. On July 14, 1908, the plaintiff, Isidro
Santos, presented a petition to the court asking that the committee be required to reconvene and pass
upon his claims against the estate which were recognized in the will of testator. This petition was denied
by the court, and on November 21, 1910, the plaintiff instituted the present proceedings against the
administratrix of the estate to recover the sums mentioned in the will as due him. Relief was denied in
the court below, and now appeals to this court.

In his first assignment of error, the appellant takes exception to the action of the court in denying his
petition asking that the committee be reconvened to consider his claim. In support of this alleged error
counsel say that it does not appear in the committee's report that the publications required by section
687 of the Code of Civil Procedure had been duly made. With reference to this point the record
affirmatively shows that the committee did make the publications required by law. It is further alleged
that at the time the appellant presented his petition the court had not approved the report of the
committee. If this were necessary we might say that, although the record does not contain a formal
approval of the committee's report, such approval must undoubtedly have been made, as will appear
from an inspection of the various orders of the court approving the annual accounts of the
administratrix, in which claims allowed against the estate by the committee were written off in
accordance with its report. This is shown very clearly from the court's order of August 1, 1912, in which
the account of the administratrix was approved after reducing final payments of some of the claims
against the estate to agree with the amounts allowed by the committee. It is further alleged that at the
time this petition was presented the administration proceedings had not been terminated. This is
correct.
In his petition of July 14, 1909, asking that the committee be reconvened to consider his claims, plaintiff
states that his failure to present the said claims to the committee was due to his belief that it was
unnecessary to do so because of the fact that the testator, in his will, expressly recognized them and
directed that they should be paid. The inference is that had plaintiff's claims not been mentioned in the
will he would have presented to the committee as a matter of course; that plaintiff was held to believe
by this express mention of his claims in the will that it would be unnecessary to present them to the
committee; and that he did not become aware of the necessity of presenting them to the committee
until after the committee had made its final report.

Under these facts and circumstances, did the court err in refusing to reconvene the committee for the
purpose of considering plaintiff's claim? The first step towards the solution of this question is to
determine whether plaintiff's claims were such as a committee appointed to hear claims against an
estate is, by law, authorized to pass upon. Unless it was such a claim plaintiff's argument has no
foundation. Section 686 empowers the committee to try and decide claims which survive against the
executors and administrators, even though they be demandable at a future day "except claims for the
possession of or title to real estate." Section 700 provides that all actions commenced against the
deceased person for the recovery of money, debt, or damages, pending at the time the committee is
appointed, shall be discontinued, and the claims embraced within such actions presented to the
committee. Section 703 provides that actions to recover title or possession of real property, actions to
recover damages for injury to person or property, real and personal, and actions to recover the
possession of specified articles of personal property, shall survive, and may be commenced and
prosecuted against the executor or administrator; "but all other actions commenced against the
deceased before his death shall be discontinued and the claims therein involved presented before the
committee as herein provided." Section 708 provides that a claim secured by a mortgage or other
collateral security may be abandoned and the claim prosecuted before the committee, or the mortgage
may be foreclosed or the security be relied upon, and in the event of a deficiency judgment, the creditor
may, after the sale of mortgage or upon the insufficiency of the security, prove such deficiency before
the committee on claims. There are also certain provisions in section 746 et seq., with reference to the
presentation of contingent claims to the committee after the expiration of the time allowed for the
presentation of claims not contingent. Do plaintiff's claims fall within any of these sections? They are
described in the will as debts. There is nothing in the will to indicate that any or all of them are
contingent claims, claims for the possession of or title to real property, damages for injury to person or
property, real or personal, or for the possession of specified articles of personal property. Nor is it
asserted by the plaintiff that they do. The conclusion is that they were claims proper to be considered by
the committee.

This being true, the next point to determine is, when and under what circumstances may the committee
be recalled to consider belated claims? Section 689 provides:

That court shall allow such time as the circumstances of the case require for the creditors to
present their claims the committee for examination and allowance; but not, in the first instance,
more than twelve months, or less than six months; and the time allowed shall be stated in the
commission. The court may extend the time as circumstances require, but not so that the whole
time shall exceed eighteen months.

It cannot be questioned that thus section supersedes the ordinary limitation of actions provided for in
chapter 3 of the Code. It is strictly confined, in its application, to claims against the estate of deceased
persons, and has been almost universally adopted as part of the probate law of the United States. It is
commonly termed the statute of nonclaims, and its purpose is to settle the affairs of the estate with
dispatch, so that residue may be delivered to the persons entitled thereto without their being
afterwards called upon to respond in actions for claims, which, under the ordinary statute of limitations,
have not yet prescribed.

The object of the law in fixing a definite period within which claims must be presented is to
insure the speedy settling of the affairs of a deceased person and the early delivery of the
property of the estate in the hands of the persons entitled to receive it. (Estate of De Dios, 24
Phil. Rep., 573.)

Due possibly to the comparative shortness of the period of limitation applying to such claims as
compared with the ordinary statute of limitations, the statute of nonclaims has not the finality of the
ordinary statute of limitations. It may be safely said that a saving provision, more or less liberal, is
annexed to the statute of nonclaims in every jurisdiction where is found. In this country its saving clause
is found in section 690, which reads as follows:

On application of a creditor who has failed to present his claim, if made within six months after
the time previously limited, or, if a committee fails to give the notice required by this chapter,
and such application is made before the final settlement of the estate, the court may, for cause
shown, and on such terms as are equitable, renew the commission and allow further time, not
exceeding one month, for the committee to examine such claim, in which case it shall personally
notify the parties of the time and place of hearing, and as soon as may be make the return of
their doings to the court.

If the committee fails to give the notice required, that is a sufficient cause for reconvening it for further
consideration of claims which may not have been presented before its final report was submitted to the
court. But, as stated above, this is not the case made by the plaintiff, as the committee did give the
notice required by law. Where the proper notice has been given the right to have the committee
recalled for the consideration of a belated claim appears to rest first upon the condition that it is
presented within six months after the time previously limited for the presentation of claims. In the
present case the time previously limited was six months from July 23, 1907. This allowed the plaintiff
until January 23, 1908, to present his claims to the committee. An extension of this time under section
690 rested in the discretion of the court. (Estate of De Dios, supra.) In other words, the court could
extend this time and recall the committee for a consideration of the plaintiff's claims against the estate
of justice required it, at any time within the six months after January 23, 1908, or until July 23, 1908.
Plaintiff's petition was not presented until July 14, 1909. The bar of the statute of nonclaims is an
conclusive under these circumstances as the bar of the ordinary statute of limitations would be. It is
generally held that claims are not barred as to property not included in the inventory. (Waughop vs.
Bartlett, 165 III., 124; Estate of Reyes, 17 Phil. Rep., 188.) So also, as indicated by this court in the case
last cited, fraud would undoubtedly have the same effect. These exceptions to the operation of the
statute are, of course, founded upon the highest principles of equity. But what is the plea of the plaintiff
in this case? Simply this: That he was laboring under a mistake of law — a mistake which could easily
have been corrected had he sought to inform himself; a lack of information as to the law governing the
allowance of claims against estate of the deceased persons which, by proper diligence, could have been
remedied in ample to present the claims to the committee. Plaintiff finally discovered his mistake and
now seeks to assert his right when they have been lost through his own negligence. Ignorantia legis
neminem excusat. We conclude that the learned trial court made no error in refusing to reconvene the
committee for the purpose of considering plaintiff's claims against the estate.
In his second assignment of error the appellant insists that the court erred in dismissing his petition filed
on November 21, 1910, wherein he asks that the administratrix be compelled to pay over to him the
amounts mentioned in the will as debts due him. We concede all that is implied in the maxim, dicat
testor et erit lex. But the law imposes certain restrictions upon the testator, not only as to the
disposition of his estate, but also as to the manner in which he may make such disposition. As stated in
Rood on Wills, sec. 412: "Some general rules have been irrevocably established by the policy of the law,
which cannot be exceeded or transgressed by any intention of the testator, be it ever so clearly
expressed."

It may be safely asserted that no respectable authority can be found which holds that the will of the
testator may override positive provisions of law and imperative requirements of public policy. (Page on
Wills, sec. 461.)

Impossible conditions and those contrary to law and good morals shall be considered as not
imposed, . . . (Art. 792, Civil Code.)

Conceding for the moment that it was the testator's desire in the present case that the debts listed by
him in his will should be paid without referring them to a committee appointed by the court, can such a
provision be enforced? May the provisions of the Code of Civil Procedure relating to the settlement of
claims against an estate by a committee appointed by the court be superseded by the contents of a will?

It is evident from the brief outline of the sections referred to above that the Code of Civil Procedure has
established a system for the allowance of claims against the estates of decedents. Those are at least two
restrictions imposed by law upon the power of the testator to dispose of his property, and which pro
tanto restrict the maxim that "the will of the testator law: (1) His estate is liable for all legal obligations
incurred by him; and (2) he can not dispose of or encumber the legal portion due his heirs by force of
law. The former take precedence over the latter. (Sec. 640, Code Civ, Proc.) In case his estate is sufficient
they must be paid. (Sec, 734, id.) In case the estate is insolvent they must be paid in the order named in
section 735. It is hardly necessary to say that a provision in an insolvent's will that a certain debt be paid
would not entitle it to preference over other debts. But, if the express mention of a debt in the will
requires the administrator to pay it without reference to the committee, what assurance is there, in the
case of an insolvent estate, that it will not take precedence over preferred debts?

If it is unnecessary to present such claim to the committee, the source of nonclaims is not applicable. It
is not barred until from four to ten years, according to its classification in chapter 3 of the Code of Civil
Procedure, establishing questions upon actions. Under such circumstances, when then the legal portion
is determined? If, in the meantime the estate has been distributed, what security have the differences
against the interruption of their possession? Is the administrator required to pay the amount stipulated
in the will regardless of its correctness? And, if not, what authority has he to vise the claim? Section 706
of the Code of Civil Procedure provides that an executor may, with the approval of the court, compound
with a debtor of deceased for a debt due the estate, But he is nowhere permitted or directed to deal
with a creditor of the estate. On the contrary, he is the advocate of the estate before an impartial
committee with quasi-judicial power to determine the amount of the claims against the estate, and, in
certain cases, to equitably adjust the amounts due. The administrator, representing the debtor estate,
and the creditor appear before this body as parties litigant and, if either is dissatisfied with its decision,
an appeal to the court is their remedy. To allow the administrator to examine and approve a claim
against the estate would put him in the dual role of a claimant and a judge. The law in this jurisdiction
has been so framed that this may not occur. The most important restriction, in this jurisdiction, on the
disposition of property by will are those provisions of the Civil Code providing for the preservation of the
legal portions due to heirs by force of law, and expressly recognized and continued in force by sections
614, 684, and 753 of the Code of Civil Procedure. But if a debt is expressly recognized in the will must be
paid without its being verified, there is nothing to prevent a partial or total alienation of the legal
portion by means of a bequest under a guise of a debt, since all of the latter must be paid before the
amount of the legal portion can be determined.

We are aware that in some jurisdictions executors and administrators are, by law, obligated to perform
the duties which, in this jurisdiction, are assign to the committee on claims; that in some other
jurisdictions it is the probate court itself that performs these duties; that in some jurisdictions the
limitation upon the presentment of claims for allowance is longer and, possibly, in some shorter; and
that there is a great divergence in the classification of actions which survive and actions which do not
survive the death of the testator. It must be further remembered that there are but few of the United
States which provide for heirs by force of law. These differences render useless as authorities in this
jurisdiction many of the cases coming from the United States. The restriction imposed upon the
testator's power to dispose of his property when they are heirs by force of law is especially important.
The rights of these heirs by force law pass immediately upon the death of the testator. (Art. 657, Civil
Code.) The state intervenes and guarantees their rights by many stringent provisions of law to the
extent mentioned in article 818 of the Civil Code. Having undertaken the responsibility to deliver the
legal portion of the net assets of the estate to the heirs by force of law, it is idle to talk of substituting for
the procedure provided by law for determining the legal portion, some other procedure provided in the
will of the testator. The state cannot afford to allow the performance of its obligations to be directed by
the will of an individual. There is but one instance in which the settlement of the estate according to the
probate procedure provided in the Code of Civil Procedure may be dispense with, and it applies only to
intestate estates. (Sec. 596, Code Civ. Proc.) A partial exemption from the lawful procedure is also
contained in section 644, when the executor or administrator is the sole residuary legatee. Even in such
case, and although the testator directs that no bond be given, the executor is required to give a bond for
the payment of the debts of the testator. The facts of the present case do not bring it within either of
this sections. We conclude that the claims against the estate in the case at bar were enforceable only
when the prescribed legal procedure was followed.

But we are not disposed to rest our conclusion upon this phase of the case entirely upon legal grounds.
On the contrary we are strongly of the opinion that the application of the maxim, "The will of the
testator is the law of the case," but strengthens our position so far as the present case is concerned.

It will ordinarily be presumed in construing a will that the testator is acquainted with the rules of
law, and that he intended to comply with them accordingly. If two constructions of a will or a
part thereof are possible, and one of these constructions is consistent with the law, and the
other is inconsistent, the presumption that the testator intended to comply with the law will
compel that construction which is consistent with the law to be adopted. (Page on Wills, sec.
465.)

Aside from this legal presumption, which we believe should apply in the present case as against any
construction of the will tending to show an intention of the testator that the ordinary legal method of
probating claims should be dispensed with, it must be remembered that the testator knows that the
execution of his will in no way affects his control over his property. The dates of his will and of his death
may be separated by a period of time more or less appreciable. In the meantime, as the testator well
knows, he may acquire or dispose of property, pay or assume additional debts, etc. In the absence of
anything to the contrary, it is only proper to presume that the testator, in his will, is treating of his
estate at the time and in the condition it is in at his death. Especially is this true of his debts. Debts may
accrue and be paid in whole or in part between the time the will is made and the death of the testator.
To allow a debt mentioned in the will in the amount expressed therein on the ground that such was the
desire of the testator, when, in fact, the debt had been wholly or partly paid, would be not only unjust
to the residuary heirs, but a reflection upon the good sense of the testator himself. Take the present
case for example. It would be absurd to say that the testator knew what the amount of his just debt
would be at a future and uncertain date. A mere comparison of the list of the creditors of the testator
and the amounts due them as described in his will, with the same list and amounts allowed by the
committee on claims, shows that the testator had creditors at the time of his death not mention in the
will at all. In other instances the amounts due this creditors were either greater or less than the amounts
mentioned as due them in the will. In fact, of those debts listed in the will, not a single one was allowed
by the committee in the amount named in the will. This show that the testator either failed to list in his
will all his creditors and that, as to those he did include, he set down an erroneous amount opposite
their names; or else, which is the only reasonable view of the matter, he overlooked some debts or
contracted new ones after the will was made and that as to others he did include he made a partial
payments on some and incurred additional indebtedness as to others.

While the testator expresses the desire that his debts be paid, he also expressly leaves the residue of his
estate, in equal parts, to his children. Is it to be presumed that he desired to overpay some of his
creditors notwithstanding his express instructions that his own children should enjoy the net assets of
his estate after the debts were paid? Again, is the net statement of the amount due some of his
creditors and the omission all together of some of his creditors compatible with his honorable and
commendable desire, so clearly expressed in his will, that all his debts be punctually paid? We cannot
conceive that such conflicting ideas were present in the testator's mind when he made his will.

Again, suppose the testator erroneously charged himself with a debt which he was under no legal or
even moral obligation to pay. The present case suggests, if it does not actually present, such a state of
affairs. Among the assets of the estate mentioned in the will is a parcel of land valued at P6,500; while in
the inventory of the administratrix the right to repurchase this land from one Isidro Santos is listed as an
asset. Counsel for the administratrix alleges that he is prepared to prove that this is the identical plaintiff
in the case at bar; that the testator erroneously claimed the fee of this land in his last will and stated
Santos' rights in the same as a mere debt due him of P5,000; that in reality, the only asset of the testator
regard to this land was the value of the right to repurchase, while the ownership of the land, subject
only to that right of redemption, belonged to Santos; that the right to repurchase this land expired in
1907, after the testator's death. Assuming, without in the least asserting, that such are the underlying
facts of this case, the unjust consequences of holding that a debt expressly mentioned in the will may be
recovered without being presented to the committee on claims, is at once apparent. In this supposed
case, plaintiff needed only wait until the time for redemption of the land had expired, when he would
acquired an absolute title to the land, and could also have exacted the redemption price. Upon such a
state of facts, the one item of P5,000 would be a mere fictitious debt, and as the total net value of the
estate was less than P15,000, the legal portion of the testator's children would be consumed in part in
the payment of this item. Such a case cannot occur if the prescribed procedure is followed of requiring
of such claims be viseed by the committee on claims.

The direction in the will for the executor to pay all just debts does not mean that he shall pay
them without probate. There is nothing in the will to indicate that the testator in tended that his
estate should be administered in any other than the regular way under the statute, which
requires "all demands against the estates of the deceased persons," "all such demands as may
be exhibited," etc. The statute provides the very means for ascertaining whether the claims
against the estate or just debts. (Kaufman vs. Redwine, 97 Ark., 546.)

See also Collamore vs. Wilder (19 Kan., 67); O'Neil vs. Freeman (45 N. J. L., 208).

The petition of the plaintiff filed on November 21, 1910, wherein he asks that the administratrix be
compelled to pay over to him the amounts mentioned in the will as debts due him appears to be nothing
more nor less than a complaint instituting an action against the administratrix for the recovery of the
sum of money. Obviously, the plaintiff is not seeking possession of or title to real property or specific
articles of personal property.

When a committee is appointed as herein provided, no action or suit shall be commenced or


prosecute against the executor or administrator upon a claim against the estate to recover a
debt due from the state; but actions to recover the seizing and possession of real estate and
personal chattels claimed by the estate may be commenced against him. (Sec. 699, Code Civ.
Proc.)

The sum of money prayed for in the complaint must be due the plaintiff either as a debt of a legacy. If it
is a debt, the action was erroneously instituted against the administratrix. Is it a legacy?

Plaintiff's argument at this point becomes obviously inconsistent. Under his first assignment of error he
alleges that the committee on claims should have been reconvened to pass upon his claim against the
estate. It is clear that this committee has nothing to do with legacies. It is true that a debt may be left as
a legacy, either to the debtor (in which case it virtually amounts to a release), or to a third person. But
this case can only arise when the debt is an asset of the estate. It would be absurd to speak of a
testator's leaving a bare legacy of his own debt. (Arts. 866, 878, Civil Code.) The creation of a legacy
depends upon the will of the testator, is an act of pure beneficence, has no binding force until his death,
and may be avoided in whole or in part by the mere with whim of the testator, prior to that time. A debt
arises from an obligation recognized by law (art. 1089, Civil Code) and once established, can only be
extinguished in a lawful manner. (Art. 1156, id.) Debts are demandable and must be paid in legal tender.
Legacies may, and often do, consist of specific articles of personal property and must be satisfied
accordingly. In order to collect as legacy the sum mentioned in the will as due him, the plaintiff must
show that it is in fact a legacy and not a debt. As he has already attempted to show that this sum
represents a debt, it is an anomaly to urge now it is a legacy.

Was it the intention of the testator to leave the plaintiff a legacy of P7,454? We have already touched
upon this question. Plaintiff's claim is described by the testator as a debt. It must be presumed that he
used this expression in its ordinary and common acceptation; that is, a legal liability existing in favor of
the plaintiff at the time the will was made, and demandable and payable in legal tender. Had the
testator desired to leave a legacy to the plaintiff, he would have done so in appropriate language instead
of including it in a statement of what he owed the plaintiff. The decedent's purpose in listing his debts in
his will is set forth in the fourth clause of the will, quoted above. There is nothing contained in that
clause which indicates, even remotely, a desire to pay his creditors more than was legally due them.

A construction leading to a legal, just and sensible result is presumed to be correct, as against
one leading to an illegal, unnatural, or absurd effect. (Rood on Wills, sec. 426.)
The testator, in so many words, left the total net assets of his estate, without reservation of any kind, to
his children per capita. There is no indication that he desired to leave anything by way of legacy to any
other person. These considerations clearly refute the suggestion that the testator intended to leave
plaintiff any thing by way of legacy. His claim against the estate having been a simple debt, the present
action was improperly instituted against the administratrix. (Sec. 699, Code Civ. Proc.)

But it is said that the plaintiff's claims should be considered as partaking of the nature of a legacy and
disposed of accordingly. If this be perfect then the plaintiff would receive nothing until after all debts
had been paid and the heirs by force of law had received their shares. From any point of view the
inevitable result is that there must be a hearing sometime before some tribunal to determine the
correctness of the debts recognized in the wills of deceased persons. This hearing, in the first instance,
can not be had before the court because the law does not authorize it. Such debtors must present their
claims to the committee, otherwise their claims will be forever barred.

For the foregoing reasons the orders appealed from are affirmed, with costs against the appellant.

G.R. No. L-29407 July 29, 1983

ESTATE OF AMADEO MATUTE OLAVE, as represented by JOSE S. MATUTE, Judicial Co-Administrator in


Sp. Proc. No. 25876, Court of First Instance of Manila, petitioner,
vs.
HONORABLE MANASES G. REYES, Presiding Judge of Branch III, Court of First Instance of Davao, Davao
City; SOUTHWEST AGRICULTURAL MARKETING CORPORATION also known as (SAMCO); CARLOS V.
MATUTE, as another Administrator of the Estate of Amadeo Matute Olave, Sp. Proc. No. 25876 CFI,
Manila; and MATIAS S. MATUTE, as former Co-Administrator of the Estate of Amadeo Matute Olave,
Sp. Proc. No. 25876, CFI, Manila, respondents.

Jose W. Diokno for petitioner.

Wingerfortis F. Escudero for respondents.

RELOVA, J.:

In this petition for certiorari, the estate of Amadeo Matute Olave, represented by Jose S. Matute,
Judicial Administrator in Sp. Proc. No. 25876, of the then Court of First Instance of Manila, assails the
Order, dated November 10, 1967, of the respondent judge, approving the "Amicable Settlement"
submitted by the parties in Civil Case No. 4623 of the then Court of First Instance of Davao, 16th Judicial
District, Branch III, and prays that the said Order be set aside.

The petition alleged that the estate of Amadeo Matute Olave is the owner in fee simple of a parcel of
land containing an area of 293,578 square meters, situated in sitio Tibambam, barrio Tibambam,
municipality of Sigaboy (now Governor Generoso), province of Davao, and covered by Original
Certificate of Title No. 0-27 of the Registry of Deeds of Davao Province; that in April 1965 herein private
respondent Southwest Agricultural Marketing Corporation (SAMCO), as plaintiff, filed Civil Case No.
4623 with the respondent Court of First Instance of Davao against respondents, Carlos V. Matute and
Matias S. Matute, as defendants, in their capacities as co-administrators of the estate of Amadeo
Matute Olave, for the collection of an alleged indebtedness of P19,952.11 and for attorney's fees of
P4,988.02; that on May 8, 1965, defendants Carlos V. Matute and Matias S. Matute in said Civil Case No.
4623, filed an answer denying their lack of knowledge and questioning the legality of the claim of
SAMCO; that on October 25, 1966 in Sp. Proc. No. 25876, the then Court of First Instance of Manila,
Branch IV, issued an order directing the administrators to secure the probate court's approval before
entering into any transaction involving the seventeen (17) titles of the estate, of which the property
described in OCT No. 0-27 is one of them; that on October 20, 1967, the parties (plaintiff and
defendants) in Civil Case No. 4623 of the Court of First Instance of Davao, submitted to the respondent
court an Amicable Settlement whereby the property of the estate covered by OCT No. 0-27 of Davao
was conveyed and ceded to SAMCO as payment of its claim; that the said Amicable Settlement signed by
the herein respondents was not submitted to and approved by the then Court of First Instance of
Manila, Branch IV, in Sp. Proc. No. 25876, nor notice thereof made to the beneficiaries and heirs in said
special proceedings; that on November 10, 1967, respondent court, despite the opposition of the other
parties who sought to intervene in Civil Case No. 4623 and despite the utter lack of approval of the
probate court in Manila, approved the said Amicable Settlement and gave the same the enforceability of
a court decision which, in effect, ceded the property covered by OCT No. 0-27, containing an area of
293,578 square meters and with an assessed value of P31,700.00 to SAMCO in payment of its claim for
only P19,952.11; and, that if the said Order of respondent dated November 10, 1967 is not set aside, the
same will operate as a judgment that "conveys illegally and unfairly, the property of petitioner-estate
without the requisite approval of the probate court of Manila, which has the sole jurisdiction to convey
this property in custodia legis of the estate. (par. 16, Petition).

Made to answer, herein respondent SAMCO and respondent judge, among others, contend that the
Amicable Settlement need not be approved by the probate court, "the same having been entered into in
another independent action and in another court of co-equal rank. Article 2032 of the Civil Code applies
only to extrajudicial compromise entered into by the administrators of the estate. In the alternative, lack
of approval of the probate court of the Amicable Settlement does not render it null and void, but at
most voidable, which must be the subject matter of a direct proceeding in the proper Court of First
Instance." (p. 60, Rollo)

In said Civil Case No. 4623 for sum of money, plaintiff SAMCO and defendants Carlos V. Matute and
Matias S. Matute, in their capacities as judicial administrators of the estate of Amado Matute Olave in
Special Proceeding No. 25876, Court of First Instance of Manila, Branch IV, submitted the following
Amicable Settlement:

1. That defendants in their capacity as judicial administrators of the Estate of Amadeo


Matute, hereby submit and acknowledge that the said Estate of Amadeo Matute is justly
indebted to plaintiff in the total sum of P28,403.02 representing the principal account of
P19,952.11 and in the sum of P8,450.91 as attorney's fees, damages, interest and costs;

2. That at present the defendant estate is devoid of or does not have any funds with
which to pay or settle the aforestated obligation in favor of the plaintiff, and that being
so, the defendant estate through the undersigned administrators, decides to pay the
plaintiff by way of conveying and ceding unto the plaintiff the ownership of a certain
real property owned by the defendant estate now under the administration of the said
undersigned administrators;
3. That plaintiff hereby accepts the offer of defendants of conveying, transferring and
ceding the ownership of the above described property as full and complete payment
and satisfaction of the total obligation of P28,403.02;

4. That the defendant estate, through the undersigned administrators hereby agree and
bind the defendant estate to pay their counsel Atty. Dominador Zuho, of the Zufio Law
Offices the sum of Eight Thousand (P8,000.00) Pesos by way of Attorney's Fee;

5. That the parties herein waive an other claims which they might have against one
another.

WHEREFORE, premises considered, it is respectfully prayed that this Honorable Court


approves the foregoing settlement and that judgment be rendered transferring the said
real property covered by Original Certificate of Title No. 0-27 to plaintiff Southwest
Agricultural Marketing Corporation and that a new transfer certificate of title be issued
to said plaintiff. (pp. 25-26, Rollo)

Section 1, Rule 87 of the Rules of Court, provides that "no action upon a claim for the recovery of money
or debt or interest thereon shall be commenced against the executor or administrator; ..." The claim of
private respondent SAMCO being one arising from a contract may be pursued only by filing the same in
the administration proceedings in the Court of First Instance of Manila (Sp. Proc. No. 25876) for the
settlement of the estate of the deceased Amadeo Matute Olave; and the claim must be filed within the
period prescribed, otherwise, the same shall be deemed "barred forever." (Section 5, Rule 86, Rules of
Court).

The purpose of presentation of claims against decedents of the estate in the probate court is to protect
the estate of deceased persons. That way, the executor or administrator will be able to examine each
claim and determine whether it is a proper one which should be allowed. Further, the primary object of
the provisions requiring presentation is to apprise the administrator and the probate court of the
existence of the claim so that a proper and timely arrangement may be made for its payment in full or
by pro-rata portion in the due course of the administration, inasmuch as upon the death of a person, his
entire estate is burdened with the payment of all of his debts and no creditor shall enjoy any preference
or priority; all of them shag share pro-rata in the liquidation of the estate of the deceased.

It is clear that the main purpose of private respondent SAMCO in filing Civil Case No. 4623 in the then
Court of First Instance of Davao was to secure a money judgment against the estate which eventually
ended in the conveyance to SAMCO of more than twenty-nine (29) hectares of land belonging to the
estate of the deceased Amadeo Matute Olave in payment of its claim, without prior authority of the
probate court of Manila, in Sp. Proc. No. 25876, which has the exclusive jurisdiction over the estate of
Amadeo Matute Olave. It was a mistake on the part of respondent court to have given due course to
Civil Case No. 4623, much less issue the questioned Order, dated November 10, 1967, approving the
Amicable Settlement.

Section 1, Rule 73 of the Rules of Court, expressly provides that "the court first taking cognizance of the
settlement of the estate of a decedent, shall exercise jurisdiction to the exclusion of all other courts."
(Emphasis supplied). The law is clear that where the estate of the deceased person is already the subject
of a testate or intestate proceeding, the administrator cannot enter into any transaction involving it
without prior approval of the probate court.

WHEREFORE, the petition for certiorari is GRANTED, and the Order, dated November 10, 1967, of the
respondent court approving the Amicable Settlement of the parties in Civil Case No. 4623 of the then
Court of First Instance of Davao, is hereby SET ASIDE.
G.R. No. 127165 May 2, 2006

SALONGA HERNANDEZ & ALLADO, Petitioner,


vs.
OLIVIA SENGCO PASCUAL and THE HONORABLE COURT OF APPEALS, Respondents.

DECISION

TINGA, J.:

Petitioner, a professional law partnership, brings forth this Petition for Review assailing the Decision1 of
the Court of Appeals dated 22 December 1995. The appellate court had affirmed two orders
promulgated by the Malabon Regional Trial Court (RTC), Branch 72 (Probate Court), in Sp. Proc. No. 136-
MN, entitled "In the Matter of Testate Estate of Doña Adela Pascual, Dr. Olivia S. Pascual, Executrix."

The case actually centers on two estate proceedings, that of Doña Adela Pascual (Doña Adela) and the
other, her husband Don Andres Pascual's (Don Andres), who predeceased her. Don Andres died
intestate, while Doña Adela left behind a last will and testament. The dispute over the intestate estate
of Don Andres has spawned at least two cases already settled by this Court.2

On 1 December 1973, an intestate proceeding for the settlement of the estate of Don Andres was
commenced by his widow Doña Adela before the then Court of First Instance, now Regional Trial Court
of Pasig, Branch 23 (Intestate Court), docketed as Sp. Proc. No. 7554. Apart from his wife, who bore him
no children, Don Andres was survived by several nephews and nieces from his full-blood and half-blood
brothers.3 This proceeding proved to be the source of many controversies, owing to the attempts of
siblings Olivia and Hermes Pascual, acknowledged natural children of Don Andres's brother, Eligio, to be
recognized as heirs of Don Andres. Olivia and Hermes Pascual procured the initial support of Doña Adela
to their claims. However, on 16 October 1985, the other heirs of Don Andres entered into a Compromise
Agreement over the objections of Olivia and Hermes Pascual, whereby three-fourths (3/4) of the estate
would go to Doña Adela and one-fourth (1/4) to the other heirs of Don Andres, without prejudice to the
final determination by the court or another compromise agreement as regards the claims of Olivia and
Hermes Pascual.4 Subsequently, the Intestate Court denied the claims of Olivia and Hermes Pascual. Said
denial was eventually affirmed by this Court in 1992 in Pascual v. Pascual-Bautista,5 applying Article 992
of the Civil Code.

In the meantime, Doña Adela died on 18 August 1987, leaving behind a last will and testament executed
in 1978, designating Olivia Pascual as the executrix, as well as the principal beneficiary of her estate. The
will also bequeathed several legacies and devises to several individuals and institutions.

Olivia Pascual then engaged the services of petitioner in connection with the settlement of the estate of
Doña Adela. Their agreement as to the professional fees due to petitioner is contained in a letter dated
25 August 1987, signed by Atty. Esteban Salonga in behalf of petitioner and Olivia Pascual. It is stipulated
therein, among others, that the final professional fee "shall be 3% of the total gross estate as well as the
fruits thereof based on the court approved inventory of the estate. Fruits shall be reckoned from the
time of [Olivia Pascual's] appointment as executrix of the estate. The 3% final fee shall be payable upon
approval by the court of the agreement for the distribution of the properties to the court designated
heirs of the estate."6
On 26 August 1987, private respondent, represented by petitioner, commenced a petition for the
probate of the last will and testament of Doña Adela before the Probate Court, docketed as Sp. Proc. No.
136-MN and raffled to Branch 72 presided by Judge Benjamin M. Aquino, Jr. The petition was opposed
by a certain Miguel Cornejo, Jr. and his siblings, who in turn presented a purported will executed in 1985
by Doña Adela in their favor. 7

After due trial, on 1 July 1993, the Probate Court rendered a Decision8 allowing probate of the 1978 Last
Will and Testament of Doña Adela and disallowing the purported 1985 Will. Letters testamentary were
issued to Olivia Pascual.9 Cornejo attempted to appeal this decision of the Probate Court, but his notice
of appeal was denied due course by the Probate Court, said notice "not having been accompanied by
any record on appeal as required under the Interim Rules and by Rule 109 of the Rules of Court."10

On 27 July 1993, petitioner filed a Notice of Attorney's Lien equivalent to three percent (3%) of the total
gross estate of the late Doña Adela S. Pascual as well as the fruits thereof based on the court approved
inventory of the estate, pursuant to the retainer agreement signed by and between petitioner and Olivia
S. Pascual, on 25 August 1987. In an Order dated 4 November 1993, the Probate Court ruled that
petitioner's "notice of attorney's lien, being fully supported by a retainer's contract not repudiated nor
questioned by his client Olivia S. Pascual, is hereby noted as a lien that must be satisfied chargeable to
the share of Olivia S. Pascual."11 This was followed by another Order, dated 11 November 1993, wherein
it was directed "that notice be x x x given, requiring all persons having claims for money against the
decedent, Doña Adela S. Vda. de Pascual, arising from contracts, express or implied, whether the same
be due, not due, or contingent, for funeral expenses and expenses of the last sickness of the said
decedent, and judgment for money against her, to file said claims with the Clerk of Court at Malabon,
Metro Manila, within six (6) months from November 4, 1993."12

Accordingly, on 22 November 1993, petitioner filed a Motion to Annotate Attorney's Lien on Properties
of the Estate of Doña Adela Vda. de Pascual.13

It was at this stage, on 19 January 1994, that the Intestate Court rendered a Decision in Sp. Proc. No.
7554, finally giving judicial approval to the aforementioned 1985 Compromise Agreement, and
partitioning the estate of Don Andres by adjudicating one-fourth (1/4) thereof to the heirs of Don
Andres and three-fourths (3/4) thereof to the estate of Doña Adela. The Intestate Court also awarded
attorney's fees to Atty. Jesus I. Santos, equivalent to 15% of the three-fourths (3/4) share of the estate
of Doña Adela.14 Olivia Pascual filed a petition for annulment of the award of attorney's fees with the
Court of Appeals, but the same was denied, first by the appellate court, then finally by this Court in its
1998 decision in Pascual v. Court of Appeals.15

On 26 April 1994, petitioner filed a Motion for Writ of Execution for the partial execution of petitioner's
attorney's lien estimated at P1,198,097.02. The figure, characterized as "tentative," was arrived at based
on a Motion to Submit Project Partition dated 26 October 1993 filed by Olivia Pascual, which alleged the
gross appraised value of Doña Adela's estate at P39,936,567.19. This sum was in turn derived from the
alleged value of the total estate of Don Andres, three-fourths (3/4) of which had been adjudicated to
Doña Adela. At the same time, petitioner noted that the stated values must be considered as only
provisional, considering that they were based on a July 1988 appraisal report; thus, the claim for
execution was, according to petitioner, without prejudice to an updated appraisal of the properties
comprising the gross estate of Doña Adela.16
On 29 April 1994, Olivia Pascual, through Atty. Antonio Ravelo, filed her comment and/or opposition to
the motion for the issuance of a writ of execution on attorney's fees. She argued that a lawyer of an
administrator or executor should charge the individual client, not the estate, for professional fees. Olivia
Pascual also claimed, citing jurisprudence17, that the counsel claiming attorney's fees should give
sufficient notice to all interested parties to the estate, and that such was not accomplished by petitioner
considering that no notices were given to the several legatees designated in Doña Adela's will.18 It was
further argued that the motion for execution was premature, considering that the proceedings before
the Intestate Court had not yet been terminated; that the computation of the figure of P1,198,097.02
was erroneous; and that the enforcement of the writ of execution on the undivided estate of Don
Andres would prejudice his other heirs entitled to one-fourth (1/4) thereof.

On 2 June 1994, the Probate Court issued the first assailed order denying the motion for writ of
execution in view of the fact that "the bulk of the estate of the late Doña Adela S. Vda. De Pascual is still
tied-up with the estate of the late Don Andres Pascual, the proceedings over which and the final
disposition thereof with respect to the partition and segregation of what is to form part of the estate of
the late Doña Adela S. Vda. De Pascual is pending with another court sitting in Pasig, Metro Manila, and
for having been prematurely filed."19

On 14 November 1994, Olivia Pascual, filed with the Probate Court a Motion to Declare General Default
and Distribution of Testamentary Dispositions with Cancellation of Administrator's Bond. It was noted
therein that no creditor had filed a claim against the estate of Doña Adela despite due notice published
pursuant to Section 1, Rule 86 of the Rules of Court. The Probate Court was also informed of the fact
that the proceedings before the Intestate Court had already been terminated by reason of the 14
January 1994 Decision rendered by the latter court. It was also stated "that the corresponding estate
taxes had been paid as evidenced by the Estate Tax Return filed with the Bureau of Internal Revenue,
and of the Certificate of Authority issued by the said agency."20 Interestingly, it was also manifested that
two of the properties that formed part of the estates of the spouses, "the Ongpin Property" and "the
Valenzuela Property," had in fact already been partitioned between the estate of Doña Adela and the
heirs of Don Andres at the ratio of three-fourths (3/4) and one-fourth (1/4), respectively.

In response, petitioner filed a Comment/Manifestation praying that an order be issued:

(1) ordering the annotation of the attorney's lien on the properties comprising the estate of
Doña Adela Pascual;

(2) a writ of partial execution be issued for the satisfaction of the attorney's lien of the
undersigned counsel [herein petitioner] in relation to the Ongpin and Valenzuela properties for
the amount of P635,368.14,without prejudice to the issuance of a writ of execution after the re-
appraisal of the present market value of the estate and the determination of the amount due to
[petitioner] as attorney's fees;

(3) ordering the appointment of a reputable appraisal company to re-appraise the present
market value of the estate of Doña Adela Pascual including the fruits thereof for the purpose of
determining the value of the attorney's fees of [petitioner]; and

(4) after the re-appraisal of the estate of Doña Adela Pascual a writ of execution be issued for
the full satisfaction and settlement of the attorney's lien of [petitioner].21
On 17 March 1995, the Probate Court issued an order which denied petitioner's motion for a re-
appraisal of the property and the issuance of a partial writ of execution "for being prematurely filed as
there is no exact estate yet to be inventoried and re-appraised, assuming re-appraisal would be proper,
because the bulk of the estate subject of this case, as far as this court is concerned, has not yet been
turned over to the executrix or to the court itself."22

Through a petition for certiorari and mandamus, petitioner assailed the two orders of the Probate Court
denying its motion for the immediate execution, partial or otherwise, of its claim for attorney's fees: the
2 June 1994 Order and the 17 March 1995 Order. Nonetheless, the twin orders of the RTC were affirmed
by the Court of Appeals, effectively precluding petitioner's attempt to execute on its attorney's lien. The
appellate court noted that the attorney's lien issued by the Probate Court was chargeable only to the
share of Olivia Pascual, and not to the estate of Doña Adela, since it was Olivia Pascual who entered into
the agreement with petitioner for the payment of attorney's fees in connection with the settlement of
the estate of Doña Adela. Citing Lacson v. Reyes,23 the Court of Appeals asserted that as a rule an
administrator or executor may be allowed fees for the necessary expenses he has incurred but he may
not recover attorney's fees from the estate.

The Court of Appeals likewise noted that in the retainer agreement between petitioner and Olivia
Pascual, it is stipulated that "the 3% final fee shall be payable upon approval by the court of the
agreement for the distribution of the properties to the court designated heirs of the estate."24 On this
score, the Court of Appeals ruled that as the petition before it did not show "that an agreement on the
distribution of properties of the estate of Doña Adela S. Pascual has been submitted and approved by
the probate court,"25 the filing of the motion for execution and that of the motion for re-appraisal of the
market value of the estate were both premature.

Petitioner sought to reconsider the Decision of the Court of Appeals, but in vain.26 Hence this petition.

Petitioner argues that as held in Occeña v. Marquez,27 the counsel seeking to recover attorney's fees for
legal services to the executor or administrator is authorized to file a petition in the testate or intestate
proceedings asking the court, after notice to all the heirs and interested parties, to direct the payment
of his fees as expenses of administration.28 Lacson, it is alleged, was inappropriately cited, since that
case involved an executor who

concurrently was a lawyer who subsequently claimed attorney's fees as part of the expenses of
administration. Petitioner also claims that the decision of the probate court admitting Doña Adela's will
to probate sufficiently satisfies the condition in the Retainer Agreement that the final fee be payable
"upon approval by the court of the agreement for the distribution of the properties to the court
designated heirs of the estate," the court-approved will comprising the agreement referred to in the
contract.

Petitioner also takes exception to the Probate Court's finding that "the bulk of the estate subject of this
case, as far as this [c]ourt is concerned, has not been turned over to the executrix or to the [c]ourt
itself," on which the appellate court predicated its ruling that the motion for a writ of execution was
premature. Petitioner submits that the Probate Court ineluctably has jurisdiction over the estate of
Doña Adela, and has necessarily assumed control over the properties belonging to the said estate. Thus,
petitioner continues, there is no longer need to await the turnover of the properties involved in the
intestate estate of Don Andres which constitute part of the testate estate of Doña Adela since the
Probate Court and the Intestate Court have concurrent jurisdiction over these properties as they have
not yet been physically divided.

Petitioner refers to the averment made by Olivia Pascual before the Probate Court that the proceedings
before the Intestate Court had already been terminated, and that the proceeds of the sale of the Ongpin
Property and the Valenzuela Property had in fact been already divided based on the three-fourths (3/4)
to one-fourth (1/4) ratio between the estate of Doña Adela and the heirs of Don Andres. Petitioner
further points out that the Probate Court had authorized and approved the sale of the Ongpin Property,
yet refused to allow the partial execution of its claim for attorney's fees.

Finally, petitioner asserts that the Probate Court erred in refusing to grant the prayer seeking the re-
appraisal of the property of Doña Adela's estate. Such re-appraisal, so it claims, is necessary in order to
determine the three percent (3%) share in the total gross estate committed to petitioner by reason of
the Retainer Agreement.

It appears that the thrust of the assailed Decision of the Court of Appeals is along these lines: that
petitioner may directly claim attorney's fees only against Olivia Pascual and not against the estate of
Doña Adela; and that petitioner's claim is also premature since contrary to the requisite stipulated in the
Retainer Agreement, there is no court-approved agreement for the distribution of the properties of the
estate of Doña Adela as yet.

As an initial premise, we consider whether a lawyer who renders legal services to the executor or
administrator of an estate can claim attorney's fees against the estate instead of the executor or
administrator. Petitioner correctly cites Occeña v. Marquez29 as providing the governing rule on that
matter as previously settled in the 1905 case of Escueta v. Sy-Juilliong,30 to wit:

The rule is that when a lawyer has rendered legal services to the executor or administrator to assist him
in the execution of his trust, his attorney's fees may be allowed as expenses of administration. The
estate is, however, not directly liable for his fees, the liability for payment resting primarily on the
executor or administrator. If the administrator had paid the fees, he would be entitled to
reimbursement from the estate. The procedure to be followed by counsel in order to collect his fees is
to request the administrator to make payment, and should the latter fail to pay, either to (a) file an
action against him in his personal capacity, and not as administrator, or (b) file a petition in the testate
or intestate proceedings asking the court, after notice to all the heirs and interested parties, to direct
the payment of his fees as expenses of administration. Whichever course is adopted, the heirs and other
persons interested in the estate will have the right to inquire into the value of the services of the lawyer
and on the necessity of his employment.31

We reiterate that as a general rule, it is the executor or administrator who is primarily liable for
attorney's fees due to the lawyer who rendered legal services for the executor or administrator in
relation to the settlement of the estate. The executor or administrator may seek reimbursement from
the estate for the sums paid in attorney's fees if it can be shown that the services of the lawyer
redounded to the benefit of the estate.32 However, if the executor or administrator refuses to pay the
attorney's fees, the lawyer has two modes of recourse. First, the lawyer may file an action against the
executor or administrator, but in his/her personal capacity and not as administrator or executor. Second,
the lawyer may file a petition in the testate or intestate proceedings, asking the court to direct the
payment of attorney's fees as an expense of administration. If the second mode is resorted to, it is
essential that notice to all the heirs and interested parties be made so as to enable these persons to
inquire into the value of the services of the lawyer and on the necessity of his employment.

Lacson v. Reyes,33 cited by the appellate court, involved an executor who also happened to be the
lawyer for the heirs who had filed the petition for probate. For that reason, that case is not squarely in
point to the case at bar. It was pronounced therein that the administrator or executor of the estate
cannot charge professional fees for legal services against the same estate, as explicitly provided under
Section 7, Rule 85 of the Rules of Court of 1985.34 No such rule exists barring direct recovery of
professional legal fees from the estate by the lawyer who is not the executor or administrator of the said
estate. The limitations on such direct recovery are nonetheless established by jurisprudence, as evinced
by the rulings in Escueta and Occeña.

The character of such claim for attorney's fees bears reiteration. As stated in Escueta, it partakes the
nature of an administration expense. Administration expenses include attorney's fees incurred in
connection with the administration of the estate.35 It is an expense attending the accomplishment of the
purpose of administration growing out of the contract or obligation entered into by the personal
representative of the estate, and thus the claim for reimbursement must be superior to the rights of the
beneficiaries.36

Notwithstanding, there may be instances wherein the estate should not be charged with attorney's fees.
If the costs of counsel's fees arise out of litigation among the beneficiaries thereof themselves or in the
protection of the interests of particular persons, the estate generally cannot be held liable for such
costs, although when the administrator employs competent counsel on questions which affect his/her
duties as the administrator and on which he/she is in reasonable doubt, reasonable expenses for such
services may be charged against the estate subject to the approval of the court.37 It has also been held
that an administrator who brings on litigation for the deliberate purpose of defrauding the legitimate
heirs and for his own benefit is not entitled to reimbursement for counsel's fees incurred in such
litigation.381avvphil.net

Clearly then, while the direct recovery of attorney's fees from the estate may be authorized if the
executor refuses to pay such fees, and claimed through the filing of the proper petition with the probate
court, such claim remains controvertible. This is precisely why Escueta and its progenies require that the
petition be made with notice to all the heirs and interested parties.

It is these perspectives that we apply to the case at bar. Notably, petitioner had filed both a Notice of
Attorney's Lien and a Motion for Writ of Execution. These two pleadings have distinct character and
must be treated as such.

After Doña Adela's will had been admitted to probate, petitioner had initially filed a Notice of Attorney's
Lien wherein it identified itself as "the attorney for the executrix named in the said will, Dra. Olivia S.
Pascual", and sought to file its "claim and/or lien for attorney's fees equivalent to Three Percent (3%) of
the total gross estate," pursuant to the 1987 Retainer Agreement. Copies of this Notice of Attorney's
Lien were furnished Attys. Fortunato Viray, Jr. and Crisanto Cornejo, who appear on record to have
served as counsels for the various oppositors to the probate of the 1978 will of Doña Adela. This Notice
of Attorney's Lien was noted by the Probate Court in its Order of 4 November 1993, "as a lien that must
be satisfied chargeable to the share of Olivia S. Pascual."
It may be so that petitioner, in filing this Notice of Attorney's Lien, initially intended to hold Olivia
Pascual, and not Doña Adela's estate, liable for the attorney's fees. It did identify itself as the lawyer of
Olivia Pascual, and the Probate Court did note that the lien be satisfied chargeable to the share of the
executor. Yet it must also be noted that such lien, as it is, is only contingent on the final settlement of
the estate of Doña Adela, at such time, since the Retainer Agreement on which the lien is hinged
provides that the final fee "be payable upon approval by the court of the agreement for the distribution
of the properties to the court designated heirs of the estate."39 This is also made clear by the order
noting the lien, which qualified that said lien was chargeable only to the share of Olivia Pascual, hence
implying that at the very least, it may be claimed only after her share to Doña Adela's estate is already
determinate.

In rendering its assailed Decision, the Court of Appeals relied on this qualification made by the Probate
Court that the lien for attorney's fees was chargeable only to the share of Olivia Pascual. Yet the Notice
of Attorney's Lien only seeks to serve notice of the pendency of the claim for attorney's fees, and not
the payment of such fees itself. On its own, the Notice of Attorney's Lien cannot serve as the basis for
the Probate Court to authorize the payment to petitioner of attorney's fees.

On the other hand, Escueta and its kindred cases do explicitly recognize the recourse for the lawyer to
directly make the claim for attorney's fees against the estate, not the executor or administrator. The
filing of the Notice of Attorney's Lien and the qualificatory character of the rulings thereon, do not
preclude the resort to the mode of recovery against the estate as authorized by jurisprudence. Clearly
then, we disagree with the opinion of the Court of Appeals that attorney's fees can be claimed only
against the share of Olivia Pascual.

The instant case is rooted in an incomplete attempt to resort to the second mode of recovery of
attorney's fees as authorized in Escueta, originating as it did from the denial of petitioner's Motion for
Writ of Execution, and not the Notice of Attorney's Lien. The Motion did expressly seek the payment of
attorney's fees to petitioner. Escueta and Occeña, among other cases, did clearly lay down the manner
under which such fees may be paid out even prior to the final settlement of the estate as an
administration expense directly chargeable to the estate itself. The critical question in the present
petition is thus whether this Motion for Writ of Execution satisfies the requisites set in Escueta for a
claim for attorney's fees directly chargeable against the estate. It does not.

The fact that the prayer for attorney's fees was cast in a motion and not a petition should not impede
such claim, considering that the motion was nonetheless filed with the Probate Court. However, the
record bears that the requisite notice to all heirs and interested parties has not been satisfied. Doña
Adela's will designated 19 other individuals apart from Olivia Pascual, and four (4) different institutions
as recipients of devises or legacies consisting of real properties, jewelries, and cash amounts. Yet only
Olivia Pascual was served with a copy of the Motion for Writ of Execution, the motion which effectively
sought the immediate payment of petitioner's attorney's fees. As early as 29 April 1994, Olivia Pascual,
in opposing the Motion for Writ of Execution, already pointed out that petitioner had failed to give
sufficient notice to all interested parties to the estate, particularly the several devisees and legatees so
named in Doña Adela's will.

Such notice is material to the other heirs to Doña Adela's estate. The payment of attorney's fees,
especially in the amount of 3% of the total gross estate as sought for by petitioner, substantially
diminishes the estate of Doña Adela and may consequently cause the diminution of their devises and
legacies. Since these persons were so named in the very will itself and the action for probate which was
filed by petitioner itself, there is no reason why petitioner could not have given due notice to these
persons on its claim for attorney's fees.

The requisite notice to the heirs, devisees, and legatees is anchored on the constitutional principle that
no person shall be deprived of property without due process of law.40 The fact that these persons were
designated in the will as recipients of the testamentary dispositions from the decedent establishes their
rights to the succession, which are transmitted to them from the moment of the death of the
decedent.41 The payment of such attorney's fees necessarily diminishes the estate of the decedent, and
may effectively diminish the value of the testamentary dispositions made by the decedent. These heirs,
devisees, and legatees acquire proprietary rights by reason of the will upon the moment of the death of
the decedent, incipient or inchoate as such rights may be. Hence, notice to these interested persons of
the claims for attorney's fees is integral, so as to allow them to pose any objections or oppositions to
such claim which, after all, could lead to the reduction of their benefits from the estate.

The failure to notify the other heirs, devisees or legatees, to the estate of Doña Adela likewise deprives
these interested persons of the right to be heard in a hearing geared towards determining whether
petitioner was entitled to the immediate payment of attorney's fees. Notably, petitioner, in filing its
Motion for Writ of Execution, had initially set the hearing on the motion on 29 April 1994, but one day
prior to the scheduled hearing, gave notice instead that the motion was being submitted for the
consideration of the Probate Court without further argument.42 Evidently, petitioner did not intend a
full-blown hearing to ensue on whether it was entitled to the payment of attorney's fees. Yet the claim
for attorney's fees is hardly incontrovertible.

That the Retainer Agreement set the attorney's fees at three percent (3%) of the gross estate does not
imply that the basis for attorney's fees is beyond controversy. Attorney's fees in this case are in the
nature of administration expenses, or necessary expenses in the first place. Any party interested in the
estate may very well, in theory, posit a myriad of objections to the attorney's fees sought, such as for
example, that these fees were not necessary expenses in the care, management, and settlement of the
estate. Whether or not such basis for valid objections exists in this case is not evident, but the fact
remains that all the parties interested in the estate, namely the other devisees and legatees, were
deprived of the opportunity to raise such objections as they were not served notice of the Motion for
Writ of Execution.

The instant claim for attorney's fees is thus precluded by the absence of the requisite notices by
petitioner to all the interested persons such as the designated heirs, devisees, legatees, as required by
the jurisprudential rule laid down in Escueta. However, the Court of Appeals held that it was the
prematurity of the claim for attorney's fees that served as the fatal impediment. On this point, the Court
does not agree.

Again, the remaining peripheral questions warrant clarification.

Escueta itself provides for two alternative approaches through which counsel may proceed with his
claim for attorney's fees. The first involves a separate suit against the executor or administrator in the
latter's personal capacity. The second approach is a direct claim against the estate itself, with due notice
to all interested persons, filed with the probate court.
In the same vein, the existence of the Retainer Agreement between petitioner and Olivia Pascual allows
petitioner two possible causes of action on which to claim attorney's fees in connection with the
administration of the estate of Doña Adela. The first possible cause of action pivots on the Retainer
Agreement, which establishes an obligation on the part of Olivia Pascual to pay the final fee of 3% of the
gross total estate of Doña Adela, payable upon approval by the Probate Court of the agreement for the
distribution of the properties to the court- designated heirs of the estate. Necessarily, since the recovery
of attorney's fees is premised on the Retainer Agreement any award thereupon has to await the final
ascertainment of value of the gross total estate of Doña Adela, as well as the approval by the Probate
Court of the agreement for the distribution of the properties. The Retainer Agreement makes it clear
that the final payment of attorney's fees is contingent on these two conditions,43 and the claim for
attorney's fees based on the Retainer Agreement cannot ripen until these conditions are met.

Moreover, it cannot be escaped that the Retainer Agreement was entered into between petitioner and
Olivia Pascual prior to the filing of the probate petition, and that at such time, she had no recognized
right to represent the estate of Doña Adela yet. This

circumstance further bolsters our opinion that if petitioner insists on the judicial enforcement of the
Retainer Agreement, its proper remedy, authorized by law and jurisprudence, would be a personal
action against Olivia Pascual, and not against the estate of Doña Adela. If this were the recourse pursued
by petitioner, and Olivia Pascual is ultimately held liable under the Retainer Agreement for attorney's
fees, she may nonetheless seek reimbursement from the estate of Doña Adela if she were able to
establish that the attorney's fees paid to petitioner were necessary administration expenses.

The second or alternative recourse is the direct claim for attorney's fees against the estate, as
authorized under Escueta. The character of this claim is not contractual in nature, but rather, as a
reimbursement for a necessary expense of administration, and it will be allowed if it satisfies the
criteria for necessary expenses of administration. Its entitlement can be established by the actual
services rendered by the lawyer necessary to the accomplishment of the purposes of administration,
and not necessarily by the contract of engagement of the attorney's services.

By filing their claim directly against the estate of Doña Adela, petitioner has clearly resorted to this
second cause of action. There are consequent advantages and disadvantages to petitioner. Since the
claim arises irrespective of the contingencies as stipulated in the Retainer Agreement, the attorney's
fees may be collected against the estate even before the final determination of its gross total value or
the final approval of the project of partition. As earlier stated, such claim for reimbursement is superior
to the right of the beneficiaries to the estate, and as such, there is need to finally determine the
respective shares of the beneficiaries before attorney's fees in the nature of administration expenses
may be paid out.

The one distinct disadvantage, however, is that the Retainer Agreement cannot be deemed binding on
the estate or the Probate Court since the estate is not a party to such contract. This would not preclude
the Probate Court from enforcing the provisions of the Retainer Agreement if, in its sound discretion,
the terms of payment therein are commensurate to the value of the actual services necessary to the
administration of the estate actually rendered by petitioner. Yet if the Probate Court does choose to
adopt the Retainer Agreement as binding on the estate of Doña Adela, petitioner may again be
precluded from immediate recovery of attorney's fees in view of the necessity or precondition of
ascertaining the gross total value of the estate, as well as the judicial approval of the final agreement of
partition.
In any event, whether the claim for attorney's fees was pursued through a separate suit against Olivia
Pascual (in her personal capacity) for the enforcement of the Retainer Agreement, or against the estate
of Doña Adela as reimbursement for necessary administration expenses, it remains essential that a
hearing be conducted on the claim. In either case too, the hearing will focus on the value of the services
of the petitioner and the necessity of engaging petitioner as counsel.

We reiterate that the direct claim against the estate for attorney's fees must be made with due notice to
the heirs, devisees, and legatees. The failure of petitioner to give such notice renders its present claim
inefficacious for now. Indeed, there is sufficient cause to dismiss outright petitioner's Motion for Writ of
Immediate Execution filed with the Probate Court, for its failure to notify therein the other persons
interested in the estate of Doña Adela. Nonetheless, to authorize said outright denial at this stage could
unduly delay the settlement of the estate of Doña Adela, considering the likelihood that petitioner
would again pursue such claim for attorney's fees as the right to which is affirmed by law and
jurisprudence.

Hence, in order not to unduly protract further the settlement of the estate of Doña Adela, the Court
deems it proper instead to mandate the Probate Court to treat the Motion for Writ of Immediate
Execution as a petition seeking a court order to direct the payment of attorney's fees as expenses of
administration, but subject to the condition that petitioner give due notice to the other designated
devisees and legatees so designated in the will of the claim prior to the requisite hearing thereon.
Petitioner may as well seize such opportunity to formally amend or reconfigure its motion to a petition
to direct payment of attorney's fees. Once this step is accomplished, there should be no impediment to
petitioner's claim for recovery of attorney's fees as reimbursement for necessary administration
expenses, within the terms established by law, jurisprudence, and this decision.

One final note. Petitioner's final prayer before this court is that it be issued a partial writ of execution,
consistent with its position before the Probate Court that it is already entitled to at least a partial
payment of its attorney's fees. This prayer cannot obviously be granted at this stage by the Court,
considering the fatal absence of due notice to the other designated beneficiaries to the estate of Doña
Adela. Still, we do not doubt that the Probate Court, within its discretion, is capacitated to render the
award of attorney's fees as administration expenses either partially or provisionally, depending on the
particular circumstances and its ultimate basis for the determination of the appropriate attorney's fees.

WHEREFORE, the petition is GRANTED IN PART. The Decision of the Court of Appeals dated 22
December 1995 and the Orders of the Regional Trial Court of Malabon, Branch 72, dated 2 June 1994
and 17 March 1995 are hereby SET ASIDE insofar as said orders denied petitioner's Motion for Writ of
Immediate Execution dated 26 April 1994. Petitioner is hereby directed to set for hearing its claim for
attorneys fees, giving due notice thereof to all the heirs, devisees, and legatees designated in the 1978
Last Will and Testament executed by Doña Adela Pascual. The Regional Trial Court is directed to treat
petitioner's aforesaid motion as a PETITION for the payment of attorney's fees as expenses of
administration, and after due hearing resolve the same with DISPATCH, conformably with this decision.
No pronouncement as to costs.

SO ORDERED.
G.R. No. L-27486 November 18, 1927

In the matter of the estate of J. H. Ankrom, deceased. HEIRS OF RAFAEL GREGOIRE, claimants-
appellants,
vs.
ALBERT L. BAKER, administrator-appellee.

Camus, Delgado and Recto for appellants.


No appearance for appellee.

STREET, J.:

This appeal has been brought to set aside an order entered on March 5, 1926, by Hon. Pedro J. Rich,
Judge of the Court of First Instance of Davao, authorizing the administrator of J. H. Ankrom, deceased, to
exclude a large tract of land, with improvements, from the inventory of assets of the decedent.

It appears that J. H. Ankrom, resident of the Province of Davao, died on September 18, 1922; and on
September 25, thereafter, the appellee, A. L. Baker, qualified as his administrator. On December 13 of
the same year, the administrator filed his inventory of the assets pertaining to the estate of his
decedent, in which inventory was included a tract of land covered by Torrens certificate of title and
containing an area of more than 930 hectares. In this inventory, said tract of land, with the
improvements thereon, was estimated at nearly P60,000. On September 24, 1924, the heirs of Rafael
Gregoire, appellants herein, filed a claim against the estate of Ankrom for the sum of $35,438.78, U. S.
currency, or P70, 877.56, based upon a judgment rendered in the Supreme Court of the Republic of
Panama. This claim was allowed by the commissioners in the estate of Ankrom, and no appeal was at
any time taken against the order so allowing it. It appears that the total recognized claims against the
estate amounted originally to P76,645.13, but four of the creditors, having claims in the amount of
P1,639.82, have been paid in full, leaving a balance owing by the estate of P75,005.31, the greater part
of which is comprised of the claim of the appellants.

As the affairs of the estate stood upon the original inventory, there appeared to be sufficient assets to
pay all claimants; but while these intestate proceedings were being conducted the administrator
discovered that on April 22, 1920, or about a year and a half before his death, Ankrom had executed a
mortgage on the property here in question in favor of the Philippine Trust Company to secure that
company from liability on a note in the amount of P20,000.00, of the same date, upon which it had
made itself contigently liable. Two days after this mortgage had been executed Ankrom appears to have
made an assignment of all his interest in the mortgaged property to one J. G. Jung, of Cincinnati, Ohio,
for a purported consideration of the sum of P1 and other good and valuable considerations. In view of
these conveyances by his intestate, the administrator presented an amended inventory, omitting
therefrom the tract of 930 hectares with its improvements thereon, the same being the land covered by
the transfers above mentioned. The court, however, having its attention called to the fact that the
omission of this property from the inventory would leave the estate insolvent, made an order on
October 7, 1925, directing the administrator to restore said item to his inventory. Nevertheless, upon a
later motion of the administrator accompanied by authenticated copies of the documents of transfer,
the court made a new order, dated march 5, 1926, approving of the omission by the administrator of
said property from the inventory; and its is from this order that the present appeal is here being
prosecuted.

From the foregoing statement it will be collected that the appellants have an undeniable credit in a large
amount against the estate of the decedent, and that upon the showing of the last approved inventory
the estate is insolvent. In view of these facts that appellants, assuming apparently that the assignment
to Jung by Ankrom of the equity of redemption of the latter in the tract of land above mentioned was
affected in fraud of creditors, are desirous of reaching and subjecting this interest to the payment of the
appellant's claim. The appellants also insist that it was the duty of the administrator to retain the
possession of this tract of land and thereby place upon Jung, or persons claiming under him, the burden
of instituting any action that may be necessary to maintain the rights of the transferee under said
assignment. The administrator, on the other hand, supposes the assignment to be valid and apparently
does not desire to enter into a contest over the question of its validity with the person or persons
claiming under it.

The precise remedy open to the appellants in the predicament above described is clearly pointed pout in
section 713 of our Code of Civil Procedure, which reads as follows:

When there is a deficiency of assets in the hands of an executor or administrator to pay debts
and expenses, and when the deceased person made in his life-time such fraudulent conveyance
of such real or personal estate or of a right or interest therein, as is stated in the preceding
section, any creditor of the estate may, by license of the court, if the executor or administrator
has not commenced such action, commence and prosecute to final judgment, in the name of
the executor or administrator, an action for the recovery of the same and may recover for the
benefit of the creditors, such real or personal estate, or interest therein so conveyed. But such
action shall not be commenced until the creditor files in court a bond with sufficient surety, to
be approved by the judge, conditioned to indemnify the executor or administrator against the
costs of such action. Such creditor shall have a lien upon the judgment by him so recovered for
the costs incurred and such other expenses as the court deems equitable.

The remedy of the appellants is, therefore, to indemnify the administrator against costs and, by leave of
court, to institute an action in the name of the administrator to set aside the assignment or other
conveyance believed to have been made in fraud of creditors.

For the appellants it is contended that, inasmuch as no appeal was taken from the order of October 7,
1925, directing the administrator to include the land in question in the inventory, said order became
final, with the result that the appealed order of March 5, 1926, authorizing the exclusion of said
property from the inventory, should be considered beyond the competence of the court. This
contention is untenable. Orders made by a court with reference to the inclusion of items of property in
the inventory or the exclusion of items therefrom are manifestly of a purely discretionary, provisional,
and interlocutory nature and are subject to modification or change at any time during the course of the
administration proceedings. Such order in question not final in the sense necessary to make it
appealable. In fact we note that the appealed order was expressly made without prejudice to the rights
of the creditors to proceed in the manner indicated in the provision above quoted from the Code of Civil
Procedure. lawphil.net

The order appealed from not being of an appealable nature, it results that this appeal must be
dismissed, and it is so ordered, with costs against the appellants.
G.R. No. L-48140 May 4, 1942

SINFOROSO PASCUAL, plaintiff-appellant,


vs.
PONCIANO S. PASCUAL, ET AL., defendants-appellees.

Celedonio Bernardo for appellant.


Ortega & Ortega for appellees.

MORAN, J.:

On September 14, 1940, while the proceedings for the probate of the will of the deceased Eduarda de
los Santos were pending in the Court of First Instance of Rizal plaintiff, Sinforoso Pascual, instituted in
the Court of First Instance of Pampanga against Ponciano S. Pascual and others, an action for the
annulment of a contract of sale of a fishpond situated in Lubao, Pampanga, supposedly executed
without consideration by said deceased in her lifetime in favor of the defendants. The complaint alleges
that plaintiff and defendants are all residents of Malabon, Rizal, and are legitimate children of the
testratix, Eduarda de los Santos. Defendants filed of a motion to dismiss, alleging want of cause of
action, limitation of action, wrong venue and pendency of another action. The trial court granted the
motion on the ground that the action should have been brought by the executor or administrator of the
estate left by the deceased, and directed the plaintiff to amend his complaint within five days. Plaintiff
filed an amended complaint, the amendment consisting in that "el demandado Miguel S. Pascual ha sido
nombrado por el Juzgado de Primera Instancia de Rizal albacea testamentario de los bienes de la finada
Eduarda de los Santos. en el asunto de la testamentaria de dicha finada." The trial court declaring that
such amendment did not cure the insufficiency of the complaint, dismissed the action. It is from this
order of dismissal that plaintiff interposed his appeal.

Under Rule 86, section 1, of the new Rules of Court, actions for the recovery or protection of the
property or rights of the deceased for causes which survive may be prosecuted or defended by his
executor or administrator. Upon the commencement of the testate or intestate proceedings the heirs
have no standing in court in actions of the above character, except when the executor or administrator
is unwilling or fails or refuses to act, in which event to heirs may act in his place. (Pomeroy on Code
Remedies, p. 158, 11 R C. L. p. 262; 21 Am. Jur., 940) Here, the fictitious sale is alleged to have been
made to the defendants, one of them, Miguel S. Pascual, being the executor appointed by the probate
court. Such executor naturally would not bring an action against himself for recovery of the fishpond. His
refusal to act may, therefore, be implied. And this brings the case under the exception. It should be
noted that in the complaint the prayer is that the fishpond be delivered not to the plaintiff but to the
executor, thus indicating that the action is brought in behalf of the estate of the deceased.

Appellees contend that there is here a wrong venue. They argue that an action for the annulment of a
contract of sale is a personal action which must be commenced at the place of residence of either the
plaintiff or the defendant, at the election of the plaintiff (Rule 5, sec. 1, Rules of Court), and, in the
instant case, both plaintiff and defendants are residents of Malabon, Rizal, but the action was
commenced in the Court of First Instance of Pampanga. It appearing, however, that the sale is alleged to
be fictitious, with absolutely no consideration, it should be regarded as a non-existent, not merely null,
contract. (8 Manresa, Comentarios al Codigo Civil Español, 2nd ed., pp. 766-770.) And there being no
contract between the deceased and the defendants, there is in truth nothing to annul by action. The
action brought cannot thus be for annulment of contract, but is one for recovery of a fishpond, a real
action that should be, as it has been, brought in Pampanga, where the property is located (Rule 5, sec. 3,
Rules of Court.)

Appellees argue further that the action brought by the plaintiff is unnecessary, the question involved
therein being one that may properly be raised and decided in the probate proceedings. The general rule
is that questions as to title to property cannot be passed upon in testate proceedings. (Bauermann vs.
Casas, 10 Phil., 386; Devesa vs. Arbes, 13 Phil., 273; Guzman vs. Anog, 37 Phil., 61; Lunsod vs. Ortega, 46
Phil., 664; Adapon vs. Maralit, 40 Off. Gaz., 6th Sup., p. 84.) The court is, however, of the opinion and so
holds that, when as in the instant case, the parties interested are all heirs of the deceased claiming title
under him, the question as to whether the transfer made by the latter to the former is or is not
fictitious, may properly be brought by motion in the testate or intestate proceedings on or before the
distribution of the estate among the heirs. This procedure is optional to the parties concerned who may
choose to bring a separate action as a matter of convenience in the preparation or presentation of
evidence, and accordingly, the action brought by the appellant is not improper.

Order is reversed, and the case is remanded the trial court for further proceedings, with costs against
appellees.
G.R. No. 129008 January 13, 2004

TEODORA A. RIOFERIO, VERONICA O. EVANGELISTA assisted by her husband ZALDY EVANGELISTA,


ALBERTO ORFINADA, and ROWENA O. UNGOS, assisted by her husband BEDA UNGOS, petitioners,
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,
respondents.

DECISION

TINGA, J.:

Whether the heirs may bring suit to recover property of the estate pending the appointment of an
administrator is the issue in this case.

This Petition for Review on Certiorari, under Rule 45 of the Rules of Court, seeks to set aside the
Decision1 of the Court of Appeals in CA-G.R. SP No. 42053 dated January 31, 1997, as well as its
Resolution2 dated March 26, 1997, denying petitioners’ motion for reconsideration.

On May 13, 1995, Alfonso P. Orfinada, Jr. died without a will in Angeles City leaving several personal and
real properties located in Angeles City, Dagupan City and Kalookan City.3 He also left a widow,
respondent Esperanza P. Orfinada, whom he married on July 11, 1960 and with whom he had seven
children who are the herein respondents, namely: Lourdes P. Orfinada, Alfonso "Clyde" P. Orfinada,
Nancy P. Orfinada-Happenden, Alfonso James P. Orfinada, Christopher P. Orfinada, Alfonso Mike P.
Orfinada (deceased) and Angelo P. Orfinada.4

Apart from the respondents, the demise of the decedent left in mourning his paramour and their
children. They are petitioner Teodora Riofero, who became a part of his life when he entered into an
extra-marital relationship with her during the subsistence of his marriage to Esperanza sometime in
1965, and co-petitioners Veronica5, Alberto and Rowena.6

On November 14, 1995, respondents Alfonso James and Lourdes Orfinada discovered that on June 29,
1995, 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 located in
Dagupan City and that accordingly, the Registry of Deeds in Dagupan issued Certificates of Titles Nos.
63983, 63984 and 63985 in favor of petitioners Teodora Rioferio, Veronica Orfinada-Evangelista, Alberto
Orfinada and Rowena Orfinada-Ungos. Respondents also found out that petitioners were able to obtain
a loan of P700,000.00 from the Rural Bank of Mangaldan Inc. by executing a Real Estate Mortgage over
the properties subject of the extra-judicial settlement.7

On December 1, 1995, respondent Alfonso "Clyde" P. Orfinada III filed a Petition for Letters of
Administration docketed as S.P. Case No. 5118 before the Regional Trial Court of Angeles City, praying
that letters of administration encompassing the estate of Alfonso P. Orfinada, Jr. be issued to him.8

On December 4, 1995, 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 with Nos. 63983, 63985 and 63984 and Other Related Documents with
Damages against petitioners, the Rural Bank of Mangaldan, Inc. and the Register of Deeds of Dagupan
City before the Regional Trial Court, Branch 42, Dagupan City.9

On February 5, 1996, 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 Riofero10 and that the titles thereof were delivered to her
as an advance inheritance but the decedent had managed to register them in his name.11 Petitioners
also raised the affirmative defense that respondents are not the real parties-in-interest but rather the
Estate of Alfonso O. Orfinada, Jr. in view of the pendency of the administration proceedings.12 On April
29, 1996, petitioners filed a Motion to Set Affirmative Defenses for Hearing13 on the aforesaid ground.

The lower court denied the motion in its Order14 dated June 27, 1996, on the ground that respondents,
as heirs, are the real parties-in-interest especially in the absence of an administrator who is yet to be
appointed in S.P. Case No. 5118. Petitioners moved for its reconsideration15 but the motion was likewise
denied.16

This prompted petitioners to file before the Court of Appeals their Petition for Certiorari under Rule 65
of the Rules of Court docketed as CA G.R. S.P. No. 42053.17 Petitioners averred that the RTC committed
grave abuse of discretion in issuing the assailed order which denied the dismissal of the case on the
ground that the proper party to file the complaint for the annulment of the extrajudicial settlement of
the estate of the deceased is the estate of the decedent and not the respondents.18

The Court of Appeals rendered the assailed Decision19 dated January 31, 1997, stating that it discerned
no grave abuse of discretion amounting to lack or excess of jurisdiction by the public respondent judge
when he denied petitioners’ motion to set affirmative defenses for hearing in view of its discretionary
nature.

A Motion for Reconsideration was filed by petitioners but it was denied.20 Hence, the petition before this
Court.

The issue presented by the petitioners before this Court is whether the heirs have legal standing to
prosecute the rights belonging to the deceased subsequent to the commencement of the administration
proceedings.21

Petitioners vehemently fault the lower court for denying their motion to set the case for preliminary
hearing on their affirmative defense that the proper party to bring the action is the estate of the
decedent and not the respondents. It must be stressed that the holding of a preliminary hearing on an
affirmative defense lies in the discretion of the court. This is clear from the Rules of Court, thus:

SEC. 5. Pleadings grounds as affirmative defenses.- Any of the grounds for dismissal provided for
in this rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary
hearing may be had thereon as if a motion to dismiss had been filed.22 (Emphasis supplied.)

Certainly, the incorporation of the word "may" in the provision is clearly indicative of the optional
character of the preliminary hearing. The word denotes discretion and cannot be construed as having a
mandatory effect.23 Subsequently, the electivity of the proceeding was firmed up beyond cavil by the
1997 Rules of Civil Procedure with the inclusion of the phrase "in the discretion of the Court", apart from
the retention of the word "may" in Section 6,24 in Rule 16 thereof.

Just as no blame of abuse of discretion can be laid on the lower court’s doorstep for not hearing
petitioners’ affirmative defense, it cannot likewise be faulted for recognizing the legal standing of the
respondents as heirs to bring the suit.

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 (t)he 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.25

Even if administration proceedings have already been commenced, the heirs may still bring the suit if an
administrator has not yet been appointed. This is the proper modality despite the total lack of
advertence to the heirs in the rules on party representation, namely Section 3, Rule 326 and Section 2,
Rule 8727 of the Rules of Court. In fact, in the case of Gochan v. Young,28 this Court recognized the legal
standing of the heirs to represent the rights and properties of the decedent under administration
pending the appointment of an administrator. Thus:

The above-quoted rules,29 while permitting an executor or administrator to represent or to bring


suits on behalf of the deceased, do not prohibit the heirs from representing the deceased. These
rules are easily applicable to cases in which an administrator has already been appointed. But
no rule 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, viz: (1) if the
executor or administrator is unwilling or refuses to bring suit;30 and (2) when the administrator is alleged
to have participated in the act complained of31 and he is made a party defendant.32 Evidently, the
necessity for the heirs to seek judicial relief to recover property of the estate is as compelling when
there is no appointed administrator, if not more, as where there is an appointed administrator but he is
either disinclined to bring suit or is one of the guilty parties himself.

All told, 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.

As the appellate court did not commit an error of law in upholding the order of the lower court,
recourse to this Court is not warranted.

WHEREFORE, the petition for review is DENIED. The assailed decision and resolution of the Court of
Appeals are hereby AFFIRMED. No costs.
SO ORDERED.
G.R. No. L-11801 June 30, 1959

CIRILO MODESTO, petitioner,


vs.
JESUS MODESTO, ET AL., ETC., respondents.

Pelayo V. Nuevo and Segundo M. Zosa for petitioner.


Antonio Montilla for respondents.

MONTEMAYOR, J.:

This is a petition for certiorari and for a writ of preliminary injunction filed by Cirilo Modesto to set aside
the order of the Court of First Instance of Leyte dated March 8, 1954, the writ of execution dated April
27, 1954 as well as the alias writ of execution dated November 10, 1955.

The facts in this case are not in dispute. It would appear that Bruno Modesto died leaving several heirs,
among them, Cirilo Modesto and Jesus Modesto. In the course of the intestate proceedings, Jesus
Modesto, acting as administrator of the estate of Bruno, filed on November 7, 1953, in the Court of First
Instance of Tacloban, Leyte, a motion to cite and examine under oath several persons, especially Cirilo
Modesto, regarding properties concealed, embezzled or fraudulently conveyed. On December 7, 1953
the court issued an order appointing the Provincial Sheriff of Leyte and the Chief of Police of Tanawan,
Leyte, as joint commissioners, to verify and ascertain persons who were holding, claiming or possessing
properties belonging to the estate of the deceased Bruno Modesto. In said motion of Jesus Modesto he
listed said properties supposed to belong to the estate, classified as follows: jewels under items 1, 2 and
3; furniture and other personal properties under items 4-10; the 11th item is supposed to be cash taken
from a deposit in the Office of the Chief of Police of Tanawan, Leyte, after taking funeral and other
expenses, in the amount of P1,700; and real properties under items 12-26.

On January 12, 1954, the joint commissioners submitted their report. On March 1, 1954 Jesus Modesto,
administrator filed a motion in court to require Cirilo Modesto to turn over to him as administrator the
personal properties belonging to the intestate supposed to be in Cirilo's possession. Pursuant to said
motion, the trial court, on March 8, 1954, issued an order requiring Cirilo Modesto to deliver to the
administrator personal properties listed in the order, such as one narra aparador, 1 desk, 1 looking glass
5 x 3 ft., 1 trunk containing clothes, 1 bicycle, 11 pieces of steel matting and money said to have been
taken from a deposit made with the Chief of Police in the amount of P1,700.00. Thereafter, on April 27,
1954, a writ of execution was issued and on May 10, 1955 as alias writ of execution was also issued by
the trial court. By virtue of said writ of execution the provincial Sheriff issued a Notice of Attachment
against the real property described in Certificate of Title no. 30167 of the Register of Deeds of Leyte and
under Tax Assessment in the name of Cirilo Modesto.

On June 2, 1955 Cirilo Modesto filed an Urgent Motion to Set Aside the Writ of Execution and for a Writ
of Preliminary Injunction, which motion was opposed by Jesus. On June 4, 1955 the Provincial Sheriff
sold at public auction the real property above-mentioned to the highest and only bidder Jesus Modesto
for P2,454 and on June 6, 1956, the Provincial Sheriff issued a Sheriff's Certificate of Final Sale in favor of
Jesus. On June 29, 1956 Jesus Modesto filed a motion for a writ of Possession. On July 11, 1956 Cirilo
filed his Motion for Reconsideration of the order dated June 4 which the trial court denied. On August 3,
1956, in pursuance of the motion for a Writ of Possession, the Provincial Sheriff issued a notification to
Cirilo placing Jesus in possession of the real property sold to him. Cirilo then filed the present petition
for certiorari to annul the proceedings had before the Court of First Instance of Leyte.

The trial court, in issuing its order of March 8, 1954 requiring Cirilo to deliver the properties listed
therein to Jesus as administrator, supposedly acted under the provisions of Section 6, Rule 88 of the
Rules of Court which reads as follows:

SEC. 6. Proceedings when property concealed, embezzled, or fraudulently conveyed. — If an


executor or administrator, heir, legatee, creditor, or other individual interested in the estate of
the deceased, complains to the court having jurisdiction of the estate that a person is suspected
of having concealed, embezzled, or conveyed away any of the money, goods or chattels of the
deceased, or that such person has in his possession or has knowledge of any deed, conveyance,
bond, contract, or other writing which contains evidence of or tends to disclose the right, title,
interest, or claim of the deceased to real or personal estate, or the last will and testament of the
deceased, the court may cite such suspected person to appear before it and may examine him
on oath on the matter of such complaint; and if the person so cited refused to appear, or to
answer on such examination or such interrogatories as are put to him, the court may punish him
for contempt, and may commit him to prison until he submits to the order to the court. The
interrogatories put to any such person, and his answers thereto, shall be in writing and shall be
filed in the clerk's office.

In this trial court committed error because the purpose of the section above-reproduced, which section
was taken from Section 709 of Act 190, is merely to elicit information or to secure evidence from those
persons suspected of having possessed or having knowledge of the properties left by a deceased person,
or of having concealed, embezzled or conveyed any of the said properties of the deceased. In such
proceedings the trial court has no authority to decide whether or not said properties, real or personal,
belong to the estate or to the persons examined. if, after such examination there is good reason to
believe that said person or persons examined are keeping properties belonging to the estate, then the
next step to be taken should be for the administrator to file an ordinary action in court to recover the
same (Alafriz vs. Mina, 28 Phil., 137; Cui vs. Piccio, 91 Phil., 713; 48 Off. Gaz. [7] 2769; Changco vs.
Madrelejos, 12 Phil., 543; Guanco vs. PNB, 54 Phil., 244, cited in Moran's Rules of Court, Vol. 2 1957
Edition, pp. 443-444).

The order requiring Cirilo to deliver the properties and cash stated in the order, as belonging to the
estate, said that Cirilo was supposed to have admitted having received or taken possession of said
properties after the death of Bruno. This statement or findings of the lower court is not supported by
the evidence on record. As a matter of fact, in the answer of Cirilo to the motion of the administrator,
he claimed that although he held the aparador mentioned in Item 4 in the list properties, nevertheless,
said furniture belonged to their parents and so Bruno Modesto had only 1/6 share; that he, Cirilo, did
not have the looking glass mentioned in the motion because the same had been taken by Jesus himself,
neither did he have the desk in question; that though he held a trunk, it was empty and only contained
clothes which were torn; that the bicycle in question was in the possession of Mauricio Modesto, the
nephew of Bruno; that he, Cirilo, did not keep the 11 pieces of steel matting; neither did he ever receive
the amount of P1,700.00 supposed to have been deposited in the office of the Chief of Police. But, even
if Cirilo had admitted possession of the properties which he was required by the court to deliver to
Jesus, still it was necessary for the ordinary courts, not the probate court, to determine the title and
ownership of said properties.
In view of the foregoing, the petition for certiorari is hereby granted and the order of the trial court of
March 8, 1954, the Writ of Execution of April 27, 1954 and the alias Writ of Execution of May 10, 1955,
and of course the sale made by the Sheriff of the real property covered by Certificate of Title No. 30167
are set aside. Respondent Jesus Modesto will pay the costs.
G.R. No. L-56504 May 7, 1987

POMPILLO VALERA and EUMELIA VALERA CABADO, petitioners,


vs.
HON. JUDGE SANCHO Y. INSERTO, in his capacity as Presiding Judge, Court of First Instance of Iloilo,
Branch 1, and MANUEL R. FABIANA, respondents.

Nos. L-59867-68 May 7, 1987

EUMELIA V. CABADO, POMPILLO VALERA and HON. MIDPANTAO L. ADIL, petitioners-appellants,


vs.
MANUEL FABIANA, JOSE GARIN and HON. COURT OF APPEALS (Tenth Division), respondents-
appellants.

Eduardo S. Baranda and Avelino T Javellana for petitioners.

Dominador G. Garin for private respondents.

NARVASA, J.:

Conflicting claims over a fishpond asserted by the administrators of the estate of deceased spouses, on
the one hand, and by the heirs of a daughter of said spouses and their lessee, on the other, have given
rise to the proceedings now docketed in this Court as (1) G.R. No. 56504 and (2) G.R. Nos. 59867-68.

Sp. Proc. No. 2223, CFI, Iloilo

In the proceedings for the settlement of the intestate estate of the decedent spouses, Rafael Valera and
Consolacion Sarrosa 1 — in which Eumelia Cabado and Pompiro Valera had been appointed
administrators 2 — the heirs of a deceased daughter of the spouses, Teresa Garin, filed a motion asking
that the Administratrix, Cabado, be declared in contempt for her failure to render an accounting of her
administration. 3 Cabado replied that no accounting could be submitted unless Jose Garin, Teresa's
husband and the movant heirs' father, delivered to the administrator an 18-hectare fishpond in Baras,
Barotoc Nuevo, Iloilo, belonging to the estate and she in turn moved for the return thereof to the
estate, 4 so that it might be partitioned among the decedents' heirs. Jose Garin opposed the plea for the
fishpond's return to the estate, asserting that the property was owned by his children and this was why
it had never been included in any inventory of the estate.

The Court, presided over by Hon. Judge Midpantao Adil, viewed the Garin Heirs' motion for contempt,
as well as Cabado's prayer for the fishpond's return to the estate, as having given rise to a claim for the
recovery of an asset of the estate within the purview of Section 6, Rule 87 of the Rules of Court. 5 It
accordingly set said incidents for hearing during which the parties presentee evidence in substantiation
of their positions. 6 Thereafter, the Court issued an Order dated September 17, 1980 commanding the
Heirs of Teresa Garin "to reconvey immediately the fishpond in question * * to the intestate Estate of
the Spouses. 7
The Order was predicated upon the Court's factual findings mainly derived from the testimony of the
two administrators that:

1. the fishpond originally belonged to the Government, and had been given in lease to Rafael Valera in
his lifetime;

2. Rafael Valera ostensibly sold all his leasehold rights in the fishpond to his daughter, Teresa Garin; but
the sale was fictitious, having been resorted to merely so that she might use the property to provide for
her children's support and education, and was subject to the resolutory term that the fishpond should
revert to Rafael Valera upon completion of the schooling of Teresa Garin's Children; and

3. with the income generated by the fishpond, the property was eventually purchased from the
Government by the Heirs of Teresa Garin, collectively named as such in the Original Certificate of Title
issued in their favor.

Upon these facts, Judge Adil ruled that an implied trust had been created, obligating Teresa Garin's heirs
to restore the property to the Valera Spouses' Estate, in accordance with Articles 1453 and 1455 of the
Civil Code providing as follows:

Article 1453. When property is conveyed to a person in reliance upon his declared
intentions to hold it for, or transfer it to another or the grantor, there is an implied trust
in favor of the person for whose benefit it is contemplated.

Article 1455. When any trustee, guardian or other person holding a fiduciary
relationship uses trust funds for the purchase of property and causes a conveyance to
be made to him or to a third person, a trust is established by operation of law in favor of
the person to whom the fund belongs.

The Court also held that the action for reconveyance based on constructive trust had not yet prescribed,
Cabado's motion for the fishpond's reversion to the estate having been filed well within ten (10) years
from June 30, 1980, the date on which Teresa Garin's heirs allegedly acquired title over it. 8

There seems little doubt, however, that the Court's pronouncement regarding the estate's title to the
fishpond was merely provisional in character, made solely to determine whether or not the fishpond
should be included in the inventory of estate assets. So it was evidently understood by the
administrators who have more than once asserted that "the probate court has jurisdiction to determine
the ownership of the fishpond for purposes of inclusion in the inventory of the properties. 9 So it was
made clear by the Probate Court itself which, at the outset, stated that the hearing on the matter 10
was meant "merely to determine whether or not the fishpond should be included as part of the estate
and whether or not the person holding it should be made to deliver and/or return ** (it) to the estate.
11 And so it was emphasized in another Order, denying reconsideration of the Order of September 17,
1980, which states that:

**(i)t is never the intendment of this court to write a finish to the issue of ownership of
the fishpond in dispute. The movants may pursue their claim of ownership over the
same in an ordinary civil action. Meanwhile, however, it is the finding of this probate
court that the fishpond must be delivered to the estate.
Clearly, there is no incompatibility between the exercise of the power of this probate
court under Section 6 in relation to Section 7, both of Rule 87, and the contention of the
movants that the proper forum to settle the issue of ownership should be in a court of
general jurisdiction. 12

Judge Adil afterwards granted the administrators' motion for execution of the order pending appeal,
and directed the sheriff to enforce the direction for the Garin Heirs to reconvey the fishpond to the
estate. 13 The corresponding writ was served on Manuel Fabiana, the supposed encargado or caretaker.
Voicing no objection to the writ, and declaring to the sheriff that he was a mere lessee, 14 Fabiana
voluntarily relinquished possession of the fishpond to the sheriff. The latter, in turn, delivered it to the
administrators. 15

Later however, Fabiana filed a complaint-in-intervention with the Probate Court seeking vindication of
his right to the possession of the fishpond, based on a contract of lease between himself, as lessee, and
Jose Garin, as lessor. 16 But Judge Adil dismissed his complaint on the following grounds, to wit:

(1) it was filed out of time because not only had judgment been rendered, but execution as regards
transfer of possession had already taken place; and

(2) the lease contract had not been registered and hence was not binding as against the estate. 17

G.R. No. 56504

Fabiana thereupon instituted a separate action for injunction and damages, with application for a
preliminary injunction. This was docketed as Civil Case No. 13742 and assigned to Branch I of the Iloilo
CFI, Hon. Sancho Y. Inserto, presiding. 18 Judge Inserto issued a temporary restraining order enjoining
estate administrators from disturbing Fabiana in the possession of the fishpond, as lessee. 19

The estate administrators filed a motion to dismiss the complaint and to dissolve the temporary
restraining order, averring that the action was barred by the Probate Court's prior judgment which had
exclusive jurisdiction over the issue of the lease, and that the act sought to be restrained had already
been accomplished, Fabiana having voluntarily surrendered possession of the fishpond to the sheriff. 20
When Judge Inserto failed to act on their motion within what the administrators believed to be a
reasonable time, considering the circumstances of the Case, the administrators filed with the Supreme
Court a special civil action for certiorari and mandamus, with a prayer for Preliminary mandatory
injunction and temporary restraining order, which was docketed as G.R. No. 56504. 21 In their petition,
the administrators contended that Branch I of the Iloilo CFI (Judge Inserto, presiding) could not and
should not interfere with the Probate Court (Branch I I, Judge Adil, presiding) in the legitimate exercise
of its j jurisdiction over the proceedings for the Settlement of the estate of the Valera Spouses.

G.R. Nos. 59867-68

In the meantime, Jose Garin — having filed a motion for reconsideration of the above mentioned order
of Judge Adil (declaring the estate to be the owner of the fishpond), in which he asserted that the
Probate Court, being of limited jurisdiction, had no competence to decide the ownership of the
fishpond,22 which motion had been denied 23-filed a notice of appeal from said Order.24 But he quickly
abandoned the appeal when, as aforestated 25 Judge Adil authorized execution of the order pending
appeal, instead, he initiated a special action for certiorari prohibition and mandamus )with prayer for
preliminary injunction) in the Court of Appeals, therein docketed as CA-G. R. No. SP-1154-R.

Fabiana followed suit. He instituted in the same Court of Appeals his own action for certiorari and
injunction, docketed as CA-G.R. No. SP-11577-R; this, notwithstanding the pendency in judge Inserto's
sala of the case he had earlier filed. 26

These two special civil actions were jointly decided by the Court of Appeals. The Court granted the
petitions and ruled in substance that:

1. The Probate Court indeed possessed no jurisdiction to resolve the issue of ownership based merely on
evidence adduced at the hearing of a "counter-motion" conducted under Section 6, Rule 87;

2. The original and transfer certificates of title covering the fishpond stand in the names of the Heirs of
Teresa Garin as registered owners, and therefore no presumption that the estate owns the fishpond is
warranted to justify return of the property on the theory that it had merely been borrowed; and

3. Even assuming the Probate Court's competence to resolve the ownership question, the estate
administrators would have to recover possession of the fishpond by separate action, in view of the
lessee's claim of right to superior possession, as lessee thereof.

From this joint judgment, the administrators have taken separate appeals to this Court by certiorari,27
docketed as G.R. Nos. 59867 and 59868. They ascribe to the Appellate Court the following errors, viz:
Page 542

1) in holding that the Probate Court (Judge Adil, Presiding) had no jurisdiction to take cognizance of and
decide the issue of title covering a fishpond being claimed by an heir adversely to the decedent spouses;

2) in ruling that it was needful for the administrators to file a separate action for the recovery of the
possession of the fishpond then in the hands of a third person; and

3) in sanctioning the act of a CFI Branch in interfering with and overruling the final judgment of another
branch, acting as probate Court, and otherwise frustrating and inhibiting the enforcement and
implementation of said judgment.

Jurisdiction of Probate Court

As regards the first issue, settled is the rule that a Court of First Instance (now Regional Trial Court),
acting as a Probate Court, exercises but limited jurisdiction, 28 and thus has no power to take
cognizance of and determine the issue of title to property claimed by a third person adversely to the
decedent, unless the claimant and all the Other parties having legal interest in the property consent,
expressly or impliedly, to the submission of the question to the Probate Court for adjudgment, or the
interests of third persons are not thereby prejudiced, 29 the reason for the exception being that the
question of whether or not a particular matter should be resolved by the Court in the exercise of its
general jurisdiction or of its limited jurisdiction as a special court (e.g., probate, land registration, etc., is
in reality not a jurisdictional but in essence of procedural one, involving a mode of practice which may
be waived. 30
The facts obtaining in this case, however, do not call for the application of the exception to the rule. As
already earlier stressed, it was at all times clear to the Court as well as to the parties that if cognizance
was being taken of the question of title over the fishpond, it was not for the purpose of settling the issue
definitely and permanently, and writing "finis" thereto, the question being explicitly left for
determination "in an ordinary civil action," but merely to determine whether it should or should not be
included in the inventory. 31 This function of resolving whether or not property should be included in
the estate inventory is, to be sure, one clearly within the Probate Court's competence, although the
Court's determination is only provisional in character, not conclusive, and is subject to the final decision
in a separate action that may be instituted by the parties. 32

The same norm governs the situation contemplated in Section 6, Rule 87 of the 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 fishpond. 33 The examination provided in the cited section is intended merely
to elicit evidence relevant to property of the decedent from persons suspected of having possession or
knowledge thereof, or of having concealed, embezzled, or conveyed away the same. 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 appropriate direction for the delivery of the property to the
estate. 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 separate action must be instituted by
the administrator to recover the property. 34

Parenthetically, in the light of the foregoing principles, the Probate Court could have admitted and taken
cognizance of Fabiana's complaint in intervention after obtaining the consent of all interested parties to
its assumption of jurisdiction over the question of title to the fishpond, or ascertaining the absence of
objection thereto. But it did not. It dismissed the complaint in intervention instead. And all this is now
water under the bridge.

Possession of Fishpond Pending

Determination of Title Thereto

Since the determination by the Probate Court of the question of title to the fishpond was merely
provisional, not binding on the property with any character of authority, definiteness or permanence,
having been made only for purposes of in. conclusion in the inventory and upon evidence adduced at
the hearing of a motion, it cannot and should not be subject of execution, as against its possessor who
has set up title in himself (or in another) adversely to the decedent, and whose right to possess has not
been ventilated and adjudicated in an appropriate action. These considerations assume greater cogency
where, as here, the Torrens title to the property is not in the decedents' names but in others, a situation
on which this Court has already had occasion to rule.

In regard to such incident of inclusion or exclusion, We hold that if a property covered


by Torrens title is involved, the presumptive conclusiveness of such title should be given
due weight, and in the absence of strong compelling evidence to the contrary, the
holder thereof should be consider as the owner of the property in controversy until his
title is nullified or modified in an appropriate ordinary action, particularly, when as in
the case at bar, possession of the property itself is in the persons named in the title. 35
Primary Jurisdiction over Title issue in

Court Taking Cognizance of Separate Action

Since, too, both the Probate Court and the estate administrators are one in the recognition of the
proposition that title to the fishpond could in the premises only be appropriately determined in a
separate action, 36 the actual firing of such a separate action should have been anticipated, and should
not therefore have come as a surprise, to the latter. And since moreover, implicit in that recognition is
also the acknowledge judgment of the superiority of the authority of the court in which the separate
action is filed over the issue of title, the estate administrators may not now be heard to complain that in
such a separate action, the court should have issued orders necessarily involved in or flowing from the
assumption of that jurisdiction. Those orders cannot in any sense be considered as undue interference
with the jurisdiction of the Probate Court. Resulting from the exercise of primary jurisdiction over the
question of ownership involving estate property claimed by the estate, they must be deemed superior
to otherwise contrary orders issued by the Probate Court in the exercise of what may be, regarded as
merely secondary, or provisional, jurisdiction over the same question.

WHEREFORE, the petition in G.R. No. 56504 is DISMISSED, for lack of merit. The petitions in G.R. No.
59867 and G.R. No. 59868 are DENIED, and the judgment of the Appellate Court, subject thereof, is
affirmed in toto. The temporary restraining order dated April 1, 1981 is lifted. Costs against petitioners.
G.R. No. 133347 April 23, 2010

ABS-CBN BROADCASTING CORPORATION, EUGENIO LOPEZ, JR., AUGUSTO ALMEDA-LOPEZ, and OSCAR
M. LOPEZ, Petitioners,
vs.
OFFICE OF THE OMBUDSMAN, ROBERTO S. BENEDICTO, EXEQUIEL B. GARCIA, MIGUEL V. GONZALES,
and SALVADOR (BUDDY) TAN, Respondents.

RESOLUTION

NACHURA, J.:

Before us is a Motion for Reconsideration filed by petitioners Eugenio, Jr., Oscar and Augusto Almeda, all
surnamed Lopez, in their capacity as officers and on behalf of petitioner ABS-CBN Broadcasting
Corporation (ABS-CBN), of our Decision in G.R. No. 133347, dismissing their petition for certiorari
because of the absence of grave abuse of discretion in the Ombudsman Resolution which, in turn, found
no probable cause to indict respondents for the following violations of the Revised Penal Code (RPC): (1)
Article 298 – Execution of Deeds by Means of Violence or Intimidation; (2) Article 315, paragraphs 1[b],
2[a], and 3[a] – Estafa; (3) Article 308 – Theft; (4) Article 302 – Robbery; (5) Article 312 – Occupation of
Real Property or Usurpation of Real Rights in Property; and (6) Article 318 – Other Deceits.

The assailed Decision disposed of the case on two (2) points: (1) the dropping of respondents Roberto S.
Benedicto and Salvador (Buddy) Tan as respondents in this case due to their death, consistent with our
rulings in People v. Bayotas1 and Benedicto v. Court of Appeals;2 and (2) our finding that the
Ombudsman did not commit grave abuse of discretion in dismissing petitioners’ criminal complaint
against respondents.

Undaunted, petitioners ask for a reconsideration of our Decision on the following grounds:

I.

WITH DUE RESPECT, THE EXECUTION AND VALIDITY OF THE LETTER-AGREEMENT DATED 8 JUNE 1973
ARE PLAINLY IRRELEVANT TO ASCERTAINING THE CRIMINAL LIABILITY OF THE RESPONDENTS AND,
THEREFORE, THE ISSUE AS TO WHETHER SAID AGREEMENT WAS RATIFIED OR NOT IS IMMATERIAL IN
THE PRESENT CASE.

II.

WITH DUE RESPECT, RESPONDENTS BENEDICTO AND TAN SHOULD NOT BE DROPPED AS RESPONDENTS
SIMPLY BECAUSE THEY MET THEIR UNTIMELY DEMISE DURING THE PENDENCY OF THE CASE.3

Before anything else, we note that petitioners filed a Motion to Refer the Case to the Court en banc.4
Petitioners aver that the arguments contained in their Motion for Reconsideration, such as: (1) the
irrelevance of the civil law concept of ratification in determining whether a crime was committed; and
(2) the continuation of the criminal complaints against respondents Benedicto and Tan who have both
died, to prosecute their possible civil liability therefor, present novel questions of law warranting
resolution by the Court en banc.
In the main, petitioners argue that the Decision is contrary to law because: (1) the ratification of the
June 8, 1973 letter-agreement is immaterial to the determination of respondents’ criminal liability for
the aforestated felonies in the RPC; and (2) the very case cited in our Decision, i.e. People v. Bayotas,5
allows for the continuation of a criminal case to prosecute civil liability based on law and is independent
of the civil liability arising from the crime.

We disagree with petitioners. The grounds relied upon by petitioners in both motions, being
intertwined, shall be discussed jointly. Before we do so, parenthetically, the counsel for respondent
Miguel V. Gonzales belatedly informed this Court of his client’s demise on July 20, 2007.6 Hence, as to
Gonzales, the case must also be dismissed.1avvphi1

Contrary to petitioners’ assertion, their motion for reconsideration does not contain a novel question of
law as would merit the attention of this Court sitting en banc. We also find no cogent reason to
reconsider our Decision.

First and foremost, there is, as yet, no criminal case against respondents, whether against those who are
living or those otherwise dead.

The question posed by petitioners on this long-settled procedural issue does not constitute a novel
question of law. Nowhere in People v. Bayotas7 does it state that a criminal complaint may continue and
be prosecuted as an independent civil action. In fact, Bayotas, once and for all, harmonized the rules on
the extinguished and on the subsisting liabilities of an accused who dies. We definitively ruled:

From this lengthy disquisition, we summarize our ruling herein:

1. Death of an accused pending appeal of his conviction extinguishes his criminal liability as well
as the civil liability based solely thereon. As opined by Justice Regalado, in this regard, "the
death of the accused prior to final judgment terminates his criminal liability and only the civil
liability directly arising from and based solely on the offense committed, i.e., civil liability ex
delicto in senso strictiore."

2. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if the
same may also be predicated on a source of obligation other than delict. Article 1157 of the Civil
Code enumerates these other sources of obligation from which the civil liability may arise as a
result of the same act or omission:

a) Law

b) Contracts

c) Quasi-contracts

d) xxx xxx xxx

e) Quasi-delicts
3. Where the civil liability survives, as explained in Number 2 above, an action for recovery
thereof may be pursued but only by filing a separate civil action and subject to Section 1, Rule
111 of the 1985 Rules on Criminal Procedure as amended. This separate civil action may be
enforced either against the executor/administrator or the estate of the accused, depending on
the source of obligation upon which the same is based as explained above.

4. Finally, the private offended party need not fear a forfeiture of his right to file this separate
civil action by prescription, in cases where during the prosecution of the criminal action and
prior to its extinction, the private offended party instituted together therewith the civil action.
In such case, the statute of limitations on the civil liability is deemed interrupted during the
pendency of the criminal case, conformably with provisions of Article 1155 of the Civil Code,
that should thereby avoid any apprehension on a possible [de]privation of right by prescription.

From the foregoing, it is quite apparent that Benedicto, Tan, and Gonzales, who all died during the
pendency of this case, should be dropped as party respondents. If on this score alone, our ruling does
not warrant reconsideration. We need not even delve into the explicit declaration in Benedicto v. Court
of Appeals.8

Second, and more importantly, we dismissed the petition for certiorari filed by petitioners because they
failed to show grave abuse of discretion on the part of the Ombudsman when he dismissed petitioners’
criminal complaint against respondents for lack of probable cause. We reiterate that our inquiry was
limited to a determination of whether the Ombudsman committed grave abuse of discretion when he
found no probable cause to indict respondents for various felonies under the RPC. The invocation of our
certiorari jurisdiction over the act of a constitutional officer, such as the Ombudsman, must adhere to
the strict requirements provided in the Rules of Court and in jurisprudence. The determination of
whether there was grave abuse of discretion does not, in any way, constitute a novel question of law.

We first pointed out in our Decision that the complaint-affidavits of petitioners, apart from a blanket
charge that remaining respondents, Gonzales (who we thought was alive at that time) and Exequiel
Garcia, are officers of KBS/RPN and/or alter egos of Benedicto, are bereft of sufficient ground to
engender a well-founded belief that crimes have been committed and that respondents, namely,
Gonzales and Garcia, are probably guilty thereof and should be held for trial. Certainly, no grave abuse
of discretion can be imputed to the Ombudsman that would warrant a reversal of his Resolution.

The charges of individual petitioners Eugenio, Jr., Oscar and Augusto Almeda against respondents,
Gonzales and Garcia, contained in their respective complaint-affidavits simply consisted of the following:

1. Complaint-affidavit of Eugenio, Jr.

32.1. I was briefed that Senator Estanislao Fernandez in representation of Benedicto, met with Senator
Tañada at the Club Filipino in June 1976. Discussions were had on how to arrive at the "reasonable
rental" for the use of ABS-CBN stations and facilities. A second meeting at Club Filipino took place on
July 7, 1976 between Senators Tañada and Fernandez, who brought along Atty. Miguel Gonzales, a close
associate and lawyer of Benedicto and an officer of KBS.

xxxx
38.2. The illegal takeover of ABS-CBN stations, studios and facilities, and the loss and/or damages caused
to our assets occurred while Benedicto, Exequiel Garcia, Miguel Gonzales, and Salvador Tan were in
possession, control and management of our network. Roberto S. Benedicto was the Chairman of the
Board of KBS-RPN and its Chief Executive Officer (CEO), to whom most of the KBS-RPN officers reported
while he was in Metro Manila. Miguel Gonzales, the Vice-President of KBS, and Exequiel Garcia, the
Treasurer, were the alter egos of Benedicto whenever the latter was out of the country; x x x.9

2. Complaint-affidavit of Oscar

25. All the illegal activities as complained of above, were done upon the orders, instructions and
directives of Roberto S. Benedicto, the Chairman of the Board and Chief Executive Officer of the
KBS/RPN group; Miguel Gonzales and Exequiel Garcia, close colleagues and business partners of
Benedicto who were either directors/officers KBS/RPN and who acted as Benedicto’s alter egos
whenever the latter was out of the country; x x x.

xxxx

38. Senator Estanislao Fernandez, in representation of Benedicto, met with Senator Tañada at the Club
Filipino on June 1976. Discussions were had on how to arrive at the "reasonable rental" for the use of
ABS stations and facilities. A second meeting at Club Filipino took place on July 7, 1976 between
Senators Tañada and Fernandez, who brought along Atty. Mike Gonzales, a close associate and friend of
Benedicto and an officer of KBS.10

3. Complaint-affidavit of Augusto Almeda

21.1. Barely two weeks from their entry into the ABS Broadcast Center, KBS personnel started making
unauthorized withdrawals from the ABS Stock Room. All these withdrawals of supplies and equipment
were made under the orders of Benedicto, Miguel Gonzales, Exequiel Garcia, and Salvador Tan, the
Chairman, the Vice-President, Treasurer, and the General Manager of KBS, respectively. No payment
was ever made by either Benedicto or KBS for all the supplies and equipment withdrawn from the ABS
Broadcast Center.

xxxx

31. Senator Estanislao Fernandez, in representation of Benedicto, met with Senator Tañada at the Club
Filipino on June 1976. Discussions were had on how to arrive at the "reasonable rental" for the use of
ABS stations and facilities. A second meeting at Club Filipino took place on July 7, 1976 between
Senators Tañada and Fernandez, who brought along Atty. Mike Gonzales, a close associate and friend of
Benedicto and an officer of KBS.11

From the foregoing, it is beyond cavil that there is no reason for us to depart from our policy of non-
interference with the Ombudsman’s finding of probable cause or lack thereof. On the strength of these
allegations, we simply could not find any rational basis to impute grave abuse of discretion to the
Ombudsman’s dismissal of the criminal complaints.

Third, we did not state in the Decision that ratification extinguishes criminal liability. We simply applied
ratification in determining the conflicting claims of petitioners regarding the execution of the letter-
agreement. Petitioners, desperate to attach criminal liability to respondents’ acts, specifically to
respondent Benedicto, alleged in their complaint-affidavits that Benedicto forced, coerced and
intimidated petitioners into signing the letter-agreement. In other words, petitioners disown this letter-
agreement that they were supposedly forced into signing, such that this resulted in a violation of Article
298 of the RPC (Execution of Deeds by means of Violence or Intimidation).

However, three elements must concur in order for an offender to be held liable under Article 298:

(1) that the offender has intent to defraud another.

(2) that the offender compels him to sign, execute, or deliver any public instrument or
document.

(3) that the compulsion is by means of violence or intimidation.12

The element of intent to defraud is not present because, even if, initially, as claimed by petitioners, they
were forced to sign the letter-agreement, petitioners made claims based thereon and invoked the
provisions thereof. In fact, petitioners wanted respondents to honor the letter-agreement and to pay
rentals for the use of the ABS-CBN facilities. By doing so, petitioners effectively, although they were
careful not to articulate this fact, affirmed their signatures in this letter-agreement.

True, ratification is primarily a principle in our civil law on contracts. Yet, their subsequent acts in
negotiating for the rentals of the facilities ― which translate into ratification of the letter-agreement ―
cannot be disregarded simply because ratification is a civil law concept. The claims of petitioners must
be consistent and must, singularly, demonstrate respondents’ culpability for the crimes they are charged
with. Sadly, petitioners failed in this regard because, to reiterate, they effectively ratified and advanced
the validity of this letter-agreement in their claim against the estate of Benedicto.

Finally, we take note of the conflicting claim of petitioners by filing a separate civil action to enforce a
claim against the estate of respondent Benedicto. Petitioners do not even specifically deny this fact and
simply sidestep this issue which was squarely raised in the Decision. The Rules of Court has separate
provisions for different claims against the estate of a decedent under Section 5 of Rule 86 and Section 1
of Rule 87:

RULE 86.

SECTION 5. Claims which must be filed under the notice. If not filed, barred; exceptions. – All claims for
money against the decedent, arising from contract, express or implied, whether the same be due, not
due, or contingent, all claims for funeral expenses and expenses for the last sickness of the decedent,
and judgment for money against the decedent, must be filed within the time limited in the notice;
otherwise they are barred forever, except that they may be set forth as counter claims in any action that
the executor or administrator may bring against the claimants. Xxx Claims not yet due, or contingent,
may be approved at their present value.

RULE 87.
SECTION 1. Actions which may and which may not be brought against executor or administrator. – No
action upon a claim for the recovery of money or debt or interest thereon shall be commenced against
the executor or administrator; but actions to recover real or personal property, or an interest therein,
from the estate, or to enforce a lien thereon, and actions to recover damages for an injury to person or
property, real or personal, may be commenced against him.

If, as insisted by petitioners, respondents committed felonies in forcing them to sign the letter-
agreement, petitioners should have filed an action against the executor or administrator of Benedicto’s
estate based on Section 1, Rule 87 of the Rules of Court. But they did not. Instead they filed a claim
against the estate based on contract, the unambiguous letter-agreement, under Section 5, Rule 86 of
the Rules of Court. The existence of this claim against the estate of Benedicto as opposed to the filing of
an action against the executor or administrator of Benedicto’s estate forecloses all issues on the
circumstances surrounding the execution of this letter- agreement.

We are not oblivious of the fact that, in the milieu prevailing during the Marcos years, incidences
involving intimidation of businessmen were not uncommon. Neither are we totally unaware of the
reputed closeness of Benedicto to President Marcos. However, given the foregoing options open to
them under the Rules of Court, petitioners’ choice of remedies by filing their claim under Section 5, Rule
86 ― after Marcos had already been ousted and full democratic space restored ― works against their
contention, challenging the validity of the letter-agreement. Now, petitioners must live with the
consequences of their choice.

WHEREFORE, in light of the foregoing, the Motion to Refer the Case to the Court en banc and the
Motion for Reconsideration are DENIED.

SO ORDERED.